Case Note & Summary
This case revolves around the North Delhi Municipal Corporation v. M/S S.A. Builders Ltd., in which the key issue pertains to post-award interest under Section 31(7) of the Arbitration and Conciliation Act, 1996. The primary contention was whether such interest should be calculated only on the principal sum or on the principal plus pre-award interest. The Supreme Court upheld that the law as laid down in M/s. Hyder Consulting (UK) Ltd. v. Governor, State of Orissa governs, which allows compound interest on the total sum.
Background of the DisputeA contract between the North Delhi Municipal Corporation and M/S S.A. Builders Ltd. in 1983 for flyover construction faced delays due to site unavailability. Arbitration was initiated under the Arbitration Act, 1940, leading to an award in 1997. The dispute centered on the calculation of post-award interest.
Arbitrator's AwardThe arbitrator awarded ₹1.7 crores with simple interest at 18% per annum from 1990 (cause of action) to payment. A corrigendum corrected minor typographical errors in the award.
Execution Proceedings and Legal ChallengesThe Corporation disputed the inclusion of compound interest in execution petitions, asserting the arbitrator had become functus officio and lacked jurisdiction to issue clarifications in 2005. The High Court upheld that clarification under Section 31(7)(b) was valid.
Supreme Court's ClarificationThe SC resolved that the Hyder Consulting (UK) Ltd. case overturned the earlier S.L. Arora case, and compound interest on the "sum" (principal + pre-award interest) is legally justified.
Ratio DecidendiThe ratio of the case lies in the interpretation of Section 31(7), emphasizing that:
The "sum" includes principal and accrued interest. Post-award interest under Section 31(7)(b) applies to this "sum."Acts and Sections Discussed:
Arbitration and Conciliation Act, 1996 Section 31(7)(a): Tribunal may award interest up to the date of the award. Section 31(7)(b): Post-award interest applies unless otherwise stated. Section 33: Clarification and correction of an arbitral award. Section 34: Procedure for setting aside an arbitral award.Subjects: Post-Award Interest Arbitration and Conciliation Act Functus Officio Doctrine Compound Interest in Arbitration Execution of Arbitral Awards
Issue of Consideration: NORTH DELHI MUNICIPAL CORPORATION VERSUS M/S. S.A. BUILDERS LTD.
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