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Religare Finvest Limited vs. Atelier Automobiles Pvt. Ltd. & Ors.

Original Miscellaneous Petition (Commercial) · 2026:DHC:7704Decided 10 Sept 2026New Delhi Bench
O.M.P. (COMM) 533/2023CNR: DLHC010555102023
Justice Avneesh Jhingan

Background

Religare Finvest, a financial company, had lent about Rs. 11.5 crore to Atelier Automobiles at a contractual interest rate of 13-14% per year. When the borrower defaulted, arbitration followed, and the arbitrator awarded the lender the principal amount but fixed interest at only 10% per year, lower than the agreed rate, both for the period before the award and after it, without explaining why.

Decision Breakdown

The Court held that under the Arbitration Act, an arbitrator can depart from the contractually agreed interest rate, but must give reasons for doing so; here, no reasoning was recorded for choosing 10% instead of the parties' agreed 13-14% rate. The Court rejected the borrower's argument that the lender, having partly accepted repayments, was now barred from challenging the award, accepting an undisputed principal amount does not stop a party from separately challenging an unreasoned part of the same award, since courts can sever and strike down only the flawed portion. Accordingly, only the interest portion of the award was set aside; the principal amount was left undisturbed.

Lesson Learnt

An arbitrator must explain the reasoning behind any interest rate awarded, especially if it departs from what the loan contract itself specified: an unreasoned interest award can be challenged and struck down even while the rest of a favourable award stands.

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