In Brief
In this arbitration dispute under a hire purchase agreement, the Court addressed the appropriate rate of interest payable on a defaulted sum. The parties had contractually agreed to pay 3% per month (36% per annum) as compensation on overdue amounts. The arbitrator awarded interest at this agreed rate, but the District Judge reduced it to 15% per annum, and the High Court partly interfered. The Supreme Court held that Section 31(7) of the Arbitration Act permits arbitrators to determine pre-award interest only when parties have not already agreed to a rate in their contract. Since the parties had explicitly agreed to 36% per annum in the hire purchase agreement, the arbitrator's award was valid and enforceable. The Court upheld 36% pre-award interest and directed 18% post-award interest."
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