M/S. D. PAL AND COMPANY ENGINEERS AND CONTRACTORS AND GENERAL ORDER SUPPLIERS Vs. SOUTH DELHI MUNICIPAL CORPORATION

JUDGEMENT

(1.) This first appeal under section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') is filed against the judgment of the court below dated 16.10.2014 whereby the court below has accepted the objections filed by the respondent herein under Section 34 of the Act and has deleted the relief granted by the Award of interest at 15% per annum. The relevant observations which are made by the court below for deleting the grant of interest are contained in paras 7(i) to 7(vii) of the impugned judgment and these paras read as under:-

(2.) The subject contract was a contract granted to the appellant for construction of drain vide the work order of the respondent dated 20.3.2002. In this contract there is no clause barring the payment of interest. An arbitrator is duly empowered to grant interest in view of the Constitution Bench judgment of the Supreme Court in the case of Secretary, Irrigation Department, Government of Orissa and Others v. G.C. Roy AIR 1992 SC 732 .

(3.) In the present case the court below has committed a complete illegality in holding that the contract in question contains a clause of prohibition of payment of interest on delayed payment inasmuch as there is no such clause in the contract order of the year 2002 which is pointed out to this Court. In any case, assuming that there is a clause for denial of interest, I have held in the case of Union of India v. M/s. N.K. Garg and Co. (2015) 224 DLT 668 that any clause by which a person is denied interest on amount due, then such a clause will be illegal and hit by the provision of section 23 of the Indian Contract Act, 1872. Detailed reasons have been given by this Court in the judgment in the case of N.K. Garg (supra) and are adopted by this Court and it is held that the arbitrator is not barred from awarding interest even if there is a clause in the contract that interest cannot be awarded.