Report No. 176
2.23 Interest under sec. 31(7)(b): 18% to be the upper limit - proposal rejected
Under sec. 31(7)(b) of the Act, it is stated that a sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per cent per annum after the date of the award till date of payment. It has been pointed out that this provision is creating great hardships in cases where the award is silent as to the rate of interest in as much as, in all such cases, 18% interest becomes payable. It has been suggested that sec. 31(7)(b) be amended as to prescribe 18% as the upper limit. The provision in section 31(7)(b) reads as follows:
"Section 31(7)(b): A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at such rate as may be fixed by the Court but not exceeding 18%" Therefore, unless the award fixes a lesser rate, where the award is silent, 18% would apply. This is a special provision and is the reverse of section 34(2) of the Code of Civil Procedure, which says that if a decree is silent, interest from the date of decree is to be deemed as refused.
The provision in section 31(7)(b) is salutary and if this provision is not there, in the case of an award which is silent in regard to interest from the date of award till payment, the party who is to pay under the award can merrily use dilatory tactics and escape paying of interest. Having regard to the very nature of the provision, deeming a rate of interest, it is not possible to say that 18% is to be the maximum. After due consideration, the Commission has felt that there is no justification for reducing the rate below 18%. Hence no amendment is necessary in section 31(7)(b).