Explore the nuanced legal analysis surrounding post-award interest entitlement in the Morgan Securities & Credits v. Videocon Industries case. This judgment by the Supreme Court of India delves into the intricacies of arbitration law, shedding light on key aspects of interest determination post-arbitration. Discover the implications and applications of Section 31(7) of the Arbitration and Conciliation Act through this comprehensive analysis.
Facts
- District Court held appellant entitled to post award interest.
- High Court allowed revision, setting aside District Court order on grounds of contract terms.
- Executing Court affirmed Arbitrator’s finding, denying post award interest based on contract terms.
Also Read: High Court of Madhya Pradesh Reverses Judgment on Charges against Accused in Assault Case
Issue
- The issue at hand is whether the appellant is entitled to post-award interest on the sum awarded by the Arbitrator.
- The question of post-award interest is under consideration in this case.
- The appellant’s entitlement to post-award interest is the focal point of this specific part of the judgment.
Also Read: Land Acquisition Dispute: High Court Judgment Reversed
Analysis
- The High Court made an error in relying on a previous decision as it did not consider the distinction between pre and post-award interest.
- The interest granted by the First Appellate Court was specifically for the post-award period, where the agreement between parties does not apply.
- Section 31(7) of the Act distinguishes between interest before and after the award.
- Under Section 31(7)(b), the sum directed to be paid under the Arbitral Award shall carry interest, irrespective of any agreement between parties.
- Clause (a) is governed by the arbitration agreement, whereas clause (b) is governed by the arbitration award in terms of interest.
- The expression ‘unless the award otherwise directs’ in Section 31(7)(b) pertains to the rate of interest and not the entitlement to interest.
- Clause (b) does not allow parties to opt-out or exclude interest for the post-award period.
- In the case of Morgan Securities & Credits (P) Ltd. v. Videocon Industries Ltd., the court clarified that post-award interest is not subject to the contractual agreement between the parties.
- Section 31(7)(b) of the Act does not give the arbitrator the discretion to determine both the rate of interest and the ‘sum’ to be paid, unless the award specifically directs so.
- The High Court in a separate case set aside the grant of interest by relying on a Supreme Court decision that interest cannot be paid if the contract explicitly prohibits it.
- Section 31 of the Arbitration and Conciliation Act outlines the form and contents of an arbitral award.
- The provision allows for the inclusion of interest in the award for the payment of money, unless agreed otherwise by the parties.
- The arbitral tribunal has the discretion to determine the rate of interest on the awarded sum for the period between the cause of action and the award date.
- If the award is for a monetary payment, unless otherwise specified, the sum shall carry interest at a rate two percent higher than the prevailing rate from the date of award till payment.
- Jaiprakash case pertains to prohibition of pendente-lite interest and is not applicable to post-award interest claims.
- The present case involves a claim for post-award interest, not pendente-lite interest.
- The judgement in Jaiprakash case does not apply to the factual circumstances of the present case.
Also Read: Amendment of Pleadings in Smt. Suman Agarwal (Bindal) v. Smt. Katoribai
Decision
- Parties shall bear their own costs
- The judgment of the High Court in Civil Revision No 2561 of 2003 (O&M) dated 14.05.2019 is set aside
- The decision of the First Appellate Court in C.A No 86 of 11.11.02 dated 04.03.2003 for granting interest @ 18% p.a. is restored
- The appeal is allowed
Case Title: R. P. GARG Vs. THE CHIEF GENERAL MANAGER TELECOM DEPARTMENT (2024 INSC 743)
Case Number: C.A. No.-010472-010472 – 2024
