Summary
Where the parties' MoU fixed 21% per annum interest on refund of advances from disbursement until repayment and the arbitral tribunal awarded exactly that, the award-holder could not claim compound or additional post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 at the execution stage. The Supreme Court set aside the High Court's remand and restored the executing court's order recording full satisfaction of the award.
Issues
- Whether a decree holder under an arbitral award granting 21% per annum interest from the date of advance until repayment, in terms of the parties' agreement, is entitled to interest on interest or post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996.
- Whether the High Court was justified in setting aside the executing court's order closing the execution proceedings and remanding the matter for fresh consideration of interest.
Provisions considered
- Section 31(7)(a), Arbitration and Conciliation Act, 1996Clause (a), opening with "unless otherwise agreed by the parties", lets the tribunal include interest in the sum awarded for the period up to the award. The tribunal's discretion is subservient to the parties' agreement, and where the parties have agreed on interest the tribunal must follow it. Here the MoU fixed 21% per annum until repayment and the award applied that term. (¶¶ 17, 17.1, 18, 20, 25.3, 27, 28, 29)
- Section 31(7)(b) (as it then stood), Arbitration and Conciliation Act, 1996Clause (b) provides that the sum awarded carries 18% per annum interest from the award to payment "unless the award otherwise directs"; it is a default that yields to interest awarded by the tribunal. Since the award itself specified interest until repayment, no further or compound interest under clause (b) could arise. (¶¶ 17, 19, 20, 29, 30)
Held
- Under Section 31(7)(a), party autonomy prevails over the tribunal's discretion on interest from the date of the cause of action up to the award; where the parties have agreed on interest, the tribunal must be guided by that agreement. Section 31(7)(b) is a default rule that applies only where the award does not otherwise direct interest for the post-award period. (¶¶ 20, 25.3, 27, 28)
- The decision in Hyder Consulting, permitting post-award interest on the aggregate of principal and pre-award interest, applies only where the award is silent or leaves interest unqualified. It has no application where the tribunal, bound by the parties' agreement, has specified both the rate and the duration of interest until repayment. (¶¶ 29, 30)
- Once the parties have agreed an interest regime and the award enforces it, courts cannot rewrite or enlarge the award by adding interest at the execution stage. As neither the MoU nor the award provided for compounding, the award-holder could not introduce a claim for compound interest in execution by relying on general principles. (¶¶ 30, 31)
- The executing court rightly held that the decree holder was not entitled to compound interest and that the amount paid by the judgment debtor satisfied the award, so the High Court erred in setting aside that order and remanding the matter. (¶¶ 32, 33)
Result
Appeal allowed; the High Court's order of remand set aside and the executing court's order closing the execution petition restored; no order as to costs.