Arbitral awards inherently carry a statutory interest rate of 18% for post-award periods, ensuring prompt compliance regardless of parties' prior decisions.

JUDGMENT :

RAVINDER DUDEJA, J.

1. This petition under Article 227 of the Constitution of India impugns the order dated 25.10.2024, passed by the learned District Judge in Ex. 55/2017, titled “ Sudhir Tyagi Vs. Union of India .”

2. At the core, the issue is whether the expression “unless the award otherwise directs” in Section 31 (7)(b) of the Arbitration & Conciliation Act, 1996 [“the Act”], relates to rate of interest and not entitlement of interest.

3. Shorn of all the unnecessary details, the relevant facts are that petitioner No. 1 i.e., Northern Railway, awarded contractual work to the respondent, but due to certain disputes, respondent invoked the arbitration clause of the agreement. The High Court, vide order dated 16.11.2012, appointed a sole arbitrator.

4. Following three issues were raised and considered by the learned Arbitrator:-

i) Is the time essence of the contract between the parties or not?

ii) Whether the respondent imposed any penalty/liquidated damages upon the complainant till the completion of work?

iii) Whether the complainant is entitled to claim amounts as per the claim petition?

5. Issues No. 1 & 2 were decided in favour of the respondent and against the petitioners. The findings of learned Sole Arbitrator on Issue No. 3 are extracted herein below:-

“Respondent shall pay a sum of Rs. 61,48,277/- (Rs. Sixty One Lakhs, forty eight thousand, two hundred and Seventy Seven with interest on sum of Rs. 10,84,385/- @ 10% per annum w.e.f. 18.01.2005 till payment as per following break-up:-

The award is made as above.”

6. Petitioner filed an Objection Petition under Section 34 of the Act before the learned District Judge against the aforesaid Arbitral Award. The petition was dismissed by the learned District Judge. Petitioners then preferred an appeal (FAO 158/2024) before this Court against the order dated 07.07.2023, passed by the learned District Judge.

7. In the meanwhile, respondent filed an Execution Petition bearing Ex. No. 55/2017 for the execution of the arbitral award dated 13.10.2015. Petitioners made complete payment of Rs. 82,86,547.62 to the respondent as per award dated 13.10.2015. However, respondent filed an application under Section 151 CPC on 20.09.2024, praying inter alia,:-

“6. Hence it is prayed that Decree Holder is entitled to Rs. 77,1800/- (Seventy Seven lacs & eighteen thousand) on Rs. 46,83,892/- from 13.10.2015 to 25.08.2024 as on 25.08.2024, Since Ld. Arbitrator did not direct post award interest on Rs. 46,83,892/- on claim No. 2,3,4 & 5.”

8. The learned executing court passed the impugned order that post-award interest at the rate of 18% per annum as per the mandate of Section 31 (7)(b) of the Act would be payable and accordingly directed the petitioners/JD to make payment of Rs. 77,18,000/- within two months. This order was passed by the learned executing court while relying upon the decision of the Supreme Court in the case of R.P. Garg Vs. The Chief General Manager, Telecom Department and Ors. Civil Appeal No. 10472/224

9. The award in this case was passed on 25.10.2024. Section 31 of the 1996 Act deals with form and contents of the arbitral award. Section 31 has eight Sub Sections. Sub Section (7) is relevant for the purpose for decision in this case. S