Case Note & Summary
This appeal arose from a judgment dated 26 February 2020 of the High Court of Delhi, which dismissed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against a Single Judge's decision dated 7 February 2019. The core issue was whether the arbitrator had the discretion to grant post-award interest solely on the principal sum due. The appellant, Morgan Securities And Credits Pvt. Ltd., had entered into an agreement with Videocon Industries Ltd. on 27 January 2003 for bill discounting facilities, disbursing Rs. 5,00,32,656. After the dues remained unpaid, the appellant invoked the arbitration clause on 31 January 2006. The sole arbitrator awarded the appellant the principal amount along with pre-award and post-award interest at specified rates. The appellant challenged the award regarding post-award interest, arguing it should apply to the total sum awarded, including pre-award interest. The Single Judge dismissed the petition, affirming the arbitrator's discretion to limit post-award interest to the principal amount. The Division Bench upheld this decision, noting that the award was not silent on post-award interest. The Supreme Court, while issuing notice on the post-award interest issue, clarified that the arbitrator's discretion includes the ability to grant post-award interest on the aggregate of principal and pre-award interest. The court emphasized that the statutory rate of eighteen percent applies if the arbitrator does not exercise discretion. Ultimately, the appeal was dismissed, affirming the lower court's ruling and the arbitrator's discretion (Paras 1-24).
Headnote
A) Arbitration - Post-Award Interest - Discretion of Arbitrator - Section 31(7)(b) Arbitration and Conciliation Act, 1996 - The court held that the arbitrator has the discretion to grant post-award interest on a part of the sum, including both principal and pre-award interest, and that the phrase 'unless the award otherwise directs' only qualifies the rate of interest. The court clarified that the arbitrator's discretion is not fettered by Section 31(7)(b) and must be exercised reasonably and in good faith (Paras 22-22).
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 against the judgment of the Delhi High Court dated 26 February 2020, affirming the discretion of the arbitrator to grant post-award interest on a part of the sum, including both principal and pre-award interest.
Law Points
- Arbitration
- post-award interest
- discretion of arbitrator
- Section 31(7)(b) Arbitration and Conciliation Act
- 1996
- Hyder Consulting case
- SL Arora case
