/2023 INSC 0192/
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8460 / 2022     
(@SLP (C) No.32002 OF 2018)
Indian Railway     …Appellant(s)
Construction Company Limited 
Versus
M/s National Buildings  …Respondent(s)
Construction Corporation Limited 
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 14.08.2018 passed by the
High Court of Delhi at New Delhi in FAO(OS) No.112
of 2018 by which the High Court has partly allowed
the   said   appeal,   the   Indian   Railway   Construction

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Company   Limited   (hereinafter   referred   to   as
“IRCON”) has preferred the present appeal. 
2. The brief facts leading to filing of the present appeal
in nut­shell are as under: 
2.1 That, an Agreement was entered into between IRCON
and   the   respondent   –   M/s.   National   Buildings
Construction   Corporation   Limited   (hereinafter
referred to as “NBCC”), whereby the respondent was
awarded the work of construction of Railway Station
cum Commercial Complex at Vashi, Navi Mumbai at
a cost of Rs.3042.91 lakh, to be constructed within a
period   of   30   months   from   05.04.1990.   NBCC   failed
to   complete   the   work   in   time.   Thereafter,   the
supplementary   agreements   were   entered   into
between   the   parties.   As   the   provision   for   grant   of
advances   had   exhausted,   NBCC   approached   IRCON
with   modified   programme   for   completion   of   works
and   sought   for   additional   financial   aid   on   certain
terms   and   conditions.   IRCON   in   consultation   with

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CIDCO,   agreed   to   grant   advance   as   a   special   case
against   Bank   Guarantee.   Accordingly,   a
supplementary   Agreement   dated   17.12.1991   was
entered into between the parties providing for special
advance   of   an   amount   of   Rs.   68   lakhs   bearing
interest at the rate of 18% per annum on furnishing
of   Bank   Guarantee.   In   terms   of   the   supplementary
Agreement   dated   17.12.1991,   a   special   advance   of
Rs.68   lakhs   was   also   given   to   NBCC.   As   there   was
delay   in   the   work   of   NBCC   and   the   work   was
practically   abandoned   and   came   to   a   standstill,
IRCON   served   on   NBCC   a   notice   dated   21.02.1994
terminating the contract relying upon Clause 60.1 of
the Agreement. 
2.2 That,   thereafter,   after   some   litigation   before   the
Delhi  High Court, the NBCC invoked the  arbitration
clause.   The   Arbitral   Tribunal   was   constituted.   The
Arbitral   Tribunal   passed   the   award   dated
04.11.2011.   That   the   Arbitral   Tribunal   rejected   the

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NBCC’s claim for refund of two security deposits i.e.
Claim Nos.33 and 34. While holding  so, the Arbitral
Tribunal held that though termination with reference
to   Clause   60.1   was   bad   in   law,   but   justified   the
termination   with   reference   to   Clause   17.4   of   the
Contract   and   consequently   rejected   the   NBCC’s
claim   for   refund   of   two   security   deposits   i.e.   claim
Nos.33   and   34.   The   Arbitral   Tribunal   also   partly
allowed   Counter   Claim   No.3   in   favour   of   IRCON.
Counter   Claim   No.3   was   relatable   to   the   counter
claim   of   IRCON   for   a   total   of   Rs.3,65,38,806/­
towards interest on various advances given to NBCC,
more   particularly,   with   regard   to   two   specific
advances being (1) Special Advance and (2) Advance
against hypothecation of equipment. 
2.3 Feeling   aggrieved   and   dissatisfied   with   the   award
passed   by   the   learned   Arbitral   Tribunal   and   insofar
as relating to Claim Nos.33 and 34 and the Counter
Claim No.3 which were in favor of IRCON, the NBCC

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approached   the   High   Court   by   filing   an   application
under Section 34 of the Arbitration and Conciliation
Act,   1996   (hereinafter   referred   to   as   “Arbitration
Act”).   The   application   under   Section   34   of   the
Arbitration   Act   was   confined   to   the   aforesaid   three
claims   /   counter   claims   respectively   viz.   Claim
Nos.33 and 34 and Counter Claim No.3 only. 
2.4 By   the   judgment   and   order   dated   03.03.2017,   the
learned Single Judge of the High Court set aside the
rejection   by   the   learned   Arbitral   Tribunal   of   Claim
Nos.33   and   34   of   NBCC   to   the   extent   it   concerned
the   return   of   security   deposit   amounts   i.e.
Rs.5,57,486/­   +   Rs.60,85,840/­   by   observing   and
concluding   that   once   the   Arbitral   Tribunal   found
that the termination with regard to Clause 60.1 was
not   justified,   it   was   not   open   for   the   Arbitral
Tribunal   thereafter   to   consider   the   termination
under Clause 17.4 justifying forfeiture of the security
deposits. The learned Single Judge of the High Court

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also   set   aside   the   award   passed   by   the   learned
Arbitral   Tribunal   on   Counter   Claim   No.3   by
observing   that   there   is   no   clause   in   the   contract   in
particular   awarding   18%   interest   per   annum   on
special advance. 
2.5 The   judgment   and   order   passed   by   the   learned
Single Judge was the subject matter of appeal under
Section 37 of the Arbitration  Act  before the Division
Bench of the High Court. 
2.6 By   the   impugned   judgment   and   order,   the   Division
Bench of the High Court has partly allowed the said
appeal under Section 37 of the Arbitration Act to the
extent   upholding   the   award   passed   by   the   learned
Arbitral Tribunal insofar as awarding the interest on
special   advance   is   concerned.   The   rest   of   the
judgment   and   order   passed   by   the   learned   Single
Judge has been affirmed / confirmed by the Division
Bench of the High Court. 

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2.7 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the Division Bench of
the   High   Court,   IRCON   has   preferred   the   present
appeal. 
 
3. Shri   R.S.   Hegde,   learned   counsel   has   appeared   on
behalf   of   the   appellant   –   IRCON     and   Shri   Arvind
Minocha,   learned   Senior   Advocate   has   appeared   on
behalf of the respondent – NBCC. 
4. Shri   R.S.   Hegde,   learned   counsel   appearing   on
behalf   of   the   appellant   has   vehemently   submitted
that   on   appreciation   of   entire   evidence   and   the
material   on   record   as   the   learned   Tribunal   has
observed   and   held   that   the   IRCON   was   justified   in
rescinding the contract due to abandonment of work
by   NBCC   and   when   the   said   finding   attained   the
finality,   the   IRCON   was   justified   in   forfeiting   the
security   deposits.   It   is   submitted   that   as   such   the
High   Court   has   taken   too   technical   view.   It   is

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submitted   that   as   such   both,   Clause   17.4   and
Clause   60.1   are   required   to   be   read   together.   It   is
submitted that the main aspect which is required to
be   considered   is   whether   the   NBCC   failed   to
complete   the   work   as   per   the   contract   and   whether
the   NBCC   abandoned   the   work   and   thereafter,
having   satisfied   that   even   during   the   extended
period, the NBCC was not able to complete the work,
the contract was rightly rescinded and therefore, the
security deposits were liable to be forfeited. 
 
4.1 It   is   submitted   that   therefore   both,   the   learned
Single Judge (in application under Section 34 of the
Arbitration   Act)   and   the   Division   Bench   of   the   High
Court have materially erred in upsetting / quashing
and   setting   aside   the   award   passed   by   the   learned
Arbitral Tribunal rejecting the Claim Nos.33 and 34. 
4.2 It   is   submitted   that   both,   the   learned   Single   Judge
as well as the Division Bench of the High Court have

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materially   erred   in   not   appreciating   the   fact   that
once   the   termination   is   justifiable   with   reference   to
the terms of the contract and even if a wrong clause
is   mentioned   in   the   letter   terminating   the   contract,
the   power   to   terminate   the   contract   cannot   be   said
to   be   illegal,   more   particularly,   when   the   power   is
traceable   to   the   specific   terms   of   the   contract,   i.e.,
Clause 17.4. 
4.3 Now, so far as the Counter Claim No.3 is concerned,
it   is   submitted   that   as   such   the   Division   Bench   of
the High Court has set aside the award of interest on
the   amount   advanced   against   hypothecation   of
equipments,   on   the   ground   that   there   is   no   such
provision   of   award   of   interest   in   the   contract   /
supplementary   Agreements.   It   is   submitted   that
however,   the   Division   Bench   of   the   High   Court   has
not properly appreciated the fact that there is no bar
to   award   interest   on   the   amount   advanced.   It   is
submitted   that   the   Arbitrator   has   power   to   award

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interest pendente lite unless specifically barred from
awarding it. Reliance is placed on the decision of this
Court   in   the   case   of   Raveechee   and   Company   Vs.
Union of India  reported in  (2018) 7 SCC 664 .
Making above submissions, it is prayed to allow
the present appeal and restore the award passed by
the Arbitral Tribunal. 
5. Learned   senior   counsel,   Mr.   Minocha   appearing   on
behalf   of   the   respondent   –   NBCC   while   supporting
the   impugned   judgment   and   order   passed   by   the
High   Court   has   vehemently   submitted   that   in   the
present   case   admittedly   the   IRCON   invoked   Clause
60.1 and rescinded the contract. It is submitted that
even the learned Arbitral Tribunal also observed and
held   that   the   IRCON   was   not   justified   in   rescinding
the contract under Clause 60.1. It is submitted that
however, thereafter the Arbitral Tribunal justified the
termination   of   the   contract   under   Clause   17.4,

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which  as   rightly  held   by   the  learned  Single  Judge   /
Division Bench was not permissible. 
5.1 It   is   submitted   that   the   finding   recorded   by   the
learned Arbitral Tribunal that the contract could not
have been rescinded under Clause 60.1 had attained
the finality. It is submitted that therefore the learned
Arbitral   Tribunal   was   not   justified   in   rejecting   the
claim   Nos.33   and   34   which   has   rightly   been   set
aside   by   the   learned   Single   Judge   and   the   Division
Bench,   which   are   not   required   to   be   interfered   with
by this Court in exercise of limited jurisdiction under
Article 136 of the Constitution of India. 
5.2 It is further submitted by learned Counsel appearing
on behalf of the respondent – NBCC that in absence
of   any   specific   provision   in   the   contract   /
supplementary   Agreements   on   interest   on   the
amount   advanced   against   hypothecation   of
equipments,   the   Division   Bench   of   the   High   Court

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has rightly set aside the same. 
Making   above   submissions,   it   is   prayed   to
dismiss the present appeal. 
6. We   have   heard   learned   Counsel   appearing   for   the
respective parties at length. 
7. As   observed   hereinabove,   challenge   to   the   award   by
the   learned   Arbitral   Tribunal   before   the   learned
Single   Judge   and   now   before   this   Court   is   with
respect   to   Claim   Nos.33   and   34   and   Counter   Claim
No.3 (Partly). 
7.1 The   learned   Arbitral   Tribunal   rejected   the   Claim
Nos.33 and 34 which were with respect to forfeiture
of   the   security   deposits   on   termination   /   rescind   of
the   contract.   The   Counter   Claim   No.3  of  the   IRCON
was   for   a   total   sum   of   Rs.3,65,38,806/­   towards
interest   on   various   advances   given   to   NBCC,   more
particularly,   with   regard   to   two   specific   advances
being   (1)   Special   Advance   and   (2)   Advance   against

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hypothecation   of   equipment.   The   learned   Arbitral
Tribunal   allowed   the   Counter   Claim   No.3   and
awarded   interest   at   the   rate   of   18%   per   annum   in
favour   of   the   IRCON   being   interest   on   special
advance   and   advances   against   hypothecation   of
equipments.   The   Division   Bench   of   the   High   Court
has   partly   allowed   the   appeal   and   allowed   the
interest in favour of IRCON at the rate of 18% so far
as special advance is concerned. 
7.2 While   considering   the   findings   recorded   by   the
learned Arbitral Tribunal and while appreciating the
submissions made by the learned counsel appearing
on   behalf   of   the   respective   parties,   relevant   clauses
of   the   Agreement,   more   particularly,   Clause
Nos.17.4,   59.1,   60.1   are   required   to   be   referred   to,
which are as under: 
“ TIME TO BE OR THE ESSENCE OF THE
CONTRACT:
17.4 The time for completion of the works
by   the   date   or   extended   date   fixed   for

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completion   shall   be   deemed   to   be   the
essence   of   the   contract   and   if   the
contractor   shall   fail   to   complete   the
works   within   the   time   prescribe   the
Company   IRCON   shall,   if   satisfied   that
the   works   can   be   completed   by   the
contractor within a reasonably short time
thereafter be entitled without prejudice to
any   other   right   or   remedy   available   on
that   behalf   to   recover   by   way   of
ascertained   liquidated   damages   a   sum
equivalent to one per cent of the contract
value   of   the   works   for   each   week   or   part
of   week   the   contractor   is   in   default   and
allow   the   contractor   such   further
extension   of   time   as   the   Project   Manager
may   decide.   If   the   Company   (IRCON)   is
not   satisfied   that   the   works   can   be
completed   by   the   contractor   and   in   the
event   of   failure   on   the   part   of   the
contractor   to   complete   the   works   within
the   further   extension   of   time   allowed   as
aforesaid   the   Company   (IRCON)   shall   be
entitled,   without   prejudice   to   any   other
right   or   remedy   available   in   that   behalf,
to   appropriate   the   contractor’s   security
deposit and rescind the contract, whether
or   not   actual   damage   is   caused   by   such
default. 
RIGHT   OF   COMPANY   (IRCON)   TO
DETERMINE CONTRACT:
59.1 The   Company   (IRCON)   shall   be
entitled   to   determine   and   terminate   the
contract   at   any   time   should   in   the
Company’s   (IRCON)   opinion,   the
cessation   of   work   become   necessary

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owing   to   paucity   of   funds   or   from   any
cause   whatsoever,   in   which   case   the
value of approved materials at site and of
work   done   to   date   by   the   contractor   will
be paid for in full at the rates specified in
the   contract.   Notice   in   writing   from   the
Company   (IRCON)   of   such   determination
and   the   reason   therefore   shall   be
conclusive evidence thereof. 
DETERMINATION OF CONTRACT OWING
TO DEFAULT OF CONTRACTOR:
60.1 If the contractor should:­ 
i. become bankrupt or insolvent or
ii. make   an   arrangement   with   or
assignment   in   favour   of   his   creditors,   or
agree   to   carry   out   the   contract   under
committee   of   Inspection   of   his   creditors,
or
iii. Being   a   company   or   corporation,   go
into   liquidation   (other   than   a   voluntary
liquidation   for   the   purpose   of
amalgamation or reconstruction), or 
iv. have an execution levied on his good
or property on the works, or 
v. assign   the   contract   or   any   part
thereof   otherwise   than   as   provided   in
Clause 7 of these conditions, or
vi. abandon the contract, or
vii. persistently   disregard   the

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instructions   of   the   Project   Manager,   or
contravene  any   provision   of  the  contract,
or
viii. fail   to   adhere   to   the   agreed
programme of work by a margin of 10% of
the stipulated period, or
ix. fail to remove materials from the site
or   to   pull   down   and   replace   work   after
receiving from the Project Manager notice
to   the   effect   that   the   said   materials   or
works   have   been   condemned   or   rejected
under conditions, or 
x. fail   to   take   steps   to   employ
competent   or   additional   staff   and   labour
as required under these conditions, or 
xi. fail   to   afford   the   Project   Manager   or
Project   Manager’s   representative   proper
facilities   for   inspecting   the   works   or   any
part   thereof   as   required   under   these
conditions, or 
xii. promise,   offer   or   give   any   bribe,
commission,   gift   or   advantages   either
himself   or   through   his   partner,   agent   or
servant   to   any   officer   of   employee   of
IRCON or to any person on his or on the
behalf in relation to the execution of this
or any other contract with IRCON.
Then   and   in   any   of   the   said   cases,   the
Project   Manager   on   behalf   of   the
Company   (IRCON)   may   serve   the
contractor with a notice in writing to that
effect   and   if   the   contractor   does   not

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within 7 days after  the delivery to him  of
such   notice   proceed   to   make   good   his
default in so far as the same is capable of
being   made   and   carry   on   the   work   or
comply   with   such   directions   as   aforesaid
to   the   entire   satisfaction   of   the   Project
Manager   the   Company   (IRCON)   shall   be
entitled   after   giving   48   hours   notice   in
writing   under   the   hand   of   the   Project
Manager   (to   remove   the   contractor   from
the   whole   or   any   portion   or   portions   as
may   be   specified   in   such   notice)   of   the
works   without   thereby   avoiding   the
contract   or   releasing   the   contractor   from
any   of   his   obligations   or   liabilities   under
the   contract   and   adopt   any   or   several   of
the following courses. 
a) to rescind the contract, of which
rescission   notice   in   writing   to
the   contractor   under   the   hand
of   the   Project   Manager   shall   be
conclusive   evidence,   in   which
case   the   security   deposit   of   the
contractor   shall   stand   forfeited
to   the   Company   IRCON   without
prejudice   to   the   Company’s
(IRCON)   right   to   recover   from
the   contractor   any   amount   by
which the cost  of competing  the
works by any other agency shall
exceed   the   value   of   the
contractor.
b) to   carry   out   the   works   or   any
part thereof, by the employment
of   the   required   labour   and
materials,   the   costs   of   which

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shall   include   lead,   lift,   freight,
supervision   and   all   incidental
charges   and   to   debit   the
contractor   with   such   costs,   the
amount   of   which   as   certified   by
the   Project   Manager   shall   be
final   and   binding   upon   the
contractor,   and   to   credit   the
contractor   with   the   value   of   the
works   done   as   if   the   works   had
been   carried   out   by   the
contractor   under   the   terms   of
the   contract.   And   the   certificate
of   Project   Manager   in   respect   of
the amount to be credited to the
contractor   shall   be   final   and
binding upon the contractor;
c) to   measure   up   the   work
executed   by   the   contractor   and
to   get   the   remaining   work
completed by another contractor
at   the   risk   and   expense   of   the
contractor   in   all   respects   in
which   case   any   expenses   that
may be incurred in excess of the
sum   which   would   have   been
paid   to   the   contractor   if   the
works   had   been   carried   out   by
him   under   the   terms   of   the
contract,   the   amount   of   which
excess as certified by the Project
Manager   shall   be   final   and
binding upon contractor shall be
borne   and   paid   by   the
contractor and may be deducted
from any moneys due to him by
the Company (IRCON) under the

//  19  //
contractor   or   otherwise   or   from
his   security   deposit.   Provided
always that in any case in which
any   of   the   powers   conferred
upon   the   Company   (IRCON)
hereof   shall   have   become
exercisable   and   the   same   shall
not   be   exercised,   the   non­
exercise   thereof   shall   not
constitute a waiver of any of the
conditions   hereof   and   such
powers shall notwithstanding be
exercisable   in   the   event   of   any
future   case   of   default   by   the
contractor  for  which  his liability
for past and future shall remain
unaffected.” 
  Considering   the   material   on   record   and   on
appreciation   of   evidence,   the   learned   Arbitral
Tribunal   though   observed   that   the   IRCON   was   not
justified   in   rescinding   the   contract   under   Clause
60.1, rescinding of the contract / termination of the
contract   was   justified   under   Clause   17.4,   and
thereby has rejected the Claim Nos.33 and 34 of the
NBCC   which   were   with   respect   to   forfeiture   of   the
security   deposits.   The   learned   Single   Judge   as   well
as   the   Division   Bench   of   the   High   Court   have   set

//  20  //
aside   the   award   passed   by   the   learned   Arbitral
Tribunal rejecting Claim Nos.33 and 34   inter alia   on
the   ground   that   once   the   Arbitral   Tribunal   gave   the
finding that the IRCON was not justified in invoking
Clause   60.1,   thereafter   it   was   not   open   for   the
Arbitral Tribunal to take the help of Clause 17.4 and
therefore,   the   learned   Arbitral   Tribunal   was   not
justified   in   rejecting   Claim   Nos.33   and   34   which
were   with   respect   to   forfeiture   of   security   deposits,
which could have been under Clause 17.4. 
However, it is required to be noted that as such
the   finding   recorded   by   the   Arbitral   Tribunal   on
applicability of Clause 17.4 and/or rescinding of the
contract   under   Clause   17.4   has   not   been   set   aside
either by the learned Single Judge or by the Division
Bench  of the  High Court  and therefore, the  findings
recorded   by   the   learned   Arbitral   Tribunal   on
applicability of Clause 17.4 has attained the finality.
The learned Arbitral Tribunal as such was absolutely

//  21  //
justified in considering whether IRCON was justified
in   rescinding   the   contract,   may   be   either   under
Clause   60.1   or   under   Clause   17.4.   Even   otherwise,
from   the   material   on   record   and   even   the   notice
dated   21.02.1994   and   the   subsequent   notice   dated
07.03.1994,   we   are   satisfied   that   the   IRCON   was
satisfied that the work could not be completed by the
contractor   even   within   further   extension   of   time.
Clause 17.4 provides that if the company (IRCON) is
not satisfied that the works can be completed by the
contractor   and   in   the  event  of  failure   on   the   part  of
the   contractor   to   complete   the   works   within   further
extension   of   time   allowed,   the   IRCON   shall   be
entitled,   without   prejudice   to   any   other   right   or
remedy   available   in   that   behalf,   to   appropriate   the
contractor’s   security   deposits   and   rescind   the
contract, whether or not actual damage is caused by
such   default.   Even   Clause   60.1   also   provides   for
determination   of   contract   owing   to   default   of

//  22  //
contractor.   It   provides   that   if   the   contractor   should
abandon   the   contract,   or   persistently   disregard   the
instructions   of   the   Project   Manager   or   contravene
any   provisions   of   the   contract….   then   the   Project
Manager   on   behalf   of   the   Company   may   serve   the
contractor with a notice in writing to that effect and
if   the   contractor   does   not   within   7   days   after   the
delivery to him of such notice proceed to make good
his default in so far as the same is capable of being
made   good   and   carry   on   the   work   or   comply   with
such directions as aforesaid to the entire satisfaction
of   the   Project   Manager,   the   Company   (IRCON)   shall
be   entitled   after   giving   48   hours   notice   in   writing
under   the   hand   of   the   Project   Manager   (to   remove
the   contractor   from   the   whole   or   any   portion   or
portions   as   may   be   specified   in   such   notice)   of   the
works   without   thereby   avoiding   the   contract   or
releasing   the   contractor   from   any   of   his   obligations
or   liabilities.   It   further   provides   that   in   such   a   case

//  23  //
the Project Manager on behalf of the IRCON shall be
entitled   to   rescind   the   contract,   in   which   case   the
security   deposit   shall   stand   forfeited   to   IRCON
without   prejudice   to   IRCON’s   right   to   recover   from
the   contractor   any   amount   by   which   the   cost   of
completing   the   works   by   any   other   agency   shall
exceed the value of the contractor. 
7.3 Thus,   both,   under   Clause   17.4   and   60.1,   on   failure
of the contractor to complete the work, the IRCON is
justified   in   rescinding   the   contract   and   forfeit   the
security   deposit.   At   the   cost   of   repetition   it   is
observed   that   the   learned   Arbitral   Tribunal   on
appreciation   of   entire   evidence   on   record,   had
specifically   observed   that   the   contractor   failed   to
complete   the   work   even   within   the   stipulated
extended   period   of   time   and   even   abandoned   the
work   and   therefore,   the   IRCON   was   justified   in
rescinding the contract. The said finding as observed
hereinabove   has   attained   finality.   Therefore,   the

//  24  //
IRCON   was   absolutely   justified   in   forfeiting   the
security   deposits   and   therefore,   the   learned   Arbitral
Tribunal   was   absolutely   justified   in   rejecting   Claim
Nos.33 and 34, which were with respect to forfeiture
of security deposits by the IRCON. Both, the learned
Single   Judge   as   well   as   Division   Bench   of   the   High
Court have seriously erred in setting aside the award
passed   by   the   learned   Arbitral   Tribunal   rejecting
Claim Nos.33 and 34. We are of the opinion that the
learned   Single   Judge,   therefore,   exceeded   in   its
jurisdiction   under   Section   34   of   the   Arbitration   Act
quashing  and  setting  aside the  well­reasoned  award
passed by   the learned Arbitral Tribunal  on  rejecting
Claim   Nos.33   and   34,   which   the   Division   Bench   of
the High Court has wrongly affirmed. 
7.4 Under   the   circumstances,   the   impugned   judgment
and order passed by the learned Single Judge as well
as   the   Division   Bench   of   the   High   Court   quashing
and   setting   aside   the   award   passed   by   the   learned

//  25  //
Arbitral   Tribunal   rejecting   Claim   Nos.33   and   34
deserve   to   be   quashed   and   set   aside   and   the   award
passed   by   the   learned   Arbitral   Tribunal   rejecting
Claim  Nos.33  and  34 is  required  to  be  restored  and
upheld. 
7.5 Now,   so   far   as   the   quashing   and   setting   aside   the
award   passed   by   the   Arbitral   Tribunal   awarding
interest  @   18%   on   advance  for  the   hypothecation   of
equipment,   by   the   learned   Single   Judge   confirmed
by the Division Bench is concerned, at the outset, it
is required to be noted that the Division Bench of the
High   Court   has   upheld   the   order   passed   by   the
learned Single Judge quashing and setting aside the
interest awarded by the learned Arbitral Tribunal on
advance   for   the   hypothecation   of   equipment   on   the
ground   that   there   is   no   such   stipulation   in   the
agreement / contract.   However, the High Court has
not   at   all   considered   Section   31(7)(a)   of   the
Arbitration   Act,   which   permits   the   arbitrator   that

//  26  //
unless otherwise agreed by the parties, where and in
so   far   as   an   arbitral   award   is   for   the   payment   of
money, the Arbitral Tribunal may include in the sum
for which the award is made interest, at such rate as
it deems reasonable, for the whole or any part of the
period between the date on which the cause of action
arose   and   the   date   on   which   the   award   is   made.
Thus,   unless   there   is   a   specific   bar   under   the
contract,   it   is   always   open   for   the   arbitrator   /
Arbitral   Tribunal   to   award   pendente   lite   interest.
Identical   question   came   to   be   considered   by   this
Court   in   the   case   of   Raveechee   and   Company
(supra).       In   the   said   decision,   it   is   observed   and
held   by   this   Court   that   an   arbitrator   has   the   power
to   award   interest   unless   specifically   barred   from
awarding   it   and   the   bar   must   be   clear   and   specific.
In the said decision, it is observed and held that the
liability   to   pay   interest   pendente   lite   arises   because
the   claimant   has   been   found   entitled   to   the   same

//  27  //
and   had   been   kept   out   from   those   dues   due   to   the
pendency of the arbitration, i.e., pendente lite.
Applying the law laid down by this Court in the
aforesaid   decision   to   the   facts   of   the   case   on   hand,
once it was found that the advance amount was paid
for  hypothecation of equipment and thereafter  when
the   Arbitral   Tribunal   awarded   the   interest   on
advance   for   hypothecation   of   equipment,   the   same
was not required to be interfered with by the learned
Single Judge in exercise of the powers under Section
34   of   the   Arbitration   Act   and   even   by   the   Division
Bench of the High Court while exercising the powers
under Section 37 of the Arbitration Act.  However, at
the   same   time   to   award   the   interest   @   18%   can   be
said   to   be   on   a   higher   side.     In   the   facts   and
circumstances of the case, if the interest is awarded
@   12%   on   advance   for   the   hypothecation   of
equipment,   the   same   can   be   said   to   be   reasonable
interest.  

//  28  //
8. In   view   of   the   above   and   for   the   reasons   stated
above,   present   appeal   succeeds.     The   impugned
judgment   and   order   passed   by   the   learned   Single
Judge   as   well   as   the   Division   Bench   of   the   High
Court   quashing   and   setting   aside   the   award   passed
by the Arbitral Tribunal rejecting Claim Nos. 33 and
34 are hereby quashed and set aside and the award
passed   by   the   Arbitral   Tribunal   rejecting   the   claim
Nos.   33   and   34   is   hereby   restored.     The   impugned
judgment and order passed by the Division Bench of
the High Court in confirming the judgment and order
passed   by   the   learned   Single   Judge   insofar   as
quashing and setting aside the award passed by the
Arbitral Tribunal awarding the interest @ 18% on the
advance   for   hypothecation   of   equipment   is
concerned,   the   same   is   hereby   quashed   and   set
aside and the award passed by the Arbitral Tribunal
awarding   the   interest   on   advance   for   hypothecation
of   equipment   is   hereby   restored,   however,   with   a

//  29  //
modification   that   there   shall   be   paid   an   interest   @
12%   pendente   lite   on   advance   for   hypothecation   of
equipment instead of 18% as awarded by the Arbitral
Tribunal.  
Present   appeal   is   accordingly   allowed   to   the
aforesaid   extent.     However,   in   the   facts   and
circumstances of the case, there shall be no order as
to costs. 
………………………………… J.
             (M. R. SHAH)
………………………………… J.
   (M.M. SUNDRESH)
New Delhi, 
March 17, 2023.