Arbitral Award – Claim for Interest on Interest or Compound interest
On 17.9.1997, the Arbitral Award in respect of the contract of 1984-85 between the parties was passed under the Indian Arbitration Act, 1940.
Interest was awarded for pre and post-award periods i.e. two periods – (i) simple interest at 12% from the date of work completion till award date and (ii) 15% per annum from the date of award till the date of payment.
However, the petitioner filed execution petition claiming 15% interest on the principal awarded amount plus 12% interest of pre-award period.
HELD that neither the Act empowers the Arbitrator nor the Court to award interest upon interest or compound interest. Similarly, there is no other provision to grant such compound interest. Even section 34 of the CPC is silent. Moreover, sub-section (3) of Section 3 of the Interest Act, 1978, specifically prohibits that nothing in section 3 which permits the Court to award interest shall empower the Court to award interest upon interest.
Judgment dated 7.8.2024 of the Supreme Court in SLP [Civil] NO.812 of 2014 of M/s. Khosla and Company Vs. The Union of India
