Arbitration Law | M/s. Shahi and Associates v. State of U.P., C.A. No. 3559 of 2010 08-08-2019 SC

SUPREME COURT OF INDIA | Arun Mishra, S. Abdul Nazeer & M.R. Shah, JJ. M/s. Shahi and Associates v. State of U.P. C.A. No. 3559 of 2010 08-08-2019

The Arbitration and Conciliation Act, 1996 - Section 31 (7) (b) - The Uttar Pradesh Civil Laws (Reforms and Amendment) Act, 1976 - Section 24 - Reduction of the Interest - Reduced the statutory interest to 6% p.a. from 18% p.a. as awarded by the Arbitrator - The interest awarded by the Arbitrator in accordance with Section 31(7)(b) of the Act of 1996 is restored.

In the instant case, though the agreement was earlier to the date of coming into force of the Act of 1996, the proceedings admittedly commenced on 27.10.1999 and were conducted in accordance with the Act of 1996. If that be so, para 7­A of Section 24 of the U.P. Amendment Act has no application to the case at hand. Since the rate of interest granted by the Arbitrator is in accordance with Section 31(7)(b) of the Act of 1996, the High Court and the District Judge were not justified in reducing the rate of interest by following the U.P. Amendment Act. The appeal, therefore, succeeds and it is accordingly allowed. [Paras 12 & 13]



The Arbitration and Conciliation Act, 1996 - Section 31 (7) (b) - The Uttar Pradesh Civil Laws (Reforms and Amendment) Act, 1976 - Section 24 - Reduction of the Interest - the provisions of Arbitration Act, 1940 including the State amendment namely para 7­A of Section 24 of U.P. Amendment Act will have no application to the proceedings commenced after coming into force of the Act of 1996.

Section 31(7)(b) of the Act of 1996 clearly mandates that, in the event the Arbitrator does not give any specific directions as regards the rate of interest on the amount awarded, such amount 'shall' carry interest @ 18% p.a. from the date of award till the date of payment. Since the Arbitration Act, 1940 has been repealed by way of Section 85 of the Act of 1996, the Schedule to the Arbitration Act, including the State amendment, also stands repealed. The only exception is provided in sub­-section (2)(a) of Section 85 where a proceeding which had commenced when the Arbitration Act of 1940 was in force and continued even after coming into force of the Act of 1996, and all parties thereto agreed for application of the old Act of 1940. Therefore, the provisions of Arbitration Act, 1940 including the State amendment namely para 7­A of Section 24 of U.P. Amendment Act will have no application to the proceedings commenced after coming into force of the Act of 1996.

Petitioner's Advocate : Abhijit Sengupta

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