Navigating section 31 of arbitration and conciliation act: Interim Measures and Interest in India
Section 31 of Arbitration and Conciliation Act, 1996, plays a vital role in arbitration proceedings in India. This provision allows arbitral tribunals to issue interim measures and include interest in arbitral awards. This article explores Section 31(7), its purpose, and recent judgments.
What is section 31 of arbitration and conciliation Act?
Section 31(7) empowers arbitral tribunals to grant interim measures during arbitration. These measures protect the interests of the parties while the dispute is resolved. The tribunal can issue orders to preserve the status quo or prevent harm.
Examples of Interim Measures Under Section 31(7)
Some of the interim measures the tribunal can order include:
- Ordering a party to deposit money in an escrow account to secure the claim.
- Restricting a party from disposing of assets to ensure the assets are not depleted before the final award is made.
- Appointing an administrator to manage a company’s affairs during the arbitration process.
Key Points to Remember About Section 31(7)
- Tribunal’s Discretion: The tribunal decides whether to grant interim measures. It considers factors like urgency and the likelihood of harm before making a decision.
- Security for Costs: The tribunal may ask the requesting party to provide security. This ensures the other party’s legal expenses are covered if the interim measure is later found unnecessary.
- Enforcement of Interim Measures: Under Section 36 of the Act, courts can enforce orders passed under Section 31(7). If a party fails to comply, the other party can approach the court for enforcement.
Recent Case Law on Section 31(7)
In Vijay Kishanlal Malhotra vs. M/s Life Insurance Corporation of India (2020), the Supreme Court upheld the broad discretion of arbitral tribunals under Section 31(7). The court confirmed that interim measures protect the parties’ rights and ensure the arbitration process remains effective.
- Understanding Interest Under Section 31(7) of the Arbitration and Conciliation Act
In addition to interim measures, Section 31(7) also addresses the inclusion of interest in arbitral awards. When an award requires the payment of money, the tribunal has the authority to determine the rate of interest for the period between the date the cause of action arose and the date the award is made. This provision ensures that the party receiving the award is compensated for the delay in payment.
- Key Aspects of Interest Under Section 31(7)
- Interest on Award: The tribunal can include interest on the awarded sum to account for any delay in the payment of the award.
- Reasonable Rate: The tribunal has the discretion to set an interest rate that it deems reasonable based on the facts of the case.
- Higher Rate Post-Award: If the award is not paid within the stipulated time, the awarded sum will accrue an interest rate that is typically 2% higher than the prevailing market rate from the date of the award until the payment is made.
Recent Judgment on Interest in Arbitration Awards
In Society for Promotion of Community Standards v. Union of India (2024), the Delhi High Court reiterated the tribunal’s discretion to include interest in arbitral awards. The Court emphasised that the goal of awarding interest is to ensure that the party who is delayed in receiving the amount is adequately compensated for the time lost.
Why Section 31(7) is Important for Arbitration in India
Section 31(7) is essential in ensuring that arbitration remains an effective and timely alternative dispute resolution mechanism. It empowers the arbitral tribunal to protect the subject matter of the dispute through interim measures and provides a fair remedy for delays in payment through the inclusion of interest. This enhances the arbitration process, making it more accessible and equitable for all parties involved.
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