The Allahabad High Court while setting aside an order which reduced the interest awarded by the arbitrator observed that the reduction of interest is nothing but a modification of the original arbitration award, and accordingly, the same is illegal and against the principles established by the Supreme Court.
Brief Facts:
The present appeal was filed by the claimant/award holder against the order passed by the District Judge, Kaushambi dated January 15, 2008, wherein the appeal was partly allowed and the rate of interest awarded by the Arbitrator was reduced from 14% to 6% per annum.
Contentions of the Petitioner:
The learned counsel appearing on behalf of the appellant submitted that the Court does not have the power to modify an award and further relied on the judgements of the Supreme Court in the case of Project Director Vs. M. Hakeem and S.V. Samudram Vs. State of Karnataka & Anr. to buttress his arguments. Further, he referred to the decision in the case of Dakshin Haryana Bijli Vitran Nigam Limited v. Navigant Technologies Private Limited wherein it was held that the court cannot correct errors of the arbitrators and it can only quash the award leaving the parties free to begin the arbitration again if it is desired.
Contentions of the Respondent:
The learned counsel appearing on behalf of the respondent submitted that the modification is only in terms of the interest and reasons have been provided in the impugned order for reducing the same.
Observations of the court:
The court stated that it is settled by a catena of Supreme Court judgments that the Court does not have the power under Section 34 of the Arbitration and Conciliation Act, 1996 to modify an award and the court under Section 34(2) of the Act has the power to sever parts of the award and set aside the same in toto, if the severance does not impact the remaining award that is upheld under Section 34 of the Act.
Further, the court referred to the decision of the court in the case of Larsen Air Conditioning and Refrigration Company, wherein the court dealt with the point of the modification of the rate of interest and categorically held that no such modification is permissible under Section 34 of the Act.
The court stated that in the present case, the rate of interest that was awarded to be paid on the principal sum was 14% per annum from 25.3.2000 till the payment was made and in the impugned order this rate of interest has been reduced to 6% without providing any cogent reasons for the same and further stated that the reduction of interest is nothing but a modification of the original arbitration award, and accordingly, the same is illegal and against the principles established by the Supreme Court.
The decision of the Court:
The court allowed the appeal and set aside the impugned order.
Case Title: Sushil Kumar Mishra vs. State of U.P. and Anr.
Coram: Hon’ble Mr. Justice Shekhar B. Saraf
Case No.: Arbitration Appeal No. – 874 of 2023
Advocate for the Petitioner: Mr. Vinod Sinha, Mr. Mahesh Sharma and Mr. Sharad Sinha
Advocate for the Respondent: S.C.
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