M/S. ORIENTAL STRUCTURAL ENGINEERS PVT. LTD. versus STATE OF KERALA

M/S. ORIENTAL STRUCTURAL ENGINEERS PVT. LTD. versus STATE OF KERALA

The Supreme Court held that the contract (Clause 60.8) provided for payment of interest on delayed payments including the local currency component and the blank space in the appendix to bid did not amount to an active exclusion or waiver of interest; the Arbitral Tribunal's award directing interest on delayed local currency payments was sustainable and the decisions of the Arbitration Court and the High Court setting aside that part of the award were incorrect; however the rate fixed by the Tribunal was excessive and was modified to simple interest at 8% per annum, with interest to be computed as directed in paragraphs 1.6–1.8 of the award.

Parties
Appellant: M/S. ORIENTAL STRUCTURAL ENGINEERS PVT. LTD.; Respondent: State of Kerala
Jurisdiction
India
Judgment Date
22 April 2021
Procedural Posture
Civil Appeal / On Appeal From the High Court (final Judgment by Supreme Court)
Outcome
Appeal allowed
Legal Topics
Interest on Delayed Payment, Waiver, Patent Illegality, Section 34 Arbitration and Conciliation Act 1996, Interpretation of Contract, Rate of Interest
Arbitration Contract Law Interest Civil Procedure Interest on Delayed Payment Waiver Patent Illegality Section 34 Arbitration and Conciliation Act 1996 +2 more

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Parties

M/S. ORIENTAL STRUCTURAL ENGINEERS PVT. LTD.

Appellant

State of Kerala

Respondent

Procedural Posture

Civil Appeal / On Appeal From the High Court (final Judgment by Supreme Court)

Legal Issues

  1. 1 Whether the contractor was entitled to interest on delayed payments in respect of the local currency component under Clause 60.8 of the contract
  2. 2 Whether leaving the rate blank in the appendix to bid implies a contractual exclusion (zero/nil) of interest for local currency payments
  3. 3 Whether the appellants waived their right to claim interest by written communications

Ratio Decidendi

The Supreme Court held that the contract (Clause 60.8) provided for payment of interest on delayed payments including the local currency component and the blank space in the appendix to bid did not amount to an active exclusion or waiver of interest; the Arbitral Tribunal's award directing interest on delayed local currency payments was sustainable and the decisions of the Arbitration Court and the High Court setting aside that part of the award were incorrect; however the rate fixed by the Tribunal was excessive and was modified to simple interest at 8% per annum, with interest to be computed as directed in paragraphs 1.6–1.8 of the award.

Court Disposition

Appeal allowed

Orders

  • The judgment of the Division Bench of the High Court of Kerala dated 17.09.2009 is set aside
  • The judgment of the Sixth Additional District Judge, Ernakulam (Arbitration Court) in the Section 34 proceeding is set aside insofar as it set aside the Arbitral Tribunal's award on interest for the local currency component