Supreme Court Backs Arbitrator’s Power to Award Compound Interest :Rules on Interest Calculation in Award Enforcement
The Supreme Court ruled that arbitral tribunals have the power to award compound interest (interest on interest) under Section 31(7) of the Arbitration Act, 1996. It clarified that the "sum awarded" includes both principal and pre-award interest, and post-award interest can be calculated on this total amount. The judgment overruled earlier contrary interpretations, affirming arbitrators' discretion in interest calculations unless expressly barred by contract. The Court emphasized this aligns with the compensatory purpose of arbitration awards for delayed payments.
Facts Of The Case:
The case involved a contractual dispute between M/s Interstate Construction (appellant) and National Projects Construction Corporation Ltd. (respondent) regarding construction work for Ramagundam Super Therma...