Full Judgment Text
2025 INSC 1148
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2025
(ARISING OUT OF SLP (CIVIL) NO. 10732 OF 2024)
HLV LIMITED (FORMERLY KNOWN
AS HOTEL LEELAVENTURE PVT. LTD.) APPELLANT(S)
VERSUS
PBSAMP PROJECTS PVT. LTD. RESPONDENT(S)
J U D G M E N T
UJJAL BHUYAN, J.
Leave granted.
2. This appeal by special leave is directed against the
judgment and order dated 22.04.2024 passed by the High
Court for the State of Telangana at Hyderabad (High Court) in
Signature Not Verified
Digitally signed by
ARJUN BISHT
Date: 2025.09.24
17:01:07 IST
Reason:
Civil Revision Petition No. 60 of 2024 ( PBSAMP Projects Private
Limited Vs. HLV Limited). By the impugned judgment and
order, the Division Bench of the High Court set aside the order
dated 02.11.2023 passed by the Principal Special Court in the
cadre of District Judge for trial and disposal of commercial
disputes at Hyderabad (referred to hereinafter as ‘the
Executing Court’) in CEP No. 05 of 2021 rejecting the petition
filed by the respondent for enforcement of the arbitral award
dated 08.09.2019 on the ground that respondent is not
entitled to compound interest and that the amount paid by
the judgment debtor (appellant) to the decree holder
(respondent) i.e. Rs. 44,42,05,254.00 was in full satisfaction
of the award.
3. Question for consideration in this appeal is
whether in the facts and circumstances of the case, the decree
holder (respondent) would be entitled to interest upon interest
in terms of Section 31(7)(b) of the Arbitration and Conciliation
Act, 1996 or the interest awarded by the arbitral tribunal in
the award dated 08.09.2019 in terms of the memorandum of
understanding dated 09.04.2014 entered into between the
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parties i.e. between the appellant and the respondent fulfil
the requirement of Section 31(7)(a) and (b) of the said Act?
4. The above question arises in the following factual
backdrop.
5. The two parties had entered into a memorandum
of understanding (MoU) on 09.04.2014. The MoU was with
regard to sale and transfer of land situated at Road No. 10,
Banjara Hills, Hyderabad admeasuring approximately 3 acres
and 28 guntas. The details of the land are mentioned in the
schedule to the MoU.
5.1. It may be mentioned that appellant as the vendor
had acquired absolute ownership of the schedule land under
different sale deeds which was to be used for construction of
a five star hotel but for various reasons did not go ahead with
the project and instead decided to sell the land to the
respondent. Under the aforesaid MoU, respondent paid a sum
of Rs. 15.5 crores as advance to the appellant. As differences
arose between the parties, the MoU was terminated
on 09.10.2024 whereafter the dispute was referred to
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arbitration. The arbitral tribunal comprised of three
arbitrators: Mr. Justice TNC Rangarajan being nominated by
the claimant i.e. the respondent and Mr. Justice A
Kulasekaran being nominated by the appellant. The two
arbitrators in turn nominated Justice Arijit Pasayat as the
presiding arbitrator.
th
6. The arbitral tribunal passed an award dated 08
September, 2019, the operative portion of which reads as
under:
The claimant is entitled to Rs. 15.5 crores with interest
at 21% p.a. from the date it was given to the date it is
repaid. The respondent has kept the documents of title
in escrow for security purposes The respondent has
admitted liability for Rs. 10 crores and disputed only
the sum of Rs. 5.5 crores. Hence we direct that the
respondent pay immediately the sum of Rs. 10 crores
with interest The escrow arrangement will be limited to
the disputed amount of Rs. 5.5 crores only. The
claimant shall give the consent letter for release of the
balance of Rs. 5.5 crores simultaneously with the tender
of the amount by way of DD or certified cheque,
NEFT/RTGS to a designated account by the respondent
within 3 months from the date of the award. The
amount will carry interest at 21% p.a. from the date it
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was received till the date of exchange of the DD, certified
cheque, NEFT/RTGS with the consent letter. The
respondent's counterclaim stands rejected. In the
peculiar facts of the case, it is directed that the parties
shall bear their respective costs.
7. Thus, the arbitral tribunal awarded Rs. 15.5 crores
to the claimant (respondent) with interest at the rate of 21
percent per annum from the date it was given to the date it is
repaid. Appellant filed a petition under Section 34 of the
Arbitration and Conciliation Act, 1996 (briefly, ‘the 1996 Act’
hereinafter) before the learned Special Court for trial and
disposal of commercial disputes at Hyderabad (Special Court)
for setting aside of the award which was registered as COP
No. 118 of 2019. Learned Special Court vide the judgment
and order dated 19.03.2021 dismissed COP No. 118 of 2019.
8. It appears that there was no further challenge to
the award. Thus, the arbitral award dated 08.09.2019
attained finality.
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9. Thereafter, respondent filed execution petition CEP
No. 05 of 2021 before the executing court for execution of the
arbitral award dated 08.09.2019.
10. In the course of hearing, the judgment debtor
(appellant) paid a total of Rs. 44,42,05,254.00 on various
dates and in various amounts starting from 22.07.2022 to
31.07.2023 which according to it was in full compliance to
the award including interest.
11. Decree holder i.e. the respondent filed a calculation
sheet before the executing court claiming compound interest
over and above the rate of interest i.e. 21 percent as awarded
by the arbitral tribunal. The executing court referred to
Section 31(7) of the 1996 Act as well as to the decision of this
Court in Hyder Consulting (UK) Limited Vs. Governor, State of
1
Orissa , and thereafter held that claim of the decree holder for
compound interest on the awarded amount was not
sustainable. The executing court cannot go beyond the award
passed by the arbitral tribunal. The decree holder is not
1
(2015) 2 SCC 189
6
entitled for compound interest as claimed. The amount paid
by the judgment debtor to the decree holder i.e. Rs.
44,42,05,254.00 was in full satisfaction of the arbitral award.
Accordingly, by the order dated 02.11.2023 executing court
closed CEP No. 05 of 2021.
12. This order came to be assailed by the respondent
before the High Court in a proceeding under Article 227 of the
Constitution of India which was registered as Civil Revision
Petition No. 60 of 2024. By the impugned judgment and order
dated 22.04.2024, the High Court was of the view that the
executing court had reached the conclusion in a cryptic and
cavalier manner. Therefore, the order dated 02.11.2023 was
set aside and the matter was remitted back to the executing
court to reconsider the issue of interest under the award
dated 08.09.2019 to the respondent though clarifying that it
had not expressed any opinion on the merit of the claim.
13. Aggrieved, the related special leave petition came
to be filed. This Court by order dated 14.05.2024 had issued
notice and in the meanwhile, had stayed the order of remand.
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14. Mr. Hemendranath Reddy, learned senior counsel
for the appellant, at the outset, submits that the award
neither granted compound interest nor granted post-award
interest. Arbitral tribunal had awarded composite interest i.e.
simple interest of 21% per annum from the dates payment
became due to the date of repayment. Respondent did not
challenge this part of the award. The award has since attained
finality. Therefore, it is not open to the respondent now to
claim either compound interest or post-award interest on the
principal amount.
14.1. Mr. Reddy, learned senior counsel, submits that
the executing court had specifically reasoned that the award
had only granted 21% simple interest from the date when the
cause of action arose till payment. For this entire period, the
arbitral tribunal awarded simple interest at the rate of 21%.
Neither any compound interest was granted nor any post-
award interest. Therefore, respondent is not entitled to
compound interest. This aspect of the matter was overlooked
by the High Court which also did not consider the fact that
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the calculation submitted by the appellant was accepted by
the executing court after due consideration of all the facts and
circumstances of the case.
14.2. According to him, the reasoning given by the
executing court cannot be faulted. Calculation offered by the
appellant having been accepted by the executing court with
sufficient reasons, the High Court was not justified in setting
aside the order passed by the executing court and remanding
the matter back for fresh consideration.
14.3. Learned senior counsel submits that by
31.07.2023, the entire amount of Rs. 44,42,05,254.00 was
paid by the appellant to the respondent in full compliance to
the award which included the interest quotient as well. No
further amount remains to be paid. Therefore, the executing
court rightly closed the execution case.
14.4. It is submitted that respondent in its claim before
the arbitral tribunal had itself calculated the interest portion
at the rate of 21% simple interest from the date the payment
became due till actual payment. As such, it is impermissible
9
for the respondent to now turn around and claim compound
interest i.e. post-award interest over and above the 21%
interest agreed upon by the parties and awarded by the
arbitral tribunal. Such claim virtually amounts to
modification of the award which is impermissible at the stage
of execution.
14.5. It is also submitted that Section 31(7)(a) and
Section 31(7)(b) of the 1996 Act has no application to the facts
of the present case as the arbitral tribunal itself awarded
composite interest covering the entire period from the time
the cause of action arose till payment. Arbitral tribunal did
not award any post-award interest. Therefore, the decision of
this Court in Hyder Consulting (UK) Limited (supra) would
have no application.
14.6. Placing reliance on a subsequent decision of this
Court in Morgan Securities and Credits Private Limited Vs.
2
Videocon Industries Limited , learned senior counsel submits
that this judgment has clarified the proposition laid down in
2
(2023) 1 SCC 602
10
Hyder Consulting (supra) by holding that an arbitral tribunal
has the discretion to grant post-award interest either on the
whole ‘sum’ or part of it. The decision in Hyder Consulting
(supra) would only be applicable when the award is silent
about payment of interest and not when the award clearly
spells the method of paying interest including future interest.
In fact, Morgan Securities (supra) has clarified the law laid
down in Hyder Consulting (supra) by holding that when the
award specifies the method of paying future interest,
then Hyder Consulting (supra) would have no application.
Therefore, the High Court clearly fell in error when it held that
Morgan Securities (supra) would not apply to the facts of the
case and remanding the matter back to the executing court
for fresh decision placing reliance on Hyder Consulting
(supra).
14.7. Learned senior counsel finally submits that High
Court was not justified in summarily dismissing the order of
the executing court as passed in a cryptic and cavalier
manner.
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14.8. He, therefore, submits that view taken by the High
Court is not correct. The same is required to be set aside and
quashed. Consequently, the appeal should be allowed by
restoring the order of the executing court.
15. Per contra , Mr. P.B. Suresh, learned senior counsel
for the respondent submits that the impugned order does not
determine any inter se rights of the parties. It is only an order
of remand with the observation that the High Court has not
expressed any opinion on merit. Therefore, such an order
calls for no interference, that too, under Article 136 of the
Constitution of India.
15.1. As and when the executing court decides the issue
finally, parties to the lis would have the right to take recourse
to the remedy as provided under the law. In such
circumstances, filing of the special leave petition by the
appellant is clearly an abuse of the process of the court.
15.2. As per the interest calculation sheet as on
31.07.2023 filed by the respondent before the executing
court, appellant was liable to pay Rs. 57,74,68,490.00. As
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against this, appellant has only paid to the respondent
Rs. 44,42,05,254.00 till 31.07.2023. Therefore, an amount
of more than Rs. 13 crores still remains outstanding. It is
required to be paid by the appellant to the respondent.
15.3. Learned senior counsel for the respondent submits
that the interest for the prior period till the date of the award
has to be capitalized which will then be the ‘sum’ in terms of
Section 31(7)(a) of the 1996 Act. On that basis, the judgment
debtor is entitled to 21% post-award interest on the above
‘sum’ till the date of payment. In addition to placing reliance
on the decision of this Court in Hyder Consulting (supra),
learned senior counsel submits that the issue raised by the
respondent is no longer res integra . The decision in Hyder
Consulting has since been explained and reiterated by this
Court in North Delhi Municipal Corporation Vs. S.A. Builders
3
Limited . As per the said judgment, respondent is entitled to
compound interest under Section 31(7)(b) of the 1996 Act on
3
(2025) 7 SCC 132
13
the ‘sum’ determined in terms of Section 31(7)(a) of the said
Act.
15.4. He finally submits that the civil appeal is devoid of
any merit and is, as such, liable to be dismissed.
16. Submissions made by learned counsel for the
parties have received the due consideration of the Court.
17. At the outset, let us examine Section 31(7) of the
1996 Act which at the relevant point of time read thus:
31. Form and contents of arbitral award.
(7)(a) Unless otherwise agreed by the parties, where
and insofar as an arbitral award is for the payment of
money, the Arbitral Tribunal may include in the sum for
which the award is made interest, at such rate as it
deems reasonable, on the whole or any part of the
money, for the whole or any part of the period between
the date on which the cause of action arose and the date
on which the award is made.
(b) A sum directed to be paid by an arbitral award
shall, unless the award otherwise directs, carry interest
at the rate of eighteen per centum per annum from the
date of the award to the date of payment.
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17.1. From a perusal of the aforesaid provision, it is
seen that Section 31(7) has got two clauses: clause (a) and
clause (b). Clause (a) starts with the expression ‘unless
otherwise agreed by the parties’. Thereafter, it says that
where an award is for payment of money, the arbitral
tribunal may include in the sum for which the award is
made interest at such rate as it deems reasonable on the
whole or any part of the money and for the whole or any
part of the period from the date when the cause of action
arose to the date when the award is made. In other words,
clause (a) empowers the tribunal to include interest in the
‘sum’ for which the award is made. The arbitral tribunal
is further conferred the discretion to award interest on
the principal sum awarded at such rate as it deems
reasonable. However, this discretion of the arbitral
tribunal is subject to any decision which is agreed upon
by the parties.
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18. Clause (a) of Section 31(7) of the 1996 Act was
examined by this Court in S.A. Builders (supra)
whereafter it was held as under:
36.1. From a minute reading of sub-section (7), it is
seen that it has got two parts: the first part i.e. clause
( a ) deals with passing of award which would include
interest up to the date on which the award is made. The
second part i.e. clause ( b ) deals with grant of interest on
the “sum” awarded by the Arbitral Tribunal.
36.2. Let us now discuss in detail the contours of the
two clauses. As per clause ( a ), when an award is made
by the Arbitral Tribunal for payment of money, the
“sum” which is awarded may include interest at such
rate as the Arbitral Tribunal deems appropriate, on the
whole or any part of the money and for the whole or any
part of the period. The period for which the interest may
be granted would be between the date on which the
cause of action arose and the date on which the
award is made. The expression which needs to be
noticed in this part is the following: the Arbitral
Tribunal may include in the sum for which the award is
made interest at such rate as it deems reasonable .
36.3. The word “may” appearing in the above expression
is quite significant. It implies that the Arbitral Tribunal
has the discretion to grant interest at a reasonable rate.
In other words, it may grant interest or it may not grant
16
interest; but if it grants interest, it would be included in
the “sum” which is awarded by the Arbitral Tribunal.
19. Insofar clause (b), as it stood at the relevant time
is concerned, it provides for award of interest by the arbitral
tribunal on the ‘sum’ adjudged under clause (a). It says that
‘unless the award otherwise directs’, a sum directed to be paid
by an award shall carry interest at the rate of 18% per annum
from the date of the award to the date of payment. In other
words, clause (b) is subject to the interest that may be
awarded by the arbitral tribunal. This provision was explained
in S.A. Builders (supra) in the following manner:
36.4. This brings us to the second part i.e. clause ( b )
which deals with post-award interest. The “sum”
directed to be paid by the Arbitral Tribunal shall, unless
the award otherwise directs, carry interest @ 18% p.a.
from the date of the award to the date of payment. Thus,
what clause ( b ) provides for is that the Arbitral Tribunal
may award interest on the “sum” adjudged under clause
( a ). But if no such interest is awarded, then there shall
be interest @ 18% on the “sum” awarded by the Arbitral
Tribunal from the date of the award to the date of
payment. The two crucial words in this part
are sum and shall . As seen from clause ( a ), the “sum”
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awarded by the Arbitral Tribunal would include interest
if it is granted by the Arbitral Tribunal. Therefore, the
“sum” as awarded by the Arbitral Tribunal may or may
not include interest. Whether the “sum” so awarded
includes or does not include interest, it would carry
further interest @ 18% from the date of the award to the
date of payment unless another rate of interest is
granted by the Arbitral Tribunal. While granting of
interest under clauses ( a ) and ( b ) by the Arbitral
Tribunal is discretionary, the interest contemplated
under clause ( b ) in the event of failure of the Arbitral
Tribunal to award interest is mandatory. Therefore, the
legislature has consciously used the word shall .
20. Thus, from a conjoint analysis of Section 31(7)(a)
and Section 31(7)(b) of the 1996 Act, what is discernible is
that insofar award of interest from the date on which the
cause of action arose till the date of the award is concerned,
the legislative intent is that the parties possess the autonomy
to determine the interest and the rate of interest for the
aforesaid period. Clause (a) i.e. discretion of the arbitral
tribunal to award interest is subject to agreement by and
between the parties. Therefore, party autonomy takes
precedence over the discretion of the arbitral tribunal.
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However, clause (b) is subject to award of interest by the
arbitral tribunal. In other words, as per clause (b), the ‘sum’
directed to be paid under an arbitral award shall carry
interest at the rate of 18% per annum from the date of the
award to the date of payment ‘unless the award otherwise
directs’. Therefore, this provision is subject to award of
interest by the arbitral tribunal. If it awards interest, then the
same shall be applicable from the date of the award till the
date of payment; if not, then the ‘sum’ as adjudged under
clause (a) shall carry interest at the rate of 18%.
21. The parties here are governed by the MOU dated
09.04.2014. Clause (6)(b) of the MoU is relevant and reads as
under:
(b) The proposed purchaser may at its option terminate
this MOU by sending to the proposed vendor an
intimation of termination of MOU and demand for
refund of advance paid together with 21% interest per
annum from the respective dates of disbursement of the
advances till actual date of payment of the same. The
proposed vendor shall tender the advances together with
21% interest per annum within 30 days of receipt of
intimation of termination from the proposed purchaser.
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It is clarified that the termination of the MOU will take
effect only from the date of receipt of all advances
together with 21% interest per annum up to date of
receipt by the proposed purchaser. If for any reason the
proposed vendor is unable to tender all advances with
21% interest per annum within 30 days of the receipt of
intimation of termination of the MOU from the proposed
purchaser, the proposed purchaser will have the option
to call upon the proposed vendor to execute the sale
deed in respect of the schedule property on as is where
is basis for a total consideration of Rs. 65 crores (Rupees
sixty five crores) and pay the balance amount after
adjusting advances paid.
21.1. The aforesaid clause in the MoU gave discretion to
the respondent to terminate the MOU in which event it would
be entitled to refund of the advance paid together with interest
at the rate of 21% per annum from the respective dates of
disbursement of the advances till the actual date of
repayment.
22. The arbitral tribunal in the award dated
08.09.2019 applied the aforesaid clause of the MOU while
declaring that the claimant was entitled to Rs. 15.5 crores
with interest at the rate of 21% per annum from the date it
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was given to the date it is paid. Therefore, it is evident that
the arbitral tribunal was guided by the rate of interest
provided in the MOU and it clarified while passing the award
that this rate of interest would be available to the respondent
from the dates of disbursement till the actual date of
repayment.
23. A two-Judge Bench of this Court in State of
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Haryana Vs. S.L. Arora considered the question as to
whether Section 31(7) of the 1996 Act authorises and enables
arbitral tribunals to award interest on interest from the date
of the award? In the facts of that case, the consequential
question formulated was as to whether the arbitral award
granted future interest from the date of award, only on the
principal amount found due to the respondent or on the
aggregate of the principal and interest up to the date of the
award? After an analysis of the aforesaid provision, the Bench
observed that Section 31(7) makes no reference to payment of
compound interest or payment of interest upon interest. It
4
(2010) 3 SCC 690
21
was held that in the absence of any provision for interest upon
interest in the contract, arbitral tribunals do not have the
power to award interest upon interest or compound interest
either for the pre-award period or for the post-award period.
It was held thus:
18. Section 31(7) makes no reference to payment of
compound interest or payment of interest upon interest.
Nor does it require the interest which accrues till the
date of the award, to be treated as part of the principal
from the date of award for calculating the post-award
interest. The use of the words “ where and insofar as an
arbitral award is for the payment of money ” and use of
the words “ the Arbitral Tribunal may include in the sum
for which the award is made, interest … on the whole or
any part of the money ” in clause ( a ) and use of the words
“ a sum directed to be paid by an arbitral award shall …
carry interest ” in clause ( b ) of sub-section (7) of Section
31 clearly indicate that the section contemplates award
of only simple interest and not compound interest or
interest upon interest. “ A sum directed to be paid by an
” refers to the award of sums on the
arbitral award
substantive claims and does not refer to interest
awarded on the “ sum directed to be paid by the award ”.
In the absence of any provision for interest upon interest
in the contract, the Arbitral Tribunals do not have the
power to award interest upon interest, or compound
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interest, either for the pre-award period or for the post-
award period.
23.1. Thereafter the Bench upon a threadbare analysis
concluded that Section 31(7) merely authorizes the arbitral
tribunal to award interest in accordance with the contract
and in the absence of any prohibition in the contract and in
the absence of specific provision relating to interest in the
contract, to award simple interest at such rates as it deems
fit from the date on which the cause of action arose till the
date of payment. The Bench further clarified that if the award
is silent about interest from the date of award till the date of
payment, the person in whose favour the award is made will
be entitled to interest at 18% per annum on the principal
amount awarded from the date of award till the date of
payment. In the facts of that case, the Bench declared that
the calculation that was made in the execution petition as
originally filed was correct and that the modification sought
for by the respondent increasing the amount due under the
award was contrary to the award. It was concluded as under:
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34. Thus it is clear that Section 31(7) merely authorises
the Arbitral Tribunal to award interest in accordance
with the contract and in the absence of any prohibition
in the contract and in the absence of specific provision
relating to interest in the contract, to award simple
interest at such rates as it deems fit from the date on
which the cause of action arose till the date of payment.
It also provides that if the award is silent about interest
from the date of award till the date of payment, the
person in whose favour the award is made will be
entitled to interest at 18% per annum on the principal
amount awarded, from the date of award till the date of
payment. The calculation that was made in the
execution petition as originally filed was correct and the
modification by the respondent increasing the amount
due under the award was contrary to the award.
24. The correctness of the view taken in S.L. Arora
(supra) came up for consideration before a three-Judge Bench
of this Court in Hyder Consulting (supra) . The majority held
that the conclusion reached in S.L. Arora (supra) was not in
consonance with the clear language of Section 31(7) of the
Act. After extracting Section 31(7) of the 1996 Act, the Bench
explained clause (a) of sub-section (7) of Section 31 in the
following manner:
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4. Clause ( a ) of sub-section (7) provides that where an
award is made for the payment of money, the Arbitral
Tribunal may include interest in the sum for which the
award is made. In plain terms, this provision confers a
power upon the Arbitral Tribunal while making an
award for payment of money, to include interest in the
sum for which the award is made on either the whole or
any part of the money and for the whole or any part of
the period for the entire pre-award period between the
date on which the cause of action arose and the date on
which the award is made. To put it differently, sub-
section (7)( ) contemplates that an award, inclusive of
a
interest for the pre-award period on the entire amount
directed to be paid or part thereof, may be passed. The
“ sum ” awarded may be the principal amount and such
interest as the Arbitral Tribunal deems fit. If no interest
is awarded, the “ sum ” comprises only the principal. The
significant words occurring in clause ( a ) of sub-section
(7) of Section 31 of the Act are “ the sum for which the
award is made ”. On a plain reading, this expression
refers to the total amount or sum for the payment for
which the award is made. Parliament has not added a
qualification like “principal” to the word “sum”, and
therefore, the word “sum” here simply means “a
particular amount of money”. In Section 31(7), this
particular amount of money may include interest from
the date of cause of action to the date of the award.
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24.1. On the above analysis, the Bench explained clause
(b) of sub-section (7) of Section 31 of the 1996 Act to mean
that the ‘sum’ which is directed to be paid by the award,
whether inclusive or exclusive of interest, shall carry interest
at the rate of 18% per annum for the post-award period unless
otherwise ordered. The above provision was explained as
under:
7. Thus, when used as a noun, as it seems to have been
used in this provision, the word “sum” simply means “an
amount of money”; whatever it may include —
“principal” and “interest” or one of the two. Once the
meaning of the word “sum” is clear, the same meaning
must be ascribed to the word in clause ( b ) of sub-section
(7) of Section 31 of the Act, where it provides that
a sum directed to be paid by an arbitral award “ shall …
carry interest …” from the date of the award to the date
of the payment i.e. post-award. In other words, what
clause ( b ) of sub-section (7) of Section 31 of the Act
directs is that the “sum”, which is directed to be paid by
the award, whether inclusive or exclusive of interest,
shall carry interest at the rate of eighteen per cent per
annum for the post-award period, unless otherwise
ordered.
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24.2. Finally, Hyder Consulting (supra) arrived at the
following conclusion:
13. Thus, it is apparent that vide clause ( ) of sub-
a
section (7) of Section 31 of the Act, Parliament intended
that an award for payment of money may be inclusive of
interest, and the “sum” of the principal amount plus
interest may be directed to be paid by the Arbitral
Tribunal for the pre-award period. Thereupon, the
Arbitral Tribunal may direct interest to be paid on such
“sum” for the post-award period vide clause ( b ) of sub-
section (7) of Section 31 of the Act, at which stage the
amount would be the sum arrived at after the merging
of interest with the principal; the two components
having lost their separate identities.
25. The question as to whether the ‘sum’ awarded
under clause (a) of sub-section (7) of Section 31 of the 1996
Act would include interest pendente lite or not again came up
for consideration before a two-Judge Bench of this Court in
Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail
5
Corporation . The Bench analyzed Hyder Consulting (supra) in
the following manner:
5
(2022) 9 SCC 286
27
15. It could thus be seen that the majority view of this
Court in Hyder Consulting (UK) is that the sum awarded
may include the principal amount and such interest as
the Arbitral Tribunal deems fit. It is further held that, if
no interest is awarded, the “sum” comprises only the
principal amount. The majority judgment held that
clause ( a ) of sub-section (7) of Section 31 of the 1996 Act
refers to the total amount or sum for the payment for
which the award is made. As such, the amount awarded
under clause ( a ) of sub-section (7) of Section 31 of the
1996 Act would include the principal amount plus the
interest amount pendente lite. It was held that the
interest to be calculated as per clause ( b ) of sub-section
(7) of Section 31 of the 1996 Act would be on the total
sum arrived as aforesaid under clause ( a ) of sub-section
(7) of Section 31 of the 1996 Act. S.A. Bobde, J. in his
judgment, has referred to various authorities of this
Court as well as Maxwell on the Interpretation of
Statutes . He emphasised that the Court must give effect
to the plain, clear and unambiguous words of the
legislature and it is not for the courts to add or subtract
the words, even though the construction may lead to
strange or surprising, unreasonable or unjust or
oppressive results.
25.1. Thereafter, the Bench made an analysis of clause
(a) of sub-section (7) of Section 31 of the 1996 Act and noted
that it begins with the expression ‘unless otherwise agreed by
28
the parties’. This expression was explained by the Bench by
holding as under:
17. It could thus be seen that the part which deals with
the power of the Arbitral Tribunal to award interest,
would operate if it is not otherwise agreed by the parties.
If there is an agreement between the parties to the
contrary, the Arbitral Tribunal would lose its discretion
to award interest and will have to be guided by the
agreement between the parties. The provision is clear
that the Arbitral Tribunal is not bound to award interest.
It has a discretion to award the interest or not to award.
It further has a discretion to award interest at such rate
as it deems reasonable. It further has a discretion to
award interest on the whole or any part of the money. It
is also not necessary for the Arbitral Tribunal to award
interest for the entire period between the date on which
the cause of action arose and the date on which the
award is made. It can grant interest for the entire period
or any part thereof or no interest at all.
25.2. Thus, this Court was of the view that power of the
tribunal to award interest would operate if it is not otherwise
agreed by the parties. If there is an agreement between the
parties to the contrary, the arbitral tribunal would lose its
discretion to award interest and will have to be guided by the
29
agreement between the parties. Thus, the expression ‘unless
otherwise agreed by the parties’ assumes significance and
concluded as under:
20. If clause ( a ) of sub-section (7) of Section 31 of the
1996 Act is given a plain and literal meaning, the
legislative intent would be clear that the discretion with
regard to grant of interest would be available to the
Arbitral Tribunal only when there is no agreement to the
contrary between the parties. The phrase “unless
otherwise agreed by the parties” clearly emphasises that
when the parties have agreed with regard to any of the
aspects covered under clause ( ) of sub-section (7) of
a
Section 31 of the 1996 Act, the Arbitral Tribunal would
cease to have any discretion with regard to the aspects
mentioned in the said provision. Only in the absence of
such an agreement, the Arbitral Tribunal would have a
discretion to exercise its powers under clause ( a ) of sub-
section (7) of Section 31 of the 1996 Act. The discretion
is wide enough. It may grant or may not grant interest.
It may grant interest for the entire period or any part
thereof. It may also grant interest on the whole or any
part of the money.
25.3. From the above, the view of the court is clearly
discernible in that the discretion to grant interest would be
available to the arbitral tribunal under clause (a) of sub-
30
section (7) of Section 31 only when there is no agreement to
the contrary between the parties. When the parties agree with
regard to any of the aspects covered under clause (a) of sub-
section (7) of Section 31, the arbitral tribunal would cease to
have any discretion with regard to the aspects mentioned in
the said provision. Only in the absence of such an agreement,
the arbitral tribunal would have the discretion to exercise its
powers under clause (a) of sub-section (7) of Section 31 of the
1996 Act.
25.4. In the facts of that case it was held that in view of
the specific agreement between the parties, the interest
quotient prior to the date of the award so also after the date
of the award will be governed by article 29.8 of the concession
agreement which was also directed by the arbitral tribunal.
This view was accordingly affirmed by this Court.
26. In Morgan Securities and Credits Private Limited Vs.
6
Videocon Industries Limited , a two-Judge Bench of this Court
again examined the decision in Hyder Consulting (supra).
6
(2023) 1 SCC 602
31
After an extensive analysis, the Bench was of the view that
the decision in Hyder Consulting (supra) was on the limited
issue of whether post-award interest could be granted on the
aggregate of the principal and the pre-award interest. The
opinion authored by Bobde, J. was limited to this aspect of
post-award interest. Thereafter, the Bench noted that the
issue before it was whether the phrase ‘unless the award
otherwise directs’ in Section 31(7)(b) of the 1996 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. Thereafter it was noted that both clauses (a) and
(b) of sub-section (7) of Section 31 are qualified. While clause
(a) is qualified by the arbitration agreement between the
parties, clause (b) is qualified by the arbitration award. The
words ‘unless otherwise agreed by the parties’ occurring at
the beginning of clause (a) qualifies the entire provision.
However, the words ‘unless the award otherwise directs’
occurring in clause (b) only qualifies the rate of post-award
interest. Thereafter, this Court summarized the findings and
32
we extract only those portions which are relevant for our
present purpose:
28.3. The phrase “unless the award otherwise directs”
in Section 31(7)( b ) only qualifies the rate of interest.
28.4. 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 per cent.
28.5. 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.
28.6.
The arbitrator must exercise the discretionary
power to grant post-award interest reasonably and in
good faith, taking into account all relevant
circumstances.
27. Though learned senior counsel for the respondent
placed heavy reliance on S.A. Builders Limited (supra), we are
of the view that S.A. Builders Limited (supra) is a continuum
of what was held by this Court in Delhi Airport Metro Express
Private Limited (supra) and in Morgan Securities and Credits
Private Limited (supra). We have already noted as to how a
two-Judge Bench of this Court in S.A. Builders Limited (supra)
(of which I was also a member) had analyzed clauses (a) and
33
(b) of sub-section (7) of Section 31 of the 1996 Act. We have
also noted that this Court had observed that the provision in
Section 31(7)(a) of the 1996 Act begins with the expression
‘unless otherwise agreed by the parties’, thereby highlighting
the legislative stance that the parties possess the autonomy
to determine pre-award interest on the payment of money that
may be awarded by the arbitral tribunal. However, no such
discretion is available to the parties under Section 31(7)(b) of
the 1996 Act though such discretion is available to the
arbitral tribunal. It was in that context this Court in the facts
of that case noted that it was not the case of the appellant
that the interest portion is covered by the contract agreement
between the parties. In the absence thereof, Section 31(7)(a)
as well as Section 31(7)(b) of the 1996 Act would have their
full effect. Therefore, it was concluded as under:
70. That apart, it is not the case of the appellant that
the interest portion is covered by the contract agreement
between the parties. In the absence thereof, Section
31(7)( ) as well as Section 31(7)( ) of the 1996 Act would
a b
have their full effect. The sum awarded would mean the
principal amount plus the interest awarded from the
date of cause of action up to the date of the award.
34
Thereafter, as per Section 31(7)( b ) of the 1996 Act, the
sum (principal plus interest) would carry interest @ 18%
from the date of the award to the date of payment. This
would be consistent with the law laid down by this Court
in Hyder Consulting .
28. Therefore, even S.A. Builders Limited (supra) lays
down the proposition that the discretion of the arbitral
tribunal to award interest under Section 31(7)(a) of the 1996
Act is subservient to the agreement between the parties. In
other words, party autonomy, so crucial to arbitration, reigns
supreme.
29. Reverting back to the facts of the present case, we
have already adverted to clause 6(b) of the MoU dated
09.04.2014 which expressly provided that in the event of
termination of the MoU, the appellant must refund all
advances with interest at the rate of 21% per annum from the
respective dates of disbursement till repayment. Thus, in the
light of the express provision contained in clause (a) of sub-
section (7) of Section 31, the arbitral tribunal awarded
interest in terms of the MoU from the date of the cause of
35
action till the date of repayment. As the arbitral tribunal had
expressly provided interest till the date of repayment,
question of additional or compound interest under clause (b)
of sub-section (7) of Section 31 of 1996 Act would not arise.
The arbitral tribunal in its award dated 08.09.2019 has
faithfully complied with the MoU agreed by and between the
parties. Thus, the arbitral tribunal exercised its discretion
within the overall framework of Section 31(7) of the 1996 Act
aligning with the legislative intent that the award, rather than
the statutory default, should govern the parties, more so in a
case as in the present one where the parties have themselves
made provision for interest throughout.
30. Therefore, reliance placed by the respondent on
Hyder Consulting (supra) to claim post-award interest is
misplaced. That principle would apply only when the arbitral
tribunal leaves a matter unqualified or is silent. In the present
case the arbitral tribunal bound by the MoU and exercising
its statutory discretion had already specified the interest rate
(21% per annum) and the duration (until repayment). As held
36
in Morgan Securities and Credits Private Limited (supra),
reaffirmed in Delhi Airport Metro Express Private Limited
(supra) and explained in S.A. Builders Limited (supra), once
parties agree on the interest regime, the arbitrator’s role is
confined to enforcing it and the courts would not rewrite or
enlarge the award by introducing further interest at the
execution stage.
31. The MoU did not stipulate compounding of
interest; the arbitral tribunal did not award compound
interest; therefore, respondent cannot at the stage of
execution seek to introduce claim of compound interest by
drawing on general principles. Allowing such a claim would
amount to rewriting the award at the stage of execution which
is impermissible.
32. In the circumstances, we are of the view that the
High Court was not justified in setting aside the order of the
executing court and remanding the matter for fresh
determination.
37
33. For the reasons aforementioned, the impugned
judgment and order of the High Court dated 22.04.2024 is
hereby set aside. Consequently, order of the executing court
dated 02.11.2023 is restored.
34. Civil appeal is accordingly allowed. However, there
shall be no order as to cost.
……………………………J.
[MANOJ MISRA]
……………………………J.
[UJJAL BHUYAN]
NEW DELHI;
SEPTEMBER 24, 2025.
38
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2025
(ARISING OUT OF SLP (CIVIL) NO. 10732 OF 2024)
HLV LIMITED (FORMERLY KNOWN
AS HOTEL LEELAVENTURE PVT. LTD.) APPELLANT(S)
VERSUS
PBSAMP PROJECTS PVT. LTD. RESPONDENT(S)
J U D G M E N T
UJJAL BHUYAN, J.
Leave granted.
2. This appeal by special leave is directed against the
judgment and order dated 22.04.2024 passed by the High
Court for the State of Telangana at Hyderabad (High Court) in
Signature Not Verified
Digitally signed by
ARJUN BISHT
Date: 2025.09.24
17:01:07 IST
Reason:
Civil Revision Petition No. 60 of 2024 ( PBSAMP Projects Private
Limited Vs. HLV Limited). By the impugned judgment and
order, the Division Bench of the High Court set aside the order
dated 02.11.2023 passed by the Principal Special Court in the
cadre of District Judge for trial and disposal of commercial
disputes at Hyderabad (referred to hereinafter as ‘the
Executing Court’) in CEP No. 05 of 2021 rejecting the petition
filed by the respondent for enforcement of the arbitral award
dated 08.09.2019 on the ground that respondent is not
entitled to compound interest and that the amount paid by
the judgment debtor (appellant) to the decree holder
(respondent) i.e. Rs. 44,42,05,254.00 was in full satisfaction
of the award.
3. Question for consideration in this appeal is
whether in the facts and circumstances of the case, the decree
holder (respondent) would be entitled to interest upon interest
in terms of Section 31(7)(b) of the Arbitration and Conciliation
Act, 1996 or the interest awarded by the arbitral tribunal in
the award dated 08.09.2019 in terms of the memorandum of
understanding dated 09.04.2014 entered into between the
2
parties i.e. between the appellant and the respondent fulfil
the requirement of Section 31(7)(a) and (b) of the said Act?
4. The above question arises in the following factual
backdrop.
5. The two parties had entered into a memorandum
of understanding (MoU) on 09.04.2014. The MoU was with
regard to sale and transfer of land situated at Road No. 10,
Banjara Hills, Hyderabad admeasuring approximately 3 acres
and 28 guntas. The details of the land are mentioned in the
schedule to the MoU.
5.1. It may be mentioned that appellant as the vendor
had acquired absolute ownership of the schedule land under
different sale deeds which was to be used for construction of
a five star hotel but for various reasons did not go ahead with
the project and instead decided to sell the land to the
respondent. Under the aforesaid MoU, respondent paid a sum
of Rs. 15.5 crores as advance to the appellant. As differences
arose between the parties, the MoU was terminated
on 09.10.2024 whereafter the dispute was referred to
3
arbitration. The arbitral tribunal comprised of three
arbitrators: Mr. Justice TNC Rangarajan being nominated by
the claimant i.e. the respondent and Mr. Justice A
Kulasekaran being nominated by the appellant. The two
arbitrators in turn nominated Justice Arijit Pasayat as the
presiding arbitrator.
th
6. The arbitral tribunal passed an award dated 08
September, 2019, the operative portion of which reads as
under:
The claimant is entitled to Rs. 15.5 crores with interest
at 21% p.a. from the date it was given to the date it is
repaid. The respondent has kept the documents of title
in escrow for security purposes The respondent has
admitted liability for Rs. 10 crores and disputed only
the sum of Rs. 5.5 crores. Hence we direct that the
respondent pay immediately the sum of Rs. 10 crores
with interest The escrow arrangement will be limited to
the disputed amount of Rs. 5.5 crores only. The
claimant shall give the consent letter for release of the
balance of Rs. 5.5 crores simultaneously with the tender
of the amount by way of DD or certified cheque,
NEFT/RTGS to a designated account by the respondent
within 3 months from the date of the award. The
amount will carry interest at 21% p.a. from the date it
4
was received till the date of exchange of the DD, certified
cheque, NEFT/RTGS with the consent letter. The
respondent's counterclaim stands rejected. In the
peculiar facts of the case, it is directed that the parties
shall bear their respective costs.
7. Thus, the arbitral tribunal awarded Rs. 15.5 crores
to the claimant (respondent) with interest at the rate of 21
percent per annum from the date it was given to the date it is
repaid. Appellant filed a petition under Section 34 of the
Arbitration and Conciliation Act, 1996 (briefly, ‘the 1996 Act’
hereinafter) before the learned Special Court for trial and
disposal of commercial disputes at Hyderabad (Special Court)
for setting aside of the award which was registered as COP
No. 118 of 2019. Learned Special Court vide the judgment
and order dated 19.03.2021 dismissed COP No. 118 of 2019.
8. It appears that there was no further challenge to
the award. Thus, the arbitral award dated 08.09.2019
attained finality.
5
9. Thereafter, respondent filed execution petition CEP
No. 05 of 2021 before the executing court for execution of the
arbitral award dated 08.09.2019.
10. In the course of hearing, the judgment debtor
(appellant) paid a total of Rs. 44,42,05,254.00 on various
dates and in various amounts starting from 22.07.2022 to
31.07.2023 which according to it was in full compliance to
the award including interest.
11. Decree holder i.e. the respondent filed a calculation
sheet before the executing court claiming compound interest
over and above the rate of interest i.e. 21 percent as awarded
by the arbitral tribunal. The executing court referred to
Section 31(7) of the 1996 Act as well as to the decision of this
Court in Hyder Consulting (UK) Limited Vs. Governor, State of
1
Orissa , and thereafter held that claim of the decree holder for
compound interest on the awarded amount was not
sustainable. The executing court cannot go beyond the award
passed by the arbitral tribunal. The decree holder is not
1
(2015) 2 SCC 189
6
entitled for compound interest as claimed. The amount paid
by the judgment debtor to the decree holder i.e. Rs.
44,42,05,254.00 was in full satisfaction of the arbitral award.
Accordingly, by the order dated 02.11.2023 executing court
closed CEP No. 05 of 2021.
12. This order came to be assailed by the respondent
before the High Court in a proceeding under Article 227 of the
Constitution of India which was registered as Civil Revision
Petition No. 60 of 2024. By the impugned judgment and order
dated 22.04.2024, the High Court was of the view that the
executing court had reached the conclusion in a cryptic and
cavalier manner. Therefore, the order dated 02.11.2023 was
set aside and the matter was remitted back to the executing
court to reconsider the issue of interest under the award
dated 08.09.2019 to the respondent though clarifying that it
had not expressed any opinion on the merit of the claim.
13. Aggrieved, the related special leave petition came
to be filed. This Court by order dated 14.05.2024 had issued
notice and in the meanwhile, had stayed the order of remand.
7
14. Mr. Hemendranath Reddy, learned senior counsel
for the appellant, at the outset, submits that the award
neither granted compound interest nor granted post-award
interest. Arbitral tribunal had awarded composite interest i.e.
simple interest of 21% per annum from the dates payment
became due to the date of repayment. Respondent did not
challenge this part of the award. The award has since attained
finality. Therefore, it is not open to the respondent now to
claim either compound interest or post-award interest on the
principal amount.
14.1. Mr. Reddy, learned senior counsel, submits that
the executing court had specifically reasoned that the award
had only granted 21% simple interest from the date when the
cause of action arose till payment. For this entire period, the
arbitral tribunal awarded simple interest at the rate of 21%.
Neither any compound interest was granted nor any post-
award interest. Therefore, respondent is not entitled to
compound interest. This aspect of the matter was overlooked
by the High Court which also did not consider the fact that
8
the calculation submitted by the appellant was accepted by
the executing court after due consideration of all the facts and
circumstances of the case.
14.2. According to him, the reasoning given by the
executing court cannot be faulted. Calculation offered by the
appellant having been accepted by the executing court with
sufficient reasons, the High Court was not justified in setting
aside the order passed by the executing court and remanding
the matter back for fresh consideration.
14.3. Learned senior counsel submits that by
31.07.2023, the entire amount of Rs. 44,42,05,254.00 was
paid by the appellant to the respondent in full compliance to
the award which included the interest quotient as well. No
further amount remains to be paid. Therefore, the executing
court rightly closed the execution case.
14.4. It is submitted that respondent in its claim before
the arbitral tribunal had itself calculated the interest portion
at the rate of 21% simple interest from the date the payment
became due till actual payment. As such, it is impermissible
9
for the respondent to now turn around and claim compound
interest i.e. post-award interest over and above the 21%
interest agreed upon by the parties and awarded by the
arbitral tribunal. Such claim virtually amounts to
modification of the award which is impermissible at the stage
of execution.
14.5. It is also submitted that Section 31(7)(a) and
Section 31(7)(b) of the 1996 Act has no application to the facts
of the present case as the arbitral tribunal itself awarded
composite interest covering the entire period from the time
the cause of action arose till payment. Arbitral tribunal did
not award any post-award interest. Therefore, the decision of
this Court in Hyder Consulting (UK) Limited (supra) would
have no application.
14.6. Placing reliance on a subsequent decision of this
Court in Morgan Securities and Credits Private Limited Vs.
2
Videocon Industries Limited , learned senior counsel submits
that this judgment has clarified the proposition laid down in
2
(2023) 1 SCC 602
10
Hyder Consulting (supra) by holding that an arbitral tribunal
has the discretion to grant post-award interest either on the
whole ‘sum’ or part of it. The decision in Hyder Consulting
(supra) would only be applicable when the award is silent
about payment of interest and not when the award clearly
spells the method of paying interest including future interest.
In fact, Morgan Securities (supra) has clarified the law laid
down in Hyder Consulting (supra) by holding that when the
award specifies the method of paying future interest,
then Hyder Consulting (supra) would have no application.
Therefore, the High Court clearly fell in error when it held that
Morgan Securities (supra) would not apply to the facts of the
case and remanding the matter back to the executing court
for fresh decision placing reliance on Hyder Consulting
(supra).
14.7. Learned senior counsel finally submits that High
Court was not justified in summarily dismissing the order of
the executing court as passed in a cryptic and cavalier
manner.
11
14.8. He, therefore, submits that view taken by the High
Court is not correct. The same is required to be set aside and
quashed. Consequently, the appeal should be allowed by
restoring the order of the executing court.
15. Per contra , Mr. P.B. Suresh, learned senior counsel
for the respondent submits that the impugned order does not
determine any inter se rights of the parties. It is only an order
of remand with the observation that the High Court has not
expressed any opinion on merit. Therefore, such an order
calls for no interference, that too, under Article 136 of the
Constitution of India.
15.1. As and when the executing court decides the issue
finally, parties to the lis would have the right to take recourse
to the remedy as provided under the law. In such
circumstances, filing of the special leave petition by the
appellant is clearly an abuse of the process of the court.
15.2. As per the interest calculation sheet as on
31.07.2023 filed by the respondent before the executing
court, appellant was liable to pay Rs. 57,74,68,490.00. As
12
against this, appellant has only paid to the respondent
Rs. 44,42,05,254.00 till 31.07.2023. Therefore, an amount
of more than Rs. 13 crores still remains outstanding. It is
required to be paid by the appellant to the respondent.
15.3. Learned senior counsel for the respondent submits
that the interest for the prior period till the date of the award
has to be capitalized which will then be the ‘sum’ in terms of
Section 31(7)(a) of the 1996 Act. On that basis, the judgment
debtor is entitled to 21% post-award interest on the above
‘sum’ till the date of payment. In addition to placing reliance
on the decision of this Court in Hyder Consulting (supra),
learned senior counsel submits that the issue raised by the
respondent is no longer res integra . The decision in Hyder
Consulting has since been explained and reiterated by this
Court in North Delhi Municipal Corporation Vs. S.A. Builders
3
Limited . As per the said judgment, respondent is entitled to
compound interest under Section 31(7)(b) of the 1996 Act on
3
(2025) 7 SCC 132
13
the ‘sum’ determined in terms of Section 31(7)(a) of the said
Act.
15.4. He finally submits that the civil appeal is devoid of
any merit and is, as such, liable to be dismissed.
16. Submissions made by learned counsel for the
parties have received the due consideration of the Court.
17. At the outset, let us examine Section 31(7) of the
1996 Act which at the relevant point of time read thus:
31. Form and contents of arbitral award.
(7)(a) Unless otherwise agreed by the parties, where
and insofar as an arbitral award is for the payment of
money, the Arbitral Tribunal may include in the sum for
which the award is made interest, at such rate as it
deems reasonable, on the whole or any part of the
money, for the whole or any part of the period between
the date on which the cause of action arose and the date
on which the award is made.
(b) A sum directed to be paid by an arbitral award
shall, unless the award otherwise directs, carry interest
at the rate of eighteen per centum per annum from the
date of the award to the date of payment.
14
17.1. From a perusal of the aforesaid provision, it is
seen that Section 31(7) has got two clauses: clause (a) and
clause (b). Clause (a) starts with the expression ‘unless
otherwise agreed by the parties’. Thereafter, it says that
where an award is for payment of money, the arbitral
tribunal may include in the sum for which the award is
made interest at such rate as it deems reasonable on the
whole or any part of the money and for the whole or any
part of the period from the date when the cause of action
arose to the date when the award is made. In other words,
clause (a) empowers the tribunal to include interest in the
‘sum’ for which the award is made. The arbitral tribunal
is further conferred the discretion to award interest on
the principal sum awarded at such rate as it deems
reasonable. However, this discretion of the arbitral
tribunal is subject to any decision which is agreed upon
by the parties.
15
18. Clause (a) of Section 31(7) of the 1996 Act was
examined by this Court in S.A. Builders (supra)
whereafter it was held as under:
36.1. From a minute reading of sub-section (7), it is
seen that it has got two parts: the first part i.e. clause
( a ) deals with passing of award which would include
interest up to the date on which the award is made. The
second part i.e. clause ( b ) deals with grant of interest on
the “sum” awarded by the Arbitral Tribunal.
36.2. Let us now discuss in detail the contours of the
two clauses. As per clause ( a ), when an award is made
by the Arbitral Tribunal for payment of money, the
“sum” which is awarded may include interest at such
rate as the Arbitral Tribunal deems appropriate, on the
whole or any part of the money and for the whole or any
part of the period. The period for which the interest may
be granted would be between the date on which the
cause of action arose and the date on which the
award is made. The expression which needs to be
noticed in this part is the following: the Arbitral
Tribunal may include in the sum for which the award is
made interest at such rate as it deems reasonable .
36.3. The word “may” appearing in the above expression
is quite significant. It implies that the Arbitral Tribunal
has the discretion to grant interest at a reasonable rate.
In other words, it may grant interest or it may not grant
16
interest; but if it grants interest, it would be included in
the “sum” which is awarded by the Arbitral Tribunal.
19. Insofar clause (b), as it stood at the relevant time
is concerned, it provides for award of interest by the arbitral
tribunal on the ‘sum’ adjudged under clause (a). It says that
‘unless the award otherwise directs’, a sum directed to be paid
by an award shall carry interest at the rate of 18% per annum
from the date of the award to the date of payment. In other
words, clause (b) is subject to the interest that may be
awarded by the arbitral tribunal. This provision was explained
in S.A. Builders (supra) in the following manner:
36.4. This brings us to the second part i.e. clause ( b )
which deals with post-award interest. The “sum”
directed to be paid by the Arbitral Tribunal shall, unless
the award otherwise directs, carry interest @ 18% p.a.
from the date of the award to the date of payment. Thus,
what clause ( b ) provides for is that the Arbitral Tribunal
may award interest on the “sum” adjudged under clause
( a ). But if no such interest is awarded, then there shall
be interest @ 18% on the “sum” awarded by the Arbitral
Tribunal from the date of the award to the date of
payment. The two crucial words in this part
are sum and shall . As seen from clause ( a ), the “sum”
17
awarded by the Arbitral Tribunal would include interest
if it is granted by the Arbitral Tribunal. Therefore, the
“sum” as awarded by the Arbitral Tribunal may or may
not include interest. Whether the “sum” so awarded
includes or does not include interest, it would carry
further interest @ 18% from the date of the award to the
date of payment unless another rate of interest is
granted by the Arbitral Tribunal. While granting of
interest under clauses ( a ) and ( b ) by the Arbitral
Tribunal is discretionary, the interest contemplated
under clause ( b ) in the event of failure of the Arbitral
Tribunal to award interest is mandatory. Therefore, the
legislature has consciously used the word shall .
20. Thus, from a conjoint analysis of Section 31(7)(a)
and Section 31(7)(b) of the 1996 Act, what is discernible is
that insofar award of interest from the date on which the
cause of action arose till the date of the award is concerned,
the legislative intent is that the parties possess the autonomy
to determine the interest and the rate of interest for the
aforesaid period. Clause (a) i.e. discretion of the arbitral
tribunal to award interest is subject to agreement by and
between the parties. Therefore, party autonomy takes
precedence over the discretion of the arbitral tribunal.
18
However, clause (b) is subject to award of interest by the
arbitral tribunal. In other words, as per clause (b), the ‘sum’
directed to be paid under an arbitral award shall carry
interest at the rate of 18% per annum from the date of the
award to the date of payment ‘unless the award otherwise
directs’. Therefore, this provision is subject to award of
interest by the arbitral tribunal. If it awards interest, then the
same shall be applicable from the date of the award till the
date of payment; if not, then the ‘sum’ as adjudged under
clause (a) shall carry interest at the rate of 18%.
21. The parties here are governed by the MOU dated
09.04.2014. Clause (6)(b) of the MoU is relevant and reads as
under:
(b) The proposed purchaser may at its option terminate
this MOU by sending to the proposed vendor an
intimation of termination of MOU and demand for
refund of advance paid together with 21% interest per
annum from the respective dates of disbursement of the
advances till actual date of payment of the same. The
proposed vendor shall tender the advances together with
21% interest per annum within 30 days of receipt of
intimation of termination from the proposed purchaser.
19
It is clarified that the termination of the MOU will take
effect only from the date of receipt of all advances
together with 21% interest per annum up to date of
receipt by the proposed purchaser. If for any reason the
proposed vendor is unable to tender all advances with
21% interest per annum within 30 days of the receipt of
intimation of termination of the MOU from the proposed
purchaser, the proposed purchaser will have the option
to call upon the proposed vendor to execute the sale
deed in respect of the schedule property on as is where
is basis for a total consideration of Rs. 65 crores (Rupees
sixty five crores) and pay the balance amount after
adjusting advances paid.
21.1. The aforesaid clause in the MoU gave discretion to
the respondent to terminate the MOU in which event it would
be entitled to refund of the advance paid together with interest
at the rate of 21% per annum from the respective dates of
disbursement of the advances till the actual date of
repayment.
22. The arbitral tribunal in the award dated
08.09.2019 applied the aforesaid clause of the MOU while
declaring that the claimant was entitled to Rs. 15.5 crores
with interest at the rate of 21% per annum from the date it
20
was given to the date it is paid. Therefore, it is evident that
the arbitral tribunal was guided by the rate of interest
provided in the MOU and it clarified while passing the award
that this rate of interest would be available to the respondent
from the dates of disbursement till the actual date of
repayment.
23. A two-Judge Bench of this Court in State of
4
Haryana Vs. S.L. Arora considered the question as to
whether Section 31(7) of the 1996 Act authorises and enables
arbitral tribunals to award interest on interest from the date
of the award? In the facts of that case, the consequential
question formulated was as to whether the arbitral award
granted future interest from the date of award, only on the
principal amount found due to the respondent or on the
aggregate of the principal and interest up to the date of the
award? After an analysis of the aforesaid provision, the Bench
observed that Section 31(7) makes no reference to payment of
compound interest or payment of interest upon interest. It
4
(2010) 3 SCC 690
21
was held that in the absence of any provision for interest upon
interest in the contract, arbitral tribunals do not have the
power to award interest upon interest or compound interest
either for the pre-award period or for the post-award period.
It was held thus:
18. Section 31(7) makes no reference to payment of
compound interest or payment of interest upon interest.
Nor does it require the interest which accrues till the
date of the award, to be treated as part of the principal
from the date of award for calculating the post-award
interest. The use of the words “ where and insofar as an
arbitral award is for the payment of money ” and use of
the words “ the Arbitral Tribunal may include in the sum
for which the award is made, interest … on the whole or
any part of the money ” in clause ( a ) and use of the words
“ a sum directed to be paid by an arbitral award shall …
carry interest ” in clause ( b ) of sub-section (7) of Section
31 clearly indicate that the section contemplates award
of only simple interest and not compound interest or
interest upon interest. “ A sum directed to be paid by an
” refers to the award of sums on the
arbitral award
substantive claims and does not refer to interest
awarded on the “ sum directed to be paid by the award ”.
In the absence of any provision for interest upon interest
in the contract, the Arbitral Tribunals do not have the
power to award interest upon interest, or compound
22
interest, either for the pre-award period or for the post-
award period.
23.1. Thereafter the Bench upon a threadbare analysis
concluded that Section 31(7) merely authorizes the arbitral
tribunal to award interest in accordance with the contract
and in the absence of any prohibition in the contract and in
the absence of specific provision relating to interest in the
contract, to award simple interest at such rates as it deems
fit from the date on which the cause of action arose till the
date of payment. The Bench further clarified that if the award
is silent about interest from the date of award till the date of
payment, the person in whose favour the award is made will
be entitled to interest at 18% per annum on the principal
amount awarded from the date of award till the date of
payment. In the facts of that case, the Bench declared that
the calculation that was made in the execution petition as
originally filed was correct and that the modification sought
for by the respondent increasing the amount due under the
award was contrary to the award. It was concluded as under:
23
34. Thus it is clear that Section 31(7) merely authorises
the Arbitral Tribunal to award interest in accordance
with the contract and in the absence of any prohibition
in the contract and in the absence of specific provision
relating to interest in the contract, to award simple
interest at such rates as it deems fit from the date on
which the cause of action arose till the date of payment.
It also provides that if the award is silent about interest
from the date of award till the date of payment, the
person in whose favour the award is made will be
entitled to interest at 18% per annum on the principal
amount awarded, from the date of award till the date of
payment. The calculation that was made in the
execution petition as originally filed was correct and the
modification by the respondent increasing the amount
due under the award was contrary to the award.
24. The correctness of the view taken in S.L. Arora
(supra) came up for consideration before a three-Judge Bench
of this Court in Hyder Consulting (supra) . The majority held
that the conclusion reached in S.L. Arora (supra) was not in
consonance with the clear language of Section 31(7) of the
Act. After extracting Section 31(7) of the 1996 Act, the Bench
explained clause (a) of sub-section (7) of Section 31 in the
following manner:
24
4. Clause ( a ) of sub-section (7) provides that where an
award is made for the payment of money, the Arbitral
Tribunal may include interest in the sum for which the
award is made. In plain terms, this provision confers a
power upon the Arbitral Tribunal while making an
award for payment of money, to include interest in the
sum for which the award is made on either the whole or
any part of the money and for the whole or any part of
the period for the entire pre-award period between the
date on which the cause of action arose and the date on
which the award is made. To put it differently, sub-
section (7)( ) contemplates that an award, inclusive of
a
interest for the pre-award period on the entire amount
directed to be paid or part thereof, may be passed. The
“ sum ” awarded may be the principal amount and such
interest as the Arbitral Tribunal deems fit. If no interest
is awarded, the “ sum ” comprises only the principal. The
significant words occurring in clause ( a ) of sub-section
(7) of Section 31 of the Act are “ the sum for which the
award is made ”. On a plain reading, this expression
refers to the total amount or sum for the payment for
which the award is made. Parliament has not added a
qualification like “principal” to the word “sum”, and
therefore, the word “sum” here simply means “a
particular amount of money”. In Section 31(7), this
particular amount of money may include interest from
the date of cause of action to the date of the award.
25
24.1. On the above analysis, the Bench explained clause
(b) of sub-section (7) of Section 31 of the 1996 Act to mean
that the ‘sum’ which is directed to be paid by the award,
whether inclusive or exclusive of interest, shall carry interest
at the rate of 18% per annum for the post-award period unless
otherwise ordered. The above provision was explained as
under:
7. Thus, when used as a noun, as it seems to have been
used in this provision, the word “sum” simply means “an
amount of money”; whatever it may include —
“principal” and “interest” or one of the two. Once the
meaning of the word “sum” is clear, the same meaning
must be ascribed to the word in clause ( b ) of sub-section
(7) of Section 31 of the Act, where it provides that
a sum directed to be paid by an arbitral award “ shall …
carry interest …” from the date of the award to the date
of the payment i.e. post-award. In other words, what
clause ( b ) of sub-section (7) of Section 31 of the Act
directs is that the “sum”, which is directed to be paid by
the award, whether inclusive or exclusive of interest,
shall carry interest at the rate of eighteen per cent per
annum for the post-award period, unless otherwise
ordered.
26
24.2. Finally, Hyder Consulting (supra) arrived at the
following conclusion:
13. Thus, it is apparent that vide clause ( ) of sub-
a
section (7) of Section 31 of the Act, Parliament intended
that an award for payment of money may be inclusive of
interest, and the “sum” of the principal amount plus
interest may be directed to be paid by the Arbitral
Tribunal for the pre-award period. Thereupon, the
Arbitral Tribunal may direct interest to be paid on such
“sum” for the post-award period vide clause ( b ) of sub-
section (7) of Section 31 of the Act, at which stage the
amount would be the sum arrived at after the merging
of interest with the principal; the two components
having lost their separate identities.
25. The question as to whether the ‘sum’ awarded
under clause (a) of sub-section (7) of Section 31 of the 1996
Act would include interest pendente lite or not again came up
for consideration before a two-Judge Bench of this Court in
Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail
5
Corporation . The Bench analyzed Hyder Consulting (supra) in
the following manner:
5
(2022) 9 SCC 286
27
15. It could thus be seen that the majority view of this
Court in Hyder Consulting (UK) is that the sum awarded
may include the principal amount and such interest as
the Arbitral Tribunal deems fit. It is further held that, if
no interest is awarded, the “sum” comprises only the
principal amount. The majority judgment held that
clause ( a ) of sub-section (7) of Section 31 of the 1996 Act
refers to the total amount or sum for the payment for
which the award is made. As such, the amount awarded
under clause ( a ) of sub-section (7) of Section 31 of the
1996 Act would include the principal amount plus the
interest amount pendente lite. It was held that the
interest to be calculated as per clause ( b ) of sub-section
(7) of Section 31 of the 1996 Act would be on the total
sum arrived as aforesaid under clause ( a ) of sub-section
(7) of Section 31 of the 1996 Act. S.A. Bobde, J. in his
judgment, has referred to various authorities of this
Court as well as Maxwell on the Interpretation of
Statutes . He emphasised that the Court must give effect
to the plain, clear and unambiguous words of the
legislature and it is not for the courts to add or subtract
the words, even though the construction may lead to
strange or surprising, unreasonable or unjust or
oppressive results.
25.1. Thereafter, the Bench made an analysis of clause
(a) of sub-section (7) of Section 31 of the 1996 Act and noted
that it begins with the expression ‘unless otherwise agreed by
28
the parties’. This expression was explained by the Bench by
holding as under:
17. It could thus be seen that the part which deals with
the power of the Arbitral Tribunal to award interest,
would operate if it is not otherwise agreed by the parties.
If there is an agreement between the parties to the
contrary, the Arbitral Tribunal would lose its discretion
to award interest and will have to be guided by the
agreement between the parties. The provision is clear
that the Arbitral Tribunal is not bound to award interest.
It has a discretion to award the interest or not to award.
It further has a discretion to award interest at such rate
as it deems reasonable. It further has a discretion to
award interest on the whole or any part of the money. It
is also not necessary for the Arbitral Tribunal to award
interest for the entire period between the date on which
the cause of action arose and the date on which the
award is made. It can grant interest for the entire period
or any part thereof or no interest at all.
25.2. Thus, this Court was of the view that power of the
tribunal to award interest would operate if it is not otherwise
agreed by the parties. If there is an agreement between the
parties to the contrary, the arbitral tribunal would lose its
discretion to award interest and will have to be guided by the
29
agreement between the parties. Thus, the expression ‘unless
otherwise agreed by the parties’ assumes significance and
concluded as under:
20. If clause ( a ) of sub-section (7) of Section 31 of the
1996 Act is given a plain and literal meaning, the
legislative intent would be clear that the discretion with
regard to grant of interest would be available to the
Arbitral Tribunal only when there is no agreement to the
contrary between the parties. The phrase “unless
otherwise agreed by the parties” clearly emphasises that
when the parties have agreed with regard to any of the
aspects covered under clause ( ) of sub-section (7) of
a
Section 31 of the 1996 Act, the Arbitral Tribunal would
cease to have any discretion with regard to the aspects
mentioned in the said provision. Only in the absence of
such an agreement, the Arbitral Tribunal would have a
discretion to exercise its powers under clause ( a ) of sub-
section (7) of Section 31 of the 1996 Act. The discretion
is wide enough. It may grant or may not grant interest.
It may grant interest for the entire period or any part
thereof. It may also grant interest on the whole or any
part of the money.
25.3. From the above, the view of the court is clearly
discernible in that the discretion to grant interest would be
available to the arbitral tribunal under clause (a) of sub-
30
section (7) of Section 31 only when there is no agreement to
the contrary between the parties. When the parties agree with
regard to any of the aspects covered under clause (a) of sub-
section (7) of Section 31, the arbitral tribunal would cease to
have any discretion with regard to the aspects mentioned in
the said provision. Only in the absence of such an agreement,
the arbitral tribunal would have the discretion to exercise its
powers under clause (a) of sub-section (7) of Section 31 of the
1996 Act.
25.4. In the facts of that case it was held that in view of
the specific agreement between the parties, the interest
quotient prior to the date of the award so also after the date
of the award will be governed by article 29.8 of the concession
agreement which was also directed by the arbitral tribunal.
This view was accordingly affirmed by this Court.
26. In Morgan Securities and Credits Private Limited Vs.
6
Videocon Industries Limited , a two-Judge Bench of this Court
again examined the decision in Hyder Consulting (supra).
6
(2023) 1 SCC 602
31
After an extensive analysis, the Bench was of the view that
the decision in Hyder Consulting (supra) was on the limited
issue of whether post-award interest could be granted on the
aggregate of the principal and the pre-award interest. The
opinion authored by Bobde, J. was limited to this aspect of
post-award interest. Thereafter, the Bench noted that the
issue before it was whether the phrase ‘unless the award
otherwise directs’ in Section 31(7)(b) of the 1996 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. Thereafter it was noted that both clauses (a) and
(b) of sub-section (7) of Section 31 are qualified. While clause
(a) is qualified by the arbitration agreement between the
parties, clause (b) is qualified by the arbitration award. The
words ‘unless otherwise agreed by the parties’ occurring at
the beginning of clause (a) qualifies the entire provision.
However, the words ‘unless the award otherwise directs’
occurring in clause (b) only qualifies the rate of post-award
interest. Thereafter, this Court summarized the findings and
32
we extract only those portions which are relevant for our
present purpose:
28.3. The phrase “unless the award otherwise directs”
in Section 31(7)( b ) only qualifies the rate of interest.
28.4. 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 per cent.
28.5. 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.
28.6.
The arbitrator must exercise the discretionary
power to grant post-award interest reasonably and in
good faith, taking into account all relevant
circumstances.
27. Though learned senior counsel for the respondent
placed heavy reliance on S.A. Builders Limited (supra), we are
of the view that S.A. Builders Limited (supra) is a continuum
of what was held by this Court in Delhi Airport Metro Express
Private Limited (supra) and in Morgan Securities and Credits
Private Limited (supra). We have already noted as to how a
two-Judge Bench of this Court in S.A. Builders Limited (supra)
(of which I was also a member) had analyzed clauses (a) and
33
(b) of sub-section (7) of Section 31 of the 1996 Act. We have
also noted that this Court had observed that the provision in
Section 31(7)(a) of the 1996 Act begins with the expression
‘unless otherwise agreed by the parties’, thereby highlighting
the legislative stance that the parties possess the autonomy
to determine pre-award interest on the payment of money that
may be awarded by the arbitral tribunal. However, no such
discretion is available to the parties under Section 31(7)(b) of
the 1996 Act though such discretion is available to the
arbitral tribunal. It was in that context this Court in the facts
of that case noted that it was not the case of the appellant
that the interest portion is covered by the contract agreement
between the parties. In the absence thereof, Section 31(7)(a)
as well as Section 31(7)(b) of the 1996 Act would have their
full effect. Therefore, it was concluded as under:
70. That apart, it is not the case of the appellant that
the interest portion is covered by the contract agreement
between the parties. In the absence thereof, Section
31(7)( ) as well as Section 31(7)( ) of the 1996 Act would
a b
have their full effect. The sum awarded would mean the
principal amount plus the interest awarded from the
date of cause of action up to the date of the award.
34
Thereafter, as per Section 31(7)( b ) of the 1996 Act, the
sum (principal plus interest) would carry interest @ 18%
from the date of the award to the date of payment. This
would be consistent with the law laid down by this Court
in Hyder Consulting .
28. Therefore, even S.A. Builders Limited (supra) lays
down the proposition that the discretion of the arbitral
tribunal to award interest under Section 31(7)(a) of the 1996
Act is subservient to the agreement between the parties. In
other words, party autonomy, so crucial to arbitration, reigns
supreme.
29. Reverting back to the facts of the present case, we
have already adverted to clause 6(b) of the MoU dated
09.04.2014 which expressly provided that in the event of
termination of the MoU, the appellant must refund all
advances with interest at the rate of 21% per annum from the
respective dates of disbursement till repayment. Thus, in the
light of the express provision contained in clause (a) of sub-
section (7) of Section 31, the arbitral tribunal awarded
interest in terms of the MoU from the date of the cause of
35
action till the date of repayment. As the arbitral tribunal had
expressly provided interest till the date of repayment,
question of additional or compound interest under clause (b)
of sub-section (7) of Section 31 of 1996 Act would not arise.
The arbitral tribunal in its award dated 08.09.2019 has
faithfully complied with the MoU agreed by and between the
parties. Thus, the arbitral tribunal exercised its discretion
within the overall framework of Section 31(7) of the 1996 Act
aligning with the legislative intent that the award, rather than
the statutory default, should govern the parties, more so in a
case as in the present one where the parties have themselves
made provision for interest throughout.
30. Therefore, reliance placed by the respondent on
Hyder Consulting (supra) to claim post-award interest is
misplaced. That principle would apply only when the arbitral
tribunal leaves a matter unqualified or is silent. In the present
case the arbitral tribunal bound by the MoU and exercising
its statutory discretion had already specified the interest rate
(21% per annum) and the duration (until repayment). As held
36
in Morgan Securities and Credits Private Limited (supra),
reaffirmed in Delhi Airport Metro Express Private Limited
(supra) and explained in S.A. Builders Limited (supra), once
parties agree on the interest regime, the arbitrator’s role is
confined to enforcing it and the courts would not rewrite or
enlarge the award by introducing further interest at the
execution stage.
31. The MoU did not stipulate compounding of
interest; the arbitral tribunal did not award compound
interest; therefore, respondent cannot at the stage of
execution seek to introduce claim of compound interest by
drawing on general principles. Allowing such a claim would
amount to rewriting the award at the stage of execution which
is impermissible.
32. In the circumstances, we are of the view that the
High Court was not justified in setting aside the order of the
executing court and remanding the matter for fresh
determination.
37
33. For the reasons aforementioned, the impugned
judgment and order of the High Court dated 22.04.2024 is
hereby set aside. Consequently, order of the executing court
dated 02.11.2023 is restored.
34. Civil appeal is accordingly allowed. However, there
shall be no order as to cost.
……………………………J.
[MANOJ MISRA]
……………………………J.
[UJJAL BHUYAN]
NEW DELHI;
SEPTEMBER 24, 2025.
38