# M/S. HYDER CONSULTING (UK) LTD v. GOVERNOR, STATE OF ORISSA THROUGH CHIEF ENGINEER

- **Citation:** [2014] 14 S.C.R. 1029
- **Court:** Supreme Court of India
- **Decided:** 2014-11-25
- **Case number:** Civil Appeal No. 3148 of 2012
- **Bench:** H. L. Dattu, S. A. Bobde, Abhay Manohar Sapre
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-hyder-consulting-uk-ltd-v-governor-state-of-orissa-through-chief-engineer-29666
- **Pages:** 53

## Headnote

Arbitration and Conciliation Act, 1996 -
s.31(7) -
c
Interpretation of- Grant ofinterest byarbitral tribunal under
- Whether amounts to granting interest on interest- Held: s.
31 (7) can be interpreted to mean that interest which accrues
till the date of the Award," be included in the "sum" from the
date of Award for calculating the post-award interest- Word D
sum means 'an amount of money' which may include principal
and interest or one of the two - Thus, clause (a) of s.31(7)
provides that the Arbitral Tribunal may include interest while
making an award for payment of money in the sum for which
the Award is made and clause (b) states that the sum so E
directed to be made by the Award shall carry interest at a
certain rate for the post award period - In view thereof, it is
clear that interest, the sum directed to be paid by the Arbitral
Award under clause (b) of sub-section (7) of Section 31 is
inclusive of interest pendent lite.
F
Answering the referred question, the Court
HELD : PER S. A. BOBDE, J. (MAJORITY)
1.1 The conclusion in S,L. Arora's case that Section
31 (7) of the Arbitration and Conciliation Act, 1996 does G
not require that interest, which accrues till the date of
the Award, be included in the "sum" from the date of
Award for calculating the post-award interest cannot be
accepted. This conclusion does not seem to be in ·
consooance with the clear language of Section 31(7) of H
. 1029
1030
SUPREME COURT REPORTS
[2014] 14 S.C.R.
A the Act. S.L. Arora's case is wrongly decided in that it
holds that a sum directed to be paid by an Arbitral
Tribunal and the reference to the Award on the
substantive claim does not refer to interest pendente lite
awarded on the "sum directed to be paid upon Award"
B and that in the absence of any provision of interest upon
interest in the contract, the Arbitral Tribunal does riot
)lave the power to award interest upon interest, or,
compound interest either for the pre-award period or for
the post-award period. Parliament has the undoubted
c power to legislate on the subject and provide that the
Arbitral Tribunal may award interest on the sum directed
. to be paid by the Award, meaning a sum inclusive ·of
principal slim adjudged and the interest, and this has
been done by Parliament· in plain language.
D [Paras 2, 15][1072-D-E; 1078-C-F]
.
1.2 Clause (a) of sub-section (7) provides that where
an Award is made for the payment of money, the Arbitral
Tribunal may include interest in the sum for which the ·
Award is made. In plain terms, this provision confers a ·
E power upon the Arbitral Tribunal while making an Award
for payment of money, to include interest in the sum for
which the Award is made on either the whole or any part
of the money and for the whole or any part of the period
for the entire pre-award period between the date on
F which the cause of action arose and the date on which
the Award is made. To put it differently, sub-section (7)(a) · ...
contemplates that an Award, inclusive of interest fortlie ·
pre-award period on the entire amount directed to be
paid or part thereof, may be passed. The" sum" awarded
G may be principal amount and such interest as theArbitral
Tribunal deems fit. If no interest is awarded, the "sum"
comprises only the principal. The significant words
occurring in clause (a) of sub"section (7) of Section 31
of the Act are "the sum for which the award is made." On
H
M/S. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1031
ORISSA THR. CHIEF ENGR.
a plain reading, this expression refers to the total amount A
or sum for the payment for which the Award is made.
Parliament has not added a qualification like "principal"
to the word "sum," and thus, the word "sum" simply
means "a particular amount of money". In Section 31 (7),
particular amount of money may include interest B
from the date of cause of action to the date of the award.
[Para 4][1073-B-F]
1.3 Once the meaning of the word "sum" is clear,
the same meaning must be ascribed to the word in clause
(b) of

## Text

_Characters 0–39,811 of 104,698. This is a partial read: ask again with offset=39811 for what follows._

[2014] 14 S.C.R 1029
M/S. HYDER CONSULTING (UK) LTD.
v.
GOVERNOR, STATE OF ORISSA THROUGH CHIEF
ENGINEER
A
(Civil Appeal No. 3148 of 2012)
B
NOVEMBER 25, 2014
[H. L. DATTU, CJI, S. A. BOBDE AND
..
ABHAY MANOHAR SAPRE, JJ.]
Arbitration and Conciliation Act, 1996 -
s.31(7) -
c
Interpretation of- Grant ofinterest byarbitral tribunal under
- Whether amounts to granting interest on interest- Held: s.
31 (7) can be interpreted to mean that interest which accrues
till the date of the Award," be included in the "sum" from the
date of Award for calculating the post-award interest- Word D
sum means 'an amount of money' which may include principal
and interest or one of the two - Thus, clause (a) of s.31(7)
provides that the Arbitral Tribunal may include interest while
making an award for payment of money in the sum for which
the Award is made and clause (b) states that the sum so E
directed to be made by the Award shall carry interest at a
certain rate for the post award period - In view thereof, it is
clear that interest, the sum directed to be paid by the Arbitral
Award under clause (b) of sub-section (7) of Section 31 is
inclusive of interest pendent lite.
F
Answering the referred question, the Court
HELD : PER S. A. BOBDE, J. (MAJORITY)
1.1 The conclusion in S,L. Arora's case that Section
31 (7) of the Arbitration and Conciliation Act, 1996 does G
not require that interest, which accrues till the date of
the Award, be included in the "sum" from the date of
Award for calculating the post-award interest cannot be
accepted. This conclusion does not seem to be in ·
consooance with the clear language of Section 31(7) of H
. 1029
1030
SUPREME COURT REPORTS
[2014] 14 S.C.R.
A the Act. S.L. Arora's case is wrongly decided in that it
holds that a sum directed to be paid by an Arbitral
Tribunal and the reference to the Award on the
substantive claim does not refer to interest pendente lite
awarded on the "sum directed to be paid upon Award"
B and that in the absence of any provision of interest upon
interest in the contract, the Arbitral Tribunal does riot
)lave the power to award interest upon interest, or,
compound interest either for the pre-award period or for
the post-award period. Parliament has the undoubted
c power to legislate on the subject and provide that the
Arbitral Tribunal may award interest on the sum directed
. to be paid by the Award, meaning a sum inclusive ·of
principal slim adjudged and the interest, and this has
been done by Parliament· in plain language.
D [Paras 2, 15][1072-D-E; 1078-C-F]
.
1.2 Clause (a) of sub-section (7) provides that where
an Award is made for the payment of money, the Arbitral
Tribunal may include interest in the sum for which the ·
Award is made. In plain terms, this provision confers a ·
E power upon the Arbitral Tribunal while making an Award
for payment of money, to include interest in the sum for
which the Award is made on either the whole or any part
of the money and for the whole or any part of the period
for the entire pre-award period between the date on
F which the cause of action arose and the date on which
the Award is made. To put it differently, sub-section (7)(a) · ...
contemplates that an Award, inclusive of interest fortlie ·
pre-award period on the entire amount directed to be
paid or part thereof, may be passed. The" sum" awarded
G may be principal amount and such interest as theArbitral
Tribunal deems fit. If no interest is awarded, the "sum"
comprises only the principal. The significant words
occurring in clause (a) of sub"section (7) of Section 31
of the Act are "the sum for which the award is made." On
H
M/S. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1031
ORISSA THR. CHIEF ENGR.
a plain reading, this expression refers to the total amount A
or sum for the payment for which the Award is made.
Parliament has not added a qualification like "principal"
to the word "sum," and thus, the word "sum" simply
means "a particular amount of money". In Section 31 (7),
particular amount of money may include interest B
from the date of cause of action to the date of the award.
[Para 4][1073-B-F]
1.3 Once the meaning of the word "sum" is clear,
the same meaning must be ascribed to the word in clause
(b) of sub-section (7) of Section 31 of the Act, where it C
provides that a sum directed to be paid by an Arbitral
Award "shall carry interest ........ " from the date of the
Award to the date of the payment i.e. post-award. In other
words, what clause (b) of sub-section (7) of Section 31
of the Act directs is that the "sum," which is directed to D
be paid by the Award, whether inclusive or exclusive of
interest, shall carry interest at the rate of eighteen per
cent per annum for the post-award period, unless
otherwise ordered. Thus, sub-section (7) of Section 31
of the Act provides, firstly, vide clause (a) thatthe Arbitral. E
Tribunal may include interest while making an award for
payment of money in the sum for which the Award is
made and further, vide clause (b) that the suin so directed
to be made by the Award shall carry interest at a certain
rate for the post award period. The purpose of enacting F
this provision is clear, namely, viz. to encourage early
payment of the awarded sum and to discourage. the
usual delay, which accompanies the execution of the
Award in the same manner as if it were a decree of the
court vide Section 36 of the Act. In view thereof, it is clear G
that the interest, the sum directed to be paid by the Arbitral
Award under clause (b) of sub-section (7) of Section 31
. of the Act is inclusive of interest pendent lite.[Para 7-1 O]
[1074-C-H; 1075-A]
H
1032
SUPREME COURT REPORTS
[2014] 14 S.C.R.
A
1.4 Section 34 of the CPC confers the same power
upon a court to award interest on an award i.e. postaward interest. While enacting Section 34, CPC,
Parliament conferred power on a court to order interest
"on the principal sum adjudged" and not on merely the
B "sum" as provided in the Arbitration Act. The departure
from the language of Section 34 CPC in Section 31 (7) of
the Act, 1996 is significant and shows the intention of
Parliament. Where different language is used by
Parliament, it is intended to have a different effect. In the
c Arbitration Act, the word "sum" has deliberately not been
qualified by using the word "principal" before it. In
Section 31 (7) of the Act, Parliament has deliberately used
the word "sum" to refer to the aggregate of the amounts
that may be directed to be paid by the Arbitral Tribunal
o and not merely the "principal" sum without interest.
Thus, it is apparent that vide clause (a) of sub-section
(7) of Section 31 of the Act, Parliament intended that an
award for payment of money may be inclusive of interest,
and the "sum" of the principal amount plus interest may
E be directed fo be paid bytheArbitral Tribunal for the preaward period. Thereupon, the Arbitral Tribunal may direct
interest to be paid on such "sum" for the post-award
period vi de clause (b) of sub-section (7) of Section 31 of
the Act, at which stage the amount would be the sum
F arrived at after the merging of interest with the principal;
the two components having lost their separate identities.
This is a case where the language of sub-section 7 clause
(a) and (b) is so plain and unambiguous that no question
of construction of a statutory provision arises.
G [Paras 11, 12, 13,14)(1075-A-H; 1076-A-B]
H
State of Haryana and Others v. S.L. Arora and
Company 2010 (2) SCR 297 : (2010) 3 SCC 690
- overruled ..
MIS. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1033
ORISSA THR. CHIEF EN(3R.
Uttar Pradesh Cooperative Federation Limited v.
A
Three Circles 2009 (14) SCR 310 : (2009) 10
SCC 374 ; McDermott International INC v. Burn
Standard Co. Ltd., 2006 (2) Suppl. SCR 409 :
(2006) 11 SCC 181 ; ONGC v. M.C. Clelland
Engineers S.A. 1999 (2) SCR 830: (1999) 4 SCC
B
327 ; Central Bank of India v. Ravindra and Others
2001 (4) Suppl. SCR 323 : (2002) 1 sec 367 ;
Ganga Prasad Verma (Dr.) v. State of Bihar 1995
. Supp (1) SCC 192; Keshavji Ravji & Co. v. CIT,
1990 (1) SCR 243: (1990) 2 SCC 231 ; Pakala .
C
Narayana Swami v. Emperor, AIR 1939 PC 47;
T.N. State Electricity Board v. Central Electricity
Regulatory Commission 2007 (5) SCR 416 :
(~007) 7 SCC 636; Emperorv. Benoarilal Sanna
AIR 1945 PC 48; Nasiruddin v. Sita Ram Agarwal
D
2003 (1) SCR 634: (2003) 2 SCC 577- referred
to.
Sussex Peerage [1844] 11CI & F. 85; Caminetti
v. United States 242 U.S. 470, 485 (1917) -
referred to.
·
E
Oxford Dictionary; Black's Law Dictionary;
Interpretation of statutes by Maxwell- referred to.
PER ABHAY MANOHAR SAPRE, J.
(SUPPLEMENTING) :
F
1.1 Section 31 (7)(a) of the Arbitration & Conciliation
Act, 1996 deals with grant of pre-award interest while subclause (b) of Section 31(7) of the Act deals with grant of
post-award interest. Pre-award interest is to ensure that
arbitral proceedings are concluded without unnecessa..Y G
delay. Longer the proceedings, would be the period
attracting interest. Similarly, post-award interest is to
ensure speedy payment in compliance of the award. Preaward interest is at the discretion of Arbitral Tribunal,
H
1034
SUPREME COURT REPORTS
[2014] 14 S.C.R.
A while the post-award interest on the awarded sum is
mandate of statute - the only difference being that of rate
of interest to be awarded by theArbitral Tribunal. In other
. words, if the Arbitral Tribunal has awarded post-award
interest payable from the date of award to the date of
B payment at a particular rate in its discretion then it will
prevail else the party will be entitled to claim post-award
interest on the awarded sum at t_he statutory rate
specified in clause (b) of Section 31(7) of the Act, i.e., 18%.
Thus, there is a clear distinction in time period and the
C intended purpose of grant of interest. [Para 5l
[1079-E~H; 1080-A]
1.2 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"
D are of utmost importance. This would mean that preaward interest is not independent of the "sum" awarded.
If in case, the Arbitral Tribunal decides to award interest
atthe time of making the award, the interest component
will not be awarded separately but it shall become part
E 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. Therefore, for the purposes of an
award, there is no distinction between a "sum" with
interest, and a "sum" without interest. Once the interest
F 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 looses its character of an
"interesf' and takes the colour of "sum" for which the
G award is made. [Paras 6, 7][1080-8-E]
1.3 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
H is made under Section 31 (7)(a) of the Act. Thus, in a pre-
M/S. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1035
ORISSA THR. CHIEF ENGR.
award stage, the legislation seeks to make no distinction A
between the sum award and the interest component in
it. Thus, the amount award under Section 31 (7)(a) of the
Act, whether with interest or without interest, constitutes
a "sum" for which the award is made. [Para 8, 9]
[1080-E-G]
B
1.4 As regards the post-award interest, Section
31(7)(b) of the Act employs the words, "A sum directed
to be paid by an arbitral award ... ". Sub-clause (b) uses
the words "arbitral award" and not the "arbitral tribunal".
The arbitral award, is made in respect of a "sum" which C
includes the interest. Therefore, what carries uls. 31 (7)(b)
of the Act is the "sum directed to be paid by an arbitral
award" and not any other amount much less by or under
the name "interest". In such situation, it cannot be said
that what is being granted under Section 31(7)(b) of the D
Act is "interest on interest". Interest under sub-clause
(b) is granted on the "sum" directed to be paid by an
arbitral award wherein the "sum" is nothing more than
what is arrived at under sub-clause (a). Thus, the
expression "grant of interest on interest" while E
exercising the power under Section 31 (7) of the Act does
not arise and, therefore, the Arbitral Tribunal is well
empowered to grant interest even in the absence of
clause in the contract for grant of interest. The said
interpretation of s. 31 (7) of the Act is based on three F
golden rules of interpretation. [Para 10, 11,12][1080-H;
1081-A-E]
.
PER H.L. DATTU, CJI. (MINORITY)
1.1 There is no infirmity.with the S.L. Arora case, G.
whereby it was held that if the arbitral award is silent
about interest from the date of. award till the date of
payment, the person in whose favour the award is made
would be entitled to interest at 18% pa on the principal
amount awarded, from the date of award till the date of H
1036
SUPREME COURT REPORTS
(2014] 14 S.C.R.
A payment. The decision in S.L. Arora case is sound and
wholly conclusive on the interpretation of Section 31(7)
of the Act, 1996 on the issue of awa~ding 'interest
on interest', thus, the instant reference is not required.
8
c
[Para 61, 29, 30][1071-C-D; 1056-A-F]
State of Haryana and Others v. S.L. Arora and
Company 2010 (2) SCR 297: (2010) 3 SCC 690
-relied on.
Uttar Pradesh Cooperative 'Federation Limited v.
Three Circles 2009 (14) SCR 310 : (2009) 10
sec 374- per incuriam.
Mcpermott International INC v. Bum Standard Co. ·
Ltd. and Other 2006 (2) Suppl. SCR 409 : (2006)
11 SCC 181 ; ONGC v. M.C. Clelland Engineers
D
S.A. 1999 (2) SCR 830: (1999) 4 sec 327-held
inapplicable.
1.2 Under clause (a) of sub- section (7) of section
31 of the Act, 1996, it relates to the power of the arbitrator
to impose interest in the first stage that is, from the date
E of cause of action to the date of arbitral award. The said
clause begins with "Unless otherwise agreed by the
parties", thereby at the onset of the sub-section itself,
the legislature has provided for a restriction on the
application of the said sub- section. In the eventthere is
F an agreement between the parties to the arbitration,
regarding the payment of interest from the date on which
the cause of action arose till the date on which the award
was made, the terms of the said agreement would prevail
over clause· (a). of section 31 (7) of the Act. [Para 33)
G [1057-G-H; 1058-A-B]
N.S. Nayak & Sons v. State of Goa (2003) 6 SCC
56 - referred to.
1.3 The arbitral tribunal has been given the
discretionary power of not only imposing interest, but
H
M/S. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1037
ORISSA THR. CHIEF ENGR.
also for determining the rate of interest that could be A
imposed from the date of cause of action to the date of
the award. However, such discretion is not unfettered
and is not exercisable upon the mere whims and fancies
of the tribunal. [Para 36][1059-D-G]
Principles of Statutory Interpretation, Justice GP
B
Singh, Thirteenth Edn, 2012, p.482 - referred
to.
1.4 The word "sum", in its natural meaning and as
pe·r its most common usage, would mean money. The
term "money" has also been used in sub- section (7) of C
section 31 of the Act, 1996. Therefore, the terms "sum"
and "mon~y'' have been used by the legislature, in the
given provision, interchangeably. The said clause states
that interest may be awarded on the "sum" for which
the .arbitral award is made, or the same could be read D
as- interest may be awarded on the "money" for which
· the arbitral award is made. This "money" for which the
award is made, necessarily would refer to the money as
adjudicated by the arbitral tribunal, based on the claims
of the parties, to be paid. under the award. In other words, E
it would simply refer to the principal amount so awarded.
(Para 40)(1061-E-H]
Darshan Singh Ba/want Singh v. State of Punjab,
1953 SCR .319 - referred to.
Webster's Third New International Dictionary,
Volume Ill; Black's Law Dictionary, Seventh
Edition, 1999; P Ramanatha Aiyar's Advanced
Law Lexicon, Third Edn; Corpus Juris
Secundum, .Volume L.XXXJ/1- referred to.
1.5 The term "interest", appears to be distinct from
the i:irincipal amount on which it is imposed.
Furthermore, the impositicm of an interest is stated to be
for the purpose of providing compensation for
F
G
H
. 1038
SUPREME COURT REPORTS
[2014) 14 S.C.R.
A withholding the said principalamount or, as in the case
of clause (a) of Section 31 (7) of the Act for withholding
the money awarded as per the claim, as determined by
the arbitral tribunal, from the date the cause of action
arose till the date when such award was made. In other
B words, interest is imposed to compensate forthe denial
to one party, by the other party, of the money which
rightfully belongs to the said former party under the
relevant agreement governing the arbitration
c
D
E
proceedings. [Para 48][1065-D-F]
Bhai Jaspal Singh v. CCT 2010 (14) SCR 41:
(2011) 1 sec 39 - referred to.
Westminster Bank Ltd v. Riches [1947] A.C; 390;
Nicholas Pike v. The Commissioners for Her
Majesty's Revenue and Customs [2013] UKUT
0.225 (TCCJ - referred to. '
Wharton's Law Lexicon, Fourteenth Edn; Black's
Law Dictionary, Seventh Edn 1999; Webster's.
Third New International Dictionary,. Volume Ill;
Corpus Juris Secundum, Volume XLVll; Stroud's
Judicial Dictionary, Seventh Edn 2008, Volume 2
- referred to.
1.6 Clause (b) is applicable for the period from the
date of award to the date of payment. The said clause
F uses the phrase "unless the award otherwis!! directs",
which would mean that in the event the arbitral tribunal,
in its award, makes a provision for interest to be imposed
in this second stage as envisaged by sub-section (7) of .
section 31 of the Act, 1996, ¢1ause (b) would become
G inapplicable. By the said award, the arbitral tribunal has
the power to impose an interest for the post-award ·
period which may be higher or lower than the rate as
prescribed under clause (b). Even ifthe award states that
no interest shall be imposed in the post-award period,
H
MIS. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1039
ORISSA THR. CHIEF ENGR.
clause (b) cannot be invoked. [Para 49)(1065-G-H; A
1066-A-B)
1. 7 If the arbitral award is silent on the question of
whether there would be any post- award interest, only
·in that situation could clause (b) be made applicable. In
the said situation, it would be mandatory as per law that B
the award would carry interest at the rate of_ 18% per
annum from the date of the award to the date of payment.
The term used in the given clause is "shall", therefore, if
applicable, the imposition .of interest as per clause (b)
would be mandatory. Clause (b) of section 31(7) further C
states that the interest as envisaged under the said
provision would be on the sum directed to be paid by an
arbitral award. [Para 50, 52)(1066-C-D; 1067-A]
H.P. Housing & Urban Development Authority v.
Ranjit Singh Rana 2012 (2) SCR427: (2012) 4
sec 505 - referred to.
D
1.8 It is a sound rule of construction whereby the
same word appearing in the same section of the same
statute must be given the same meaning, unless there E
is anything to indicate the contrary. The only exception
to this rule of construction, whereby the said principle
may be rebutted, is by making reference to the context
in which the words are used. The word may be
understood in a different sense, if the context so requires F
that to be done. Clause (a) and clause (b) does not
appear to be divergent from one another. The word
"sum" has been used in both clauses in the context of
what is to be paid as . per the arbitral award.
[Para 55)[1068-E-G]
G
1.9 For the purposes of the Act, interest could be
included within the principal amount only when the said
aggregate amount is paid to the party in whose favour
the arbitral award was passed. In other words, once the
H
. '
1040
SUPREME COURT REPORTS
(2014] 14 S.C.R.
A interest amount is within the physical and actual
possession of the party so entitled to it, only then could
the· interest amount be said to have merged with the
principal amount. Therefore, the appellants would not
be entitled to claim post-award interest on the aggregate
B of the principal amount and interest pendente lite, since
the said aggregate sum was not in the actual physical
possessron of the appellants. Further, section 31(7)
neither makes reference to compounding of interest, nor
to awarding interest on interest. Therefore, the term
C . "sum" in clause (b) and (a) would refer to the money as
adjudicated by the arbitral tribunal. This money would
be distinct from the interest as may have been awarded
by the arbitral tribunal under clause (a). Therefore, the
interest under clause (b) would be imposed on money
o · awarded by the arbitral tribunal on the basis of the claims
of the parties, and the said money cannot merge within
it any interest as imposed in the period from the date of
cause of action to the date of the award. [Paras 59, 60]
[1070-E-H; 1071-A-C]
E
Central Bank of India v. Ravindra and Others 2001
(4) Suppl. SCR 323: (2002) 1 SCC 367; State of
UP v. Synthetics and Chemicals Ltd. (1991) 4
SCC 139 ; Fuerst Day Lawson Ltd. v. Jindal
·Exports Ltd. 2001 (3) SCR 479 : (2001.) 6 sec
F
356 ; Sayeed Ahmed & Co. v. State of U. P & Ors.
2009 (10) SCR 841 : (2009) 12 SCC ·26 ; Sree
KamatchiAmman Constructions v. The Divisional
Railway Manager(Works), Pa/ghat and Ors. 2010
(10) SCR 487 : (2010) 8 SCC 767 ; Union of India
G
v. Tata Chemicals Ltd., 2014 (3) SCR 298: (2014)
6 sec 335 - referred to.
H
Parkside Leasing Ltd v. Smith (Inspector of Taxes)
[1985] 1 WLR 310 ; D&C Builders Ltd. v. Rees
· [1966] 2 Q.B. 617 - referred to.
M/S. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1041
.ORISSA THR. CHIEF ENGR.
CASE LAW REFERENCE
A
In the Judgment of Justice S.A. Bobde
2009 (14) SCR 310
referred to
Para 1
2006 (2) Suppl. SCR 409 referred to
Para 1
1999 (2) SCR 830
referred to
Para 1
B
2001 (4) Suppl. SCR 323 refer.red to
Para 1
2010 (2) SCR 297
overruled
Para 2,15
1995 Supp (1) sec 192
referred to
Para 14
1990 (1) SCR 243
referred to
Para 14
c
AIR 1939 PC 47
referred to
Para 14
2007 (5) SCR 416
referred to
Para 14
AIR 1945 PC 48
referred to
Para 14
2003 (1) SCR634
referred to
Para 14
D
In the judgment of H.L. Dattu, CJI ·
2001 (4) Suppl. SCR323 referred to
Para 2
2010 (2) SCR 297
relied on
Para 20,
•
29,61
E
2006 (2) Suppl. SCR 409 held inapplicable Para 20
2009 (14) SCR 310
. per incuriam
Para 21
1999 (2) SCR 830
held inapplicable Para 26
(1991) 4 sec 139
referred to
Para 13
F
2001 (3) SCR 479
referred to
Para 14
2009 (10) SCR 841
referred to
Para 24. ·
2010 (10) SCR 487
referred to
Para 25
2003 (1) Suppl. SCR 69
referred to
Para 34
G
1953 SCR 319
referred to
Para 38
2010 (14) SCR 41
referred to
Para 49
2012 (2) SCR 427
referred to
Para 51
2014 (3) SCR 298
referred to
Para 57
H
1042
A
B
SUPREME COURT REPORTS
[2014] 14 S.C.R.
CIVILAPPELLATE JURISDICTION: Civil Appeal No(s).
3148of2012.
From the Judgment and Order dated 28-07-2010 of the
High Court of Orissa at Cuttak in W.P.(C) No. 5302 of2009.
With
CivilAppeal Nos. 3147, 3149 of2012 and 1390 of2013,
SLP (C) No. 19895, 20282 of 2008, 21896of2010 and 18614
of2012.
K.K. Venugopal, C.U. Singh, Nidhesh Gupta, Ajay Kapur,
C
Sr. Advs., Manu Nair, Ms. Sannjh N. Purohit, Malak Bhatt (For
Mis SureshA. Shroff & Co.), Kamal Mohan Gupta, Tarun Gupta,
Anurag Pandey, Raghav Awasthi, Siddharth N. (For M/s
Karanjawala & Co.), Advs. forthe appearing parties.
L. Nageswara Rao,ASG, Mrs. Kirti Renu Mishra. Shivraj
D Gaonkar,A. Tewari, Ms. Eliza Bar(ForShree Pal Singh),Ashok
Mathur, Advs. for the appearing parties.
The Judgments of the Court was delivered by
H. L. DATTU, CJI.
E
1. In view of the reference order dated 13.03.2012, this
Civil Appeal and the matters connected therewith are placed
before a three-Judge Bench of this Court for consideration
and dedsion. The question before this Court is, whether the
decision of this Court in State of Haryana and Others v. S.L.
F Arora and Company., (2010) 3 SCC 690, wherein it is held
that an award of interest on interest from the date of award is
not permissible under sub- section (7) of section 31 of the
Arbitration and Conciliation Act, 1996 (for short, "theAct, 1996"),
is in consonance with .earlier decisions of this Court. A twoG Judge Bench of this Court, by the said reference order, is of
the opinion that the present appeal and the connected matters
would need to be heard by a Bench of three Judges of this ·
Court.
H
M/S. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1043
ORISSATHR. CHIEF ENGR. [H. L. DATIU, CJI.]
2. By the referral order dated 13. 03.2012, it is found that A
the learned counsel for the appellants therein would doubt the
correctness of the decision in the S.L. Arora case (supra) in
light of McDermott International INC v. Bum Standard Co.
Ltd. and Others, (2006) 11 SCC 181; Uttar Pradesh
Cooperative Federation Limited v. Three Circles, (2009) 10 B
SCC 374; Oil and Natural Gas Commission v. M.C. Clelland
Engineers S.A., (1999) 4 SCC 327; and Central Bank oflndia
v. Ravindra and Others, (2002) 1 SCC 367. Therein, the
appellants would contend that, in accordance with the decision
of this Court in the aforementioned cases, the interest awarded c
on the principal amount upto the date of award, becomes the
principal amount for the purposes of awarding future interest
under the Act, 1996. The appellants would contend that the
decision in the S.L. Arora case (supra) inadvertently and
erroneously assumed that the aforementioned cases would D
not be applicable to it. Since the decision in the S.L. Arora
case (supra) negated the above stated principle, the appellants
would contend that the said case would require reconsideration
by a larger Bench ofthis Court.
FACTS:
E
Civil Appeal No.3148 of 2012
3. The present civil appeal came before a two-Judge
Bench of this Court against a judgment and final order dated
28.07.2010, passed by the High Court of Orissa at Cuttack in
Writ Petition (Civil) No. 5302 of 2009. The said Writ Petition
F
was filed challenging the orders dated 19.02.2009 and ·
26.03.2009, passed by the District Judge, Khurda in Execution
Petition No. 17 of 2006, whereby the learned District Judge
had issued order of attachment in favour of the appellant herein. G
The claim in the execution petition was for the payment of
Rs.8,92, 15,993/-. The said claim included in itself post award
interest on the aggregate of the principal amount awarded by
the arbitral award and interestpendente lite thereon. By virtue
of arbitral award dated 26.04.2000, which was upheld by the H
1044
SUPREME COURT REPORTS
[2014] 14 S.C.R.
A
Division Bench of the High Court of Orissa by its order dated
28.06.2006, a principal amount of Rs.2,30,59,802/- was
awarded in favour of the appellant herein. The said impugned
judgment of the High Court of Orissa dated 28.07.2010, inter
alia, relied upon the decision of this Court in the S.L Arora .
B case (supra) and quashed the orders passed by the learned
District Judge, whereby Rs.8,92, 15,993/- was awarded in
favourofthe appellant. The learned Judges of the High Court,
vide the impugned judgment, directed the executing court to
re-calculate the total amount payable under the award keeping
C in view the principles laid down in the S.L. Arora case (supra).
4. According to the referral order dated 13.03.2012, the
appellants contended that the S.L.Arora case (supra) was
based on an inadvertent erroneous assumption that McDermott
case (supra) and the Three Circles case (supra) were per
D incuriam in holding that interest awarded· on the principal
amount upto the date of award becomes the principal amount
and, therefore, award of future interest thereon would not
amount to award of interest on interest. The S.L. Arora case
(supra) held contrary to the aforementioned principle. To
E support their contention, the appeilants also made a reference
· to the ONGC case (supra) and the Central Bank of India case
(supra).·
ISSUES:
F
5. The issues that arise for the consideration of this Court
are firstly, whether in light of the Three Circles case (supra)
and McDermott case (supra) there exists any infirmity in the
decision rendered by this Court in the S.L. Arora case (supra);
and secondly to detentline whether sub- section (7) of section ·
31 of the Act, 1996 could be interpreted to include interest
G pe.ndente lite within the sum payable as per the arbitral award,
for the purposes of awarding post-award interest.
. SUBMISSIONS :
6. Shri K.K. Venugopal, learned Senior Counsel
H appearing for the appellants herein, in the first instance, would
M/S. HYDER CONSULTING (UK) LTD. v. GOV., STATE OF 1045
ORISSA THR. CHIEFENGR. [H. L. DATTU, CJI.]
submit that the decision in the S.L Arora case (supra) was A
incorrect in ignoring the earlier decisions of this Court, namely
the Three Circles case (supra), the McDermott case (supra),
the ONGC case (supra) and the Central Bank of India case ·
(supra). In light of the aforesaid latter cases, it is contended
thatthe S.L Arora case (supra) wrongly held thatthe interest B
as envisaged under clause (b) of sub- section (7) of section
31 of the Act, 1996 would apply only on the principal amount
awarded by the arbitral tribunal. Shri K.K. Venugopal would
further refer to the 246'" Report of the Law Commission of India
titled as 'Amendments to the Arbitration and Conciliation Act,
C
1996' in support of the above contention.
7.The submissions of Shri K.K. Venugopal could be
summarized as follows- firstly, that under clause (a) of subsection (7) of section 31 of the Act, 1996, the award is for
money and the sum for which the award is.made would include D
within it, the interest that may be awarded for the period from
the date of cause of action to the date of award; secondly, that
under clause (b) of sub- section (7) of section 31 of the Act,
1996, the sum directed to be paid by the arbitral award is the
sum awarded, which is inclusive of interest pendente lite;
E
thirdly, that there may be scenarios wherein an award would
be made only for interest as the claim would relate only to
interest and in such a case 18% per annum interest would
automatically attach to the given award; fourthly, that the
transaction on which the claim is made and the money is so
F
awarded, merges with the award and ceases to be the principal
amount, so that interest under clause (b) would be the totality;
fifthly, that the comparison of the amended section 34 of the
Code of Civil Procedure, 1908 would show that unless the
phrase 'principal amount' is used in clause (a) for 'sum' and
G
again 'principalamount' is used in clause (b) for 'sum', the
word 'sum' would be the aggregate of the principal amount
. and interest; sixthly, that the entirety of commercial transactions
would be seriously affected if a judgment debtor were to delay
the payment of interest on the total amount, as the gain to the H
'
1046
SUPREME COURT REPORTS
(2014] 14 S.C.R.
A judgment debtor on that element of interest is a loss to the
claimant for which he has no recourse; seventhly, the S.L. Arora
case (supra) was wrongly decided as the judgment is contrary
to the Act, 1996 on the grounds, inter a/ia, that it would be a
misnomer to state that interest would not be applicable on
B substantive claims as the same finds no mention in the given
provision; and lastly, 18% interest would be applicable proprio
vigore unless stopped by the award itself.
8. P~rcontra, Shri L. Nageshwara Rao, learned Senior
Counsel and Additional Solicitor General of India would submit
C that there was no infirmity whatsoever in the S.L. Arora case
(supra) and that, therefore, the present reference was not
required. Furthermore, the learned Additional Solicitor General
would submit that the term "sum" as found in sub- section (7)
of section 31 of the Act, 1996 should be read as "principal
D amount" as held in the S.L. Arora case (supra).
DISCUSSION :
9. At the outset, it would be necessary to discuss the
correctness of the reference order in light of the S.L. Arora
E case (supra): Th is Court, in the S.L. Arora case (supra), was
required to adjudicate upon two primary issues namely- firatly,
whether sub- section (7) of section 31 of the Act, 1996
authorised the arbitral tribunal to award interest on ·interest from
the date of award; and secondly, whether the arbitral tribunal
F could grant future interest from the date of award.
·
10. In the S.L. Arora case (supra), this Court had sought
to clarify whether the arbitral tribunal's power to grant postaward interest ~xtended only on the principal amount or on the
aggregate of the principal amount and the interest, as
G determined to be payable from the date of cause of action to
the date of award. On perusal of sub- section (7) of Section 31
of the Act, 1996,this Court observed:
"18. Section 31(7) makes no reference to payment of
compound interest or payment of interest upon interest.
H
Nor does it require the interest which accrues till the date
M/S. HYDERCONSULTING(UK) LTD. v. GOV., STATE OF 1047
ORISSA THR. CHIEF ENGR. [H. L. DATTU, CJI.]
of the award, to be treated as part of the principal from
A
the date of award for calculating the post-award interest.
The use of the words "where and insofar as an arbitral
award is for the payment of money" and use of the words
"the Arbitral Tribunal may include in the sum for which
the award is made, interest ... on the whole or any part B
of the money" in Clause (a) and use of the words "a sum
directed to be paid by an arbitral award shall ... carry
interesf' in Clause (b) of Sub-section (7) of Section 31
clearly indicate that the section contemplates award of
only simple interest and not compound interest or interest c
upon interest. "A sum directed to be paid by an arbitral
aware!' refers to the award of sums on the substantive
claims and does not refer to interest awarded on the "sum
directed to be paid by the award'. In_ the absence of any
provision for interest upon interest in the contract, the o
arbitral tribunals do not have the power to award interest
upon interest, or compound interest, either for the preaward period or for the post-award period."
(emphasis in original)
11. In the S.L. Arora case (supra), this Court highlighted
E
that there was a tendency among contractors to elevate the
claims for interest and costs to the level of substantive disputes,
by categorizing them under independent heads of claim.
Further, it was noticed that, since arbitrations usually have a
high pendency period owing to prolonged arbitration
F
proceedings or intervening as well as post arbitral litigations,
the interest payable on the amount awarded often increases
to substantial amounts, l?Ometimes even exceeding the actual
amount awarded. The CTlur(-in the S.L. Arora case (supra),
then sought to set out the legal position on the award of interest G
to understand the authority of the tribunal as envisioned in subsection (7) of Section 31 of the Act, 1996.
12. The present reference requires this Court to
reconsider the decision in S.L. Arora case (supra), in light of H
1048
SUPREME COURT REPORTS
[2014] 14 S.C.R.
A
previous decisions of this Court inthe McDermott case (supra)
and the Three Circles case (supra). It may be reiterated that
the referral order dated 13.03.2012 takes note of the contention
of the appellants that the S.L. Arora case (supra) erroneously
held the Three Circles case (supra) and the McDermott case
B (supra) to be per incuriam in holding that interest awarded on
the principal amount upto the date of award becomes the
principal amount.
13. Before I consider. the correctness of the
aforementioned decisions; it would be necessary to elaborate
C upon the concept of "per incuriam". ---------------The latin
expression perincuriam literally means 'through inadvertence'.
A decision can be said to be given per incuriam when the
Court of record has acted in ignorance of any previous decision
of its own, or a subordinate court has acted in ignorance of a
D decision of the Court of record. As regards the judgments of
this Court rendered per incuriam, it cannot be said that this
Court has "declared the law" on a given subject matter, if the
relevant law was not duly considered by this Court in its
decision. In this regard, I refer to the case of State ofU.P. v.
E Synthetics and Chemicals Ltd., (1991) 4 SCC 139, wherein
F
Justice R.M. Sahai, in his concurring opinion stated as follows:
"40. 'lncuria' literally means 'carelessness'. In practice
per incuriam appears to mean per ignoratium. English
courts have developed this principle in relaxation of the
rule of stare decisis. The 'quotable in law' is avoided and
ignored if it is rendered, 'in ignoratium of a statute or
other binding authority'. ... "
14. Therefore, I am of the considered view that a prior
decision of this Court on identical facts and law binds the Court
G on the same points of· law in a iater case. In exceptional
circumstances, where owing to obvious inadvertence or
oversight, a judgment fails to notice a plain statutory provision
or obligatory authority running counter to the reasoning and
result reached, the principle of per incuriam may apply. The
H
M/S. HYDER CONSULTING (UK) LTD. v. GOV.. STATE OF 1049
ORISSA THR. CHIEF ENGR. [H. L. DATTU, CJI.]
said principle was also noticed in the case of Fuerst Day A
Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356.
15. I would now analyse the decisions noticed by the
referral order dated 13.03.2012, to determine the correctness
or otherwise of the present reference, and consequently
determine the power of an arbitral tribunal to award interest
B
under section 31 of the Act, 1996.
16. This Court in the Three Circles case (supra), placing
its reliance on earlier decisions, by its judgment, allowed the
arbitral tribunal to pass an award, enforcing interest on interest.
C
This Court observed that:
"31. Now the question comes which is related to
awarding of 'interest on interest'. According to th·e
appellant, they have to pay interest on an amount which
was inclusive of interest and the principal amount and,
D
therefore, this amounts to a liability to pay 'interest on
interest'. This question is no longer res integra at the
present point of time. This Court in McDermott
International Inc. v. Burn Standard Co. Ltd and Ors.,(2006)
11 SCC 181 has settled this question in which it had
E
observed as follows (SCC p.207, para 44):
"44 .... TheArbitrator has awarded the principal amount
and interest thereon upto the d,ate of award and future
· interest thereupon which do not amount to award on
interest on interest as interest awarded on the principal
F
amount upto the date of award became the principal
amount which is permissible in law."
The High Court on this question has also rightly relied on
a decision of this Court in the case of Oil and Natural
Gas Commission v. M.C. Clelland Engineers S.A. (1999) G
4 SCC 327. That being the position, we are unable to
find any ground to set aside the judgment of the Division
Bench of the High Court while considering the ground of
'interest on interest'."
H
•
1050
SUPREME COURT REPORTS
[2014] 14 S.C.R.
A
17. It would be crucial to note thatthe reliance upon the
McDermott case (supra) by this Court in the Three Circles
case (supra) is not in consonance with the doctrine of
precedents. On a perusal of the McDermott case (supra), it is
observed that the substantive proposition of that case did not
B address the issue on the power of the tribunal to award 'interest
on interest' or compound interest. The proposition on 'interest
on interest' was made only in one of the submissions of the
respondent therein.