Facts
The Appellants were awarded a contract by the State of Kerala for the upgradation of State Highway for two stretches Muvattupuzha-Thodupuzha and Muvattupuzha-Angamaly. An Appeal was presented before the Supreme court from disputes arising between the parties primarily relating to making payment to the Appellants. However, arguments advanced before the Supreme Court over the entitlement of the Appellants to receive interest on delayed payment. An agreement was done by the parties which had a provision for resolution of disputes by a Disputes Review Board (DRB). The disputes being not resolved were referred to the Arbitral Tribunal. The tribunal passed the award in favour of the Appellants. The award of Tribunal was then assailed by the State of Kerala before the District Court at Ernakulam. The award was then set aside. Aggrieved by the decision the Appellants filed an appeal before the Supreme Court.
Arguments placed before the Court
The Appellant pleaded before the Supreme Court to set aside the order of the Division Bench of the High Court of Kerala. They pleaded to receive interest on delayed payment in relation to the local currency component of the contract. The Respondents contested this providing a communication before the court in which the Appellants mentioned waiving off the interest. The Appellants, however, said this to be made under duress and coercion.
Court’s Observations
The Court noted that the view taken by the Tribunal on consideration of the contract was both reasonable and possible. The court further noted that the rate of interest directed is rather excessive. The Court stated that 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 Secretary, Irrigation Department, Government of Orissa & Ors, vs. G.C.Roy. [(1992) 1 SCC 508].
Court’s Judgment
The Supreme Court set aside the Judgment of the Division Bench of the High Court of Kerala and entitled the Appellants to receive interest on delayed payment in relation to the local currency component of the contract.
Click here to read the Judgment
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