HLV Limited (Formerly Known as Hotel Leelaventure Pvt. Ltd.) vs PBSAMP Projects Pvt. Ltd.

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)

JUDGMENT

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

Signature Not Verified Court for the State of Telangana at Hyderabad (High Court) in 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.

6. The arbitral tribunal passed an award dated 08th

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

Orissa1, 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.

Videocon Industries Limited2, 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

Limited3. 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

Haryana Vs. S.L. Arora4 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 arbitral award” refers to the award of sums on the 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)(a) contemplates that an award, inclusive of 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 (a) of sub-

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

Corporation5. 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 (a) of sub-section (7) of 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.

Videocon Industries Limited6, 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)(a) as well as Section 31(7)(b) of the 1996 Act would 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