Post-award arbitral interest must comply with amended Section 31(7)(b), not the pre-2015 18% rate.

An arbitral award dated 28 February 2022 directed payment of certain sums and awarded post-award interest at 18% per annum until payment.

The appellant did not challenge the principal amount or other components of the award; its challenge was confined to the rate of post-award interest.

The appeal under Section 37 challenged the order upholding the interest component of the award.

Whether the learned Arbitrator was legally justified in awarding post-award interest at 18% per annum under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996.

Whether, in the absence of an agreement providing for post-award interest, the applicable rate was 2% above the current rate of interest prevailing on the date of the award.

Whether the principle stated in State of Haryana v. S.L. Arora and Company remained applicable after the amendment to Section 31(7)(b) effective from 23 October 2015.

Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 empowers the arbitral tribunal to award pre-award interest at such reasonable rate as it deems appropriate, subject to any agreement between the parties.

Section 31(7)(b), as substituted with effect from 23 October 2015, provides that an arbitral award directing payment of money shall, unless the award otherwise directs, carry post-award interest at 2% above the current rate of interest prevailing on the date of the award.

The Court considered State of Haryana v. S.L. Arora and Company, which distinguished pre-award and post-award interest and explained the statutory scheme under the earlier version of Section 31(7)(b); however, the Court held that the decision was of limited assistance because the statutory rate had subsequently been amended from 18% to the current rate plus 2%.

The Court also proceeded under the appellate framework of Sections 37 and 34 of the Act.

The Court found that the award was passed in February 2022, after the 2015 amendment to Section 31(7)(b).

The prevailing rate of interest for private-sector banks on the date of the award was identified as 9.71%, making the statutory post-award rate 11.71% per annum.

The Court held that the Arbitrator was not justified in applying 18%, since that rate reflected the statutory position under the unamended provision and had been replaced by the current-rate-plus-2% formula from 23 October 2015.

Accordingly, the reliance on S.L. Arora could not sustain the 18% award, and the interest component was liable to be modified under the principles governing interference with an arbitral award.

The arbitral award dated 28 February 2022 and the impugned court order were set aside insofar as they awarded interest at 18%, and the post-award interest was modified to 11.71% per annum from 28 February 2022 until payment.

Since the appellant had deposited the principal amount in an FDR, the respondent was permitted to obtain and encash it.

The appellant was directed to pay interest at 11.71% until the date of furnishing of the FDR, by 31 October 2026; failure to pay by that date would attract further interest at 15% per annum.