Commercial Contracts & Interest Rates: Supreme Court Reaffirms ‘Party Autonomy’ Over ‘Public Policy’
The Supreme Court held that under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, party autonomy prevails; where a commercial contract specifies an interest rate, the arbitral tribunal has no discretion to deviate. A stipulated interest rate of 36% with monthly rests in a bill discounting agreement between equal bargaining parties is not unconscionable or against public policy. The rule of contra proferentem does not apply to mutually negotiated commercial contracts.
Facts Of The Case:
The dispute originated from a bill discounting facility extended by the respondent, Morgan Securities and Credits Private Limited, to M/s BPL Display Device Ltd (BDDL) and the appellant, BPL Limited, through sanction letters dated 27.12.2002 and 11.06.2003. The facility allowed BDDL to ...