In Brief
A refrigeration company won an arbitral award against the Union of India for claims arising from a contract dispute. The arbitrator awarded 18% compound interest on the judgment amount. The High Court reduced this to 9% simple interest, citing its inherent powers. The Supreme Court allowed the appeal, holding that Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 mandates 18% per annum as the statutory interest rate when an arbitrator does not direct otherwise. Courts can only interfere with arbitral awards on narrow grounds under Section 34—patent illegality or denial of natural justice—not on the basis of reasonableness. The 1996 Act deliberately excludes courts' power to modify awards. Therefore, the High Court erred in reducing the interest rate, and the 18% award was reinstated.
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