Case: Union of India Vs. M/s. Pradeep Vinod Construction Co

2. The arbitral award dated 16.08.2005, which is a subject matter of consideration, awarded interest to the contractor on account of delayed payment. The orders which came to be passed during the course of the challenge to the above award dated 16.08.2005, clearly depict, that interest was not awarded by the arbitrators either on earnest money or on security deposit. Yet, it is sought to be asserted on behalf of the appellant, that the grant of interest in the arbitral award fell foul of two judgments rendered by this Court.

Court's reasoning:
Having given our thoughtful consideration to the contractual obligations entered into by the parties through clause 16, we have no reason to doubt, firstly, that the clause related exclusively to earnest money and security deposit. The above Clause did not relate to the other contractual obligations between the parties. A perusal of clause 16 (1) further clarifies the position, inasmuch as, even if some payment under the contractual obligation was diverted to make good the security deposit payable, no interest would be payable thereon as well. Therefore, there can be no doubt, thatof interest, contemplated between the parties under clause 16, was exclusively limited to the component of earnest money and the security deposit, which was held by the appellant and nothing else. Even though, there can be no dispute whatsoever, that Clause 16(2) is in pari materia with the clause taken into consideration in Tehri Hydro Development Corpn.Ltd. case (supra), yet in the case before us, having read the clause in its entirety, we are satisfied, that the parties had agreed, that payment of interest would not be due, only with reference to earnest money and security deposit. Thus viewed, we have no hesitation in concluding, that the determination in the arbitral award, of component of interest, payable by the appellant to the respondent, was in terms of the contractual obligation. Nothing in the contract provided forof interest on the contractual obligations.8. In recording our finding, we have merely given effect to the judgments relied upon by the learned counsel for the appellant. We have interpreted the contractual clause pertaining to the obligation of interest, and rendered our determination thereon.