The judgment clarifies the distinction between compound and simple interest under the Arbitration and Conciliation Act regarding awards.

Dictated by Arijit Banerjee, J.:

This appeal is directed against an order dated May 8, 2018, passed by the Additional District Judge, 1^st Court, South 24 Parganas, Alipore, on an application under Section 34 of the Arbitration and Conciliation Act , 1996, filed by the respondents herein.

Disputes and differences having arisen between the appellant and the respondents in relation to a contract, arbitration took place. The respondent company (Ruia Chemicals Pvt. Ltd.) was the claimant. The appellant (M/s. Balmer Lawrie Co. Ltd.) was the respondent before the Arbitral Tribunal.

The Tribunal awarded a sum of approximately Rs. 40 lac to Ruia after adjusting the amount of Rs. 2 lac which was the amount of counter claim made by Balmer Lawrie and which was allowed. The Arbitrator also held that Ruia is entitled to get back the performance guarantees. However, the Arbitrator did not award interest.

To the extent that interest was not awarded and another bank guarantee was not released by the Arbitrator, Ruia filed the said Section 34 application challenging the award.

The learned Trial Court awarded interest for the period

11.05.2012 to 11.03.2018 at the rate of 18 per cent per annum compounded annually. The learned Trial Court held that Ruia is entitled to get back both the bank guarantees.

Being aggrieved, Balmer Lawrie has come up by way of this appeal under Section 37 of the 1996 Act.

We have heard learned Counsel for the parties at some length.

We see that the learned Trial Court has awarded a sum of Rs. 65,92,426/- on account of interest at the rate of 18 per cent per annum compounded annually on the award amount of Rs. 40,42,148/- as would be evident from back calculation of the amount.

Learned Advocate for Balmer Lawrie says that awarding compound interest is not contemplated by law. We enquired of her whether or not Balmer Lawrie is agreeable to pay interest at simple rate for the aforesaid period at the rate mentioned in Section 31 (7) of the 1996 Act as it stood prior to its amendment in 2015. We have also requested the learned Advocate for Ruia to obtain instructions as to whether or not her client is agreeable to accept simple interest at the rate of 18 per cent for the period of time indicated by the learned Trial Court.

Learned Advocate for Balmer Lawrie shall also seek instruction as to why the bank guarantees that Ruia had furnished have not yet been returned to Ruia.

List the matter once again on 21.08.2025 under the heading “For Orders”.