Calcutta High Court: In an application filed by the petitioner to determine the applicable interest rate in the execution proceedings related to an Award, a single-judge bench comprising of Moushumi Bhattacharya,* J., held that the petitioner is entitled to interest on the awarded amount, and the rate of interest would be 2% higher than the prevalent rate on the date of the Award. The Court calculated the applicable interest rate as 15.75% and directed the respondent to pay the interest along with the principal amount by a specified date.
In the instant matter, the petitioner/award-holder filed an application in an execution proceeding related to an Award dated 30-09-2008, seeking interest at 18% per annum on the awarded amount from 01-02-2009, based on paragraph 15.12 of the Award. The Award held the respondent/award-debtor liable for a sum of Rs. 3,87,73,200/- for the petitioner’s loss of profit, with costs assessed at Rs. 4 lakhs in favor of the petitioner. The respondent contended that the rate of interest should be governed by Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 (the Act), as the Award predates the 2016 amendment. The central question in the present matter is determining the applicable rate of interest under the Amendment Act of 2016, effective from 23-10-2015, i.e., whether the petitioner is entitled to interest on the awarded amount at the rate of 18% per annum or at 2% higher than the current rate of interest prevalent on the date of the Award, from the date of the Award to the date of payment.
The Court observed that the Award was made before the Amendments to Section 31(7)(b) were brought into effect, thus governed by the pre-amendment position, where the interest rate is normally 18% per annum unless otherwise directed by the Award. Although the Arbitrator declined to award interest at 18%, the Court held that this refusal does not entitle the respondent to claim interest at the rate of 18% during execution proceedings. Considering the Amendment Act of 2016 and Hindustan Construction Co. Ltd. v. Union of India, (2020) 17 SCC 324, where the Supreme Court upheld the applicability of pre-amendment awards in post-amendment execution proceedings, the Court determined that the interest rate should be 2% higher than the prevalent rate on the date of the Award.
The Court held that the petitioner is entitled to interest on the awarded amount, but at a rate determined by the amended Section 31(7)(b), which requires interest to be 2% higher than the current rate of interest from the date of the Award to the date of payment.
“…since the Award is silent or rather refused to pass any Award on interest, the vacuum thereto would be filled up by the amended Section 31(7)(b) which was already in place when the execution application was filed in 2021.”
The Court calculated the interest rate at 15.75%, based on the prevalent SBI rate on the date of the Award and directed the respondent to pay interest of 15.75% on the awarded amount being Rs.3,89,04,600/- from 30-09-2008 till the date of payment. The amount shall be paid by 07-03-2024 by way of banker’s cheque to the petitioner’s designated bank account. The Court stated that the execution proceedings will remain pending until compliance with the order and fixed the next date on hearing on 12-03-2024.
[Amiya Steel (P) Ltd. v. SAIL, 2024 SCC OnLine Cal 2053, order dated 27-02-2024]
*Judgment by Justice Moushumi Bhattacharya
Advocates who appeared in this case:
Mr. Surajit Nath Mitra, Sr. Adv., Mr. D. N. Sharma, Mr. Shailendra Jain, Ms. Swati Agarwal, Ms. Anusha Nayak, Counsel for the Petitioner
Mr. Arijit Basu, Counsel for the Respondent
