Arbitration and Conciliation Act, 1996: s. 31(7)(b) – Reduction of rate of interest – Arbitral award along with interest payable in accordance with s. 31(7(b), at the rate of 18% pa – District judge reduced the rate of interest on the sum awarded from 18% to 6% relying on para 7-A of s. 24 of the UP Amendment Act – Upheld by the High Court – On appeal, held: Section 31(7)(b) clearly states that unless otherwise specified, the awarded sum would carry an interest @ 18% pa – Para 7-A of s. 24 of the U.P. Amendment Act was an amendment to the First Schedule of Arbitration Act, 1940 – Since the Arbitration Act, 1940 has been repealed, the Schedule to the Arbitration Act, including the State amendment, also stands repealed – Thus, the provisions of Arbitration Act, 1940 including para 7-A of s. 24 would have no application to the proceedings commenced after coming into force of the Act of 1996 – On facts, though the agreement was earlier to the date of coming into force of the Act of 1996, the proceedings commenced on 27.10.1999 and were conducted in accordance with the Act of 1996, thus, para 7-A of s. 24 of the U.P. Amendment Act would not be applicable – High Court and the District Judge not justified in reducing the rate of interest by following the U.P. Amendment Act – Award of interest in accordance with s. 31(7)(b) is restored – Arbitration Act, 1940 – Uttar Pradesh Civil Laws (Reforms and Amendment) Act, 1976 – s.
24. Allowing the appeal, the Court
HELD: 1.1 The Arbitration and Conciliation Act, 1996 has come into force with effect from 22.08.1996. Section 85 of the Act of 1996 expressly repeals the provisions of the Arbitration Act, 1940. Thus, the Act of 1996 would be applicable to all arbitral proceedings which have commenced on or after the said Act came into force. Para 7-A of Section 24 of the U.P. Amendment Act was an amendment to the First Schedule of Arbitration Act, 1940. This amendment was introduced by the U.P. Act No. 57 of 1976. Section 31(7)(b) of the Act of 1996, before its amendment by Act
3 of 2016, which has come into force with effect from 23.10.2015, is relevant for the purpose of this case, empowers the Arbitrator to award pre-award and post-award interest. Section 31(7)(b) clearly mandates that, in the event the Arbitrator does not give any specific directions as regards the rate of interest on the amount awarded, such amount ‘shall’ carry interest @ 18% p.a. from the date of award till the date of payment. Since the Arbitration Act, 1940 has been repealed by way of Section 85, the Schedule to the Arbitration Act, including the State amendment, also stands repealed. The only exception is provided in sub-section (2)(a) of Section 85 where a proceeding which had commenced when the Arbitration Act of 1940 was in force and continued even after coming into force of the Act of 1996, and all parties thereto agreed for application of the old Act of 1940. Therefore, the provisions of Arbitration Act, 1940 including the State amendment-para 7-A of Section 24 of U.P. Amendment Act will have no application to the proceedings commenced after coming into force of the Act of 1996. [Para 9-11][644-C-F; 645-B-D]
1.2 In the instant case, though the agreement was earlier to the date of coming into force of the Act of 1996, the proceedings admittedly commenced on 27.10.1999 and were conducted in accordance with the Act of 1996. If that be so, para 7-A of Section
24 has no application to the case at hand. Since the rate of interest granted by the Arbitrator is in accordance with Section 31(7)(b), the High Court and the District Judge were not justified in reducing the rate of interest by following the U.P. Amendment Act. The judgments of the High Court and the order of the District Judge are set aside only insofar as reduction of rate of interest is concerned. The interest awarded by the Arbitrator in accordance with s. 31(7)(b) of the 1996 Act is restored.[Para 12,13][645-EG]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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