Judgment of the Day | 9th March | Arbitration Tribunal Cannot Grant Interest If Contract Prohibits.

Описание: In today’s Judgment of the Day, the Supreme Court clarified an important principle under the Arbitration and Conciliation Act, 1996.
A bench of Justice Sanjay Karol and Justice Vipul M. Pancholi held that an arbitral tribunal cannot award pre-award or pendente lite interest when the contract expressly prohibits the grant of such interest.
The Court observed that although Section 31(7) of the Arbitration Act allows interest to be awarded, the arbitral tribunal must respect the contractual terms agreed between the parties. In this case, the tribunal attempted to grant interest by describing it as “compensation”, but the Supreme Court held that this cannot override an explicit contractual bar.
Invoking Section 37(1)(a) of the Arbitration & Conciliation Act, the Court set aside the part of the award granting pre-award interest.
This judgment reinforces a crucial arbitration principle:
Party autonomy and contractual terms prevail over arbitral discretion.
Watch this video to understand the legal principle, statutory framework, and implications for arbitration practice and contract drafting.
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