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Union of India v. M/s Concrete Products and Construction Company and Others

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 2950-2951 of 2014)Decided 3 Mar 2014
Civil Appeal Nos. 2950-2951 of 2014
Justice S.S. Nijjar · Justice F.M. Ibrahim Kalifulla

Background

Railway contractors disputed deductions from payments for concrete sleepers, said to recover earlier overpayments for raw-material price escalation. An arbitrator ordered repayment with interest, and the High Court upheld the award. The Union appealed against the interest component, relying on clauses permitting notified retention of money pending determination of claims and excluding interest on that retention.

Decision Breakdown

The Court held that the arbitrator had to respect the contract's express exclusion of interest on the retained amounts. It allowed the appeals on interest, holding that interest could not be awarded from recovery until the arbitral award. Its reasoning recognised interest for the interval between the award and deposit in the High Court, followed by no further interest after deposit and conversion into fixed deposits. The judgment's final operative wording is inconsistent with that explanation about the intermediate interval. The ruling concerned the interest component, rather than overturning the contractors' underlying repayment entitlement.

Lesson Learnt

An arbitrator's power to award interest is subject to the applicable contractual terms, and the period before an award must be distinguished from later periods. This source's inconsistent final wording means it should not be used alone to calculate a precise post-award interest entitlement.

Official source (sci.gov.in)View Judgment (PDF)

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