Parties can mutually seek clarification from arbitrator even after 30 days: Supreme Court

The Supreme Court on Tuesday ruled that parties to an arbitration can seek clarification from the arbitrator beyond the legally stipulated period of 30 days if it is mutually agreed by them. .Section 33 of the Arbitration and Conciliation Act lays down that after the completion of 30 days, no party can seek correction or interpretation of an arbitral award. A Bench of Justice Abhay S Oka and Justice Ujjal Bhuyan gave a wider interpretation to Section 33 and held that the period of 30 days is not an inflexible period. "The language of sub-Section (1) of Section 33 makes it abundantly clear that the period of 30 days as provided in Section 33(1) is not an inflexible period. If the parties agree, the said period can be extended,” the Court said..It made the observations while dealing with a civil appeal related to an arbitral award connected to a work awarded by North Delhi Municipal Corporation (NDMC) to a contractor in 1983. Since the project was not completed on time, the matter was taken to arbitration. The arbitrator accepted a majority of claims made by the contractor. The same was upheld by courts including the Supreme Court.The execution of the award then led to question on whether post-award interest under Section 31(7) of the 1996 Act be applied to principal amount only or on the principal sum and accrued pre-award interest.In a clarification, the arbitrator in March 2005 said the post-award interest would apply to both the principal amount and pre-award interest at a rate of 18% per annum.The dispute then continued to remain pending before courts. Meanwhile, the Supreme Court in a seminal ruling also held that post-award interest would have to be awarded on the principal amount as well as on the interest accrued on the principal amount. Considering the top court's ruling, a single-judge of the Delhi High Court in 2017 held that the post-award interest would apply to both the principal and pre-award interest.After a challenge before the Division Bench, the NDMC took the matter in appeal to Supreme Court. .In its verdict, the top court reiterated that when an arbitral award grants a post award interest, it should be calculated as a percentage on both the principal amount and pre-award interest. Post award interest refers to an interest granted for the period between date of the award to the date of actual payment. "The majority view in M/s. Hyder Consulting (UK) Ltd. (supra) is that post-award interest can be granted by an arbitrator on the interest amount awarded," the Bench said..In the present case, the Court also pointed to Section 31 (7) of the Arbitration act, which states that unless the parties agree otherwise, an arbitrator can add interest to the final award amount.Since the interest portion was not covered by the contract agreement between the parties, the Court said,"The sum awarded would mean the principal amount plus the interest awarded from the date of cause of action upto the date of the award. Thereafter, as per Section 31(7)(b) of the 1996 Act, the sum (principal plus interest) would carry interest @ 18% from the date of the award to the date of payment. This would be consistent with the law laid down by this Court in M/s. Hyder Consulting (UK) Ltd (supra).".The Court also rejected the argument against validity of the arbitrator's clarification, noting that a Division Bench of the High Court had permitted the contractor to seek it.“This is a case where court had permitted the respondent to seek clarification from the learned Arbitrator beyond the initial period of 30 days whereafter the appellant fully participated in the clarificatory proceeding. In the circumstances, contention of the appellant that the learned Arbitrator had become functus officio and therefore lacked jurisdiction to issue the clarification cannot be accepted and is thus rejected.”.[Read Judgment]