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The High Court of Delhi, in the matter titled as M/s Khubi Ram Rajiv Kumar & Co. v. M/s Naveen Enterprises & Ors.1, through its judgment dated 20.12.2025, allowed an appeal under Section 37 of the A&C Act and held that the arbitral tribunal had erred in rejecting the claimant's entitlement to interest despite the existence of clear contractual terms governing the commercial transactions between the parties.
The issue before the High Court was whether the arbitral tribunal and the lower court were justified in not allowing interest for delayed payments, notwithstanding an express interest clause forming part of the invoices in violation Section 28(3) of the A&C Act.
The High Court held that once the arbitral tribunal has accepted the invoices as constituting binding contractual documents, then it cannot selectively ignore or exclude the terms and conditions contained therein, including the clause stipulating interest at the rate of 1.75% per month. It was further held that the arbitrator having recognised the arbitration clause contained in the invoices was bound to enforce the accompanying interest clause in accordance with Section 28(3) of the A&C Act. Consequently, the award and the order passed under Section 34 of the A&C Act were set aside to the extent of denied interest, and the High Court granted interest at 1.75% per month (21% per annum) on the outstanding principal amount from the date it became due until the date of the award, and thereafter at 18% per annum until realisation.
Footnote
1 FAO 407/2016.
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