Case Note & Summary
The appeal arose from a judgment of the Delhi High Court dismissing an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, which challenged a Single Judge's decision upholding an arbitral award. The dispute centered on whether the arbitrator had discretion to grant post-award interest only on the principal sum under Section 31(7)(b) of the Act. The appellant, Morgan Securities And Credits Pvt. Ltd., and the respondent, Videocon Industries Ltd., had entered into an agreement in 2003 for bill discounting facilities, with the appellant disbursing Rs. 5,00,32,656. Due to non-payment, arbitration was invoked, leading to an award in 2013 that granted pre-award interest at varying rates and post-award interest at 18% per annum solely on the principal amount, citing the decision in State of Haryana v. SL Arora. The appellant challenged this under Section 34, arguing that post-award interest should be on the aggregate of principal and pre-award interest as per Hyder Consulting (UK) Limited v. Governor, State of Orissa, which overruled SL Arora. The respondent contended that the arbitrator's discretion under Section 31(7)(b) included determining the quantum, and since the award was not silent on post-award interest, Section 31(7)(b) did not apply. The Supreme Court analyzed Section 31(7)(b), noting the phrase 'unless the award otherwise directs' allows the arbitrator to specify the quantum for post-award interest. It held that the arbitrator exercised this discretion by limiting interest to the principal, and as the award was explicit, the statutory default under Section 31(7)(b) was not triggered. The Court affirmed that Hyder Consulting clarified the 'sum' includes principal and pre-award interest only when the award is silent, which was not the case here. Consequently, the appeal was dismissed, upholding the High Court's decision that judicial interference was unwarranted.
Headnote
A) Arbitration Law - Post-Award Interest - Arbitrator's Discretion on Quantum - Arbitration and Conciliation Act, 1996, Section 31(7)(b) - The arbitrator awarded post-award interest at 18% per annum only on the principal amount, not on the aggregate of principal and pre-award interest, based on the overruled decision in State of Haryana v. SL Arora. The Supreme Court held that under Section 31(7)(b), the arbitrator has discretion to determine the quantum over which post-award interest is granted, and since the award specifically directed interest only on the principal, the statutory default under Section 31(7)(b) did not apply. The appeal was dismissed, affirming the High Court's decision. (Paras 1-15) B) Arbitration Law - Post-Award Interest - Interpretation of 'Sum' in Section 31(7)(b) - Arbitration and Conciliation Act, 1996, Section 31(7)(b) - The appellant contended that post-award interest should be on the aggregate of principal and pre-award interest as per Hyder Consulting (UK) Limited v. Governor, State of Orissa. The Court analyzed that Hyder Consulting overruled SL Arora, clarifying that the 'sum' in Section 31(7)(b) includes principal and pre-award interest, but this applies only if the award is silent on post-award interest. Here, the award was not silent, so Section 31(7)(b) was not invoked. (Paras 4-10) C) Arbitration Law - Judicial Review - Scope of Interference with Arbitral Award - Arbitration and Conciliation Act, 1996, Sections 34, 37 - The Single Judge and Division Bench of the Delhi High Court dismissed challenges to the arbitral award, holding that the court would not interfere with the arbitrator's exercise of discretion in granting post-award interest only on the principal. The Supreme Court upheld this, noting that the arbitrator's discretion under Section 31(7)(b) is broad and includes determining the quantum, and judicial intervention is limited unless the award is perverse or contrary to law. (Paras 4-5, 15)
Issue of Consideration
Whether the arbitrator has the discretion to grant post-award interest only on the principal sum due under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996
Final Decision
The Supreme Court dismissed the appeal, upholding the judgment of the Delhi High Court dated 26 February 2020, and held that the arbitrator had discretion under Section 31(7)(b) to grant post-award interest only on the principal sum, and the award was not silent on post-award interest, so Section 31(7)(b) was not invoked
Law Points
- Arbitrator's discretion under Section 31(7)(b) of the Arbitration and Conciliation Act
- 1996 includes determining the quantum over which post-award interest is granted
- not just the rate
- post-award interest is payable on the 'sum' awarded
- which includes principal and pre-award interest unless the award otherwise directs
- the phrase 'unless the award otherwise directs' in Section 31(7)(b) allows the arbitrator to specify the quantum
- and if so specified
- the statutory default under Section 31(7)(b) does not apply
- the decision in Hyder Consulting (UK) Limited v. Governor
- State of Orissa overruled State of Haryana v. SL Arora on the interpretation of 'sum' for post-award interest
