Case Note & Summary
The case arises from an auction of shops conducted by the Municipal Council Thanesar on 18.10.2006. Disputes arose regarding delivery of possession and completion of construction, leading to arbitration. The arbitrator passed an award on 14.10.2010 directing the Municipal Council to pay interest at 7% per annum on advance rent and non-refundable security, and damages at 12% interest on non-refundable security until possession. The award was upheld up to the Supreme Court. In execution proceedings, the Executing Court interpreted the interest as simple interest with yearly rests. The High Court, in civil revisions, held that the decree-holders were entitled to post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996, and that the interest should be calculated with quarterly rests (compound interest). The Supreme Court partly allowed the appeals. It affirmed the High Court's decision on post-award interest, relying on Hyder Consulting (UK) Ltd. vs. Governor, State of Orissa. However, it reversed the High Court's decision on the interest calculation, holding that the award did not specify compound interest and must be construed as simple interest at 7% per annum. The Court directed that both pre-award and post-award interest be calculated as simple interest at 7% per annum.
Headnote
A) Arbitration Law - Interpretation of Award - Interest Rate - The arbitrator awarded interest at 7% per annum without specifying whether simple or compound - The Supreme Court held that the award must be construed as simple interest, as the award did not indicate any intention to award compound interest - The Executing Court and High Court erred in awarding interest with quarterly rests (Paras 8-10).
B) Arbitration Law - Post-Award Interest - Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 - The High Court correctly held that decree-holders are entitled to post-award interest under Section 31(7)(b) - This issue is settled by Hyder Consulting (UK) Ltd. vs. Governor, State of Orissa (Paras 7, 11).
Issue of Consideration
Whether the decree-holders are entitled to post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996, and whether the interest awarded at 7% per annum should be calculated with quarterly rests (compound interest) or as simple interest.
Final Decision
Appeals partly allowed. The High Court's order on post-award interest under Section 31(7)(b) is affirmed. However, the direction for interest with quarterly rests is set aside. The award is construed as simple interest at 7% per annum. Pre-award and post-award interest shall be calculated as simple interest at 7% per annum. No order as to costs.
Law Points
- Arbitration award interpretation
- Post-award interest under Section 31(7)(b) of Arbitration and Conciliation Act
- 1996
- Executing court cannot modify award
- Simple interest vs compound interest
Case Details
Civil Appeal Nos. 1751-1763 of 2019 (Arising out of SLP(C) Nos. 15937-15949 of 2017)
Uday Umesh Lalit, Dr. Dhananjaya Y. Chandrachud
Ajay Majithia for appellants; A. Tewari, Anupam Raina, Raktim Gogoi, Chritarth Palli for respondents
Municipal Council Thanesar
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Civil appeals against High Court order in civil revisions arising from execution proceedings of an arbitration award.
Remedy Sought
Appellants sought to set aside the High Court order granting interest with quarterly rests and post-award interest.
Filing Reason
Dispute over interpretation of arbitration award regarding interest calculation and entitlement to post-award interest.
Previous Decisions
Arbitrator passed award on 14.10.2010; objections under Section 34 dismissed on 15.09.2012; First Appeals dismissed on 17.01.2014; SLP dismissed on 04.08.2014; Executing Court order on 23.03.2015; High Court order on 03.03.2017.
Issues
Whether the decree-holders are entitled to post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996.
Whether the interest awarded at 7% per annum should be calculated with quarterly rests (compound interest) or as simple interest.
Submissions/Arguments
Appellants argued that the award did not specify quarterly rests and that the Executing Court correctly interpreted it as simple interest with yearly rests.
Respondents argued that they were entitled to post-award interest under Section 31(7)(b) and that interest should be calculated with quarterly rests as per nationalized bank norms.
Ratio Decidendi
An arbitration award granting interest at a specified rate per annum without any indication of compounding must be construed as simple interest. The Executing Court cannot modify the award by adding quarterly rests. Post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 is payable as held in Hyder Consulting (UK) Ltd. vs. Governor, State of Orissa.
Judgment Excerpts
The Award did not even remotely suggest that such award of interest would be with a direction that interest be capitalized on yearly or quarterly basis. It was pure and simple award of interest @ 7% and could not be taken to be a direction to award compound interest.
The first issue was rightly answered in favour of the respondents. The question is no longer res integra and stands answered in clear terms in Para 10 of the Judgment of Bobde, J. and paras 27-28 of the Judgment of Sapre, J. in Hyder Consulting (supra).
Procedural History
Auction on 18.10.2006; disputes led to arbitration; arbitrator passed award on 14.10.2010; objections under Section 34 dismissed on 15.09.2012; First Appeals dismissed on 17.01.2014; SLP dismissed on 04.08.2014; execution proceedings; Executing Court order on 23.03.2015; civil revisions filed; High Court order on 03.03.2017; present appeals filed.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 31(7)(a), Section 31(7)(b), Section 34
