Case Details M/s Larsen Air Conditioning and Refrigration Company vs Union of India and Ors.

Court

Supreme Court of India

Date

11 August 2023

Case No.

Civil Appeal No. 3798 of 2023

Result

Disposed

Bench

S. Ravindra Bhat, Dipankar Datta

Citation

[2023] 11 S.C.R. 86 : 2023 INSC 708

Issue for consideration

Whether the High Court erred in modifying the arbitral award to the extent of reducing the interest, from compound interest of 18% to 9% simple interest per annum.

Headnote

Arbitration and Conciliation Act, 1996 – s.31 – Modification of interest by the High Court – Propriety of:

Held : In the instant case, given that the arbitration commenced in 1997, i.e., after the Act of 1996 came into force on 22.08.1996, the arbitrator, and the award passed by them, would be subject to this statute – Under the enactment, i.e. s.31(7), the statutory rate of interest itself is contemplated at 18% p.a. – This is in the event the award does not contain any direction towards the rate of interest – Therefore, there is little to no reason, for the High Court to have interfered with the arbitrator’s finding on interest accrued and payable – Unlike in the case of the old Act, the court is powerless to modify the award and can only set aside partially, or wholly, an award on a finding that the conditions spelt out u/s. 34 of the 1996 Act have been established. [Para 13]

Arbitration and Conciliation Act, 1996 – s.34 – Jurisdiction under: Held : The limited and extremely circumscribed jurisdiction of the court u/s. 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality, i.e., that “illegality must go to the root of the matter and cannot be of a trivial nature”; and that the tribunal “must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground”– The other ground would be denial of natural justice. [Para 15]

Arbitration and Conciliation Act, 1996 – s.37 – Scope of Appellate Court to review findings:

Held : In appeal, s.37 of the Act grants narrower scope to the appellate court to review the findings in an award, if it has been upheld, or substantially upheld u/s. 34 – It is important to notice that the old Act contained a provision which enabled the court to modify an award – However, that power has been consciously omitted by Parliament, while enacting the Act of 1996 – This means that the Parliamentary intent was to exclude power to modify an award, in any manner, to the court. [Para 15]

LIST OF CITATIONS AND OTHER REFERENCES

JUDGMENT / ORDER OF THE SUPREME COURT JUDGMENT S. RAVINDRA BHAT, J. 1. Aggrieved by the impugned judgment1 of the Allahabad High Court, the appellant has approached this court with a simple question of law, as to whether the High Court erred in modifying the arbitral award to the extent of reducing the interest, from compound interest of 18% to 9% simple interest per annum. Facts 2. The dispute between the appellant and Union of India (hereafter ‘respondent-state’) arose from a contract entered into pursuant to being awarded the tender. In the course of work, certain disputes arose. On 22

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