Awarding Interest in Arbitration Proceedings

The Apex Court in the case of  M/s Oriental Structural Engineers Pvt Ltd  Versus  State of Kerala  Civil Appeal No. 3454 of 2011, made the following observations regarding computation of interest, when the amount for the same was not specified in the contract, “As the agreement is silent on the point of rate of interest but provides for payment of interest on delayed payment, the Tribunal’s exercise of fixing the rate should have been on the basis of applying the principle laid down in paragraph 43.1. in the case of G.C. Roy (supra). The said principle is applicable in a proceeding under the 1996 Act as well. This principle has been broadly incorporated in Section 31(7) (a) of the 1996 Act. The only difference between the situation contemplated in the aforesaid provision and the facts of this case is that the agreement involved is not silent on interest entitlement of the appellants on delayed payment but the agreement contains provision for such payment. Only the rate at which interest would be payable remained unspecified. In our view, simple interest at the rate of 8% would be just and equitable on the sum left unpaid, calculated otherwise on the basis of sub­paragraphs 1.6. to 1.8 of the award.”