Contractual interest in arbitration award barred extra post-award interest and compounding at execution stage

The parties' MoU fixed interest on refund of the advance at 21% per annum from the dates of disbursement until actual repayment, and the arbitral tribunal adopted that contractual regime in the award. Because the award itself covered interest up to repayment and did not provide for compounding, execution proceedings could not be used to enlarge the award by adding compound interest or further post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996. The claim for additional interest was therefore not maintainable, and restoration of full satisfaction of the award was upheld.

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Issues: Whether, in view of the MoU and the arbitral award, the decree holder was entitled to claim compound interest or additional post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996.

Analysis: Section 31(7)(a) permits the arbitral tribunal to include pre-award interest in the sum awarded, but that discretion is controlled by the parties' agreement. The MoU expressly provided for refund of the advance with interest at 21% per annum from the respective dates of disbursement till actual repayment. The arbitral tribunal adopted that contractual regime and awarded 21% interest till repayment. Since the award itself covered interest up to the date of repayment, there was no scope to add further post-award interest or compound interest at the execution stage. The award did not provide for compounding, and execution proceedings could not be used to enlarge the award.

Conclusion: The claim for compound interest and additional post-award interest was not maintainable, and the order of the executing court restoring full satisfaction of the award was correct.

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