Supreme Court clarifies limits on post-award interest in arbitration decree

The Supreme Court dismissed the special leave petition, affirming the Calcutta High Court's decision that the decree directing payment of interest from the date of the award till the date of the decree was inexecutable. The Division Bench correctly set aside the Executing Court's order exceeding the terms of the arbitration award by granting post-award interest not included in the original award. The Court emphasized that the Executing Court should not go beyond the award's terms while passing a decree, ultimately dismissing the appeal with no order as to costs.

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Issues involved: Interpretation of arbitration award regarding grant of interest from the date of the award till the date of the decree.

The appellant, a proprietary concern, received a work order from Coal India Limited for transportation of coal/coke and operation of a stockyard. Disputes arose, leading to arbitration and an award in favor of the appellant. The respondent challenged the award, but subsequent appeals upheld the award. The respondent then filed a special leave petition before the Supreme Court, which was dismissed. An execution proceeding followed, with the respondent contending that the decree directing payment of interest from the date of the award till the date of the decree was inexecutable. The Calcutta High Court held the decree inexecutable, directing the appellant to refund the interest amount. The appellant appealed, but the Division Bench upheld the decision, leading to the present special leave petition.

The key question in this appeal was whether the Division Bench was correct in setting aside the order of the Executing Court directing payment of interest at the rate of 18% from the date of the award till the date of the decree. The facts revealed that the award did not grant post-award interest, only pre-reference interest and interest during the pendency of arbitration proceedings. The appellant did not object to the lack of post-award interest in the award but applied for a decree in terms of the award under Section 17 of the Arbitration Act. Citing relevant case law, it was established that the Executing Court should not exceed the award's terms while passing a decree.

The Constitution Bench of the Supreme Court in a previous case overruled a decision regarding the arbitrator's power to grant pendente lite interest. The Court clarified three periods for which interest could be awarded by the arbitrator. In the present case, interest was granted for the first two periods but not for the last period. The Executing Court's decision to grant interest for the post-award period, not included in the award, was deemed beyond its jurisdiction, rendering the decree a nullity. The Court referenced a similar case where exceeding the terms of the award was considered an excess of jurisdiction.

In conclusion, the Court found no merit in the appeal as the appellant had not objected to the award's terms but sought a decree in its favor. The appeal was dismissed with no order as to costs.

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