North Delhi Municipal Corporation vs M/S S.A. Builders Ltd

2024 INSC 988 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1878 OF 2024 (@ SPECIAL LEAVE PETITION (CIVIL) NO. 3421 OF 2024)

NORTH DELHI MUNICIPAL CORPORATION APPELLANT(S)

VERSUS

M/S. S.A. BUILDERS LTD. RESPONDENT(S)

JUDGMENT

UJJAL BHUYAN, J.

Heard learned counsel for the parties.

2. This civil appeal by special leave is directed against the

impugned order dated 01.07.2019 passed by a Division Bench of

the High Court of Delhi at New Delhi (‘High Court’) disposing of

EFA(OS) No. 17/2017 and C.M. No. 20662/2017 (North Delhi

Municipal Corporation Vs. M/s. S A Builders Ltd).

3. By the impugned order dated 01.07.2019, the Division

Bench held that this Court vide the order dated 12.03.2015 had Signature Not Verified Digitally signed by

directed the High Court to decide the issue of interest component ARJUN BISHT Date: 2024.12.17 16:07:06 IST Reason:

payable to the respondent in accordance with the law laid down 2

in M/s. Hyder Consulting (UK) Ltd. Vs. Governor, State of Orissa1

and not in accordance with the law laid down in State of Haryana

Vs. S.L. Arora2, declaring that the matter relating to amount

payable to the respondent had attained finality and could not be

interfered with. The Division Bench set aside that part of the order

of the learned Single Judge dated 19.04.2017 passed in E.A. (OS)

No. 34/2016 pertaining only to the calculations and permitted

both the parties (appellant and respondent) to make submissions

before the learned Single Judge restricted to the quantum of the

amount payable to the respondent. The appeal and the

miscellaneous application were disposed of with the observation

that learned Single Judge would decide the amount payable by

the appellant to the respondent after hearing both the sides.

4. At the outset, it would be appropriate to advert to the

relevant facts having a material bearing on the lis.

Facts

5. Respondent was awarded a contract work relating to

construction of approaches to flyover at the level crossing on New

Rohtak Road with clover-leaf slip road and service road etc. by the

1 (2015) 2 SCC 189 2 (2010) 3 SCC 690 3

appellant. A contract agreement was entered into between the

parties in this regard on 11.11.1983. The work however could not

be completed even beyond the stipulated date of completion till

March, 1990 and, therefore, the work had to be closed in an

incomplete form. The main reason for closing the work was non-

availability of site.

5.1. The last payment to the tune of Rs. 4,71,48,122.00 was

made to the respondent on 09.02.1988. Thereafter, no payments

were made to the respondent for the work done upto March, 1990

when the contract was closed. Respondent submitted its final bill

which the appellant failed to pay. As a result, dispute arose

between the parties.

6. Thereafter, respondent filed an application under

Section 20 of the Arbitration Act, 1940 before the High Court

seeking appointment of an arbitrator to arbitrate the dispute

between the parties. High Court appointed Sh. S.P. Rai, Ex-

Member(Personnel), Postal Services Board and Additional

Secretary to the Government of India, Ministry of

Communications, as the sole Arbitrator. It may be mentioned that

on the consent of both the parties, the arbitration proceedings

were carried out in terms of the Arbitration and Conciliation Act, 4

1996 whereafter award was passed by the sole Arbitrator on

16.12.1997. Learned Arbitrator awarded various sums under

different heads out of the 26 claims, while rejecting a few of the

claims of the respondent. Counter claim of the appellant was also

allowed to a limited extent under three heads. After adjusting the

two, an amount of Rs. 1,70,70,720.80 was awarded to the

respondent with simple interest @ 18% per annum on the award

amount w.e.f. 01.04.1990 upto the date of actual payment except

on claim No. 23(b) which related to expenses incurred by the

respondent on account of bank guarantee commission, margin

money etc. for keeping the bank guarantee alive.

6.1. Thereafter, the sole Arbitrator issued a corrigendum

dated 18.12.1997 pointing out certain typographical errors in the

award, whereafter it was mentioned that the net amount payable

to the respondent would be Rs. 1,70,40,720.80 instead of

Rs. 1,70,70,720.80, further clarifying that the above correction

would form part of the award dated 16.12.1997.

7. Respondent filed an execution petition being Ex.P. No.

99/1998 under Section 36 of the Arbitration and Conciliation Act,

1996 (briefly ‘the 1996 Act’ hereinafter) before the Single Bench

of the High Court for execution of the arbitral award. Learned 5

Single Judge vide the order dated 26.08.2004 framed the

following issue for consideration:

Whether post award interest under Section 31(7) of the Arbitration and Conciliation Act, 1996 would be calculated on the principal sum adjudged or would it be calculated on the principal sum plus interest on the principal sum which has accrued from the date of cause of action to date of passing of award, as under the new 1996 Act, award is enforced as a decree of the court.

8. Simultaneously, appellant also filed before the Single

Bench a petition under Section 34 of the 1996 Act challenging the

award dated 16.12.1997. By order dated 08.01.2002, the petition

of the appellant under Section 34 of the 1996 Act was dismissed.

9. Appellant then preferred an appeal under Section 37 of

the 1996 Act before the Division Bench assailing the order dated

08.01.2002 being FAO(OS) No. 89/2002. The said appeal was,

however, dismissed by the Division Bench of the High Court by

the judgment and order dated 14.03.2002.

10. Being aggrieved by the order dated 14.03.2002,

appellant filed a special leave petition before this Court being

SLP(C) No. 7474/2002. Though this Court had initially issued

notice and granted limited stay qua execution of the award vis-à- 6

vis claim Nos. 22, 25 and 26, the said special leave petition was

subsequently dismissed by this Court on 03.02.2010.

11. Reverting back to the execution petition filed by the

respondent, learned Single Judge vide the order dated

26.08.2004 after framing the issue as above expressed the view

that post-award interest under Section 31(7) of the 1996 Act

affects a large volume of litigation before the court. Therefore, in

order to avoid proliferation of litigation and unnecessary appeals,

learned Single Judge referred the matter to the Division Bench to

clarify the position in this regard.

12. When the matter was placed before the Division Bench,

respondent sought leave to approach the learned Arbitrator for

seeking the clarification as to whether the interest awarded in the

award was under Section 31(7)(a) of the 1996 Act or not? Division

Bench vide the order dated 03.01.2005 granted such permission

to the respondent with the clarification that the permission so

granted should not be understood to contain any expression of

opinion of the Division Bench about payment of interest under

Section 31(7)(a) or Section 31(7)(b) of the 1996 Act.

13. Pursuant thereto, an application was filed by the

respondent before the learned Arbitrator seeking clarification in 7

terms of the order dated 03.01.2005. It was contended on behalf

of the respondent that though under sub-Section (7) of Section

31 of the 1996 Act interest can be awarded, Arbitral Tribunal,

however, had not clarified as to whether the said interest was

awarded under clause (a) of sub-Section (7) of Section 31 of the

1996 Act or not. Appellant filed objection to such application

primarily contending on merit that no such clarification was

warranted in the facts and circumstances of the case.

14. Learned Arbitrator after hearing the parties issued a

clarification on 15.03.2005 vis-à-vis payment of interest. After

analysing the provisions of both Section 31(7)(a) and Section

31(7)(b) of the 1996 Act, learned Arbitrator clarified that

post-award interest shall be payable on the awarded sum i.e. on

the amount of claim awarded plus the interest for the pre-

reference period as well as interest pendente lite from the date of

the award till it is paid @ 18% per annum.

15. It may be mentioned that against the order of the

Division Bench of the High Court dated 03.01.2005 whereby the

Division Bench had granted permission to the respondent to

approach the Arbitral Tribunal for clarification, appellant had

filed special leave petition before this Court being SLP(C) CC No. 8

5011/2007 and by order dated 09.07.2007, the said special leave

petition was dismissed.

16. Against the clarification of the learned Arbitrator dated

15.03.2005, an application was filed by the appellant before the

Single Bench being EA(OS) No. 270/2005 in the pending Ex.P.

No. 99/1998 for setting aside the said clarification. By the order

dated 19.02.2008, learned Single Judge, after referring to Section

32 of the 1996 Act and a decision of the Delhi High Court in Ircon

International Ltd. Vs. Budhiraja Mining & Construction Ltd.3, held

that learned Arbitrator had become functus officio and, therefore,

had no authority to entertain the application for clarification.

After 30 days of the award, learned Arbitrator had no authority to

make any change in the award. The earlier order of the learned

Arbitrator awarding simple interest @ 18% per annum on the

awarded amount from 01.04.1990 till the date of actual payment

takes care of the interest part. Learned Single Judge, therefore,

set aside the clarification issued by the learned Arbitrator,

declaring that the award dated 16.12.1997 passed earlier and the

interest granted thereunder would hold the field and would be

3 2007(4) Arb. LR 159 (Delhi) 9

payable by the judgment debtor (appellant) to the judgment

holder (respondent).

17. According to the appellant, it paid the interest

component and submitted before the executing court that the

decree stood satisfied. Learned Single Judge vide the order dated

08.10.2010 disposed of the execution petition being Ex.P. No.

99/1998 holding that the decree stood satisfied.

18. Against the order dated 19.02.2008, respondent

preferred an appeal before the Division Bench being EFA(OS) No.

16/2008. Division Bench vide the order dated 23.02.2012

referred to the decision of this Court in S.L. Arora (supra) and held

that the settled legal position that prevailed was that compound

interest under the 1996 Act could not be granted in view of the

decision in S.L. Arora (supra). Resultantly, the amount covered by

the compound interest was not payable. It was observed that in

view of the settled legal position that respondent was not entitled

to compound interest as per the decision in S.L. Arora (supra), the

appeal had become an academic exercise. Division Bench

therefore declined to examine the reasoning of the learned Single

Judge while passing the order dated 19.02.2008. The appeal of 10

the appellant was dismissed in the aforesaid manner and not on

the basis of the reasons given by the learned Single Judge.

19. Assailing the order dated 23.02.2012 of the Division

Bench, respondent preferred SLP(C) No. 18614/2012. This Court

passed an order on 13.07.2012 to tag the aforesaid SLP with Civil

Appeal No. 3148 of 2012 (M/s. Hyder Consulting (UK) Ltd. Vs.

Governor, State of Orissa Thr. Chief Engineer).

20. On leave being granted, SLP(C) No. 18614/2012 came

to be registered as Civil Appeal No. 2841 of 2015. Civil Appeal

No. 3148 of 2012 (M/s. Hyder Consulting (UK) Ltd. Vs. Governor,

State of Orissa) came to be disposed of alongwith Civil Appeal No.

2841 of 2015 (M/s. S.A. Builders Vs. North Delhi Municipal

Corporation) and other connected appeals vide the order dated

12.03.2015. This Court referred to its earlier decision in M/s.

Hyder Consulting (UK) Ltd. (supra) and held that the decision in

S.L. Arora (supra) does not lay down the correct law. Computation

of the amount has to be done by the executing court on the basis

of the principles stated in M/s. Hyder Consulting (UK) Ltd. (supra). In M/s. Hyder Consulting (UK) Ltd. (supra), it has been held that

the sum directed to be paid by the award would mean a sum

inclusive of the principal amount adjudged and the interest 11

thereon. Therefore, the post-award interest that may be awarded

would be on the principal amount as well as on the interest on

the principal amount which together would constitute the sum

awarded.

21. Civil Appeal No. 2841 of 2015 i.e. the civil appeal of the

respondent was allowed by directing that the interest component

payable to the respondent shall be computed in accordance with

the law laid down in M/s. Hyder Consulting (UK) Ltd. (supra) and

not in accordance with S.L. Arora (supra) since S.L. Arora (supra)

has been overruled in M/s. Hyder Consulting (UK) Ltd. (supra). Resultantly, the decisions of the Single Bench as affirmed by the

Division Bench were set aside; respondent was given liberty to

seek execution of the award in terms of M/s. Hyder Consulting

(UK) Ltd. (supra).

22. It is stated by the appellant that in the course of an

audit, it transpired that it had made excess payment to the

respondent due to an error in calculation of interest. Therefore,

appellant filed an application being EA(OS) No. 364/2013 in the

disposed of execution petition being Ex. P. No. 99/1998 praying

for a direction for refund of the excess payment which was

quantified at Rs. 1,54,19,281.00 alongwith interest @ 18% from 12

09.09.2010 till the date of payment. Thereafter, appellant filed

another application being EA(OS) No. 25/2015 for amending the

earlier application being EA(OS) No. 364/2013. It was stated that

the refund claim amount was Rs. 5,45,41,756.00 as on

09.09.2010. In the proceedings held on 10.03.2017, learned

Single Judge prima facie held that respondent would be entitled

to interest on the pre-award interest. Appellant was directed to

verify the calculation of interest and to deposit the said amount

before the High Court which would be without prejudice to the

rights and contentions of the appellant.

23. Respondent filed a fresh application before the Single

Bench being EA(OS) No. 34/2016 claiming a sum of

Rs. 9,10,43,399.53 as on 31.12.2015 from the appellant in view

of the order of this Court dated 12.03.2015 passed in C.A. No.

2841 of 2015.

24. Appellant also filed an application being EA(OS) No.

166/2017 before the executing court for recall of the direction for

deposit of the additional interest. Learned Single Judge vide the

judgment and order dated 19.04.2017 held that the arbitral

award dated 16.12.1997 has to be considered in the light of the

decision of this Court in M/s. Hyder Consulting (UK) Ltd. (supra). 13

On the contention of the appellant that the learned Arbitrator had

no jurisdiction to issue such clarification as the Arbitral Tribunal

had become functus officio, the same was rejected by the learned

Single Judge on the ground that such clarification was obtained

in terms of the leave granted by the Division Bench; the special

leave petition filed by the appellant against the order of the

Division Bench was dismissed by this Court; further, the decision

of the Single Bench dated 19.02.2008 setting aside the

clarification issued by the learned Arbitrator as upheld by the

Division Bench was expressly set aside by this Court. Therefore,

learned Single Judge held that respondent would be entitled to

post-award interest not only on the claims as awarded [except

claim No. 23(b)] but also on the pre-award interest. The quantum

of pre-award interest would be included in the amount awarded

and that the post-award interest would run on the said composite

amount. Thus, the amount payable by the appellant to the

respondent would have to be computed on the said basis.

Accordingly, the appellant was directed to verify the calculations

and to pay the amount to the respondent within four weeks.

25. The aforesaid judgment and order of the learned Single

Judge dated 19.04.2017 was assailed by the appellant in appeal 14

before the Division Bench being EFA(OS) No.17/2017. Division

Bench vide the order dated 26.07.2017 noted that an amount of

Rs. 5,14,44,393.00 was outstanding, due to be paid by the

appellant to the respondent. Accordingly, without prejudice to the

respective rights and contentions of the parties, a direction was

issued to the appellant to deposit a sum of Rs. 5,14,44,393.00

before the High Court on or before 06.09.2017 to be released in

favour of the respondent, subject to offering of solvent security.

26. In terms of the aforesaid direction, appellant deposited

on 04.09.2017 a sum of Rs. 5,14,44,393.00 before the High Court

by way of a demand draft dated 30.08.2017.

27. Thereafter, an application was filed before this Court

by the appellant for seeking clarification of the order dated

12.03.2015 passed in C.A. No. 2541 of 2015. It was contended

therein that the civil appeal of the respondent was decided on the

principles of law laid down in M/s. Hyder Consulting (UK) Ltd.

(supra) but the main issue that learned Arbitrator lacked

jurisdiction to entertain the application for clarification and then

to pass a clarificatory order was not gone into. 15

28. However, the aforesaid application being M.A. No. 927

of 2018 was withdrawn by the appellant and was disposed of as

such vide the order dated 13.04.2018.

29. Division Bench thereafter passed the impugned order

dated 01.07.2019 rejecting the contention of the appellant that

the learned Arbitrator had no jurisdiction because by the order

dated 12.03.2015, this Court had directed that the High Court

would decide the issue of interest component payable to the

respondent in accordance with the law laid down in M/s. Hyder

Consulting (UK) Ltd. (supra) and not in accordance with S.L. Arora

(supra). That apart, such a contention was not available to the

appellant at the stage of execution proceeding. The matter had

attained finality upto the level of this Court and, thus, cannot be

interfered with on merit. Therefore, with the consent of the

parties, Division Bench set aside the operative part of the order

dated 19.04.2017 pertaining only to the calculations and

permitted both the parties to make submissions restricted to the

quantum of the amount payable to the respondent. Learned

Single Judge was requested to decide the amount payable to the

respondent after hearing both the sides.

16

Pleadings

30. According to the appellant, learned Arbitrator had

become functus officio after passing of the award dated

16.12.1997. Therefore, he had no jurisdiction to issue the

clarification dated 15.03.2005.

30.1. In the garb of the clarification dated 15.03.2005,

learned Arbitrator had substantially modified the award dated

16.12.1997. Appellant’s challenge to the same on the ground that

learned Arbitrator had no jurisdiction to issue the clarification

since he had become functus officio was upheld by the learned

Single Judge vide the order dated 19.02.2008. Challenge to the

aforesaid order by the respondent was rejected by the Division

Bench vide the order dated 23.02.2012. However, Division Bench

did not examine the question of jurisdiction but applied the ratio

of S.L. Arora (supra) while dismissing the appeal of the respondent

though this was the issue before the Division Bench. When the

aforesaid order of the Division Bench was questioned before this

Court by the respondent in C.A. No. 2841 of 2015, the same was

allowed vide the order dated 12.03.2015 relying on the decision

of this Court in M/s. Hyder Consulting (UK) Ltd. (supra) which had

overruled the earlier decision in S.L. Arora (supra). This Court also 17

did not examine the primary question as to whether the learned

Arbitrator had become functus officio while issuing the

clarification.

30.2. When the appellant had earlier questioned the award

under Section 34 of the 1996 Act and thereafter under Section 37

of the 1996 Act, the clarification dated 15.03.2005 was not in

existence. Therefore, appellant could challenge the same only in

the execution proceeding. Though the learned Single Judge had

upheld the objection of the appellant and had set aside the

clarification, Division Bench of the High Court while upholding

the decision of the learned Single Judge and this Court while

setting aside both the orders of the learned Single Judge and the

Division Bench, did not examine this aspect of the matter.

30.3. It is also contended that learned Arbitrator had

terminated the arbitral proceedings vide the award dated

16.12.1997 followed by the corrigendum dated 18.12.1997. No

application having been moved for rectification of any clerical or

calculation error within 30 days in terms of Section 33 of the 1996

Act and the respondent having not challenged the award under

Section 34 of the said Act, learned Arbitrator could not have

introduced any correction to the award, that too, in the manner 18

in which it has been done. In the award, he had granted simple

interest whereas by way of clarification, the same was changed to

compound interest.

30.4. It is settled law that Section 33 is the only provision in

the 1996 Act which allows correction of clerical errors. In the garb

of clarification or correcting clerical errors, learned Arbitrator

introduced substantial change in the award. In any view of the

matter, the power under Section 33 of the 1996 Act could not

have been exercised by the learned Arbitrator more than 6 years

after passing of the award.

31. Respondent in its counter affidavit has stated that the

special leave petition out of which the present civil appeal arises

is totally misconceived and is an abuse of the process of law.

31.1. Learned Arbitrator vide the award dated 16.12.1997

had awarded a sum of Rs. 1,70,70,720.80 (corrected to Rs.

1,70,40,720.80) alongwith interest @ 18% per annum in favour of

the respondent. In the course of the execution proceeding, the

executing court i.e. the learned Single Judge referred the matter

to the Division Bench on the question as to whether under Section

31(7) of the 1996 Act, post-award interest would be on the

principal sum adjudged or would be on the principal sum plus 19

interest on the principal sum which had accrued from the date of

the cause of action to the date of passing of the award. Division

Bench permitted the respondent to seek clarification from the

learned Arbitrator. This order was challenged by the appellant

before this Court by way of a special leave petition. However, the

said special leave petition was dismissed. It was, thereafter, that

the clarification was issued by the learned Arbitrator. Appellant

never challenged the clarified award under Section 34 of the 1996

Act; instead approached the executing court. The executing court

i.e. learned Single Judge had erroneously set aside the

clarification. Appeal filed by the respondent against such order

was dismissed by the Division Bench. When the respondent had

approached this Court by filing special leave petition, a three-

Judge Bench of this Court had already decided the issue in M/s.

Hyder Consulting (UK) Ltd. (supra). In the said decision, this Court

held that an arbitrator has the power to grant post-award interest

under Section 31(7) of the 1996 Act on the sum comprising of the

principal plus interest on the principal which has accrued from

the date of cause of action to the date of passing of the award.

Leave was granted whereafter the civil appeal of the respondent

was allowed by this Court. Following the law laid down in M/s. 20 Hyder Consulting (UK) Ltd. (supra), the orders of Single Bench and

Division Bench were set aside. Liberty was granted to the

respondent to seek execution as per the law in M/s. Hyder

Consulting (UK) Ltd. (supra).

31.2. In the above context, it is contended on behalf of the

respondent that the clarification issued by the learned Arbitrator

stood affirmed by this Court. Therefore, post the decision of this

Court, it is not open to the appellant to again question the

clarification on the ground that learned Arbitrator had no

jurisdiction to issue such clarification.

31.3. Notwithstanding the same, appellant had filed M.A. No.

927/2018 before this Court seeking clarification of the order

dated 12.03.2015 passed in the disposed of civil appeal which

was decided in favour of the respondent. Same grounds qua lack

of jurisdiction on the part of the learned Arbitrator were raised in

the miscellaneous application as are being raised now. The

miscellaneous application was extensively argued before this

Court. It was orally observed by this Court during the hearing

that the clarification was in consonance with the law laid down

by the three-Judge Bench of this Court in M/s. Hyder Consulting

(UK) Ltd. (supra) and was on the verge of dismissing the 21

miscellaneous application. It was at that stage that learned

counsel for the appellant sought leave of this Court to withdraw

the miscellaneous application and accordingly, the same was

disposed of as withdrawn. However, no liberty was granted to the

appellant to reagitate the said issue again in any other

proceeding. That being the position, appellant is estopped from

raking up the said issue again before this Court.

31.4. It is contended that learned Arbitrator was well within

his powers under Section 33 of the 1996 Act to issue the

clarification which has now attained finality.

31.5. In that view of the matter, the civil appeal being devoid

of any merit should be dismissed.

Submissions

32. Ms. Madhavi Divan, learned senior counsel for the

appellant, at the outset, submitted that the clarification of the

learned Arbitrator dated 15.03.2005 is a nullity in the eyes of law.

Referring to the final award dated 16.12.1997, learned senior

counsel submits that learned Arbitrator had awarded simple

interest @ 18% per annum from the date of the cause of action

i.e. 01.04.1990 till the date of actual payment which includes the

post-award period as well. She submits that since the award 22

provided for post-award interest, provisions of Section 31(7)(b) of

the 1996 Act would not come into play.

32.1. This position is clear and unambiguous.

Notwithstanding the same, after a period of about 8 years,

respondent, at the stage of execution proceeding, made a request

before the Division Bench of the High Court for clarification from

the learned Arbitrator as to whether the interest was awarded

under Section 31(7) of the 1996 Act or not. Without expressing

any opinion on the said issue, Division Bench vide the order dated

03.01.2005 permitted the respondent to approach the learned

Arbitrator for clarification. Though this decision of the Division

Bench was challenged before this Court by the appellant by way

of special leave petition, the same was dismissed.

32.2. Learned senior counsel submits that the clarification

sought for by the respondent from the learned Arbitrator was that

in the award it was not specifically mentioned that interest was

granted under sub-Section(7) of Section 31 of the 1996 Act.

Highlighting this aspect, learned senior counsel submits that

learned Arbitrator was requested only to specifically mention

whether the interest was awarded under Section 31(7) of the 1996

Act or not.

23

32.3. She further submits that in the clarificatory

proceedings before the learned Arbitrator, it was specifically

urged on behalf of the appellant that the learned Arbitrator had

awarded past, pendente lite and future interest in terms of Section

31(7) of the 1996 Act. However, in the garb of issuing a

clarification, learned Arbitrator fundamentally altered the award

resulting in heavy financial burden on the appellant.

32.4. Therefore, learned Arbitrator had transgressed the

scope of clarification sought for by the respondent, much beyond

the scope of Section 33(1)(a) of the 1996 Act.

32.5. Learned senior counsel in support of her above

contention has placed reliance on the decision of this Court in

Gyan Prakash Arya Vs. Titan Industries Ltd.4 , more particularly

on paragraph 13 thereof.

32.6. Ms. Divan vehemently argued that under the 1996 Act

the arbitration proceedings came to be terminated upon making

of the award under Section 32 thereof. Any fresh award beyond

the four corners of Section 33 of the said Act is barred and would

be a nullity. It is a case of lack of subject-matter jurisdiction and,

4 (2023) 1 SCC 153 24

therefore, the clarification is non est in the eyes of law. In this

connection, she has referred to a decision of this Court in

Harshad Chiman Lal Modi Vs. DLF Universal Ltd.5, more

particularly to paragraphs 30 to 33 thereof. Any order passed by

a tribunal lacking inherent jurisdiction would be coram non

judice. Such an order would be a nullity and is non est. The same

can be questioned at any stage i.e. at the stage of execution or

even in a collateral proceeding.

32.7. Proceeding further, learned senior counsel submits

that this Court never had the opportunity in the earlier

proceedings to examine the issue as to whether learned Arbitrator

had acted without jurisdiction while issuing the clarification

which resulted in modifying the original award. Therefore, the

said issue may be examined and the civil appeal should be

allowed.

32.8. Finally, learned senior counsel referred to the decision

of this Court in M/s. Hyder Consulting (UK) Ltd. (supra) and

submits that in that case this Court had clarified the expression

‘the arbitral tribunal may include in the sum, for which the award

is made’, occurring in Section 31(7)(a) of the 1996 Act, holding

5 (2005) 7 SCC 791 25

that the sum may include the principal amount and the interest

accrued thereon and, therefore, grant of interest on interest or

compound interest is permissible under Section 31(7)(b) of the

said Act. She asserts that M/s. Hyder Consulting (UK) Ltd. (supra)

is not an authority for the proposition that where the arbitrator

had exercised his jurisdiction not to grant compound interest,

even then such compound interest ought to be granted or is

mandated to be granted. On the contrary, M/s. Hyder Consulting

(UK) Ltd. (supra) recognises that such interest may be contained

in the ‘sum’ or may not be contained in the said ‘sum’. According

to her, it would be a complete absurdity if M/s. Hyder Consulting

(UK) Ltd. (supra) is interpreted to mean that where interest on

interest has not been granted or interest is not contained in the

sum, it should be superimposed on an existing award. Seen in

the above backdrop, the direction of this Court to compute the

interest amount, in accordance with the law laid down in M/s.

Hyder Consulting (UK) Ltd. (supra), cannot be interpreted to mean

that compound interest must be granted where it has not been

granted in the first place.

26

32.9. She, therefore, submits that the impugned order of the

Division Bench of the High Court is required to be set aside and

the entire controversy is required to be given a quietus.

33. Mr. C. Aryama Sundaram, learned senior counsel

representing the respondent at the outset submits that the

primary issue raised by the appellant in the present proceeding

i.e. whether the Arbitrator had become functus officio and thus

had no jurisdiction to issue the clarification dated 15.03.2005,

was expressly raised by the appellant and decided in favour of the

respondent by this Court on three earlier occasions. Firstly, the

Division Bench of the High Court vide the order dated 03.01.2005

had permitted the respondent to approach the Arbitral Tribunal

for seeking clarification. In the special leave petition filed by the

appellant before this Court assailing the aforesaid order of the

Division Bench, appellant had specifically challenged not only the

power of the High Court to refer the matter to the learned

Arbitrator for clarification but also the very jurisdiction of the

learned Arbitrator to issue such clarification. The said SLP was

dismissed by this Court vide the order dated 09.07.2007.

Secondly, the clarification dated 15.03.2005 of the learned

Arbitrator was challenged by the appellant by filing objection in 27

the pending execution proceeding. The challenge was made on

the ground that the learned Arbitrator had become functus officio

and thus had no authority to issue any clarification. Learned

Single Judge had set aside the clarification of the learned

Arbitrator by accepting the contention of the appellant which

order was upheld by the Division Bench. Special leave petition

filed by the respondent against the aforesaid order of the Division

Bench was allowed by this Court vide the order dated 12.03.2015;

judgments of the learned Single Judge as well as of the Division

Bench of the High Court whereby the clarification issued by the

learned Arbitrator was set aside were reversed by this Court vide

the order dated 12.03.2015. Thirdly, appellant had filed a

miscellaneous application before this Court seeking clarification

of the aforesaid order dated 12.03.2015. In the said application,

it was specifically pleaded that the order dated 12.03.2015 only

considered the issue of interest: whether governed by S.L. Arora

(supra) or by M/s. Hyder Consulting (UK) Ltd. (supra) and that

other issues contained in the order of the learned Single Judge

dated 19.02.2008 were not considered by this Court. After

arguing the miscellaneous application at considerable length,

appellant unconditionally withdrew the same when it was about 28

to be dismissed. Mr. Sundaram submits that when an objection

is raised but not pressed, it must be taken to have been impliedly

overruled. Therefore, the party that had raised objection earlier

would be precluded from raising the same again in view of the bar

of res judicata. Thus, appellant is debarred from raising the same

issue again and again (in this case for the fourth time).

33.1. Learned senior counsel submits that the principle of

constructive res judicata is applicable to execution proceeding as

well and in this connection, relies upon a decision of this Court

in Mohanlal Goenka Vs. Benoy Kishna Mukherjee6.

33.2. He also submits that when the respondent had filed

application before the learned Arbitrator for clarification on the

question of interest upon permission being granted by the

Division Bench of the High Court, appellant did not raise any

objection before the learned Arbitrator as to its jurisdiction to

issue such clarification or that the learned Arbitrator had become

functus officio. Referring to the decision of this court in Gas

Authority of India Limited Vs. Keti Construction (I) Limited7, he

submits that if objection as to jurisdiction is not raised before the

6 (1952) 2 SCC 648 7 (2007) 5 SCC 38 29

Arbitral Tribunal, the same cannot be allowed to be raised later

in subsequent proceedings.

33.3. Proceeding further, Mr. Sundaram, learned senior

counsel submits that after the learned Arbitrator had issued the

clarification dated 15.03.2005, no petition was filed by the

appellant under Section 34 of the 1996 Act. Therefore, appellant

had consciously waived off its right to challenge the said

clarification which has thus become final.

33.4. Referring to the decision of this Court in M/s. Hyder

Consulting (UK) Ltd. (supra), learned senior counsel submits that

this Court in the aforesaid decision has held that the moment the

arbitrator awards pendente lite interest under Section 31(7)(a) of

the 1996 Act, the same automatically merges with the principal

amount and becomes part of the ‘sum’ awarded. This means that

there is no requirement of the arbitrator specifically mentioning

in the award that the pendente lite interest would merge with the

principal or that it would bear future interest; rather, in view of

the language used in Section 31(7)(b) of the 1996 Act, the

pendente lite interest automatically merges with the principal so

as to arrive at the ‘sum’ for the purpose of calculation of future

interest. Clarification given by the learned Arbitrator is completely 30

in consonance with the law laid down by this Court in M/s. Hyder

Consulting (UK) Ltd. (supra). A bare reading of the original award

dated 16.12.1997 conveys the same meaning. Therefore, it cannot

be said that the learned Arbitrator had made any modification of

the award or had passed a completely new award. It was purely

and simply a clarification of what was awarded.

33.5. Learned senior counsel for the respondent submits

that this Court vide the order dated 12.03.2015 held that the

interest component shall be calculated in accordance with the law

laid down in M/s. Hyder Consulting (UK) Ltd. (supra). In the

execution proceeding, respondent had lodged claim strictly in

accordance with the law laid down in M/s. Hyder Consulting (UK)

Ltd. (supra). This decision has been explained and reiterated by

this Court in the case of Delhi Airport Metro Express Private

Limited Vs. Delhi Metro Rail Corporation8. This Court categorically

held that in view of M/s. Hyder Consulting (UK) Ltd. (supra), the

amount awarded under Section 31(7)(a) would include the

principal amount plus the interest amount pendente lite. It was

further held that the interest calculated as per Section 31(7)(b) of

the 1996 Act would be on the sum arrived at under Section

8 (2022) 9 SCC 286 31

31(7)(a) of the 1996 Act. Learned senior counsel asserts that it

would be wrong to say that learned Arbitrator had no jurisdiction

to issue the clarification. A plain reading of Section 33(2) of the

1996 Act would show that the learned Arbitrator had the

jurisdiction to issue the clarification. He submits that even

learned Single Judge while setting aside the clarification

acknowledged the fact that the learned Arbitrator had the

jurisdiction to issue the clarification but the same had to be

issued within 30 days. Once the Division Bench had given liberty

to the respondent to seek clarification after 30 days even that

issue i.e. seeking of clarification beyond 30 days would be of no

consequence.

33.6. Learned senior counsel submits that undue hardship

and serious prejudice would be caused to the respondent if the

concurrent findings of two courts which are based on order(s) of

this Court are set aside. Contending that there is no merit in the

civil appeal, respondent seeks dismissal of the same.

34. After the arguments were closed and judgment was

reserved, we had permitted the parties to file brief summary of

submissions actually canvassed before the Court. Pursuant to 32

such permission, both the sides have filed brief summary of

submissions.

35. Submissions made by learned counsel for the parties

have received the due consideration of the Court. We have also

considered the summary of submissions as well as the judgments

cited at the bar.

Analysis

36. Let us at the outset refer to and analyse the relevant

provisions of the 1996 Act. Section 31 of the 1996 Act deals with

the form and contents of arbitral award. Section 31 has eight sub-

Sections. Sub-Section (7) is relevant to the debate. Sub-Section

(7) as it stood at the relevant point of time reads as under:

31. Form and contents of arbitral award – * * * * * (7)(a) Unless otherwise agreed by the parties, where and in so far 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 33

interest at the rate of eighteen per centum per annum from the date of award to the date of payment.

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 34

discretion to grant interest at a reasonable rate. In other words,

it may grant interest or it may not grant interest; but if it grants

interest, it would be included in the ‘sum’ which is awarded by

the arbitral tribunal.

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 at the rate of 18 percent per annum 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 at the rate of 18 percent 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’ 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 at the rate of 18 percent from the date of the

award to the date of payment unless another rate of interest is 35

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.

37. Thus from an analysis of Section 31(7)(a) of the 1996

Act, which provides for pre-award interest, it is seen that the

provision begins with the expression unless otherwise agreed by

the parties, thereby highlighting the legislative stance that parties

possess the autonomy to determine pre-award interest on the

payment of money 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.

38. Natural corollary to the above analysis would be that

the ‘sum’ so awarded by the arbitral tribunal which may include

interest from the date when the cause of action arose to the date

of the award, would carry further interest of 18 percent from the

date of the award to the date of payment unless the arbitral award

otherwise directs. Thus, the legislative intent is that the awarded

sum whether inclusive of interest or not, in case included, then 36

from the date of cause of action to the date of award, would carry

further interest from the date of the award to the date of payment.

39. Generally, going by the provisions contained in Section

31(7) of the 1996 Act, it is evident that an arbitral tribunal has

the power to grant (i) pre-award (ii) pendente lite (iii) post-award

interest. Intention behind awarding pre-award interest is

primarily to compensate the claimant for the pecuniary loss

suffered from the time the cause of action arose till passing of the

arbitral award. Further, this is also to ensure that the arbitral

proceeding is concluded within a reasonable period to minimise

the impact of the pre-award interest as well as interest pendente

lite; thereby promoting efficiency in the arbitration process.

Similarly, grant of post-award interest also serves a salutary

purpose. It primarily acts as a disincentive to the award debtor

not to delay payment of the arbitral amount to the award holder.

40. In S.L. Arora (supra), a two-Judge Bench of this Court

considered amongst others 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 till payment.

After referring to the old Arbitration Act, 1940 as well as to the

provisions of the Interest Act, 1978, the Bench observed that 37

unlike the old Act the 1996 Act contains specific provision dealing

with power of the arbitral tribunal to award interest. Analysing

the aforesaid provision, the Bench further observed that 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 the award for calculating the post-

award interest. Examining the difference between clauses (a) and

(b) of Section 31 (7) of the 1996 Act, the Bench observed that

clause (a) relates to pre-award period interest whereas clause (b)

relates to post-award period interest. The contract binds and

prevails in regard to interest during the pre-award period. The

contract has no application in regard to interest during the post-

award period. Clause (a) gives discretion to the arbitral tribunal

in regard to the rate, the period, the quantum (principal) when

awarding interest. But such discretion is always subject to the

contract between the parties. Clause (b) also gives discretion to

the arbitral tribunal to award interest for the post-award period

but that discretion is not subject to any contract; moreover, if that

discretion is not exercised by the arbitral tribunal, then the

statute steps in and mandates payment of interest at the specified 38

rate of 18% per annum for the post-award period. While clause

(a) gives the parties an option to contract out of interest, no such

option is available in regard to the post-award period.

40.1. Summing up, the Bench observed that in regard to pre-

award period, interest has to be awarded as specified in the

contract and in the absence of any contract, as per the discretion

of the arbitral tribunal. On the other hand, in regard to the post-

award period, interest is payable as per the discretion of the

arbitral tribunal and in the absence of exercise of such discretion,

at the mandatory statutory rate of 18% per annum. According to

the Bench, the award of interest under sub-Section (7) of Section

31, like award of cost under sub-Section (8) of Section 31 of the

1996 Act, are ancillary matters when the arbitral tribunal decides

the substantive dispute(s) between the parties. Therefore, the

expressions sum for which the award is made and a sum directed

to be paid by an arbitral award contextually refers to the award

on the substantive claims and not ancillary or consequential

directions relating to interest and costs. The Bench explained that

clause (b) of Section 31(7) is intended to ensure prompt payment

by the award debtor once the award is made. The higher rate of

interest is provided in clause (b) with the deliberate intent of 39

discouraging award debtors from adopting dilatory tactics and to

persuade them to comply with the award. Holding 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, the Bench concluded as under:

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.

41. The correctness of the view taken in S.L. Arora (supra)

was gone into by a three-Judge Bench of this Court in M/s. Hyder

Consulting (UK) Ltd (supra). The majority opined that it was not

possible to agree with the conclusion in S.L. Arora (supra) that 40 Section 31(7) of the 1996 Act does not require that interest which

accrues till the date of the award be included in the sum from the

date of the award for calculating the post-award interest. Justice

Bobde in his majority opinion was of the view that the conclusion

reached in S.L. Arora (supra) does not seem to be in consonance

with the clear language of Section 31(7) of the 1996 Act. After

extracting sub-Section (7) of Section 31 of the 1996 Act, the

majority analysed clause (a) of sub-Section (7) in the following

manner:

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 41

(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.

41.1. Insofar clause (b) is concerned, the majority opined as

under:

7. ……..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.

41.2. Thus, clause (a) of sub-Section (7) of Section 31

provides that the arbitral tribunal may include interest while

making an award for payment of money in the sum for which the

award is made and as per clause (b), the sum so directed to be

made by the award shall carry interest at a certain rate for the

post-award period. The purpose for enacting such a provision is

to encourage early payment of the awarded sum and to

discourage delay. Therefore, the ‘sum’ directed to be paid by the 42

arbitral award under clause (b) of sub-Section (7) of Section 31 of

the 1996 Act is inclusive of interest pendente lite. In M/s. Hyder

Consulting (UK) Ltd (supra), the majority referred to Section 34 of

the Civil Procedure Code, 1908 and after making a comparison of

the said provision with Section 31(7) of the 1996 Act observed

that while enacting Section 34 of the Civil Procedure Code,

Parliament conferred power on a court to award interest on the

principal sum adjudged and not merely on the ‘sum’ as provided

in the 1996 Act. Observing that the departure from the language

of Section 34 of the Civil Procedure Code in Section 31(7) of the

1996 Act is significant and shows the intention of the Parliament,

it has been held as follows:

12. It is settled law that where different language is used by Parliament, it is intended to have a different effect. In the Arbitration Act, the word “sum” has deliberately not been qualified by using the word “principal” before it. If it had been so used, there would have been no scope for the contention that the word “sum” may include “interest.” In Section 31(7) of the Act, Parliament has deliberately used the word “sum” to refer to the aggregate of the amounts that may be directed to be paid by the Arbitral Tribunal and not merely the “principal” sum without interest.

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, 43

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.

14. In fact this is a case where the language of sub-section (7) clauses (a) and (b) is so plain and unambiguous that no question of construction of a statutory provision arises. The language itself provides that in the sum for which an award is made, interest may be included for the pre-award period and that for the post-award period interest up to the rate of eighteen per cent per annum may be awarded on such sum directed to be paid by the arbitral award.

41.3. The majority declared that S.L. Arora (supra) was

wrongly decided in that it holds that a sum directed to be paid by

an arbitral tribunal and the reference to the award on the

substantive claim does not refer to interest pendente lite awarded

on the sum directed to be paid upon award and that in the absence

of any provision of interest upon interest in the contract, the

arbitral tribunal does 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 has been clarified that the ‘sum’ 44

includes the principal as adjudged together with the interest

granted.

42. A three-Judge Bench of this Court in UHL Power

Company Limited Vs. State of Himachal Pradesh9, declared that

the judgment in S.L. Arora (supra) has since been overruled by a

three-Judge Bench of this Court in M/s. Hyder Consulting (UK)

Ltd. (supra). The majority view in M/s. Hyder Consulting (UK) Ltd.

(supra) is that post-award interest can be granted by an arbitrator

on the interest amount awarded.

43. The question as to whether the sum awarded under

clause (a) of sub-Section (7) of Section 31 of the 1996 Act will

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

Corporation10. The Bench referred to the decision of this Court in

M/s. Hyder Consulting (UK) Ltd (supra) and held as follows:

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

9 (2022) 4 SCC 116 10 (2022) 9 SCC 286 45

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.

43.1. Since in that case interest was governed by Article 29.8

of the concession agreement between the parties, the Bench

explained the power of the arbitral tribunal to award interest qua

the agreement and held as follows:

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 46

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.

44. Again in the case of Morgan Securities & Credits (P) Ltd.

Vs. Videocon Industries Ltd.11, the issue before this Court was

whether the expression unless the award otherwise directs

appearing 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’ which must be paid. After an

exhaustive examination, this Court summarized the findings as

under:

28.1. The judgment of the two-Judge Bench in S.L. Arora was referred to a three-Judge Bench in Hyder Consulting on the question of whether post-award interest could be granted on the aggregate of the principal and the pre-award interest arrived at under Section 31(7)(a) of the Act.

11 (2023) 1 SCC 602 47

28.2. Bobde, J.'s opinion in Hyder Consulting held that the arbitrator may grant post-award interest on the aggregate of the principal and the pre-award interest. The opinion did not discuss the issue of whether the arbitrator could use their discretion to award post- award interest on a part of the “sum” awarded under Section 31(7)(a).

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.

28.7 * * * * *

45. Let us now turn to Section 33 of the 1996 Act which

provides for correction and interpretation of award; additional

award. Section 33 reads as under:

33. Correction and interpretation of award;

additional award.—(1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties— 48

(a) a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award;

(b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award.

(2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award.

(3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award.

(4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award.

(5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request.

(6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, 49

give an interpretation or make an additional arbitral award under sub-section (2) or sub-section (5).

(7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.

45.1. As per sub-Section (1), within 30 days from the date of

receipt of the arbitral award, a party with notice to the other party,

may request the arbitral tribunal to correct any computation

errors, any clerical or typographical errors or any other errors of

a similar nature occurring in the award. Further, if the parties

agree, a party with notice to the other party, may request the

arbitral tribunal to give an interpretation of a specific point or part

of the award. The period of 30 days contemplated under sub-

Section (1) may stand extended to another period of time if agreed

upon by the parties. Therefore, ordinarily the time limit for

correction of errors or for interpretation of a specific point or part

of the award is 30 days from the date of receipt of the arbitral

award. However, the limitation of 30 days can be waived for

another period of time, if agreed upon by the parties. Question for

consideration is what would be the contours of the expression

unless another period of time has been agreed upon by the parties,

as appearing in sub-Section (1) of Section 33.

50

45.2. Sub-Section (7) of Section 33 clarifies that correction

or interpretation of arbitral award or passing of additional arbitral

award would attract Section 31 of the 1996 Act as discussed

supra. Therefore, the language of sub-Section (1) of Section 33

makes it abundantly clear that the period of 30 days as provided

in Section 33(1) is not an inflexible period. If the parties agree, the

said period can be extended.

45.3. There is no dispute to the proposition of law laid down

in Harshad Chiman Lal Modi (supra), relied upon by the appellant,

that where a court has no jurisdiction over the subject matter of

the suit by reason of any limitation imposed by the statute,

charter or commission, it cannot take up the cause or matter; an

order passed by the court having no such jurisdiction is a nullity.

Question is whether such a proposition would have any

application to the facts and circumstances of the present case. As

we have seen, there was no embargo on the Arbitral Tribunal to

exercise jurisdiction over the subject matter. The only limitation

was that the correction and/or interpretation of the award should

be done within 30 days from the date of receipt of the arbitral

award unless another period of time has been agreed upon by the 51

parties. Therefore, the expression unless another period of time

has been agreed upon by the parties assumes critical significance.

46. Reverting back to the facts of the present case, learned

Arbitrator passed the award on 16.12.1997. After adjusting the

claims and counter claims, learned Arbitrator granted principal

amount of Rs. 1,70,70,720.80 (corrected to Rs. 1,70,40,720.80 as

per the corrigendum dated 18.12.1997). On the question of

interest, learned Arbitrator awarded simple interest @ 18% per

annum on the award amount from 01.04.1990 i.e. the date of

cause of action to the date of actual payment except on claim No.

23(b).

47. In the execution proceeding before the learned Single

Judge, an order was passed on 26.08.2004. Learned Single Judge

framed an issue for consideration as to whether post-award

interest under Section 31(7) of the 1996 Act would be calculated

on the principal amount adjudged or on the principal amount

plus interest on the principal amount which has accrued from the

date of cause of action to the date of passing of the award as under

the 1996 Act, award is to be enforced as a decree of the court.

According to the learned Single Judge, it was an important issue

affecting a large volume of litigation. Therefore, to avoid 52

proliferation of litigation and unnecessary appeals, learned Single

Judge was of the view that the aforesaid question should be

decided by a Division Bench.

48. From a perusal of the Division Bench order dated

03.01.2005, it is seen that respondent had contended that there

was no clarity as to whether the interest awarded by the Arbitral

Tribunal was under Section 31(7)(a) of the 1996 Act or not.

Respondent then made a submission that he may be permitted to

approach the Arbitral Tribunal for a clarification on this issue. In

view of such submission, Division Bench granted permission to

the respondent to approach the Arbitral Tribunal for clarification.

While granting such permission, Division Bench did not answer

the above question clarifying that it had not expressed any

opinion about payment of interest either under Section 31(7)(a) or

under Section 31(7)(b) of the 1996 Act.

49. In terms of the permission granted, respondent filed an

application before the learned Arbitrator seeking clarification of

the interest awarded by the learned Arbitrator qua Section 31(7)

of the 1996 Act. In its response to the application of the

respondent filed before the learned Arbitrator, appellant

contended that the learned Arbitrator had awarded simple 53

interest @ 18% per annum on the awarded amount from

01.04.1990 to the date of actual payment except on claim No.

23(b). Referring to the interest portion of the award, it stated that

interest was required to be paid on Rs. 1,70,70,720.80 minus Rs.

5,61,208.00 [for claim No. 23(b)] equal to Rs. 1,65,09,512.80,

which is the principal amount. Therefore, it was contended that

interest was to be paid on the amount of Rs. 1,65,09,512.80 till

the date of payment. According to the appellant, respondent was

entitled to interest on Rs. 1,65,09,512.80 from 01.04.1990 to

22.04.2002 @ 18% per annum. This comes to Rs. 3,56,60,547.64.

Appellant had paid Rs. 1,65,09,512.80 on 22.04.2002 and

another amount of Rs. 2,11,29,475.20 was paid towards interest

also on 22.04.2002. It was submitted that learned Arbitrator had

awarded interest for the past period, pendente lite and also future

interest. Thus, learned Arbitrator had exercised his jurisdiction

under Section 31(7)(a) as well as under Section 31(7)(b) of the

1996 Act. Therefore, there was no need for clarification.

50. What is therefore discernible from the above is that

appellant had participated in the clarificatory proceeding before

the learned Arbitrator taking the stand that no clarification as

sought for was required on merit.

54

51. Learned Arbitrator issued the clarification on

15.03.2005. It was clarified that the amount awarded alongwith

interest for the pre-reference and pendente lite periods become

the decretal amount. As per Section 31(7)(b), this amount would

carry further interest @ 18% per annum. Thus, learned Arbitrator

clarified that post-award interest shall be payable on the awarded

sum i.e. the amount of claim awarded (principal amount) plus

interest for the pre-reference period and pendente lite upto the

date of the award at the rate mentioned thereunder.

52. Appellant did not challenge the clarification dated

15.03.2005 under Section 34 of the 1996 Act; instead appellant

questioned the same in the execution proceeding before the

learned Single Judge. Learned Single Judge in his order dated

19.02.2008 held that learned Arbitrator had become functus

officio and thus had no authority to entertain the application for

clarification. Learned Arbitrator, in his award, had granted simple

interest @ 18% per annum on the awarded amount i.e. the

principal amount from 01.04.1990 to the date of actual payment

which takes care of the interest part. The decree holder

(respondent herein) neither challenged the award nor sought

clarification within 30 days. It is also not a case where the award 55

debtor (appellant herein) had agreed for extension of time limit.

Holding that learned Arbitrator had no authority to make any

change in the award, learned Single Judge set aside the

clarification.

53. When the respondent approached the Division Bench

assailing the above decision of the learned Single Judge, the

Division Bench held vide the order dated 23.02.2012 that in view

of the judgment in S.L. Arora (supra), compound interest under

the 1996 Act cannot be granted. Accordingly, challenge to the

decision of the learned Single Judge was rejected.

54. When the matter came up before this Court in Civil

Appeal No. 2841 of 2015 at the instance of the revenue, this Court

observed that the decision in S.L. Arora (supra) has been

overruled in M/s. Hyder Consulting (UK) Ltd. (supra) declaring

that the interest component payable to the respondent shall be

computed in accordance with the law laid down in M/s. Hyder

Consulting (UK) Ltd. (supra). Both the orders of the learned Single

Judge and the Division Bench were set aside, further clarifying

that it would be open to the respondent to seek execution as per

the law pronounced by this Court in M/s. Hyder Consulting (UK)

Ltd. (supra).

56

55. Thereafter, the executing court i.e. learned Single

Judge passed the order dated 19.04.2017. Learned Single Judge,

firstly, held that it was no longer open to examine the question as

to whether the respondent had any right to approach the learned

Arbitrator to seek clarification or whether the learned Arbitrator

had become functus officio since the Division Bench had expressly

permitted the respondent to seek clarification from the learned

Arbitrator which decision was not interfered with by this Court.

Thereafter, the decision of the Single Bench setting aside the

clarification of the learned Arbitrator which was affirmed by the

Division Bench were set aside by this Court in the civil appeal of

the respondent with liberty to the respondent to seek execution

as per the law laid down in M/s. Hyder Consulting (UK) Ltd.

Secondly, learned Single Judge clarified that the respondent

would be entitled to post-award interest not only on the claims as

awarded but also on the pre-award interest as well as on the

interest pendente lite. The quantum of pre-award interest and the

interest pendente lite would be calculated and included in the

amount awarded i.e. the ‘sum’ and the post-award interest would

run on the said ‘sum’ i.e. principal amount plus interest (pre-

award interest plus interest pendente lite).

57

56. When the appellant assailed this order before the

Division Bench, vide the impugned order dated 01.07.2019, the

Division Bench held as follows:

17. We, thus, reject the contentions of the learned counsel for the appellant for the reason that in the order dated 12.03.2015, the Supreme Court has directed that the High Court would decide the issue of interest component payable to the respondent in accordance with law laid down in M/s Hyder Consulting (UK) Ltd. (supra) and not in accordance with law laid down in S.L. Arora (supra). The other reason for rejecting the contentions of the appellant is that the grounds, which are sought to be urged before us, are not available to the appellant at this stage in these proceedings, which are execution proceedings.

The matter had attained finality upto the Apex Court and we cannot interfere on the merits of the case at this stage.

18. However, in view of the submissions of the parties with respect to the quantity, with the consent of the parties, we set aside the operative part of the order dated 19.04.2017 pertaining only to the calculations and permit both the parties to make submissions restricted to the quantum of the amount payable to the respondent.

57. Thus, as can be seen, the impugned order is a consent

order. Division Bench of the High Court after taking the consent 58

of the parties had remitted the matter back to the High Court only

as to the calculations permitting both the parties to make

submissions before the learned Single Judge on the quantum

payable to the respondent. If that be the position, it is not open to

the appellant to assail the aforesaid order.

58. The issue raised by the appellant in the present

proceeding i.e. learned Arbitrator had become functus officio and

therefore had no jurisdiction to issue the clarification, was also

raised in the miscellaneous application filed by the appellant

before this Court seeking clarification of the order dated

12.03.2015. While dismissing the miscellaneous application, no

leave was granted by this Court to agitate the aforesaid issue in

any other proceeding. Therefore, viewed from this perspective

also, it is not open to the appellant to raise the aforesaid issue

again in the present proceeding.

Conclusion

59. In view of what we have discussed above, the

interpretation given by us to Section 33(1) of the 1996 Act and on

a cumulative assessment of the attendant facts and

circumstances of the case, we are of the view that the clarification

sought for and issued by the learned Arbitrator would be covered 59

by the expression unless another period of time has been agreed

upon by the parties appearing in Section 33 (1) of the 1996 Act.

This is a case where court had permitted the respondent to seek

clarification from the learned Arbitrator beyond the initial period

of 30 days whereafter the appellant fully participated in the

clarificatory proceeding. Therefore, the present case would be

covered by the above expression. In the circumstances,

contention of the appellant that the learned Arbitrator had

become functus officio and therefore lacked jurisdiction to issue

the clarification cannot be accepted and is thus rejected.

60. 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 upto the date of the

award. 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 M/s. Hyder Consulting

(UK) Ltd (supra).

60

61. We thus see no error or infirmity in the impugned order

passed by the Division Bench of the High Court. Consequently,

we are of the view that the appeal lacks merit and is, accordingly,

dismissed. However, there shall be no order as to costs.

………………………………J. [ABHAY S. OKA]

...……………………………J. [UJJAL BHUYAN] NEW DELHI;

DECEMBER 17, 2024.