Interest on interest under arbitration award rejected; post-award interest confined to principal sum adjudged.

Post-award interest under an arbitration award and decree was confined to the principal sum adjudged and did not extend to pre-award interest, because Section 29 of the Indian Arbitration Act, 1940 and Section 34 of the Code of Civil Procedure limit interest to the principal sum, and Section 3(3) of the Interest Act, 1978 bars interest on interest unless statute or contract expressly permits it. In the absence of any express stipulation in the award, decree, statute, or contract authorising compounding of pre-award interest, the higher post-award rate could not be applied to the combined amount. The view that a wider phraseology could support interest on the whole award was distinguished as arising under different statutory language.

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Issues: Whether post-award interest under the arbitration award and decree was payable only on the principal sum awarded or also on the pre-award interest component, thereby permitting interest on interest.

Analysis: The award and decree granted simple interest at 12% per annum for the pre-award period and 15% per annum for the post-award period on the amount awarded. Section 29 of the Indian Arbitration Act, 1940 and Section 34 of the Code of Civil Procedure limit interest to the principal sum adjudged. Section 3(3) of the Interest Act, 1978 also prohibits award of interest upon interest unless specifically authorised by statute or contract. The absence of any express stipulation in the award, decree, statute, or contract to compound the pre-award interest meant that the post-award rate could not be applied to the principal sum plus pre-award interest. The decisions recognising a wider meaning of the sum awarded were distinguished on the ground that they arose under a materially different statutory phraseology.

Conclusion: Interest on interest was not payable. The 15% post-award interest was confined to the principal amount awarded and did not extend to the pre-award interest component. The challenge was rejected.

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