Arbitration and Conciliation Act, 1996 – s.31(7)(a), (b) – High Court set aside the order of the Executing Court rejecting the petition filed by the respondent-decree holder for enforcement of the arbitral award on the ground that respondent is not entitled to compound interest and that the amount paid by the appellant-judgment debtor to the respondent was in full satisfaction of the award – Respondent, if entitled to interest upon interest in terms of s.31(7)(b) or the interest awarded by the arbitral tribunal in the award in terms of the MoU entered into between the parties fulfil the requirement of s.31(7)(a) and (b):
Held: 1.1 Clause 6(b) of the MoU expressly provided that in the event of termination of the MoU, the appellant must refund all advances with interest at the rate of 21% per annum from the respective dates of disbursement till repayment – Thus, in the light of the express provision contained in clause (a) of sub-section (7) of s.31, the arbitral tribunal awarded interest in terms of the MoU from the date of the cause of action till the date of repayment – As the arbitral tribunal had expressly provided interest till the date of repayment, question of additional or compound interest under clause (b) of sub-section (7) of s.31 would not arise. [Para 29]
1.2 Arbitral tribunal in its award complied with the MoU agreed by and between the parties – Thus, it exercised its discretion within the overall framework of s.31(7) aligning with the legislative intent that the award, rather than the statutory default, should govern the parties, more so in a case as in the present one where the parties themselves made provision for interest throughout. [Para 29]
1.3 Reliance placed by the respondent on Hyder Consulting case to claim post-award interest is misplaced – That principle would apply only when the arbitral tribunal leaves a matter unqualified or is silent – In the present case, the arbitral tribunal bound by the MoU and exercising its statutory discretion had already specified the interest rate (21% per annum) and the duration (until repayment). [Para 30]
1.4 The MoU did not stipulate compounding of interest; the arbitral tribunal did not award compound interest; therefore, respondent cannot at the stage of execution seek to introduce claim of compound interest by drawing on general principles. [Para 31]
1.5 High Court not justified in setting aside the order of the executing court and remanding the matter for fresh determination – Impugned judgment set aside – Order of the executing court restored. [Paras 32, 33]
Arbitration and Conciliation Act, 1996 – s.31(7)(a), (b) – ‘sum’; ‘unless the award otherwise directs’:
Held: 1.1 From a conjoint analysis of s.31(7)(a) and s.31(7)(b), it is discernible that insofar award of interest from the date on which the cause of action arose till the date of the award is concerned, the legislative intent is that the parties possess the autonomy to determine the interest and the rate of interest for the aforesaid period – Clause (a) i.e. discretion of the arbitral tribunal to award interest is subject to agreement by and between the parties – Therefore, party autonomy takes precedence over the discretion of the arbitral tribunal. [Para 20]
1.2 However, clause (b) is subject to award of interest by the arbitral tribunal – As per clause (b), the ‘sum’ directed to be paid under an arbitral award shall carry interest at the rate of 18% per annum from the date of the award to the date of payment ‘unless the award otherwise directs’ – Therefore, this provision is subject to award of interest by the arbitral tribunal – If it awards interest, then the same shall be applicable from the date of the award till the date of payment; if not, then the ‘sum’ as adjudged under clause
(a) shall carry interest at the rate of 18%. [Para 20]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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