INDIA Law and Practice Contributed by: Anuradha Mukherjee, Omar Ahmad, Vikram Shah and Soumya Dasgupta, Cyril Amarchand Mangaldas
Arbitration proceedings are terminated by the making of a final award by the arbitrator. An interim award can also be made at any time dur- ing the arbitral proceedings. 9.2 Rules Regarding Damages The awarding of damages is covered by Sec- tions 73 and 74 of the ICA. Section 73 requires a party in breach of the contract to reasonably compensate the counterparty by way of dam- ages. However, damages can only be awarded if loss has occurred, as would naturally and conse- quently arise due to the breach; such conse- quence must be one that could have been rea- sonably foreseen by the parties to arise due to the breach of the contract. The loss alleged to have been suffered cannot be remote. The “but for” test is also applied, under which no loss would have been suffered “but for” the breach by the respondent. The party claiming damages must also be able to show evidence of the loss suffered as a result of the breach. Section 74 of the ICA deals with the granting of liquidated damages if the parties have agreed the payment of such in the event of a breach. Liquidated damages are pre-determined esti- mates of losses that are payable in the event of loss suffered on account of a breach. However, they cannot be in the nature of a penalty – ie, liquidated damages ought not to be dispropor- tionate to the losses that could result from the breach. The contract may provide a ceiling for liquidated damages in the form of a maximum amount that can be awarded. However, if the liquidated dam- ages are only specified to be paid in the event of loss suffered due to a specific breach, then that would not prevent a party from claiming dam-
ages for losses arising due to a different breach of the contract for which no damages are stipu- lated. 9.3 Pre-judgment and Post-judgment Interest Pre-judgment interest, if claimed for, can be granted by the court in a suit. As per Order VII Rule 2A of the CPC, the plaints should specify the basis of any interest being sought, along with the rate, period, total amount, etc. As per the CPC, the court can grant interest for the following periods: • any period prior to the filing of the suit; • from the date of the suit to the date of the decree; and • from the date of the decree to the date of the payment. Arbitral Proceedings Interest for the pre-reference and pendente lite period Unless the parties have agreed to the contrary, the award can provide for interest at any rate deemed reasonable by the arbitrator, and for any period from the date on which the cause of action arose to the date of the award. Post-award interest Post-award interest is also payable on the amount directed to be paid by the award at a rate of 2% higher than the prevailing rate on the date of the award. This interest will be payable for the period from the date of the award to the date of payment.
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