Case Law Details
Indian Oil Corpn. Ltd. Vs U.B. Engineering Ltd. (Supreme Court of India)
The issue whether the learned Arbitrator could have awarded the interest on the interest of Rs. 2,27,58,137.08 from the date of award till realization and whether the same can be said to be interest on interest is now not res integra in view of the decision of this Court in the case of Hyder Consulting (UK) Limited vs. Governor, State of Orissa, (2015) 2 SCC 189. In paras 27-32, it is observed and held as under:-
“27. Section 31(7)(a) employs the words “…the Arbitral Tribunal may include in the sum for which the award is made interest…”. The words “include in the sum” are of utmost importance. This would mean that pre-award interest is not independent of the “sum” awarded. If in case, the Arbitral Tribunal decides to award interest at the time of making the award, the interest component will not be awarded separately but it shall become part and parcel of the award. An award is thus made in respect of a “sum” which includes within the “sum” component of interest, if awarded.
28. Therefore, for the purposes of an award, there is no distinction between a “sum” with interest, and a “sum” without interest. Once the interest is “included in the sum” for which the award is made, the original sum and the interest component cannot be segregated and be seen independent of each other. The interest component then loses its character of an “interest” and takes the colour of “sum” for which the award is made.
29. There may arise a situation where, the Arbitral Tribunal may not award any amount towards principal claim but award only “interest”. This award of interest would itself then become the “sum” for which an award is made under Section 31(7)(a) of the Act. Thus, in a pre-award stage, the legislation seeks to make no distinction between the sum awarded and the interest component in it.
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As per Section 31(7)(b) of the Act, A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment