M/s D. Khosla and Company vs The Union of India

Court

Supreme Court of India

Date

7 August 2024

Case No.

Special Leave Petition (Civil) No. 812 of 2014

Result

Dismissed

Bench

Pamidighantam Sri Narasimha, Pankaj Mithal

Citation

[2024] 8 S.C.R. 113 : 2024 INSC 587

Acts & Sections

Arbitration Act, 1940 Interest Act, 1978 CPC

Issue for consideration

Arbitrator passed award granting interest for two periods-(i) Preaward period, from the date of completion of the work up to the date of the award @ 12% per annum (simple interest); and (ii) Postaward, from the date of the award till the date of its payment or the date of the court decree @ 15% per annum. Whether interest was payable on interest or whether 15% interest per annum awarded would be on the principal sum award plus 12% per annum interest on it for the pre-award period.

Headnote

Arbitration Act, 1940 – ss.29, 17 – Interest Act, 1978 – s.3 – Code of Civil Procedure, 1908 – s.34 – Court /Arbitrator if can award compound interest or interest upon interest unless specifically provided under the statute or the terms and conditions of the contract:

Held: No – Though, there is no dispute as to the power of the courts to award interest on interest or compound interest in a given case subject to the power conferred under the statutes or under the terms and conditions of the contract but, where no such power is conferred ordinarily, the courts do not award interest on interest – Neither the Act specifically empowers the Arbitrator or the Court to award interest upon interest or compound interest nor there is any other provision which provides for grant of compound interest or interest upon interest – s.34, CPC is also silent in this regard whereas s.3(3) of the Interest Act specifically prohibits the same – In the present case, the award and the decree nowhere awarded 15% interest per annum on the amount awarded including the interest component i.e. the pre-award interest – This could not have been done even otherwise as there is no provision to that effect under the relevant statutes or the contract – The interest awarded under the award in the first part, was simple interest @ 12% per annum on the ‘amount awarded’ whereas in the second part, interest @ 15% per annum was awarded referring to the ‘amount awarded’ – The amount awarded in both the situations referred to the principal amount of compensation awarded i.e. Rs.21,56,745/- and was same and cannot be two distinct amounts – Concurrent judgments of the courts below not interfered with. [Paras 23, 24, 27, 28]

Judgment Pankaj Mithal, J. 1. Heard Smt. Jyoti Mendiratta, learned counsel for the petitioner and Smt. Aishwarya Bhati, learned A.S.G. for the Union of India. 2. In connection with a contract of 1984-85 between the petitioner and the respondent, an award came to be passed by the Arbitrator on 17.09.1997 under the Indian Arbitration Act, 1940.1 It was made the rule of the court under Section 14 read with Section 17 of the Act and a decree was accordingly drawn. 3. The award vide its paragraph 12 provided for the interest on the amount awarded. The interest was awarded for two periods viz. (

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