IMPORTANT POINT
Post-award interest – when liable.

JUDGMENT

R.M. Lodha, J.

Leave granted.

2. Pursuant to the agreement between the parties being agreement No. 11 of 1989-90 concerning construction of residential complex at Shimla, certain disputes arose. As per the terms of the contract, the Arbitrator was appointed to adjudicate the claims of the respondent and counter-claims of the appellants. On August 12, 1998, the Arbitrator passed the award. Aggrieved thereby, the appellants filed objections under Section 34(3) of the Arbitrator and Conciliation Act, 1996 (for short “the Act”). The objections were accepted by the High Court to the extent that the reasons were not given by the Arbitrator and, accordingly, the matter was sent back to the Arbitrator for giving reasons in support of the award.

3. After remand, the Arbitrator considered the matter and passed the award on February 14, 2001. The appellants filed objections against the award dated February 14, 2001. They also deposited the entire amount due under the award before the High Court on May 24, 2001. The objections filed by the appellants were ultimately rejected by the single Judge of the High Court on February 26, 2008. Against this order, intra-court appeal is said to be pending. The respondent, however, started execution of the Award dated February 14, 2001 by filing Execution Petition on August 12, 2008. The appellants filed objections to the Execution Petition.

4. The question before the High Court was whether the respondent was entitled to interest @ 18% p.a. from the date of the award dated February 14, 2001 till the date of actual payment to the respondent.

5. The High Court considered the diverse provisions of the Act including Section 31(7)(a) and (b) of the Act and few decisions of this Court and ultimately held that the respondent was entitled to post-award interest @ 18% p.a. from the date of the award till the date of the actual payment. It is this order which is in appeal before us.

6. There is no dispute that the entire amount due under the Award dated February 14, 2001 was deposited by the appellants before the High Court on May 24, 2001. The question that arises for determination before us is, whether deposit of the entire award amount by the appellants on May 24, 2001 into the High Court amounts to payment to the respondent and the appellants liability to pay interest @ 18% p.a. from the date of the award ceased from that date.

7. Section 31(7)(a) and (b) of the Act reads as under:

“31(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 interest at the rate of eighteen per centum per annum from the date of the award to the date of payment.”

8. The above provision has been recently considered by this Court in State of Haryana and others vs. S.L. Arora and Company1 (2010)3 SCC 690. This Court held as under:

“........In a nutshell, in regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of contract, as per discretion of the Arbitral Tribunal. On the other hand, in retard 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 a mandatory statutory rate of 18% per annum.”

This Court further observed in para 24.6 as under:

“.........but if the award is silent in regard to the interest from the date of award, or does not specify the rate of interest from the date of award, then the party in whose favour an award for money has been made, will be entitled to interest at 18% per annum from the date of award. He may claim