Reduction of Interest Rate: Kalsi Construction Company vs. Institution

In a significant ruling, the Supreme Court of India has ordered a reduction in the interest rate for the case involving Kalsi Construction Company and Institution. The dispute, arising from the construction contract for the Advanced Pediatrics Centre, led to arbitration resulting in an award of Rs.1,17,00,000/- with 10% per annum interest rate. Stay tuned to learn more about this landmark judgment.


  • The appellant’s appeal under Section 34 of the Arbitration and Conciliation Act challenging the award was dismissed.
  • The High Court affirmed the dismissal in the appeal filed by the appellant under Section 37 of the Act.
  • This appeal is against the High Court’s judgment in FAO No.4045 of 2003.
  • The High Court upheld the Arbitrator’s Award including the 18% per annum interest rate.
  • Kalsi Construction Company was allotted a contract for construction of Advanced Pediatrics Centre of the Post Graduate Institute of Medical Research and Education.
  • Dispute arose between the parties regarding completion of the work, which was referred to arbitration.
  • Learned Arbitrator awarded an amount of Rs.1,17,00,000/- against claim of Rs.10,63,00,000/- made by Kalsi Construction Company.
  • Interest at the rate of 18% per annum was awarded as per Section 31(7) of the Arbitration and Conciliation Act.

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  • Mr. Sudarshan Rajan, learned counsel for the appellant-Institution is only seeking a reduction in the rate of interest, not pressing other grounds of appeal.
  • Mr. Naresh Markanda, senior counsel for the respondent-Company, is open to the court’s discretion on the interest rate, emphasizing it should be reasonable due to the delay in payment since the award in 1999.
  • Section 31(7)(a) of the Arbitration and Conciliation Act allows for interest to be awarded unless otherwise agreed by the parties.
  • The parties had initially agreed on 18% per annum interest rate, but due to the extended period since the award and based on counsel’s submission, the court is considering reducing the rate using Article 142 of the Constitution of India.
  • Given the nature of the contract for construction and the overall circumstances, the court deems it appropriate to exercise its power under Article 142 to reduce the interest rate awarded by the Arbitral Tribunal.

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  • The award amount along with the accrued interest at the rate of 10% per annum shall be payable to the Company within eight weeks from today.
  • Failure to make payment within eight weeks will result in the entire award amount carrying interest at the rate of 18% as awarded by the Tribunal.
  • The appeal is disposed of with no order as to costs.
  • The interest rate previously set at 18% per annum is modified and reduced to 10% per annum.

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Case Number: C.A. No.-007148-007148 / 2019

Click here to read/download original judgement

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