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TMI Blog2025 (5) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of the contract between the parties or not? ii) Whether the respondent imposed any penalty/liquidated damages upon the complainant till the completion of work? iii) Whether the complainant is entitled to claim amounts as per the claim petition? 5. Issues No. 1 & 2 were decided in favour of the respondent and against the petitioners. The findings of learned Sole Arbitrator on Issue No. 3 are extracted herein below:- "Respondent shall pay a sum of Rs. 61,48,277/- (Rs. Sixty One Lakhs, forty eight thousand, two hundred and Seventy Seven with interest on sum of Rs. 10,84,385/- @ 10% per annum w.e.f. 18.01.2005 till payment as per following break-up:- (a) Rs. 10,84,285/- allowed with interest @ 10% Per annum w.e.f. 18.01.2005 till the date of realization/payment as against claim No. 1 & 8 (Consolidated); (b) Rs. 46,83,892/- Allowed against claim No. 2,3,4 & 5 (c) Rs. 50,000/- Allowed against claim No. 7 (d) Rs. 3,50,000/- Allowed against claim No. 9 Total Rs.61,48,277.00 The award is made as above." 6. Petitioner filed an Objection Petition under Section 34 of the Act before the learned District Judge against the aforesaid Arbitral Award. The petition was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deals with passing of award which would include interest upto the date on which the award is made, while the second part i.e., Clause (b) deals with the grant of interest on the sum awarded by the Arbitral Tribunal. 11. In the present scenario, the court is more concerned with the interpretation of Clause (b), which deals with the post-award interest. What Clause (b) provides for is that Arbitral Tribunal may award interest on the sum adjudged under Clause (a). But if no such interest is awarded, then there shall be interest at the rate of 18% on the sum awarded by the Arbitral Tribunal from the date of the award to the date of payment. The intent behind granting the pre-award interest is to compensate the complainant for the loss suffered from the time the cause of action arose till the passing of the arbitral award. This is also for ensuring that the arbitral proceedings are concluded expeditiously. Similarly, the intent behind grant of post-award interest is that the award debtor is discouraged to delay the payment of the arbitral amount to the award holder. 12. Section 31(7)(b) of the Act specifically states that the Arbitral award shall carry an interest unless the award ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-award period is subject to the agreement as regard the rate of interest or unpaid sum between the parties. 18. Clause (b) of Section 31(7) of the Act gives discretion to the Arbitral Tribunal to award interest for the post-award period but that discretion is not subject to any contract. If such discretion is not exercised by the Arbitral Tribunal, then the statute steps in and mandates the payment of interest at the rate specified for the post- award period. While Clause (a) gives parties an option to contract out of interest, no such option is available in regard to the post-award period. 19. In the case of M/s. Hyder Consulting (UK) Ltd. Vs. Governor, State of Orissa, AIR 2015 SC 856, a three Judge Bench overruled the decision in State of Haryana & Ors. Vs. S.L. Arora & Company, (2010) 3 SCC 690 to the extent that latter decision held that the Arbitral Tribunal does not have the power to award interest over interest. Three separate judgments were authored in this case. Justice A.N. Sapre in his concurring opinion has noted that while the grant of pre-award interest is at the discretion of the Arbitral Tribunal, post-award interest is mandated by the statute where the Arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their discretion to award post-award interest on a part of the 'sum' awarded under Section 31(7)(a); (iii) The phrase 'unless the award otherwise directs' in Section 31(7)(b) only qualifies the rate of interest; (iv) According to Section 31(7)(b), if the arbitrator does not grant post-award interest, the award holder is entitled to post-award interest at eighteen percent; (v) Section 31(7)(b) does not fetter or restrict the discretion that the arbitrator holds in granting post-award interest. The arbitrator has the discretion to award post-award interest on a part of the sum; (vi) The arbitrator must exercise the discretionary power to grant post-award interest reasonably and in good faith, taking into account all relevant circumstances; and (vii) By the arbitral award dated 29 April 2013, a post-award interest of eighteen percent was awarded on the principal amount in view of the judgment of this Court in SL Arora (supra). In view of the above discussion, the arbitrator has the discretion to award post- award interest on a part of the 'sum'; the 'sum' as interpreted in Hyder Consulting (supra). Thus, the award of the arbitrator granting post award interest on the princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue before us is whether the phrase "unless the award otherwise directs" in Section 31(7)(b) of the Act only provides the arbitrator the discretion to determine the rate of interest or both the rate of interest and the "sum" it must be paid against At this juncture, it is crucial to note that both clauses (a) and (b) are qualified. While, clause (a) is qualified by the arbitration agreement, clause (b) is qualified by the arbitration award. However, the placement of the phrases is crucial to their interpretation. The words, "unless otherwise agreed by the parties" occur at the beginning of clause (a) qualifying the entire provision. However, in clause (b), the words, "unless the award otherwise directs" occur after the words "a sum directed to be paid by an arbitral award shall" and before the words "carry interest at the rate of eighteen per cent". Thereby, those words only qualify the rate of post-award interest. 25. Section 31(7)(a) confers a wide discretion upon the arbitrator in regard to the grant of pre-award interest The arbitrator has the discretion to determine the rate of reasonable interest, the sum on which the interest is to be paid, that is whether on the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X
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