An arbitral award's stipulations on interest must be strictly enforced as per the parties' agreement, disallowing claims for compound interest unless explicitly provided, reinforcing party autonomy in arbitration agreements.

JUDGMENT :

UJJAL BHUYAN, J.

1. Leave granted.

2. This appeal by special leave is directed against the judgment and order dated 22.04.2024 passed by the High Court for the State of Telangana at Hyderabad (High Court) in Civil Revision Petition No. 60 of 2024 ( PBSAMP Projects Private Limited vs. HLV Limited ). By the impugned judgment and order, the Division Bench of the High Court set aside the order dated 02.11.2023 passed by the Principal Special Court in the cadre of District Judge for trial and disposal of commercial disputes at Hyderabad (referred to hereinafter as ‘the Executing Court’) in CEP No. 05 of 2021 rejecting the petition filed by the respondent for enforcement of the arbitral award dated 08.09.2019 on the ground that respondent is not entitled to compound interest and that the amount paid by the judgment debtor (appellant) to the decree holder (respondent) i.e. Rs. 44,42,05,254.00 was in full satisfaction of the award.

3. Question for consideration in this appeal is whether in the facts and circumstances of the case, the decree holder (respondent) would be entitled to interest upon interest in terms of Section 31 (7)(b) of the Arbitration and Conciliation Act, 1996 or the interest awarded by the arbitral tribunal in the award dated 08.09.2019 in terms of the memorandum of understanding dated 09.04.2014 entered into between the parties i.e. between the appellant and the respondent fulfil the requirement of Section 31 (7)(a) and (b) of the said Act?

4. The above question arises in the following factual backdrop.

5. The two parties had entered into a memorandum of understanding (MoU) on 09.04.2014. The MoU was with regard to sale and transfer of land situated at Road No. 10, Banjara Hills, Hyderabad admeasuring approximately 3 acres and 28 guntas. The details of the land are mentioned in the schedule to the MoU.

5.1. It may be mentioned that appellant as the vendor had acquired absolute ownership of the schedule land under different sale deeds which was to be used for construction of a five star hotel but for various reasons did not go ahead with the project and instead decided to sell the land to the respondent. Under the aforesaid MoU, respondent paid a sum of Rs. 15.5 crores as advance to the appellant. As differences arose between the parties, the MoU was terminated on 09.10.2024 whereafter the dispute was referred to arbitration. The arbitral tribunal comprised of three arbitrators: Mr. Justice TNC Rangarajan being nominated by the claimant i.e. the respondent and Mr. Justice A Kulasekaran being nominated by the appellant. The two arbitrators in turn nominated Justice Arijit Pasayat as the presiding arbitrator.

6. The arbitral tribunal passed an award dated 08th September, 2019, the operative portion of which reads as under:

The claimant is entitled to Rs. 15.5 crores with interest at 21% p.a. from the date it was given to the date it is repaid. The respondent has kept the documents of title in escrow for security purposes The respondent has admitted liability for Rs. 10 crores and disputed only the sum of Rs. 5.5