Arbitral Award – Interest – Section 31(7)(b) of AA & Section 2(b) of the Interest Act, 1978,

On 22.12.2007, the Arbitral Award for Rs.2,62,02,434/- was passed in favour of the appellant and rejected the counter claims of the respondent.

In para 25 of the Award, it was stated that “interest at prevalent rates for claim due and ordered is to be paid for the period it is due to the date of payment.”  Thus, the Arbitrator had not fixed the interest mathematically by indicating percentage. 

The said Award confirmed by the High Court on 6.7.2020.   The respondent did not challenge the said order.

In the meanwhile, the Commercial Execution Petition was filed in 2015 for payment of decretal amount with interest computed at the rate of 18% per annum from the date of the  Arbitral Award.

The respondent objected to the interest claim on the ground that it has to be calculated as per Section 31(7)(b) amended from 23.10.2015 and the current rate of interest defined in Section 2(b) of the Interest Act, 1978, is payable.

HELD that in the absence of agreement between the parties, the amended Section 31(7)(b) introduced by Amendment of 2015 will not apply to the arbitral proceedings commenced prior to 23.10.2015.  Therefore, the unamended Section 31(7)(b) shall apply.

The unamended Section 31(7)(b) provides that unless the Award otherwise directs, the Award amount shall carry interest at 18% per annum.  This will not apply since the Arbitrator had fixed the interest at “prevalent rates”.

Thus, the Commercial Court was right interpreting that the words “prevalent rate of interest” as “current rate of interest” as per Section 2(b) of the Interest Act, 1978, for calculating the interest on Award amount.

 Judgment dated 25.4.2024 of the Division Bench of the High Court of Jharkhand in C.M.P. No.1064 of 2022 of C.I.S.C. – S.R.S.C.   Vs.  Central Coalfields Limited