The Supreme Court has ruled that an arbitration tribunal has no power to direct payment of compound interest or interest on interest on the award amount from the date of the award to the date of payment. It declared in the appeal case, State of Haryana vs SL Arora & Co, that the Punjab Haryana high court was wrong in taking a contrary view. The Supreme Court itself had misconstrued the law last year in its judgment in UP Cooperative Federation Ltd vs Three Circles. The present judgment therefore laid down the correct law. In this case, the work on the construction contract was delayed, leading to disputes. They were referred to a sole arbitrator, who gave an award in favour of the contractor. However, the firm wrongly calculated the claim in the first instance. Later, it presented the full claim with interest on interest, which was approved by the arbitration tribunal, and later upheld by the high court. The state government appealed to the Supreme Court and it allowed the appeal.
