Section 31(7) interest interpretation allows post-award interest on the full arbitral sum, including pre-award interest.

Section 31(7) of the Arbitration and Conciliation Act, 1996 was interpreted to permit post-award interest on the entire awarded sum, including pre-award interest merged into the award. The majority held that the expression "sum directed to be paid" in Section 31(7)(b) refers to the aggregate amount awarded, and that earlier authorities under the Arbitration Act, 1940 and Section 34 CPC could not control this interpretation. The contrary view in S.L. Arora, which treated the provision as excluding interest on interest, was held to be incorrect. The dissent read "sum" as principal only and denied post-award interest on pre-award interest.

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Issues: Whether Section 31(7) of the Arbitration and Conciliation Act, 1996 permits post-award interest on the entire sum directed to be paid, including interest awarded for the pre-award period, and whether the earlier view in S.L. Arora correctly stated the law.

Analysis: The majority held that Section 31(7)(a) authorises the arbitral tribunal to include pre-award interest in the sum for which the award is made, and that Section 31(7)(b) uses the same expression "sum" to describe the amount carrying post-award interest. On that construction, the word "sum" denotes the aggregate amount awarded under the award, so post-award interest may run on the amount inclusive of pre-award interest. The majority further held that decisions under the Arbitration Act, 1940 and Section 34 of the Code of Civil Procedure, 1908 could not control the interpretation of Section 31(7) of the Arbitration and Conciliation Act, 1996, and concluded that the earlier view treating the provision as excluding interest on interest was incorrect. The dissenting opinion construed "sum" as the principal amount only and held that post-award interest does not extend to pre-award interest.

Conclusion: Section 31(7) permits post-award interest on the awarded sum inclusive of pre-award interest, and the contrary view was held to be wrong; the matter was remanded for further adjudication.

Final Conclusion: The decision settled the interpretive controversy on Section 31(7) in favour of allowing post-award interest on the full awarded sum, while sending the appeal back to a smaller Bench for disposal of the connected matters.

Ratio Decidendi: Under Section 31(7) of the Arbitration and Conciliation Act, 1996, the expression "sum directed to be paid by an arbitral award" includes pre-award interest once merged in the award, so post-award interest is payable on that aggregate amount unless the award otherwise directs.

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