The concept of 'Party Autonomy', having held the centre stage and being the focus of the entire arbitration process, this principle also came to be applied in determining the power of the Arbitral Tribunal in the matter of grant of interest. Recently the Hon'ble Supreme Court of India was called upon to adjudge on this issue when it was observed that an arbitrator is a creature of a contract and is equally bound by it. The Hon'ble Supreme Court held that the discretion with regard to grant of interest is available to the Arbitral tribunal only when there is no agreement to the contrary between the parties. This article endeavours to analyse the perspective of the Hon'ble Supreme Court in applying the principles of 'party autonomy' in the matter of exercise of discretion by the Arbitral Tribunal for grant of interest.

FACTS OF THE CASE:

Appellant- Delhi Airport Metro Express Private Limited (hereinafter referred to as "DAMEPL") and the Respondent- Delhi Metro Rail Corporation (hereinafter referred to as "DMRC") entered into a Concession Agreement dated 25.08.2008. As per the Agreement, DMRC had to carry out civil works and DAMEPL had to execute the balance work. It is pertinent to highlight here that as per Article 29 of the Concession Agreement, in the event of termination, it was the respondent-DMRC, which was liable to make Termination Payment.

Subsequently, DAMEPL terminated the Concession Agreement by Termination Notice dated 08.10.2012 and DMRC referred the dispute to Arbitration on 23.10.2012. An arbitral Award came to be passed on 11.05.2017. Since, DMRC was aggrieved by the award, it filed a petition under Section 34 of the 1996 Act challenging the award dated 11.05.2017. Delhi High Court upheld the award vide order dated 06.03.2018 which on the further challenge before Supreme Court was also upheld on 09.09.2021. DAMEPL immediately filed Execution Petition before Delhi High Court on 12.09.2021. In the said proceedings, a contention was raised on behalf of DAMEPL which is the issue in the present article that the sum as specified under Clause 31(7)(a) of the 1996 Act, would include interest for a period from the date on which the cause of action arose to the date on which the award was made.

DECISION BY THE HON'BLE COURT:

IN RESPECT OF INTEREST TO BE AWARDED:

While deliberating on the issue at hand, the Hon'ble Court distinguished its earlier judgment titled Hyder Consulting (UK) Limited1 Vs Governor, State of Orissa (Hyder Consulting), wherein it was held that the sum awarded may include the principal amount and such interest as the Arbitral tribunal deems fit. The said judgment further held that, if no interest is awarded, then the "sum" comprises only the principal amount and will also include the interest amount pendente lite. However, in the present case Hon'ble Court was of the view that the provision and the part which deals with the power of the Arbitral Tribunal to award interest would operate only if it is not "otherwise agreed by the parties", as prescribed in Section 31(7)(a) of the 1996 Act. If there is an agreement between the parties to the contrary, then the Arbitral Tribunal would lose its discretion to award interest and will have to be guided by the agreement between the parties.

Therefore, the court observed that the legislative intent of Section 31(7)(a) of the 1996 Act is quite clear that the discretion regarding the grant of interest would be available to the Arbitral Tribunal only when there is no agreement to the contrary between the parties, and the Arbitral tribunal would cease to have any discretion with regard to the aspects mentioned in the said contractual provision.

IN RESPECT OF JUDICIAL INTERPRETATION OF "UNLESS OTHERWISE AGREED BY THE PARTIES":

The hon'ble court referred to the judgment of "NS NAYAK & Sons Vs State of Goa2" and noted the interpretation of the expression "unless otherwise agreed by the parties", wherein the Court had held that the term "unless otherwise agreed by the parties" indicates that it is open to the parties to agree otherwise. It is the basic scheme and an important aspect of the Arbitration Act, of 1996 that the Act emphasizes 'party autonomy' and that during the arbitral proceedings, the right is given to the parties to decide their own procedure.

Hon'ble Court while referring to the judicial interpretation of the statute as per the judgment titled "Hardeep Singh Vs State of Punjab and others3", held that while construing a provision, the full effect is to be given to the language used therein, giving reference to the context and other provisions of the statute. Court further held that an interpretation that renders a provision otiose or redundant should be avoided and no part of a statute and no word of a statute can be construed in isolation.

In addition to the above, while deliberating on the issue, of "how to interpret a general judgment", the Hon'ble Court observed that the 'ratio decidendi' is the rule deducible from the application of law to the facts and circumstances of a case which constitutes its ratio decidendi, and not some conclusion based upon facts which may appear to be similar. Further, the court held that one additional or different fact can make a world of difference between conclusions in two cases even when the same principles are applied in each case of similar facts.

CONCLUSION:

Hon'ble Court, while distinguishing Hyder Consultancy, held that there was no agreement between the parties in that case, with regard to the payment of interest and as such, the phrase "unless otherwise agreed by the parties" did not fall for consideration in the Hyder Consultancy case. However, to the contrary in the present judgment, Hon'ble Court held that the legislative intent is clear when the parties have agreed to the contrary on any of the aspects as mentioned in Section 31(7)(a) of the 1996 Act, the Arbitral Tribunal will cease to have any discretion and would be bound by an agreement between the parties.

By relying on the above conclusion, the Court was pleased to dismiss the present appeal while holding that Article 29.8 of the Concession Agreement categorically provided for the payment of interest on the Termination Payment amount. Therefore, the decision of the Arbitral tribunal on granting interest prior to the date of award and after the date of award was held to be in accordance with the provisions of the Concession Agreement. The Arbitral Tribunal had rightly given effect to the specific agreement between the parties. Hon'ble Court further held that the arbitral award has been passed in consonance with the provisions as contained in Section 31(7)(a) of the 1996 Act and in consonance with the phrase "unless otherwise agreed by the parties" and accordingly, the Arbitral Award stood confirmed.

Footnotes

1 (2015) 2 SCC 189

2 (2003) 6 SCC 56

3 (2014) 3 SCC 92

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