STATE OF PUNJAB AND ORS Vs. LAMBA BUILDERS

JUDGEMENT

(1.) The State is before this Court challenging the order dated 28.11.2009, passed by the learned court below, whereby in execution of the award of the arbitrator, the learned court below has directed for payment of interest on the interest.

(2.) Briefly, the facts are that the respondent had entered into an agreement with the State on 27.4.1998 for executing work of construction of Ghaggar Escape Regulator. As there was some dispute regarding the payment, the matter was referred for arbitration. On 26.11.2002, the arbitrator passed the award for a sum of Rs. 8,80,495/-in favour of the respondent and accepted the counter claim of the State to the tune of Rs. 2,50,000/-against the respondent. On 22.11.2007, the petitioners paid a sum of Rs. 21,46,142/-to the respondent, the amount of Rs. 6,30,495/-being the net amount after adjusting the counter claim allowed to the petitioners from the amount awarded to the respondent along with interest of Rs. 15,15,647/-from 20.8.1991 till 21.11.2007. As the amount of counter claim awarded to the petitioners was set aside by this Court vide judgment dated 12.2.2008 passed in FAO No. 751 of 2007, further sum of Rs. 9,31,424/ was paid to the respondent as principal being Rs. 2,50,000/-and the balance being interest. The dispute in the present case is regarding calculation of interest.

(3.) Learned Counsel for the petitioners submitted that the manner in which the respondent is seeking to calculate the amount of interest is resulting in payment of compound interest to the respondent, which was not awarded by the arbitrator. In the absence of any specific direction of the arbitrator, which is in conformity with the terms of agreement entered into between the parties, no interest on interest can be claimed by a party to the arbitration.