The main legal point established in the judgment is that the directions for payment of interest in the impugned Award were contrary to the provisions of Section 31(7) of the Arbitration and Conciliation Act, 1996, and the Arbitral Tribunal had committed a manifest illegality in including the amount of interest determined for the pre-reference/past period to be added to the principal amount.

JUDGMENT

Yashwant Varma, J. The present appeal under Section 37 of the Arbitration and Conciliation Act, 1996 [the Act] impugns the judgment dated 02 August 2021 rendered by a learned Single Judge on the petition under Section 34 of the Act preferred by the appellant. The appellant also seeks partial setting aside of the impugned Award dated 28 October 2020. However, Mr. Mehta learned senior counsel appearing in support of the appeal clarified that the challenge stands restricted to the directions framed by the Arbitral Tribunal [AT] insofar as the issue of interest is concerned.

2. In order to appreciate the nature of the challenge which stands raised, Mr. Mehta drew our attention to the following operative directions as framed by the AT while considering the issue of interest:

"58.....

In nutshell the Claimant is held entitled to interest as under:

a) Pre-reference/past period interest:

@ 18% per annum on a sum of Rs.34,43,490.61 w.e.f. July 1987 up till 19.01.1998.

b) Pendente-lite interest:

i) @ 12% per annum w.e.f. 20.01.1998 up till 31.12.2008 on the total amount (i.e. principal amount and the amount of interest of the pre-reference/past period).

ii) @ 12% per annum w.e.f. 01.01.2017 till the date of award on the total amount (i.e. principal amount + amount of interest of the pre-reference/past period)

c) Future interest

@ 18% per annum from the date of the award till the date of payment on the total amount (i.e. principal amount + amount of interest of the pre-reference/past period)."

3. The challenge, Mr. Mehta explained, is not with respect to either the rate at which interest has been awarded nor does it extend to the award of interest for the pre-reference/past period. The grievance of the appellant appears to essentially stem from the directions as contained in sub-paragraph (b) (i) of Para 58 and to the extent of the AT stipulating that interest for the period aforenoted would be leviable not merely on the principal amount as awarded but also upon the said amount inclusive of the amount of interest relating to the "pre-reference/past period". Mr. Mehta further pointed out that similarly in sub-paragraph (b) (ii) of Para 58, the AT has proceeded to award interest on identical terms.

4. The AT in the Award, which ultimately came to be rendered had while dealing with the question of interest observed as under:

"58. The Tribunal is, however, in agreement with the submissions of the Respondent's Counsel that the Respondent should not be penalized to pay interest for the latches of the Claimant for the period of about 8-9 years during which the Claimant failed to prosecute the matter diligently. Accordingly, the Tribunal holds that the Claimant will not be entitled to any interest for the period of about 8 years w.e.f. 01.01.2009 till 31.12.2016. As regards the rate at which the interest should be awarded for the pre-reference period, the Tribunal has no hesitation to award interest @ 18% per annum from July 1987 to 19.01.1998. The amount of interest at the above rate for the pre-reference period i.e. till the date of filing of the claim shall be added to the allowed amount of claim and would be considered for the purpose of calculation of pendent lite and future interest. In the opinion of the Tribunal, it would meet the ends of justice to award pendente-lite interest @ 12% per annum for the period between 20.01.1998 till 01.01.2009 and thereafter w.e.f. 01.01.2017 till the date of award on the aforesaid amount. So far as the award of future interest is concerned going by the provisions of Section 31(7)(b) of the Act, the Tribunal must award interest @ 18% per annum on the principal awarded amount i.e. the amount of partly awarded claims plus interest for pre-reference period from the date of award till the date of payment.

In nutshell the Claimant is held entitled to interest as under:

a) Pre-reference/past period interest:

@ 18% per annum on a sum of Rs.34,43,490.61 w.e.f. July 1987 up till 19.01.1998.

b) Pendente-lite interest: