If the clause prohibiting the interest is not specifically pleaded, the arbitral tribunal may award interest on the security deposit: Madras High court

According to the Madras High Court, if the party that was wronged didn’t ask for the prohibition, the arbitral panel might still grant interest awards even though there was a contractual prohibition. The matter was between The Union of India v. R.K. Constructions (Arb. O.P. (Com Div) No. 148 of 2022) and was presided over by Hon’ble Mr. Justice Senthilkumar Ramamoorthy.


The parties signed a deal on October 13, 2005. The agreement was dissolved on May 15, 2007, as a result of several disagreements. The arbitral award was eventually issued by the respondent on April 20, 2021, and it was dated August 28, 2007.

According to the arbitral ruling, the arbitrator granted the petitioner’s request for a return of the security deposit as well as pendente lite interest at a rate of 12% per annum and additional claims.


The Justice Senthilkumar Ramamoorthy panel ruled that a party cannot rely on a GCC provision to challenge an arbitral judgment that grants interest in violation of the clause if the party did not raise the issue with the arbitral tribunal during the arbitration.

The court stated that under an adversarial system, decisions are made based on facts and pleadings. A party desiring to contest a claim based on a contractual prohibition must expressly plead and provide the relevant document as evidence; otherwise, the objection is deemed waived.

It further concluded that a contract between the parties is not a statute over which the tribunal may independently exercise jurisdiction, therefore in order for the tribunal to consider its content, it must be submitted in evidence.

Accordingly, the court rejected the petition.

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