The High Court of Delhi (Delhi HC) vide its judgment dated 01.08.2023 in the case of National Projects Constructions Corporation Ltd. v. M/s Interstate Construction [FAO (OS) (COMM) 175/2021] held that the Arbitral Tribunal while providing remedy in the form of “interest” in an award must be governed by section 31 (7) of the Arbitration and Conciliation Act, 1996 (Arbitration Act).
The Division Bench of the Delhi HC, in this ruling held that section 31 (7) of the Arbitration Act recognizes only two periods, i.e., one being the period from date of cause of action till the date of Award, and the second being the period starting from the date of Award till payment. The Court further held that awarding interest on interest amounts to compounding of interest which is manifestly illegal and contrary to the explicit terms for award of interest provided under section 31 (7) of the Arbitration Act.
