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     REPORTABLE      

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3148 OF 2012                                                            M/S. HYDER CONSULTING (UK) LTD.    ... APPELLANT                   

VERSUS

GOVERNOR, STATE OF ORISSA  THROUGH CHIEF ENGINEER    ... RESPONDENT                                  

WITH

CIVIL APPEAL NO. 3147 OF 2012

CIVIL APPEAL NO. 3149 OF 2012

CIVIL APPEAL NO. 1390 OF 2013

S.L.P. (C) NO. 19895 OF 2008

S.L.P. (C) NO. 20282 OF 2008

S.L.P. (C) NO. 21896 OF 2010

S.L.P. (C) NO. 18614 OF 2012

JUDGMENT

H.L. DATTU, CJI.

1. In view of the reference order dated 13.03.2012,  

this Civil Appeal and the matters connected therewith are  

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placed  before  a  three-Judge  Bench  of  this  Court  for  

consideration  and  decision.  The  question  before  this  

Court is, whether the decision of this Court in State of  

Haryana and Others v. S.L. Arora and Company., (2010) 3  

SCC 690, wherein it is held that an award of interest on  

interest from the date of award is not permissible under  

sub- section (7) of section 31 of the Arbitration and  

Conciliation Act, 1996 (for short, “the Act, 1996”), is  

in  consonance  with  earlier  decisions  of  this  Court.  A  

two-Judge  Bench  of  this  Court,  by  the  said  reference  

order, is    of the opinion that the present appeal and  

the connected matters would need to be heard by a Bench  

of three Judges of this Court.

2. By  the referral  order dated  13.03.2012, it  is  

found that the learned counsel for the appellants therein  

would doubt the correctness of the decision in the S.L.  

Arora  case (supra) in light of  McDermott International  

INC v. Burn Standard Co. Ltd. and Others, (2006) 11 SCC  

181;  Uttar  Pradesh  Cooperative  Federation  Limited  v.  

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Three Circles, (2009) 10 SCC 374;  Oil and Natural Gas  

Commission v. M.C. Clelland Engineers S.A., (1999) 4 SCC  

327; and  Central Bank of India v. Ravindra and Others,  

(2002) 1 SCC 367. Therein, the appellants would contend  

that, in accordance with the decision of this Court in  

the  aforementioned  cases,  the  interest  awarded  on  the  

principal  amount  upto  the  date  of  award,  becomes  the  

principal  amount  for  the  purposes  of  awarding  future  

interest  under  the  Act,  1996.  The  appellants  would  

contend that the decision in the S.L. Arora case (supra)  

inadvertently  and  erroneously  assumed  that  the  

aforementioned cases would not be applicable to it. Since  

the decision in the  S.L. Arora  case (supra) negated the  

above stated principle, the appellants would contend that  

the said case would require reconsideration by a larger  

Bench of this Court.  

FACTS :

Civil Appeal No.3148 of 2012

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3. The present civil appeal came before a two-Judge  

Bench of this Court against a judgment and final order  

dated 28.07.2010, passed by the High Court of Orissa at  

Cuttack in Writ Petition (Civil) No. 5302 of 2009. The  

said Writ Petition was filed challenging the orders dated  

19.02.2009 and 26.03.2009, passed by the District Judge,  

Khurda in Execution Petition No. 17 of 2006, whereby the  

learned District Judge had issued  order of attachment in  

favour  of  the  appellant  herein.  The  claim  in  the  

execution  petition  was  for  the  payment  of  

Rs.8,92,15,993/-. The said claim included in itself post  

award interest on the aggregate of the principal amount  

awarded by the arbitral award and interest pendente lite  

thereon. By virtue of arbitral award dated 26.04.2000,  

which was upheld by the Division Bench of the High Court  

of  Orissa  by  its  order  dated  28.06.2006,  a  principal  

amount of Rs.2,30,59,802/- was awarded in favour of the  

appellant herein. The said impugned judgment of the High  

Court of Orissa dated 28.07.2010, inter alia, relied upon  

the decision of this Court in the S.L. Arora case (supra)  

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and  quashed  the  orders  passed  by  the  learned  District  

Judge, whereby Rs.8,92,15,993/- was awarded in favour of  

the appellant. The learned Judges of the High Court, vide  

the impugned judgment, directed the executing court to  

re-calculate  the  total  amount  payable  under  the  award  

keeping  in  view  the  principles  laid  down  in  the  S.L.  

Arora case (supra).

4. According to the referral order dated 13.03.2012,  

the appellants contended that the S.L. Arora case (supra)  

was  based  on  an  inadvertent  erroneous  assumption  that  

McDermott case (supra) and the Three Circles case (supra)  

were per incuriam in holding that interest awarded on the  

principal  amount  upto  the  date  of  award  becomes  the  

principal amount and, therefore, award of future interest  

thereon  would  not  amount  to  award  of  interest  on  

interest. The  S.L. Arora  case (supra) held contrary to  

the  aforementioned  principle.  To  support  their  

contention, the appellants also made a reference to the  

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ONGC  case  (supra) and  the  Central  Bank  of  India  case  

(supra).

ISSUES :

5. The issues that arise for the consideration of  

this Court are  firstly, whether in light of the  Three  

Circles  case  (supra)  and  McDermott  case  (supra)  there  

exists  any  infirmity  in  the  decision  rendered  by  this  

Court in the  S.L. Arora  case (supra); and  secondly  to  

determine whether sub- section (7) of section 31 of the  

Act,  1996  could  be  interpreted  to  include  interest  

pendente lite within the sum payable as per the arbitral  

award, for the purposes of awarding post-award interest.

SUBMISSIONS :

6. Shri  K.K.  Venugopal,  learned  Senior  Counsel  

appearing  for  the  appellants  herein,  in  the  first  

instance,  would  submit  that  the  decision  in  the  S.L.  

Arora case (supra) was incorrect in ignoring the earlier  

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decisions of this Court, namely the  Three Circles  case  

(supra),  the  McDermott  case  (supra),  the  ONGC  case  

(supra) and the  Central Bank of India  case (supra). In  

light of the aforesaid latter cases, it is contended that  

the  S.L.  Arora  case  (supra)  wrongly  held  that  the  

interest as envisaged under clause (b) of sub- section  

(7) of section 31 of the Act, 1996 would apply only on  

the principal amount awarded by the arbitral tribunal.  

Shri K.K. Venugopal would further refer to the 246th Report  

of the Law Commission of India titled as ‘Amendments to  

the Arbitration and Conciliation Act, 1996’ in support of  

the above contention.

7. The submissions of Shri K.K. Venugopal could be  

summarized as follows- firstly, that under clause (a) of  

sub- section (7) of section 31 of the Act, 1996, the  

award is for money and the sum for which the award is  

made would include within it, the interest that may be  

awarded for the period from the date of cause of action  

to the date of award; secondly, that under clause (b) of  

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sub- section (7) of section 31 of the Act, 1996, the sum  

directed to be paid by the arbitral award is the sum  

awarded, which is inclusive of interest  pendente lite;  

thirdly,  that  there  may  be  scenarios  wherein  an  award  

would be made only for interest as the claim would relate  

only  to  interest  and  in  such  a  case  18%  per  annum  

interest would automatically attach to the given award;  

fourthly, that the transaction on which the claim is made  

and the money is so awarded, merges with the award and  

ceases to be the principal amount, so that interest under  

clause  (b)  would  be  the  totality;  fifthly,  that  the  

comparison of the amended section 34 of the Code of Civil  

Procedure,  1908  would  show  that  unless  the  phrase  

‘principal amount’ is used in clause (a) for ‘sum’ and  

again ‘principal amount’ is used in clause (b) for ‘sum’,  

the word ‘sum’ would be the aggregate of the principal  

amount  and  interest;  sixthly,  that  the  entirety  of  

commercial transactions would be seriously affected if a  

judgment debtor were to delay the payment of interest on  

the total amount, as the gain to the judgment debtor on  

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that element of interest is a loss to the claimant for  

which he has no recourse; seventhly, the S.L. Arora case  

(supra) was wrongly decided as the judgment is contrary  

to the Act, 1996 on the grounds,  inter alia,  that it  

would be a misnomer to state that interest would not be  

applicable  on  substantive  claims  as  the  same  finds  no  

mention in the given provision; and lastly, 18% interest  

would be applicable proprio vigore unless stopped by the  

award itself.

8. Per  contra,  Shri  L.  Nageshwara  Rao,  learned  

Senior Counsel and Additional Solicitor General of India  

would submit that there was no infirmity whatsoever in  

the  S.L.  Arora  case  (supra)  and  that,  therefore,  the  

present  reference  was  not  required.  Furthermore,  the  

learned  Additional  Solicitor  General  would  submit  that  

the term “sum” as found in sub- section (7) of section 31  

of the Act, 1996 should be read as “principal amount” as  

held in the S.L. Arora case (supra).

DISCUSSION :

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9. At the outset, it would be necessary to discuss  

the correctness of the reference order in light of the  

S.L. Arora case (supra). This Court, in the  S.L. Arora  

case (supra), was required to adjudicate upon two primary  

issues  namely-  firstly,  whether  sub-  section  (7)  of  

section  31  of  the  Act,  1996  authorised  the  arbitral  

tribunal to award interest on interest from the date of  

award; and secondly, whether the arbitral tribunal could  

grant future interest from the date of award.  

10. In the  S.L.  Arora case (supra), this Court had  

sought to clarify whether the arbitral tribunal’s power  

to  grant  post-award  interest  extended  only  on  the  

principal  amount  or  on  the  aggregate  of  the  principal  

amount and the interest, as determined to be payable from  

the date of cause of action to the date of award. On  

perusal of sub- section (7) of Section 31 of the Act,  

1996, this Court observed:

“18. Section 31(7) makes no reference to payment  

of compound interest or payment of interest upon  

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interest. Nor does it require the interest which  

accrues till the date of the award, to be treated  

as part of the principal from the date of award  

for calculating the post-award interest. The use  

of the words "where and insofar as an arbitral  

award is for the payment of money" and use of the  

words "the Arbitral Tribunal may include in the  

sum for which the award is made, interest ... on  

the whole or any part of the money" in Clause (a)  

and use of the words "a sum directed to be paid by  

an  arbitral  award  shall  ...  carry  interest"  in  

Clause  (b)  of  Sub-section  (7)  of  Section  31  

clearly  indicate  that  the  section  contemplates  

award  of  only  simple  interest  and  not  compound  

interest  or  interest  upon  interest.  “A  sum  

directed to be paid by an arbitral award” refers  

to the award of sums on the substantive claims and  

does not refer to interest awarded on the “sum  

directed to be paid by the award”. In the absence  

of any provision for interest upon interest in the  

contract, the arbitral tribunals do not have the  

power to award interest upon interest, or compound  

interest, either for the pre-award period or for  

the post-award period.”  

(emphasis in original)

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11. In  the  S.L.  Arora case  (supra),  this  Court  

highlighted that there was a tendency among contractors  

to elevate the claims for interest and costs to the level  

of  substantive  disputes,  by  categorizing  them  under  

independent heads of claim. Further, it was noticed that,  

since arbitrations usually have a high pendency period  

owing to prolonged arbitration proceedings or intervening  

as  well  as  post  arbitral  litigations,  the  interest  

payable  on  the  amount  awarded  often  increases  to  

substantial amounts, sometimes even exceeding the actual  

amount  awarded.  The  Court,  in  the  S.L.  Arora case  

(supra), then sought to set out the legal position on the  

award  of  interest  to  understand  the  authority  of  the  

tribunal as envisioned in sub- section (7) of Section 31  

of the Act, 1996.

12. The  present  reference  requires  this  Court  to  

reconsider the decision in  S.L. Arora case (supra), in  

light  of  previous  decisions  of  this  Court  in  the  

McDermott case  (supra)  and  the  Three  Circles case  

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(supra).  It  may  be  reiterated  that  the  referral  order  

dated  13.03.2012  takes  note  of  the  contention  of  the  

appellants that the  S.L. Arora case (supra) erroneously  

held the  Three Circles  case (supra) and the  McDermott  

case (supra) to be per incuriam in holding that interest  

awarded on the principal amount upto the date of award  

becomes the principal amount.

13. Before  I  consider  the  correctness  of  the  

aforementioned  decisions,  it  would  be  necessary  to  

elaborate upon the concept of “per incuriam”.  The latin  

expression  per  incuriam literally  means  ‘through  

inadvertence’. A decision can be said to be given  per  

incuriam when the Court of record has acted in ignorance  

of any previous decision of its own, or a subordinate  

court has acted in ignorance of a decision of the Court  

of  record.  As  regards  the  judgments  of  this  Court  

rendered per incuriam, it cannot be said that this Court  

has “declared the law” on a given subject matter, if the  

relevant law was not duly considered by this Court in its  

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decision. In this regard, I refer to the case of State of  

U.P. v. Synthetics and Chemicals Ltd., (1991) 4 SCC 139,  

wherein  Justice  R.M.  Sahai,  in  his  concurring  opinion  

stated as follows:

“40. ‘Incuria’ literally means ‘carelessness’. In  

practice  per  incuriam appears  to  mean  per  

ignoratium.  English  courts  have  developed  this  

principle  in  relaxation  of  the  rule  of  stare  

decisis.  The ‘quotable  in law’  is avoided  and  

ignored if it is rendered, ‘in ignoratium of a  

statute or other binding authority’. ...”

14. Therefore, I am of the considered view that a  

prior decision of this Court on identical facts and law  

binds the Court on the same points of law in a later  

case.  In  exceptional  circumstances,  where  owing  to  

obvious inadvertence or oversight, a judgment fails to  

notice  a  plain  statutory  provision  or  obligatory  

authority  running  counter  to  the  reasoning  and  result  

reached,  the  principle  of  per  incuriam may  apply.  The  

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said principle was also noticed in the case of Fuerst Day  

Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356.

15. I would now analyse the decisions noticed by the  

referral  order  dated  13.03.2012,  to  determine  the  

correctness or otherwise of the present reference, and  

consequently determine the power of an arbitral tribunal  

to award interest under section 31 of the Act, 1996.  

16. This  Court in  the  Three  Circles case  (supra),  

placing  its  reliance  on  earlier  decisions,  by  its  

judgment, allowed the arbitral tribunal to pass an award,  

enforcing interest on interest. This Court observed that:  

“31. Now the question comes which is related to  

awarding of 'interest on interest'. According to  

the appellant, they have to pay interest on an  

amount which was inclusive of interest and the  

principal amount and, therefore, this amounts to  

a liability to pay 'interest on interest'. This  

question is no longer res integra at the present  

point  of  time.  This  Court  in  McDermott  

International Inc. v. Burn Standard Co. Ltd and  

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Ors.,(2006) 11 SCC 181 has settled this question  

in which it had observed as follows (SCC p.207,  

para 44):

“44. ...The Arbitrator has awarded the  

principal  amount  and  interest  thereon  

upto  the  date  of  award  and  future  

interest thereupon which do not amount  

to  award  on  interest  on  interest  as  

interest awarded on the principal amount  

upto  the  date  of  award  became  the  

principal amount which is permissible in  

law.”

The High Court on this question has also rightly  

relied on a decision of this Court in the case of  

Oil and Natural Gas Commission v. M.C. Clelland  

Engineers S.A. (1999) 4 SCC 327. That being the  

position, we are unable to find any ground to set  

aside the judgment of the Division Bench of the  

High  Court  while  considering  the  ground  of  

'interest on interest'.”

17. It would be crucial to note that the reliance  

upon  the  McDermott case  (supra)  by  this  Court  in  the  

Three Circles case (supra) is not in consonance with the  

doctrine  of  precedents.  On  a  perusal  of  the  McDermott  

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case  (supra),  it  is  observed  that  the  substantive  

proposition of that case did not address the issue on the  

power of the tribunal to award ‘interest on interest’ or  

compound  interest.  The  proposition  on  ‘interest  on  

interest’ was made only in one of the submissions of the  

respondent therein. The ratio decidendi of that decision  

merely  laid  down  the  discretion  of  the  arbitrator  to  

decide the rate of interest awarded under sub- section  

(7) of section 31 of the Act, 1996, on a part or whole of  

the award money. In this regard, the Court observed as  

follows:

“154.  The  power  of  the  arbitrator  to  award  

interest for pre-award period, interest  pendent  

lite and interest  post-award period  is not  in  

dispute.  Section 31(7)(a)provides  that  the  

arbitral  tribunal  may  award  interest,  at  such  

rate as it deems reasonable, on the whole or any  

part of the money, for the whole or any part of  

the period between the date on which the cause of  

action arose and the date on which award is made,  

i.e., pre-award period. This, however, is subject  

to the agreement as regard the rate of interest  

on unpaid sum between the parties. The question  

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as to whether interest would be paid on the whole  

or part of the amount or whether it should be  

awarded in the pre-award period would depend upon  

the  facts and  circumstances of  each case.  The  

arbitral  tribunal in  this behalf  will have  to  

exercise its discretion as regards (i) at what  

rate  interest  should  be  awarded;  (ii)  whether  

interest should be awarded on whole or part of  

the  award  money;  and  (iii)  whether  interest  

should be awarded for whole or any part of the  

pre-award period.  

155.  The  1996  Act  provides for  award  of  18%  

interest.  The  arbitrator  in  his  wisdom  has  

granted  10%  interest  both  for  the  principal  

amount as also for the interim. By reason of the  

award,  interest  was  awarded  on  the  principal  

amount. An interest thereon was upto the date of  

award as also the future interest at the rate of  

18% per annum.

156.  However,  in  some  cases,  this  Court  has  

resorted  to  exercise  its  jurisdiction  under  

Article  142  in  order  to  do  complete  justice  

between the parties.”

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18. From the above-quoted paragraphs of the McDermott  

case (supra), it is abundantly clear that the decision  

neither  makes  any  reference  to  awarding  of  compound  

interest  nor  does  it  allow  post-award  interest  to  be  

imposed  on  the  aggregate  of  the  principal  claim  and  

interest  pendente lite. This Court had merely sought to  

clarify the position with respect to the rate of interest  

awarded and further the power of this Court to invoke  

Article 142 of the Constitution of India, 1950 to alter  

the  said  rate  of  interest  in  order  to  do  complete  

justice. Thus, it is evident from paragraphs 154 to 156  

of  the  McDermott case  (supra),  that  the  proposition  

surrounding  arbitral  tribunal’s  authority  to  award  of  

‘interest  on  interest’  was  not  deliberated  upon  but  

merely argued by the respondents therein. However, this  

argument was erroneously relied upon in the Three Circles  

case (supra) to decide upon the issue related to awarding  

of ‘interest on interest’ or compound interest.

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19. This  Court, therefore,  in the  S.L. Arora case  

(supra) has disagreed with the reasoning laid down in the  

McDermott case (supra) as well as the Three Circles case  

(supra).  This  Court,  on  perusal  of  the  relevant  

paragraphs  in  the  aforesaid  decisions,  held  that  the  

observations therein must be treated as  per incuriam  on  

the issue around awarding of ‘interest on interest’ or  

compound interest. It was observed that:

“28. ...But a careful reading of the decision in  

Mcdermott, shows that the portion of Mcdermott  

extracted in Three Circles, assuming it to be the  

law laid down in Mcdermott, is not a finding or  

conclusion of this Court, nor the ratio decidendi  

of  the  case,  but  is  only  a  reference  to  the  

contention of the respondent in Mcdermott.  

29.  Paras  1  to  27  (of  the  SCC  report)  in  

Mcdermott state the factual background. Paras 28  

and  29 contain  the submissions  of the  learned  

Counsel for BSCL, the respondent therein. Paras  

30  to  44  contain  the  submissions  made  by  the  

learned  Counsel  for  Mcdermott,  the  appellant  

therein,  in  reply  to  the  submissions  made  on  

behalf of BSCL. The passage that is extracted in  

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Three Circles is part of para 44 of the decision  

which contains the last submission of the learned  

Counsel  for  Mcdermott  on  the  question  of  

interest. The reasoning in the decision starts  

from para 45. This Court considered the several  

questions  seriatum  in  paras  45  to  160.  The  

question relating to interest was considered in  

paras 154 to 159 relevant portions of which we  

have extracted above. Therefore, the observation  

in  Three  Circles  that  Mcdermott  held  that  

interest awarded on the principal amount upto the  

date of award becomes the principal amount and  

therefore award of future interest therein does  

not amount to award of interest on interest, is  

per  incuriam  due  to  an  inadvertent  erroneous  

assumption.”

20. I am in agreement with the aforesaid view in the  

S.L. Arora case (supra). The decision in the  McDermott  

case (supra) would not be applicable, since it does not  

pertain to the issue of granting compound interest on the  

post-award  claim.  This  Court,  in  the  McDermott case  

(supra), did not consider the issue pertaining to award  

of  ‘interest  upon  interest’  or  compound  interest.  It  

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merely  held  that  the  interest  must  be  awarded  on  the  

principal  amount  upto  the  date  of  award.  Thus,  the  

McDermott case (supra) would be wholly inapplicable to  

the issue for consideration by this Bench.

21. Further,  the  decision  of  Three  circles case  

(supra) did not place reliance on the ratio decidendi of  

the  McDermott case  (supra)  but  merely  re-stated  the  

contention  raised  by  the  respondent  therein  to  decide  

upon  the  issue  of  ‘interest  on  interest’  or  compound  

interest.  Therefore,  in  my  considered  view,  the  Three  

Cirlces  case (supra) would be deemed as  per incuriam in  

regard to the concept of awarding ‘interest on interest’  

or  compound  interest,  due  to  such  an  inadvertent  

erroneous reliance upon the McDermott case (supra).

22. At this stage, it would be necessary to take into  

consideration, the decisions of this Court in the  ONGC  

case (supra) as well as the  Central Bank of India case  

(supra). It was argued, as per the referral order, that  

these  decisions  would  support  the  proposition  that  

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arbitral tribunals have the authority to award ‘interest  

on interest’ from the date of the award.  

23. On perusal of the ONGC case (supra), I find that  

this  Court  has  recognised  and  accepted  the  power  of  

arbitral tribunals to award interest upon interest. This  

Court  has  considered  such  an  award  as  a  requisite  

compensatory  measure  for  delayed  payment  and  included  

such  interest  along  with  the  principal  amount  in  the  

‘sum’ so awarded. This Court observed as follows:

“4.  There  cannot  be  any  doubt  that  the  

Arbitrators have powers to grant interest akin to  

Section 34 of the CPC which is the power of the  

court in view of Section 29 of the Arbitration  

Act,  1940.  It  is  clear  that  interest  is  not  

granted upon interest awarded but upon the claim  

made. The claim made in the proceedings is under  

two heads - one is the balance of amount claimed  

under invoices and letter dated February 10, 1981  

and  the  amount  certified  and  paid  by  the  

appellant  and  the  second  is  the  interest  on  

delayed  payment.  That  is  how  the  claim  for  

interest on delayed payment stood crystallized by  

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the  time  the  claim  was  filed  before  the  

Arbitrators.  Therefore,  the  power  of  the  

Arbitrators to grant interest on the amount of  

interest which may, in other words, be termed as  

interest on damages or compensation for delayed  

payment  which  would  also  become  part  of  the  

principal.  If that  is the  correct position  in  

law,  we  do  not  think  that  Section  3  of  the  

Interest Act has any relevance in the context of  

the  matter  which  we  are  dealing  with  in  the  

present  case.  Therefore,  the  first  contention  

raised  by  Shri  Datta,  though  interesting,  

deserves to be and is rejected.”

24. However, it would be pertinent to note that the  

ONGC case  (supra)  as  well  as  the  Three  Circles case  

(supra),  both  pertained  to  the  awards  under  the  

Arbitration Act, 1940 (for short “the Act, 1940”). The  

Act, 1940 did not contain any specific provision dealing  

with the arbitrator’s power to grant interest. Further,  

it is a settled position that the decisions of this Court  

regarding award of interest made under the Act, 1940 are  

not applicable to arbitration held under the Act, 1996.  

In this regard, I place reliance on the decision of this  

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Court in  Sayeed Ahmed & Co. v. State of U.P. & Ors.,  

(2009) 12 SCC 26, wherein it was observed that:

“14. The decisions of this Court with reference  

to  the  awards  under  the  old  Arbitration  Act  

making  a  distinction  between  the  pre-reference  

period  and  pendente  lite period  and  the  

observation  therein  that  arbitrator  has  the  

discretion to award interest during pendente lite  

period  inspite  of  any  bar  against  interest  

contained in the contract between the parties are  

not applicable to arbitrations governed by the  

Arbitration and Conciliation Act 1996.”

25. Pursuant to the enactment of sub- section (7) of  

section 31 of the Act, 1996, the difference between pre-

reference  period  and  pendente  lite  period  has  been  

removed insofar as it relates to the award of interest by  

arbitrator, unlike the position as under the Act, 1940.  

It would not be appropriate for this Court, in matters  

pertaining to the Act, 1996, to rely upon decisions which  

interpreted  the  arbitrator’s  power  to  award  interest  

under the Act, 1940. This position was further reiterated  

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in  Sree Kamatchi Amman Constructions v. The Divisional  

Railway Manager (Works), Palghat and Ors., (2010) 8 SCC  

767.

26. Furthermore, I take note of the fact that the  

aforementioned principle was applied by this Court in the  

S.L. Arora case (supra). It was explicitly stated that  

since  the  ONGC case  (supra)  and  Three  Circles case  

(supra)  related  to  awards  under  the  Arbitration  Act,  

1940, they can be of no assistance in interpreting sub-  

section (7) of section 31 of the Act, 1996. I concur with  

the above reasoning to show the inapplicability of the  

ONGC  case (supra) and the  Three Circles  case (supra) to  

the present case.

27. The  last  case  relied  upon  by  the  appellants  

herein is the  Central Bank of India  case (supra). This  

Court in the  Central Bank of India case (supra), under  

Section  34  of  the  Code  of  Civil  Procedure,  1908  (for  

short,  “the  Code”),  sought  to  determine  whether  the  

liability  of  the  borrower  to  pay  interest  on  the  

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principal sum, would include interest that became merged  

with the principal sum adjudged. This aforesaid decision  

discussed the scope for charging compound interest under  

Section 34 of the Code. The Court sought to determine the  

meaning attached to phrases ‘principal sum adjudged’ and  

‘such principal sum’, pursuant to the 1956 amendment to  

the Code. Further, the Court sought to determine whether  

such  ‘principal  sum’  would  include  liability  to  pay  

compound  interest  thereon.  However,  the  issue  with  

respect  to  award  of  interest  upon  interest  under  sub-  

section (7) of Section 31 of the Act, 1996 was not the  

subject matter in the aforesaid decision.  

28. In my considered view, the Central Bank of India  

case  (supra)  cannot  be  relied  upon  by  the  appellants  

herein in support of their contention that the arbitral  

tribunal  possessed  the  power  to  award  interest  on  

interest. The  Central Bank of India case (supra) dealt  

with section 34 of the Code, and therefore may not be  

said  to  be  wholly  applicable  to  cases  under  the  Act,  

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1996. However, even if the principle in the said case is  

held to be applicable to the Act, 1996, it would only  

support the view endorsed by the S.L. Arora case (supra).  

29. Lastly, it would be necessary to highlight the  

views of the 246th  Report of the Law Commission of India,  

which  suggested  amendments  to  the  Act,  1996.  On  the  

question of ‘Interest on Sums Awarded’ at page 33 of the  

said Report, the Commission was of the opinion that the  

words used in sub- section (7) of Section 31 of the Act,  

1996 are of wider import and the scheme of the relevant  

provisions  indicated  that  the  award  of  interest  on  

interest is not only permitted but is also the norm. The  

Commission was of the view that the decision in the S.L.  

Arora case (supra) required reconsideration on the issue  

of awarding future interest on both, the principal sum as  

well as the interest accrued till date of the award. In  

light of the preceding discussion, I do not agree with  

the  said  view  taken  by  the  Commission.  It  is  my  

considered opinion that the decision in  S.L. Arora case  

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(supra)  is  sound  and  wholly  conclusive  on  the  

interpretation of sub- section (7) of Section 31 of the  

Act,  1996  on  the  issue  of  awarding  ‘interest  on  

interest’. The Law Commission had erred in relying upon  

the ONGC case (supra) as well as the Three Circles case  

(supra), since these decisions are not applicable to the  

present arbitration held under the Act, 1996.

30. Thus, I am of the considered opinion that, since  

the position on the interpretation of sub- section (7) of  

Section 31 of the Act, 1996 regarding award of interest  

upon  interest  has  been  correctly  decided  in  the  S.L.  

Arora case  (supra),  the  present  reference  may  not  be  

required. The decision of this Court in the Three Circles  

case (supra) was rightly held to be passed on inadvertent  

erroneous assumption, as stated in the  S.L. Arora case  

(supra). The McDermott case (supra) did not deal with the  

question pertaining to awarding of ‘interest on interest’  

or compound interest. Furthermore, the decision in the  

ONGC case  (supra)  pertained  to  the  Act,  1940,  and,  

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therefore,  in  light  of  the  settled  principle  of  law,  

would not be applicable to cases under the Act, 1996.  

Lastly, the decision in the  Central Bank of India case  

(supra) did not deal with the issue around interpretation  

of sub- section (7) of Section 31 of the Act, 1996, nor  

did the principle laid down therein hold contrary to the  

decision in S.L. Arora case (supra).

31. However, out of sheer deference to the learned  

two-Judge  Bench  of  this  Court,  I  would  clarify  the  

apparent controversy around sub- section (7) of section  

31 of the Act, 1996. The said provision reads as follows:

“31. Form and contents of arbitral award.—

...

(7) (a) Unless otherwise agreed by the parties,  

where and in so far as an arbitral award is for  

the payment of money, the arbitral tribunal may  

include in the sum for which the award is made  

interest, at such rate as it deems reasonable,  

on the whole or any part of the money, for the  

whole or any part of the period between the date  

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on which the cause of action arose and the date  

on which the award is made.

(b) A sum directed to be paid by an arbitral  

award shall, unless the award otherwise directs,  

carry  interest  at  the  rate  of  eighteen  per  

centum per annum from the date of the award to  

the date of payment.”

32. On a bare perusal of the said section, I find  

that  in  the  first  instance,  it  applies  only  to  an  

arbitral award which is for the payment of money. The  

power to award interest by the arbitral tribunal has been  

divided into two stages- firstly, from the date of cause  

of action to the date on which the arbitral award is  

made, and secondly, from the date of award to the date of  

payment. The said classification was also noticed by this  

Court in the Sayeed Ahmed case (supra). I will deal with  

these stages separately as has been provided under the  

said provision itself.

33. Under clause (a) of sub- section (7) of section  

31 of the Act, 1996, I find that it relates to the power  

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of the arbitrator to impose interest in the first stage  

as mentioned hereinabove, that is, from the date of cause  

of action to the date of arbitral award. The said clause  

begins  with  “Unless  otherwise  agreed  by  the  parties”,  

thereby  at  the  onset  of  the  sub-section  itself,  the  

legislature  has  provided  for  a  restriction  on  the  

application of the said sub- section. In the event there  

is an agreement between the parties to the arbitration,  

regarding the payment of interest from the date on which  

the cause of action arose till the date on which the  

award was made, the terms of the said agreement would  

prevail over clause (a) of sub- section (7) of section 31  

of the Act, 1996. This Court, in the Sree Kamatchi Amman  

Constructions case (supra), observed as follows:

“19. Section 37(1)(sic) of the new Act by using  

the  words  “unless  otherwise  agreed  by  the  

parties”  categorically  clarifies  that  the  

arbitrator is bound by the terms of the contract  

insofar as the award of interest from the date  

of  cause  of  action  to  the  date  of  award.  

Therefore, where the parties had agreed that no  

interest shall be payable, the Arbitral Tribunal  

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cannot award interest between the date when the  

cause of action arose to the date of award.”

34. In  the  context  of  the  Act,  1996,  the  phrase  

“unless otherwise agreed by the parties” was explained in  

the case of N.S. Nayak & Sons v. State of Goa, (2003) 6  

SCC 56. This Court observed that:

“14. ...The phrase “unless otherwise agreed by  

the parties” used in various sections, namely,  

17, 21, 23(3), 24(1), 25, 26, 29, 31, 85(2)(a)  

etc. indicates that it is open to the parties to  

agree  otherwise.  During  the  arbitral  

proceedings, right is given to the parties to  

decide their own procedure. So if there is an  

agreement between the parties with regard to the  

procedure to be followed by the arbitrator, the  

arbitrator  is  required  to  follow  the  said  

procedure.  Reason  being,  the  arbitrator  is  

appointed on the basis of the contract between  

the parties and is required to act as per the  

contract. However, this would not mean that in  

appeal  parties  can  contend  that  the  appellate  

procedure should be as per their agreement. ...”

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35. In  the  event  that  the  terms  of  the  given  

contract, as applicable to the parties to the arbitration  

proceedings,  are  silent  on  the  question  of  interest  

payable in the first stage, as given under clause (a) of  

sub- section (7) of section 31 of the Act, 1996, only  

then would the provisions of the said clause apply. The  

said clause thereafter gives the arbitral tribunal the  

discretion to include the interest in the sum for which  

the  award  was  made.  The  principles  for  levying  such  

interest are found in the said clause itself. They are as  

follows:  

(1) Interest to be imposed at such rate as the arbitral  

tribunal deems reasonable;

(2) The interest may be either on the whole or any part  

of the money; and

(3) The interest may be for the whole or any part of the  

period  between  the  date  on  which  the  cause  of  action  

arose and the date on which the award is made.

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36. I take note that the arbitral tribunal has been  

given  the  discretionary  power  of  not  only  imposing  

interest, but also for determining the rate of interest  

that could be imposed from the date of cause of action to  

the  date  of  the  award.  The  arbitral  tribunal  has  the  

discretion  to  decide  whether  such  interest  would  be  

imposed on the whole or a part of the money awarded, and  

further  whether  it  would  be  imposed  for  the  entire  

duration from the date of cause of action to the date of  

award, or on a part of it. However, such discretion is  

not unfettered and is not exercisable upon the mere whims  

and fancies of the tribunal. In  Principles of Statutory  

Interpretation, Justice G.P. Singh, Thirteenth Edition,  

2012, at p.482, it has been stated as follows:

“Even where there is not much indication in the  

Act of the ground upon which discretion is to be  

exercised it does not mean that its exercise is  

dependent  upon  mere  fancy  of  the  Court  or  

Tribunal  or  Authority  concerned.  It  must  be  

exercised  in  the  words  of  Lord  Halsbury,  

‘according to the rules of reason and justice,  

not according to private opinion; according to  

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law and not humour; it is to be not arbitrary,  

vague and fanciful, but legal and regular’.”

37. It can be concluded that the discretion, whether  

to award interest by the arbitral tribunal under clause  

(a), is necessarily to be exercised as per the facts and  

circumstances of each case. The said discretion must be  

within the parameters of the statute and in accordance  

with the rule of law. Furthermore, the said clause states  

that the rate of interest, if such interest is awarded by  

the arbitral tribunal, must be as the said tribunal deems  

reasonable. It is settled law that discretion must always  

be exercised lawfully.

38. At this stage, it would be relevant to consider  

the meaning of the words “sum” and “interest” as used in  

clause (a) of sub- section (7) of section 31 of the Act,  

1996.  It  is  settled  principle  of  interpretation  of  

statutes that while interpreting the words of a statute,  

the context in which they appear would be necessary to be  

taken  into  consideration.  In  support  of  the  said  

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principle  of  contextual  interpretation,  I  refer  to  a  

Constitution  Bench  decision  of  this  Court  in  Darshan  

Singh Balwant Singh v. State of Punjab,  1953 SCR 319,  

wherein it was observed as follows:

“10. ...It is a cardinal rule of interpretation  

that the language used by the legislature is the  

true depository of the legislative intent, and  

that words and phrases occurring in a statute  

are to be taken not in an isolated or detached  

manner dissociated from the context, but are to  

be read together and construed in the light of  

the purpose and object of the Act itself.”

39. In the absence of a definition in the Act, 1996,  

I would notice that the word “sum”, would simply refer to  

money in common parlance. Further, the dictionary meaning  

of the word may be taken into consideration.  Webster’s  

Third  New  International  Dictionary,  Volume  III defines  

“sum” to mean, inter alia, the following:

“Sum:  An  indefinite  or  specified  amount  of  

money.”

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Black’s  Law  Dictionary,  Seventh  Edition,  1999,  defines  

“sum” as:

“sum. 1. A quantity of money.”

P. Ramanatha Aiyar’s Advanced Law Lexicon, Third Edition,  

2005,  Book  4,  defines  “sum”,  inter  alia,  as  the  

following:

“Sum. When used with reference to values, ‘sum’  

imports a sum of money.”

Corpus Juris Secundum, Volume LXXXIII, defines the word  

“sum” as follows:

“Sum. While the word ‘sum’ must be construed in  

connection with the context, it has a definite  

meaning  appropriate  to  use  with  reference  to  

dollars and cents, and, except where a different  

meaning plainly appears, it is restricted in its  

application  to  money,  and  in  sense  it  is  

lexically defined as meaning money, and this is  

said to be the sense in which the word is most  

commonly used.”

40. Therefore, I find that the word “sum”, in its  

natural meaning and as per its most common usage, would  

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mean money. The term “money” has also been used in sub-  

section (7) of section 31 of the Act, 1996. Therefore, I  

would not hesitate in finding that the terms “sum” and  

“money” have been used by the legislature, in the given  

provision, interchangeably. In this light, it would be  

pertinent to take note of the given clause once again.  

The said clause states that interest may be awarded on  

the “sum” for which the arbitral award is made, or the  

same could be read as- interest may be awarded on the  

“money”  for  which  the  arbitral  award  is  made.  This  

“money” for which the award is made, necessarily would  

refer  to  the  money  as  adjudicated  by  the  arbitral  

tribunal, based on the claims of the parties, to be paid  

under the award. In other words, it would simply refer to  

the principal amount so awarded.

41. It would be necessary to understand the meaning  

of  “interest”  as  used  under  the  said  clause  as  well.  

Again,  in  the  absence  of  a  definition  under  the  Act,  

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1996, I would rely upon its meaning in common parlance.  

For this, support of dictionaries can be taken.  

42. Wharton’s  Law  Lexicon,  Fourteenth  Edition,  

defines “interest” as follows:

“Interest. 1. Money paid at a fixed rate per  

cent  for  the  loan  or  use  of  some  other  sum,  

called the principal.”

Black’s  Law  Dictionary,  Seventh  Edition,  1999,  defines  

“interest” as:

“interest.  1.  Advantage  or  profit,  esp.  of  a  

financial nature.”

Webster’s Third New International Dictionary, Volume  

III defines  “interest”  to  mean,  inter  alia,  the  

following:

“interest.  The  price  paid  for  borrowing  money  

generally  expressed  as  a  percentage  of  the  

amount borrowed paid in one year.”

Corpus Juris Secundum, Volume XLVII, explains the word  

“interest” as follows:

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“Interest is the compensation allowed by law, or  

fixed by the parties, for the use or forbearance  

of money, or as damages for its detention.”

Stroud’s  Judicial  Dictionary,  Seventh  Edition,  2008,  

Volume  2,  p.  1385,  defines  the  term  “interest”  as  

follows:

“Interest is compensation paid by the borrower  

to the lender for deprivation of the use of his  

money.”

43.  Therefore, in  light of  the above,  “interest”  

would  be  the  return  or  compensation  for  the  use  or  

retention by one person of a sum of money belonging to or  

owed to another. It may be understood to mean the amount  

which one has contracted to pay for the use of borrowed  

money. It is a consideration paid either for the use of  

money or for forbearance in demanding it, after it has  

fallen due, and thus, it could be said to be a charge for  

the use or forbearance of a particular amount of money.  

In this sense, it is a compensation allowed in law for  

use of money belonging to another or for the delay in  

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paying the said money after it has become payable. This  

principle has also been noticed in the Central Bank case  

(supra).

44. It may be pertinent to take note of the approach  

of English Courts to interpret the term “interest”.  In  

Westminster  Bank  Ltd  v.  Riches,  [1947]  A.C.  390,  the  

House of Lords elaborated upon the term “interest” for  

payment of moneys. Lord Wright observed that:

“The essence of interest is that it is a payment  

which becomes due because the creditor has not  

had his money at the due date. It may be regarded  

either as representing the profit he might have  

made  if  he  had  had  the  use  of  the  money,  or  

conversely the loss he suffered because he had  

not that use. The general idea is that he is  

entitled  to  compensation  for  the  deprivation.  

From that point of view it would seem immaterial  

whether the money was due to him under a contract  

express or implied or a statute or whether the  

money was due for any other reason in law.”

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45. In the case of Nicholas Pike v. The Commissioners  

for Her Majesty's Revenue and Customs, [2013] UKUT 0225  

(TCC), the House of Lords observed as follows:

“15. First, interest is calculated by reference  

to an underlying debt. As Megarry J put it in  

Euro Hotel (supra) at p 1084 b-f:—

“It seems to me that running through the  

cases  there  is  the  concept  that  as  a  

general  rule  two  requirements  must  be  

satisfied  for  payment  to  amount  to  

interest,  and  a  fortiori  to  amount  to  

“interest of money”. First, there must  

be a sum of money by reference to which  

the payment which is said to be interest  

is  to  be  ascertained.  …  Second,  those  

sums of money must be sums that are due  

to  the  person  entitled  to  the  alleged  

interest … I do not, of course, say that  

in every case these two requirements are  

exhaustive,  or  that  they  are  

inescapable.  Thus  I  do  not  see  why  

payments  should  not  be  “interest  of  

money”  if  A  lends  money  to  B  and  

stipulates that the interest should be  

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paid not to him but to X: yet for the  

ordinary case I think they suffice”.

...

20. Sixth, the mere fact that the payment by way  

of interest may be aggregated with a payment of a  

different nature does not “denature” the payment  

that is interest. This point was made in Chevron  

Petroleum UK Ltd v. BP Petroleum Development Ltd  

[1981] STC 689 at p 694 g-j where Megarry VC is  

reported as saying:—

“If in its nature a sum is “interest of  

money”  I  think  it  retains  that  nature  

even  if  the  parties  to  a  contract  

provide  for  it  to  be  wrapped  up  with  

some other sum and the whole paid in the  

form  of  single  indivisible  sum.  The  

wrappings may conceal the nature of the  

contents, but they do not alter them ...  

If the true nature of a sum of money is  

that it is “interest of money” that sum  

will  not  be  denatured,  or  transmuted  

into  something  different,  simply  by  

being incorporated into some larger sum  

444

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before  being  made  payable  under  the  

terms of the contract”.

...”

46. It may be inferred from the aforesaid decisions,  

that for an amount to be referred as “interest”, it must,  

prima facie, fulfill two conditions-

(1) There must be a sum of money by reference to which  

the payment of interest may be ascertained.

(2)  The  sum  of  money  must,  generally,  be  due  to  the  

person entitled to the interest.

Furthermore,  it  would  be  gainsaid  in  stating  that  the  

mere fact that a payment of interest may be aggregated  

with  a  payment  of  a  different  nature,  the  said  

aggregation  would  not  alter  the  distinct  nature  of  

interest from the money on which it is levied.

47. Further, this Court in the case of  Bhai Jaspal  

Singh v. CCT, (2011) 1 SCC 39, observed that:

454

Page 46

“36. Interest is compensatory in character and is  

imposed on an assessee who has withheld payment  

of any tax as and when it is due and payable. The  

interest is levied on the actual amount of tax  

withheld and the extent of delay in paying the  

tax  on  the  due  date.  Essentially,  it  is  

compensatory and different from penalty which is  

penal in character [see Pratibha Processors v.  

Union of India, (1996) 11 SCC 101].”

48. Therefore,  it  may  be  concluded  that  the  term  

“interest”,  appears  to  be  distinct  from  the  principal  

amount  on  which  it  is  imposed.  Furthermore,  the  

imposition of an interest is stated to be for the purpose  

of  providing  compensation  for  withholding  the  said  

principal amount or, as in the case of clause (a) of sub-  

section  (7)  of  Section  31  of  the  Act,  1996,  for  

withholding  the  money  awarded  as  per  the  claim,  as  

determined by the arbitral tribunal, from the date the  

cause of action arose till the date when such award was  

made. In other words, interest is imposed to compensate  

for the denial to one party, by the other party, of the  

money which rightfully belongs to the said former party  

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under  the  relevant  agreement  governing  the  arbitration  

proceedings.

49. Having clarified sub-section (a) of sub- section  

(7) of section 31 of the Act, 1996, I would now consider  

clause  (b)  of  the  said  provision.  As  noticed  above,  

clause (b) is applicable for the period from the date of  

award to the date of payment. The applicability of clause  

(b) has also been qualified by the legislature. The said  

clause  uses  the  phrase  “unless  the  award  otherwise  

directs”, which would mean that in the event the arbitral  

tribunal, in its award, makes a provision for interest to  

be  imposed  in  this  second  stage  as  envisaged  by  sub-  

section (7) of section 31 of the Act, 1996, clause (b)  

would  become  inapplicable.  By  the  said  award,  the  

arbitral tribunal has the power to impose an interest for  

the post-award period which may be higher or lower than  

the  rate  as  prescribed  under  clause  (b).  Even  if  the  

award states that no interest shall be imposed in the  

post-award period, clause (b) cannot be invoked.  

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50. If the arbitral award is silent on the question  

of whether there would be any post- award interest, only  

in that situation could clause (b) be made applicable. In  

the said situation, it would be mandatory as per law that  

the award would carry interest at the rate of 18% per  

annum from the date of the award to the date of payment.  

The term used in the given clause is “shall”, therefore,  

if applicable, the imposition of interest as per clause  

(b) would be mandatory.  

51. It would be relevant also to take note of the  

case of  H.P. Housing & Urban Development Authority v.  

Ranjit Singh Rana, (2012) 4 SCC 505. In the Ranjit Singh  

Rana  case (supra), this Court dealt with the meaning of  

the word “payment” as under clause (b) of sub- section  

(7) of section 31 of the Act, 1996 to ascertain when the  

liability  to  pay  post-award  interest  would  come  to  an  

end.  After  making  a  reference  to  the  S.L.  Arora  case  

(supra), this Court went into the dictionary meaning of  

the word “payment”. The Court explained as follows:

484

Page 49

“15. The  word  “payment”  may  have  different  

meaning in different context but in the context  

of Section 37(1)(b); it means extinguishment of  

the  liability  arising  under  the  award.  It  

signifies satisfaction of the award. The deposit  

of the award amount into the court is nothing  

but  a  payment  to  the  credit  of  the  decree-

holder. In this view, once the award amount was  

deposited  by  the  appellants  before  the  High  

Court on 24-5-2001, the liability of post-award  

interest from 24-5-2001 ceased. The High Court,  

thus, was not right in directing the appellants  

to  pay  the  interest  @  18%  p.a.  beyond  24-5-

2001.”

52. Clause (b) of sub- section (7) of section 31 of  

the  Act,  1996  further  states  that  the  interest  as  

envisaged under the said provision would be on the sum  

directed to be paid by an arbitral award. As noticed in  

the discussion hereinabove, the term “sum”, as in clause  

(a), refers simply to the money directed to be paid as  

per the award, that is, the money as adjudicated by the  

arbitral tribunal.

494

Page 50

53. It is a settled principle of law that if the same  

word is used more than once in the same provision of a  

statute, the intention of the legislature must be to give  

the same meaning to the word at each place where it is  

repeated. There would be a presumption that the said word  

is used in the same sense throughout the given provision.  

According to Bennion on Statutory Interpretation, Fifth  

Edition, 2008, p. 1160:

“Same  words  to  be  given  same  meaning.  It  is  

presumed  that  a  word  or  phrase  is  not  to  be  

taken  as  having  different  meanings  within  the  

same instrument, unless this fact is made clear.  

Where therefore the context makes it clear that  

the term has a particular meaning in one place,  

it  will  be  taken  to  have  that  meaning  

elsewhere.”

54. In  support  of  this  principle,  I  refer  to  the  

Central Bank  case (supra), wherein a Constitution Bench  

of this Court observed as follows:

“42. ... Ordinarily, a word or expression used  

at  several  places  in  one  enactment  should  be  

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Page 51

assigned  the  same  meaning  so  as  to  avoid  “a  

head-on clash” between two meanings assigned to  

the  same  word  or  expression  occurring  at  two  

places in the same enactment. It should not be  

lightly assumed that “Parliament had given with  

one hand what it took away with the other” (see  

Principles of Statutory Interpretation, Justice  

G.P.  Singh,  7th  Edn.  1999,  p.  113).  That  

construction  is  to  be  rejected  which  will  

introduce  uncertainty,  friction  or  confusion  

into the working of the system (ibid, p. 119).  

While embarking upon interpretation of words and  

expressions used in a statute it is possible to  

find  a  situation  when  the  same  word  or  

expression may have somewhat different meaning  

at different places depending on the subject or  

context. This is however an exception which can  

be resorted to only in the event of repugnancy  

in the subject or context being spelled out. It  

has  been  the  consistent  view  of  the  Supreme  

Court that when the legislature used same word  

or  expression  in  different  parts  of  the  same  

section or statute, there is a presumption that  

the word is used in the same sense throughout  

(ibid, p. 263). More correct statement of the  

rule  is,  as  held  by  the  House  of  Lords  in  

Farrell v.  Alexander All ER at p. 736b, “where  

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the draftsman uses the same word or phrase in  

similar contexts, he must be presumed to intend  

it in each place to bear the same meaning”. The  

court having accepted invitation to embark upon  

interpretative expedition shall identify on its  

radar  the  contextual  use  of  the  word  or  

expression  and  then  determine  its  direction  

avoiding  collision  with  icebergs  of  

inconsistency and repugnancy.”

55. It can be concluded that it is a sound rule of  

construction whereby the same word appearing in the same  

section  of  the  same  statute  must  be  given  the  same  

meaning,  unless  there  is  anything  to  indicate  the  

contrary.  The  only  exception  to  this  rule  of  

construction, whereby the said principle may be rebutted,  

is by making reference to the context in which the words  

are  used.  The  word  may  be  understood  in  a  different  

sense, if the context so requires that to be done. The  

context  herein,  that  is,  under  clause  (a)  and  under  

clause (b) of sub- section (7) of section 31 of the Act,  

1996, does not appear to be divergent from one another.  

525

Page 53

The  word  “sum”  has  been  used  in  both  clauses  in  the  

context of what is to be paid as per the arbitral award.

56. Before I conclude, it would be profitable to take  

note  of  the  Central  Bank  of  India  case  (supra)  with  

regard  to  the  limited  issue  of  imposition  of  compound  

interest. While describing the role of the legislature to  

relieve  burdened  debtors  from  being  charged  with  

oppressive  compound  interest  rates,  this  Court  in  the  

Central  Bank  of  India  case  (supra),  stated  that  the  

practice of imposing such interest was permissible, legal  

and  judicially  correct,  if  it  was  a  consequence  of  a  

voluntary agreement between the parties, except when the  

same  was  superseded  by  legislation.  Furthermore,  this  

Court  observed  that  the  interest  would  be  included  as  

part of the principal amount only once it is capitalised.  

This Court, in the  Central Bank of India  case (supra),  

observed as follows:

“36.  ...There is  nothing wrong  in the  parties  

voluntarily entering into transaction, evidenced  

by  deeds  incorporating  covenant  or  stipulation  

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for payment of compound interest at reasonable  

rates, and authorising the creditor to capitalise  

the interest on remaining unpaid so as to enable  

interest being charged at the agreed rate on the  

interest component of the capitalised sum for the  

succeeding  period.  Interest  once  capitalised,  

sheds its colour of being interest and becomes a  

part  of  principal  so  as  to  bind  the  

debtor/borrower.”

57. To  support the  above principle,  whereby it  is  

stated that compound interest is permissible only as a  

consequence of an explicit statutory provision, I take  

note of the case of  Union of India v. Tata Chemicals  

Ltd., (2014) 6 SCC 335 wherein this Court observed as  

follows:

“38. Providing for payment of interest in case of  

refund of amounts paid as tax or deemed tax or  

advance tax is a method now statutorily adopted  

by  fiscal  legislation  to  ensure  that  the  

aforesaid amount of tax which has been duly paid  

in prescribed time and provisions in that behalf  

form part of the recovery machinery provided in a  

taxing  statute. Refund  due and  payable to  the  

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assessee is debt-owed and payable by the Revenue.  

The Government, there-being no express statutory  

provision for payment of interest on the refund  

of excess amount/tax collected by the Revenue,  

cannot  shrug  off  its  apparent  obligation  to  

reimburse the deductors lawful monies with the  

accrued  interest  for  the  period  of  undue  

retention of such monies. ...”

58. I may also take note of the decision in Parkside  

Leasing Ltd v. Smith (Inspector of Taxes) [1985] 1 WLR  

310, wherein the Chancery Division, while discussing the  

difference between the receipt of proceeds by cash or by  

cheque,  was  of  the  view  that  it  would  be  the  actual  

“receipt” of the proceeds, in either case, that places  

such  proceeds  at  the  disposal of  the  payee.  The  said  

decision relied upon  D&C Builders Ltd. v. Rees [1966] 2  

Q.B. 617, wherein Lord Denning observed that:

“...The cheque, when given, is conditional payment. When  

honoured, it is actual payment. ...”  

555

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In other words, the  Parkside Leasing Ltd.  case (supra)  

was of the view that money would be “paid” only when the  

recipient would have the option to utilise the said money  

and exercise willful discretion.  

59. For the purposes of the Act, 1996, interest could  

be  included  within  the  principal  amount  only  when  the  

said  aggregate  amount  is  paid  to  the  party  in  whose  

favour  the  arbitral  award  was  passed.  In  other  words,  

once  the  interest  amount  is  within  the  physical  and  

actual possession of the party so entitled to it, only  

then could the interest amount be said to have merged  

with  the  principal  amount.  Therefore,  in  the  present  

scenario, the appellants would not be entitled to claim  

post-award  interest  on  the  aggregate  of  the  principal  

amount  and  interest  pendente  lite,  since  the  said  

aggregate sum was not in the actual physical possession  

of the appellants herein. Further, I take note that sub-  

section (7) of section 31 of the Act, 1996, neither makes  

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reference  to  compounding  of  interest,  nor  to  awarding  

interest on interest.

60. Therefore, in my considered view, the term “sum”  

as used in clause (b) of sub- section (7) of section 31  

of the Act, 1996 would have the same meaning as assigned  

to the word under clause (a) of the same provision. It  

would refer to the money as adjudicated by the arbitral  

tribunal  based  on  the  claim  of  the  parties  to  the  

arbitral proceedings. It has already been noticed that  

this money would be distinct from the interest as may  

have been awarded by the arbitral tribunal under clause  

(a) of sub- section (7) of section 31 of the Act, 1996.  

Therefore, the interest under clause (b) would be imposed  

on money awarded by the arbitral tribunal on the basis of  

the  claims  of  the  parties,  and  the  said  money  cannot  

merge within it any interest as imposed in the period  

from  the  date  of  cause  of  action  to  the  date  of  the  

award.

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61. In light of the above discussion, the reference  

is answered in the following terms-

I find no infirmity with the S.L. Arora case (supra),  

whereby it was held that if the arbitral award is silent  

about interest from the date of award till the date of  

payment, the person in whose favour the award is made  

will be entitled to interest at 18% per annum on the  

principal amount awarded, from the date of award till the  

date of payment.

62. In  view  of  the  above,  while  answering  the  

referral order, Civil Appeal No. 3148 of 2012, along with  

all connected matters, is remanded back to an appropriate  

two-Judge Bench of this Court for adjudication.

..............CJI. [H.L. DATTU]

NEW DELHI, NOVEMBER 25, 2014.

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 3148   OF 2012   

M/S. HYDER CONSULTING (UK) LTD.             …. APPELLANT

VERSUS

GOVERNOR STATE OF ORISSA TH. CHIEF ENG. .. RESPONDENT

WITH

SLP (C) No. 19895/2008

  SLP (C) No. 20282/2008   

CIVIL APPEAL No.  3149   OF 2012   

CIVIL APPEAL No.  3147   OF 2012   

  SLP (C) No. 18614/2012   

CIVIL APPEAL No.  1390   OF 2013   

  SLP (C) No. 21896/2010   

JUDGMENT

S. A. BOBDE, J.

1. I have had the advantage of reading the Judgment of  

my Lord, the Chief Justice.  I entirely agree that the findings  

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of this Court in  State of Haryana and Others v. S.L. Arora   

and  Company,  (2010)  3  SCC  690  that  Uttar  Pradesh  

Cooperative Federation Limited v. Three Circles,  (2009) 10  

SCC  374 was  incorrectly  founded  upon  the  decision  in  

McDermott  International  INC  v.  Burn  Standard  Co.  Ltd.,   

(2006)  11  SCC  181  and  that  such  reliance  was  not  in  

consonance with the doctrine of precedent. The McDermott  

case  is  not  an  authority  on  the  question  whether  the  

Arbitrator  may  award  compound  interest  nor  does  that  

decision  sanction  post-award  interest  be  imposed on  the  

aggregate  sum  and  interest  pendent  lite.  The  Arbitral  

Tribunal’s authority to award “interest on interest” was not  

discussed  therein.  This  Court,  therefore,  while  deciding  

State of  Haryana and Others v. S.L. Arora and Company,   

(2010) 3 SCC 690, rightly refused to treat the  McDermott  

case as  well  as  the  Three Circles case as  authorities  for  

awarding  “interest  on  interest”  and  held  that  both  were  

wrongly  decided.  Further,  the  decisions  in  ONGC v.  M.C.  

Clelland Engineers S.A., (1999) 4 SCC 327 as well  as the  

Three Circles case pertain to an Award under the Arbitration  

Act, 1940, which did not contain a specific provision dealing  

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with the arbitrator’s power to grant interest.  Likewise, the  

Central Bank of India v. Ravindra and Others, (2002) 1 SCC  

367  case  arose  under  Section  34  of  the  Code  of  Civil  

Procedure, 1908 (hereinafter referred to as “the CPC”), and  

cannot  be  treated  as  an  authority  for  award  of  interest  

under clause (7) of Section 31 of the Arbitration Act, 1996  

(hereinafter referred to as “the Act”).

2. It is not possible to agree with the conclusion in   S.L.  

Arora’s  case that Section 31(7) of the Act does not require  

that interest, which accrues till the date of the Award, be  

included in the “sum” from the date of Award for calculating  

the post-award interest. In my humble view, this conclusion  

does not seem to be in consonance with the clear language  

of Section 31(7) of the Act.

3. Sub-section (7) of Section 31 of the Act, which deals  

with the power of  the Arbitral  Tribunal  to award interest,  

reads as follows:

       “Sub-section (7)  

(a) Unless otherwise agreed by the parties, where and  in  so  far  as  an  arbitral  award  is  for  the  payment  

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of money,  the  Arbitral  Tribunal  may  include  in  the  sum for  which  the award is  made interest,  at  such  rate as it deems reasonable, on the whole or any part  of the money, for the whole or any part of the period  between the date on which the cause of action arose  and the date on which the award is made.

(b) A sum directed to  be paid by an arbitral  award  shall,  unless  the  award  otherwise  directs,  carry  interest at the rate of eighteen per centum per annum  from the date of the award to the date of payment.”

4. Clause (a) of sub-section (7) provides that where an  

Award  is  made  for  the  payment  of  money,  the  Arbitral  

Tribunal  may  include  interest  in  the  sum  for  which  the  

Award  is  made.   In  plain  terms,  this  provision  confers  a  

power upon the Arbitral Tribunal while making an Award for  

payment of money, to include interest in the sum for which  

the Award is made on either the whole or any part of the  

money and for the whole or any part of the period for the  

entire  pre-award  period  between  the  date  on  which  the  

cause of action arose and the date on which the Award is  

made.  To put it differently, sub-section (7)(a) contemplates  

that an Award, inclusive of interest for the pre-award period  

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on the entire amount directed to be paid or part thereof,  

may  be  passed.   The  “sum”  awarded  may  be  principal  

amount and such interest as the Arbitral Tribunal deems fit.  

If  no  interest  is  awarded,  the  “sum”  comprises  only  the  

principal.  The significant words occurring in clause (a) of  

sub-section (7) of Section 31 of the Act are “the sum for  

which  the  award  is  made.”   On  a  plain  reading,  this  

expression  refers  to  the  total  amount or sum for  the  

payment for which the Award is made.  Parliament has not  

added a qualification like “principal” to the word “sum,” and  

therefore, the word “sum” here simply means “a particular  

amount of money.”  In Section 31 (7), this particular amount  

of money may include interest from the date of  cause of  

action to the date of the award.

5. The Oxford Dictionary gives the following meaning to  

the word “sum”:   

Sum, ‘if noun’:- A particular amount of money.

Sum, ‘if  verb’:-  The total amount resulting from the  

addition of two or more numbers, amounts, or items.

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6. In Black’s Law Dictionary, the word “sum” is given the  

following meaning:-

“SUM.  In  English  law-  A  summary  or  abstract;  a  

compendium;  a  collection.   Several  of  the  old  law  

treatises are called “sum.”  Lord Hale applies the term  

to  summaries  of  statute  law.  Burrill.   The  sense  in  

which the term is most commonly used is “money”; a  

quantity  of  money  or  currency;  any  amount  

indefinitely, a sum of money, a small sum, or a large  

sum.  U.S. v. Van Auken,  96 U.S. 368, 24 L.Ed. 852;  

Donovan v. Jenkins, 52 Mont. 124, 155 P. 972, 973.”

7. Thus, when used as a noun, as it seems to have been  

used in this provision, the word “sum” simply means “an  

amount of money”; whatever it may include -  “principal”  

and “interest” or one of the two.  Once the meaning of the  

word “sum” is clear, the same meaning must be ascribed to  

the word in clause (b) of sub-section (7) of Section 31 of the  

Act, where it provides that a sum directed to be paid by an  

Arbitral Award “shall carry interest ……..”  from the date of  

the Award to the date of the payment i.e. post-award.  In  

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other words, what clause (b) of sub-section (7) of Section 31  

of the Act directs is that the “sum,” which is directed to be  

paid  by  the  Award,  whether  inclusive  or  exclusive  of  

interest, shall carry interest at the rate of eighteen per cent  

per  annum  for  the  post-award  period,  unless  otherwise  

ordered.   

8. Thus,  sub-section  (7)  of  Section  31  of  the  Act  

provides,  firstly,  vide clause (a)  that  the Arbitral  Tribunal  

may include interest while making an award for payment of  

money in the sum for which the Award is made and further,  

vide clause (b) that the sum so directed to be made by the  

Award  shall  carry  interest  at  a  certain  rate  for  the  post  

award period.

9. The  purpose  of  enacting  this  provision  is  clear,  

namely,  viz.  to encourage early payment of  the awarded  

sum and to discourage the usual delay, which accompanies  

the execution of the Award in the same manner as if it were  

a decree of the court vide Section 36 of the Act.  

10. In this view of the matter, it is clear that the interest,  

the sum directed to be paid by the Arbitral  Award under  

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clause  (b)  of  sub-section  (7)  of  Section  31  of  the  Act  is  

inclusive of interest pendent lite.   

11. At this juncture, it may be useful to refer to Section 34  

of the CPC, also enacted by Parliament and conferring the  

same power upon a court to award interest on an award i.e.  

post-award  interest.   While  enacting  Section  34,  CPC,  

Parliament conferred power on a court to order interest “on  

the principal sum adjudged” and not on merely the “sum”  

as provided in the Arbitration Act.  The departure from the  

language of Section 34 CPC in Section 31 (7) of  the Act,  

1996 is significant and shows the intention of Parliament.

12. It is settled law that where different language is used  

by Parliament, it is intended to have a different effect.  In  

the  Arbitration  Act,  the  word  “sum”  has  deliberately  not  

been qualified by using the word “principal” before it.  If it  

had been so used, there would have been no scope for the  

contention that the word “sum” may include “interest.”  In  

Section 31(7) of the Act, Parliament has deliberately used  

the word “sum” to refer to the aggregate of the amounts  

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that may be directed to be paid by the Arbitral Tribunal and  

not merely the “principal” sum without interest.

13. Thus, it is apparent that vide clause (a) of sub-section  

(7) of  Section 31 of  the Act,  Parliament intended that an  

award for payment of money may be inclusive of interest,  

and the “sum” of the principal amount plus interest may be  

directed  to  be  paid  by  the  Arbitral  Tribunal  for  the  pre-

award period.  Thereupon, the Arbitral Tribunal may direct  

interest to be paid on such “sum” for the post-award period  

vide clause (b) of sub-section (7) of Section 31 of the Act, at  

which stage the amount would be the sum arrived at after  

the  merging  of  interest  with  the  principal;  the  two  

components having lost their separate identities.

14.  In fact this is a case where the language of sub-section  

7 clause (a) and (b) is so plain and unambiguous that no  

question of construction of a statutory provision arises. The  

language itself provides that in the sum for which an award  

is made, interest may be included for the pre-award period  

and that for the post-award period interest up to the rate of  

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eighteen per cent per annum may be awarded on such sum  

directed to be paid by the Arbitral Award.  

In such a situation one is reminded of the decision in Ganga  

Prasad Verma (Dr.) v. State of Bihar, 1995 Supp (1) SCC 192  

Para 5, where this Court held that, “Where the language of  

the Act is clear and explicit, the court must give effect to it,  

whatever may be the consequences, for  in that case the  

words of the statute speak the intention of the Legislature.”  

Similarly, in Keshavji Ravji & Co. v. CIT, (1990) 2 SCC 231, a  

three-Judge Bench of this Court explained the rule of literal  

interpretation  as  under  (SCC  p.242,  Para  11):  “If  the  

intendment is not in the words used it is nowhere else. The  

need for interpretation arises when the words used in the  

statute are, on their terms, ambivalent and do not manifest  

the intention of the legislature.”

We may also refer to the decision of the Privy Council  in  

Pakala  Narayana  Swami  v.  Emperor,  AIR  1939  PC  47,  

wherein Lord Atkin observed that,  “when the meaning of  

words  is  plain,  it  is  not  the  duty  of  courts  to  busy  

themselves  with  supposed  intentions.”   This  view  was  

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upheld recently by this Court in T.N. State Electricity Board  

v. Central Electricity Regulatory Commission, (2007) 7 SCC  

636.  

In fact the settled view on this subject has been to admit  

results  of  construction  even  if  they  be  strange  or  

surprising1, unreasonable or unjust or oppressive2. The Privy  

Council in Emperor v. Benoarilal Sarma, AIR 1945 PC 48 (p.  

53), emphasised, “Again and again, this Board has insisted  

that in construing enacted words we are not concerned with  

the policy involved or with the results, injurious or otherwise  

which may follow from giving effect to the language used.”

In the case of Nasiruddin v. Sita Ram Agarwal, (2003) 2 SCC  

577 (Para 37), a three-Judge Bench of this Court, made it  

clear  that  the  Court’s  jurisdiction  cannot  be  invoked  to  

interpret a statute so as to add or subtract words or read  

something into a provision which is not there.  

1

London Brick Company Ltd. v. Robinson, [1943] 1 ALL ER 23, p. 26 (HL). 2

IRC v. Hinchy, [1960] 1 ALL ER 505, pp. 508, 512 (HL).

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Infact,  Maxwell  on the Interpretation of  Statutes, states,  

“where  the  language  is  plain  and  admits  of  but  one  

meaning, the task of interpretation can hardly be said to  

arise.  “The  decision  in  this  case,”  said  Lord  Morris  of  

Borth-y-Gest in a revenue case, “calls for a full  and fair  

application of  particular  statutory language to particular  

facts as found. The desirability or the undesirability of one  

conclusion  as  compared  with  another  cannot  furnish  a  

guide in reaching a decision.” 3 Where, by the use of clear  

and unequivocal language capable of only one meaning,  

anything is enacted by the legislature, it must be enforced  

however harsh or absurd or contrary to common sense the  

result may be. 4 The interpretation of a statute is not to be  

collected from any notions which may be entertained by  

the court as to what is just and expedient:5 words are not  

3

Shop and Store Developments Ltd. v. I.R.C. [1967] 1 A.C. 472, per Lord Morris  of Borth-y-Gest at p. 493. But see I.R.C. v. Bates [1965] I W.L.R. 1133, per Lord  Denning M.R., affirmed in H.L. at [1967] 2 W.L.R. 60 sub. Nom. Bates v. I.R.C.; Luke v.  I.R.C. [1963] A.C. 557, per Lord Reid.  4

Cartledge v. E. Jopling & Sons, Ltd. [1963] A.C. 758. Cf. Miller v. Salomons  [1853] 7 Ex. 475, per Pollock C.B.; Re British Farmers’, etc., Co. (1878) 48 L.J.Ch. 56,  per Jessel M.R.; Magor and St. Mellons R.D.C. v. Newport Corporation [1952] A.C. 189. 5

Gwynne v. Burnell (1840) 7 Cl. & F. 572 per Coleridge J.

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to be construed, contrary to their meaning, as embracing  

or  excluding  cases  merely  because  no  good  reason  

appears why they should not be embraced or excluded.6  

Tindal,  C.J.  in the  Sussex Peerage7 case, summarised this  

principle  as  follows:  “If  the  words  of  the  Statute  are  in  

themselves precise and unambiguous then no more can be  

necessary than to expound those words in their natural and  

ordinary  sense.  The  words  themselves  do  alone  in  such  

cases best declare the intent of the law giver.” This cardinal  

principle  of  construction  was  first   stated  by  the  United  

States Supreme Court in its landmark decision of Caminetti  

v. United States, 242 U.S. 470, 485 (1917), whereby Justice  

Day observed, “where the language is plain and admits of  

no more than one meaning the duty of interpretation does  

not arise.”   

15. In the result, I am of the view that S.L. Arora’s case is  

wrongly decided in that it holds that a sum directed to be  

6

Whitehead v. James Stott Ltd. [1949] 1 K.B. 358; Galashiels Gas Co., Ltd. v.  O’Donell [1949] A.C. 275. 7

[1844] 11 Cl & F 85, p. 143.  

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paid by an Arbitral Tribunal and the reference to the Award  

on  the  substantive  claim  does  not  refer  to  interest  

pendente  lite awarded  on  the  “sum directed  to  be  paid  

upon Award” and that in the absence of any provision of  

interest upon interest in the contract, the Arbitral Tribunal  

does not have the power to award interest upon interest, or  

compound interest either for the pre-award period or for the  

post-award period. Parliament has the undoubted power to  

legislate  on  the  subject  and  provide  that  the  Arbitral  

Tribunal may award interest on the sum directed to be paid  

by the Award,  meaning a  sum inclusive of  principal  sum  

adjudged  and  the  interest,  and  this  has  been  done  by  

Parliament in plain language.

                                 .........................................………J.                                                          [S.A. BOBDE]

NEW DELHI, NOVEMBER  25th, 2014

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REPORTABLE

IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3148 OF 2012

M/s Hyder Consulting (UK) Ltd.                 Appellant(s)

VERSUS

Governor State of Orissa  through Chief Engineer           Respondent(s)

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WITH Special Leave Petition (C) No.19895 of 2008 Special Leave Petition (C) No.20282 of 2008

Civil Appeal No.3149 of 2012 Civil Appeal No.3147 of 2012

Special Leave Petition (C) No.18614 of 2012 Civil Appeal No.1390 of 2013

Special Leave Petition (C) No.21896 of 2010 J U D G M E N T

Abhay Manohar Sapre, J.

1. I  have  had  the  benefit  of  reading  the  scholarly  

Judgments  of  My  Lord  the  Chief  Justice  as  also  my  

learned brother Bobde J.

2. With  great  respect,  I  find  myself  in  complete  

agreement  with  the  reasoning  and  the  eventual  

conclusion arrived at by brother Bobde J.  Even though,  

the  judgment  delivered  by  brother  Bobde  J.  

encapsulates everything of what is required to be said,  

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I, however, looking to the point involved and very ably  

argued by all learned senior counsel, wish to record my  

own reasons, in addition to what has already been laid  

down.  

3. Reiteration  of  facts  is  unnecessary.  The  only  

question that arises for determination in the instant lis  

is,  "Whether grant of interest by the Arbitral  Tribunal  

under Section 31(7) of the Arbitration and Conciliation  

Act, 1996 (hereinafter referred to as ‘the Act”) amounts  

to granting "interest on interest"?

4. The aforesaid question can be answered by a plain  

and simple reading of Section 31(7) of the Act which  

reads as under:

“31(7)(a) Unless otherwise agreed by the parties, where  and in so far as an arbitral award is for the payment of  money, the arbitral  tribunal may include in the sum for  which the award is made interest, at such rate as it deems  reasonable, on the whole or any part of the money, for the  whole  or  any  part  of  the  period  between  the  date  on  which the cause of action arose and the date on which the  award is made.

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payment at a particular rate in its discretion then it will  

prevail  else  the  party  will  be  entitled  to  claim  post-

award  interest  on  the  awarded  sum at  the  statutory  

rate specified in clause (b) of Section 31(7) of the Act,  

i.e.,  18%.   Thus,  there is  a  clear  distinction in  time  

period and the intended purpose of grant of interest.

6. Section 31(7)(a) employs the words "...the arbitral   

tribunal may include in the sum for which the award is   

made interest...".  The words "include in the sum" are  

of utmost importance. This would mean that pre-award  

interest is not independent of the "sum" awarded. If in  

case, the Arbitral Tribunal decides to award interest at  

the time of making the award, the interest component  

will not be awarded separately but it shall become part  

and  parcel  of  the  award.  An  award  is  thus  made  in  

respect  of  a  "sum"  which  includes  within  the  "sum"  

component of interest, if awarded.  

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7. Therefore, for the purposes of an award, there is  

no  distinction  between  a  "sum"  with  interest,  and  a  

"sum" without interest. Once the interest is "included  

in the sum" for which the award is made, the original  

sum and the interest component cannot be segregated  

and be seen independent of each other.  The interest  

component then looses its character of an "interest"  

and takes the colour of "sum" for which the award is  

made.  

8. There  may  arise  a  situation  where,  the  Arbitral  

Tribunal may not award any amount towards principal  

claim but award only "interest”. This award of interest  

would itself then become the "sum" for which an award  

is made under Section 31(7)(a) of the Act.  Thus, in a  

pre-award  stage,  the  legislation  seeks  to  make  no  

distinction  between  the  sum  award  and  the  interest  

component in it.  

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9. Therefore, I  am inclined to hold that the amount  

award under Section 31(7)(a) of the Act, whether with  

interest  or  without  interest,  constitutes  a  "sum"  for  

which the award is made.   

10. Coming  now  to  the  post-award  interest,  Section  

31(7)(b) of the Act employs the words, "A sum directed  

to be paid by an arbitral award...".  Sub-clause (b) uses  

the  words  "arbitral  award"  and  not  the  "arbitral  

tribunal”. The arbitral award, as held above, is made in  

respect  of  a  "sum"  which includes the interest.  It  is,  

therefore, obvious that what carries under Section 31(7)

(b) of the Act is the "sum directed to be paid by an  

arbitral award"  and not any other amount much less  

by or under the name "interest".  In such situation, it  

cannot be said that what is being granted under Section  

31(7)(b) of the Act is "interest on interest".  Interest  

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under sub-clause (b) is granted on the "sum" directed  

to be paid by an arbitral award wherein the "sum" is  

nothing more than what is arrived at under sub-clause  

(a).  

11. Therefore, in my view, the expression “grant of  

interest  on  interest”  while  exercising  the  power  

under  Section  31(7)  of  the  Act   does  not  arise  and,  

therefore,  the  Arbitral  Tribunal  is  well  empowered to  

grant  interest  even  in  the  absence  of  clause  in  the  

contract for grant of interest.   

12. My aforesaid interpretation of Section 31 (7) of the  

Act is based on three golden rules of interpretation as  

explained  by  Justice  G.P.  Singh  -  Interpretation  of  

Statute (13th Edition- 2012) where the learned author  

has said that while interpreting any Statue, language of  

the provision should be read as it is and the intention of  

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the legislature should be gathered primarily from the  

language used in the provision meaning thereby that  

attention should be paid to what has been said as also  

to what has not been said; second, in selecting out of  

different  interpretations   "the  Court  will  adopt  that  

which is just, reasonable, and sensible rather than that  

which is  none of  those things" ;  and third,  when the  

words of the Statute are clear, plain or unambiguous,  

i.e.,  they  are  reasonably  susceptible  to  only  one  

meaning , the Courts are bound to give effect to that  

meaning  irrespective  of  the  consequence  (see  pages  

50, 64, and 132).  I have kept these principles in mind  

while interpreting Section 31(7) of the Act.  

                                            ……..................................J.

    [ABHAY MANOHAR SAPRE]

New Delhi; November 25, 2014.

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