National Project Construction Ltd., and Another Vs E… — Arbitration | Andhra Pradesh HC (2025)

National Project Construction Ltd., and Another Vs E… — Arbitration | Andhra Pradesh HC (2025)

What the court decided

AI extract

Outcome

None; the appeal was dismissed with no order as to costs, leaving the Arbitrator's Award dated 15.03.2002 undisturbed, and pending miscellaneous applications were directed to stand closed.

Issue for consideration

Whether the learned Arbitrator acted without power in awarding interest on interest — i.e., post-award interest @ 18% p.a. computed on amounts that already included pre-award interest @ 15% — such that the entire Award is liable to be set aside. +1 more

Court's answer

The present case arises under the Arbitration and Conciliation Act, 1996 and not the Arbitration Act, 1940; therefore the ratio of Hyder Consulting (UK) Ltd. v. State of Orissa and UHL Power Co. Ltd. v. State of H.P. applies, and the grant of post-award interest @ 18% on the award amount (inclusive of principal and pre-award interest) is not in violation of Supreme Court principles or any provision of law.

Ratio / Principle

As the Award was passed in 2002, before the 2016 amendment, the 18% rate of interest is in accordance with the provisions of the Arbitration and Conciliation Act, 1996 as then in force (the provision initially providing for interest @ 18%, later modified to 2% over the bank rate).

Key takeaways

The ratio in M/s. D. Khosla and Company (that neither the Act, nor Section 34 CPC, nor the Interest Act empowers award of interest on interest) was rendered with reference to the Arbitration Act, 1940, and accordingly does not govern arbitrations conducted under the 1996 Act.ratio¶212

Detailed headnote1 paragraphs

Arbitration — Interest on interest — Arbitration and Conciliation Act, 1996, S.31(7)(b). Award dated 15.03.2002 arising out of a works-contract Agreement dated 28.12.1994 relating to Visakhapatnam Steel Plant granted interest @ 15% on the principal claims (claims 1 to 8) from completion of contract to the date of award, aggregating Rs.32,73,171.59 paise, and further interest @ 18% p.a. on that aggregate from the date of award till realization. Appellants challenged the Award as impermissible interest on interest, placing reliance on M/s. D. Khosla and Company v. Union of India ([2024] 8 S.C.R. 113 : 2024 INSC 587). Held, dismissing the appeal: (i) a closer reading shows D. Khosla was rendered with reference to the Arbitration Act, 1940, and its ratio does not apply to arbitrations under the 1996 Act; (ii) the three-Judge Bench decisions in Hyder Consulting (UK) Ltd. v. State of Orissa ((2015) 2 SCC 189), which overruled State of Haryana v. S.L. Arora ((2010) 3 SCC 690), and UHL Power Company Ltd. v. State of H.P. ((2022) 4 SCC 116) govern — post-award interest under S.31(7)(b) runs on the 'sum directed to be paid by an arbitral award', which includes the principal sum adjudged plus pendente lite interest, so the 18% award is not prohibited interest on interest; (iii) since the Award of 2002 predates the 2016 amendment (under which the statutory rate became 2% above the bank rate), the 18% rate accords with S.31(7)(b) as it then stood. No order as to costs; pending miscellaneous applications closed.

IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI

Civil Miscellaneous Appeal No.46 of 2009

Between:

NATIONAL PROJECT CONSTRUCTION LTD., AND ANOTHER, RASHTHRIYA PRAYOJANA NIRMAN NIGAM LTD., REPRESENTED BY ITS CHAIRMAN RAJA HOUSE, NEHRU PLACE, NEW DELHI REP. BY GPA HOLDER I.E, V.R.REDDY,

THE UNIT OFFICER NPCC LIMITED, VISAKHAPATNAM, PANTHULUGARI MEDA OLD GAJUWAKA, VISAKHAPATNAM.

...APPELLANT(S)

AND

E KONDAIAH CONSTRUCTIONS AND 2 OTHERS, A PROPRIETARY CONCERN REP. BY ITS PROPRIETOR SRI E. KONDAIAH REHABILITATION COLONY, NANDIPURA, VISAKHAPATNAM.

VISAKHAPATNAM STEEL PLANT, REPRESENTED BY ITS CHAIRMAN & MANAGING DIRECTOR, UKKUNAGARAM, VISAKHAPATNAM.

SRI B V RANGA RAJU RET JUDGE, HIGH COURT OF A.P., ARBITRATOR R/O. 55-1-24/3, JAGANNADHARAJU NAGAR, VENKOJIPALEM,

ERLA KONDALA RAO, S/O. LATE E. KONDAIAH, AGED 48 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

ERLA MALYADRI, S/O. LATE E. KONDAIAH, AGED 47 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

ERLA ANKA RAO, S/O. LATE E. KONDAIAH, AGED 46 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND

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RRR,J & TCDS,J C.M.A.No.46 of 2009

MANDAL, SPSR NELLORE DISTRICT.

ERLA HANUMANTHA RAO, S/O. LATE E. KONDAIAH, AGED 44 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

...RESPONDENT(S):

Appeal Under Section_____against orders

IA NO: 1 OF 2008(CMAMP 68 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 656 days in representing the CMASR.No. 5608/2006

IA NO: 2 OF 2008(CMAMP 69 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 673 days in payment of deficit court fee of Rs. 190/- CMA.SR.No. 5608/2006

IA NO: 3 OF 2008(CMAMP 70 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 25 days in filing CMASR.No. 5608 /2006 an

IA NO: 4 OF 2008(CMAMP 235 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased stay all further proceedings in EP.No. 1 of 2007 in AOP .NO.572 of 2002 on the file of the VI Addl. District Judge, Visakhapatnam pending disposal of CMA

IA NO: 5 OF 2008(CMAMP 2599 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be

3

RRR,J & TCDS,J C.M.A.No.46 of 2009

pleased vacate the order dated 26.1.2008 passed in CMAMP No.235/20087 in CMASR No.5608/2006 in the interest of justice

IA NO: 1 OF 2016(CMAMP 1095 OF 2016

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased expedite the hearing of the appeal by fixing an early date in the interest of justice

IA NO: 1 OF 2021

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to expedite the hearing of the appeal by fixing an early date in the interest of justice, and pass

IA NO: 1 OF 2025

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased may be pleased to set aside the order of abatement of the Appeal in the interest of justice.

IA NO: 2 OF 2025

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased Pleased to bring the LRs/Petitioners of the Deceased 1st Respondent E.Kondaiah as Respondents 4 to 7 in the Appeal in the interest of justice.

Counsel for the Appellant(S):

1.C PRAKASH REDDY

Counsel for the Respondent(S):

1.VIVEK CHANDRA SEKHAR S

2.G RAMA GOPAL

3.A KRISHNAM RAJU

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RRR,J & TCDS,J C.M.A.No.46 of 2009

Date of Judgment pronounced on: 09-12-2025

HON’BLE SRI JUSTICE R. RAGHUNANDAN RAO

AND

THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR

Whether Reporters of Local newspapers : Yes/No May be allowed to see the judgments? 2. Whether the copies of judgment may be marked : Yes/No to Law Reporters/Journals: 3. Whether the Lordship wishes to see the fair copy : Yes/No of the Judgment?

5

RRR,J & TCDS,J C.M.A.No.46 of 2009

*IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI

*** HON’BLE SRI JUSTICE R. RAGHUNANDAN RAO**

AND

THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR

+ CIVIL MISCELLANEOUS APPEAL No.46 of 2009

% Dated: 09-12-2025

Between:

NATIONAL PROJECT CONSTRUCTION LTD., AND ANOTHER, RASHTHRIYA PRAYOJANA NIRMAN NIGAM LTD., REPRESENTED BY ITS CHAIRMAN RAJA HOUSE, NEHRU PLACE, NEW DELHI REP. BY GPA HOLDER I.E, V.R.REDDY,

THE UNIT OFFICER NPCC LIMITED, VISAKHAPATNAM, PANTHULUGARI MEDA OLD GAJUWAKA, VISAKHAPATNAM.

...APPELLANT(S)

AND

E KONDAIAH CONSTRUCTIONS AND 2 OTHERS, A PROPRIETARY CONCERN REP. BY ITS PROPRIETOR SRI E. KONDAIAH REHABILITATION COLONY, NANDIPURA, VISAKHAPATNAM.

VISAKHAPATNAM STEEL PLANT, REPRESENTED BY ITS CHAIRMAN & MANAGING DIRECTOR, UKKUNAGARAM, VISAKHAPATNAM.

SRI B V RANGA RAJU RET JUDGE, HIGH COURT OF A.P., ARBITRATOR R/O. 55-1-24/3, JAGANNADHARAJU NAGAR, VENKOJIPALEM,

ERLA KONDALA RAO, S/O. LATE E. KONDAIAH, AGED 48 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

6

RRR,J & TCDS,J C.M.A.No.46 of 2009

ERLA MALYADRI, S/O. LATE E. KONDAIAH, AGED 47 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

ERLA ANKA RAO, S/O. LATE E. KONDAIAH, AGED 46 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

ERLA HANUMANTHA RAO, S/O. LATE E. KONDAIAH, AGED 44 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

...RESPONDENT(S):

Appeal Under Section_____against orders

IA NO: 1 OF 2008(CMAMP 68 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 656 days in representing the CMASR.No. 5608/2006

IA NO: 2 OF 2008(CMAMP 69 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 673 days in payment of deficit court fee of Rs. 190/- CMA.SR.No. 5608/2006

IA NO: 3 OF 2008(CMAMP 70 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 25 days in filing CMASR.No. 5608 /2006 an

IA NO: 4 OF 2008(CMAMP 235 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased stay all further proceedings in EP.No. 1 of 2007 in AOP .NO.572 of 2002 on the file of the VI Addl. District Judge, Visakhapatnam pending

7

RRR,J & TCDS,J C.M.A.No.46 of 2009

disposal of CMA

IA NO: 5 OF 2008(CMAMP 2599 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased vacate the order dated 26.1.2008 passed in CMAMP No.235/20087 in CMASR No.5608/2006 in the interest of justice

IA NO: 1 OF 2016(CMAMP 1095 OF 2016

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased expedite the hearing of the appeal by fixing an early date in the interest of justice

IA NO: 1 OF 2021

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to expedite the hearing of the appeal by fixing an early date in the interest of justice, and pass

IA NO: 1 OF 2025

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased may be pleased to set aside the order of abatement of the Appeal in the interest of justice.

IA NO: 2 OF 2025

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased Pleased to bring the LRs/Petitioners of the Deceased 1st Respondent E.Kondaiah as Respondents 4 to 7 in the Appeal in the interest of justice.

Counsel for the Appellant(S):

1.C PRAKASH REDDY

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RRR,J & TCDS,J C.M.A.No.46 of 2009

Counsel for the Respondent(S):

1.VIVEK CHANDRA SEKHAR S

2.G RAMA GOPAL

3.A KRISHNAM RAJU

<GIST :

HEAD NOTE:

Cases referred:

[2024] 8 S.C.R. 113: 2024 INSC 587

(2015) 2 SCC 189

(2022) 4 SCC 116

(2010) 3 SCC 690

9

RRR,J & TCDS,J C.M.A.No.46 of 2009

[3529]

APHC010240132009

IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI

(Special Original Jurisdiction)

TUESDAY, THE NINTH DAY OF DECEMBER TWO THOUSAND AND TWENTY FIVE

PRESENT

THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO

THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR

CIVIL MISCELLANEOUS APPEAL NO: 46/2009

Between:

NATIONAL PROJECT CONSTRUCTION LTD., AND ANOTHER, RASHTHRIYA PRAYOJANA NIRMAN NIGAM LTD., REPRESENTED BY ITS CHAIRMAN RAJA HOUSE, NEHRU PLACE, NEW DELHI REP. BY GPA HOLDER I.E, V.R.REDDY,

THE UNIT OFFICER NPCC LIMITED, VISAKHAPATNAM, PANTHULUGARI MEDA OLD GAJUWAKA, VISAKHAPATNAM.

...APPELLANT(S)

AND

E KONDAIAH CONSTRUCTIONS AND 2 OTHERS, A PROPRIETARY CONCERN REP. BY ITS PROPRIETOR SRI E. KONDAIAH REHABILITATION COLONY, NANDIPURA, VISAKHAPATNAM.

VISAKHAPATNAM STEEL PLANT, REPRESENTED BY ITS CHAIRMAN & MANAGING DIRECTOR, UKKUNAGARAM, VISAKHAPATNAM.

SRI B V RANGA RAJU RET JUDGE, HIGH COURT OF A.P., ARBITRATOR R/O. 55-1-24/3, JAGANNADHARAJU NAGAR, VENKOJIPALEM,

10

RRR,J & TCDS,J C.M.A.No.46 of 2009

ERLA KONDALA RAO, S/O. LATE E. KONDAIAH, AGED 48 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

ERLA MALYADRI, S/O. LATE E. KONDAIAH, AGED 47 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

ERLA ANKA RAO, S/O. LATE E. KONDAIAH, AGED 46 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

ERLA HANUMANTHA RAO, S/O. LATE E. KONDAIAH, AGED 44 YEARS, R/O. D.NO.3-313, CHAMADALA AND JALADANKI VILLAGE AND MANDAL, SPSR NELLORE DISTRICT.

...RESPONDENT(S):

Appeal Under Section_____against orders

IA NO: 1 OF 2008(CMAMP 68 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 656 days in representing the CMASR.No. 5608/2006

IA NO: 2 OF 2008(CMAMP 69 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 673 days in payment of deficit court fee of Rs. 190/CMA.SR.No. 5608/2006

IA NO: 3 OF 2008(CMAMP 70 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 25 days in filing CMASR.No. 5608 /2006 an

IA NO: 4 OF 2008(CMAMP 235 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased

11

RRR,J & TCDS,J C.M.A.No.46 of 2009

stay all further proceedings in EP.No. 1 of 2007 in AOP .NO.572 of 2002 on the file of the VI Addl. District Judge, Visakhapatnam pending disposal of CMA

IA NO: 5 OF 2008(CMAMP 2599 OF 2008

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased vacate the order dated 26.1.2008 passed in CMAMP No.235/20087 in CMASR No.5608/2006 in the interest of justice

IA NO: 1 OF 2016(CMAMP 1095 OF 2016

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased expedite the hearing of the appeal by fixing an early date in the interest of justice

IA NO: 1 OF 2021

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to expedite the hearing of the appeal by fixing an early date in the interest of justice, and pass

IA NO: 1 OF 2025

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased may be pleased to set aside the order of abatement of the Appeal in the interest of justice.

IA NO: 2 OF 2025

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased Pleased to bring the LRs/Petitioners of the Deceased 1st Respondent E.Kondaiah as Respondents 4 to 7 in the Appeal in the interest of justice.

Counsel for the Appellant(S):

1.C PRAKASH REDDY

12

RRR,J & TCDS,J C.M.A.No.46 of 2009

Counsel for the Respondent(S):

1.VIVEK CHANDRA SEKHAR S

2.G RAMA GOPAL

3.A KRISHNAM RAJU

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RRR,J & TCDS,J C.M.A.No.46 of 2009

The Court made the following Judgment:

(per Hon‟ble Sri Justice R. Raghunandan Rao)

The appellants herein, had entered into an Agreement, dated 28.12.1994, for execution of certain works contracts, in relation to the Visakhapatnam Steel Plant. Certain disputes had arisen between the parties, in relation to payment of enhanced consideration and compensation. These disputes were referred to Arbitration and resulted in an Award being passed by a learned Arbitrator, on 15.03.2002.

Aggrieved by the said Award, the appellants herein had moved A.O.P.No.572 of 2002 before the learned VI Additional District Judge, Visakhapatnam. The said petition came to be dismissed, on 21.10.2005.

Aggrieved by the said Order of Dismissal, the present Writ Appeal came to be filed.

Sri C. Prakash Reddy, learned counsel appearing for the appellants, assails the Award, on the ground that, the learned Arbitrator had awarded interest on interest and the same is impermissible and the entire Award has to be set aside.

The case of the appellants is that, the learned Arbitrator had awarded compensation, in relation to claims 1 to 8 made by the respondents. Along with the Principal Award under these claims, the learned Arbitrator also awarded interest @ 15%, on the principal amounts from the date of

14

RRR,J & TCDS,J C.M.A.No.46 of 2009

completion of contract to the date of the award. The aforesaid compensation which included the principal amounts and the interest thereon, amounted to Rs.32,73,171.59 paise. The learned Arbitrator, after arriving at this figure, had further awarded interest @ 18% p.a. from the date of award till the date of realization.

Sri C. Prakash Reddy, learned counsel appearing for the appellants, would rely upon the judgment of the Hon’ble Supreme Court in the case of M/s. D. Khosla and Company V. The Union of India¹ , to contend that the learned Arbitrator did not have any power or authority to award interest on interest and consequently, the Award would have to be set aside. The Hon’ble Supreme Court, after referring to the judgments of the Hon’ble Supreme Court in the case of Hyder Consulting (UK) Ltd. V. State of Orissa² and the judgment of the Hon’ble Supreme Court in the case of UHL Power Company Limited Vs. State of Himachal Pradesh³ , had held as follows:

“24. Neither the Act specifically empowers the Arbitrator or the court to award interest upon interest or compound interest nor there is any other provision which provides for grant of compound interest or interest upon interest. Even Section 34 CPC is silent in this regard whereas Sub-Section (3) of Section 3 of the Interest Act specifically prohibits the same.”

Sri G. Rama Gopal, learned counsel appearing for the respondents, on

the other hand, sought to take us through the judgments of the Hon’ble

1 [2024] 8 S.C.R. 113: 2024 INSC 587

2 (2015) 2 SCC 189

3 (2022) 4 SCC 116

15

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Supreme Court in the cases of Hyder Consulting (UK) Ltd. V. State of Orissa and UHL Power Company Limited Vs. State of Himachal Pradesh,

to contend that there could be award of interest on interest by a learned Arbitrator, in Arbitration conducted under the Arbitration and Conciliation Act, 1996.

A three-Judge Bench of the Hon’ble Supreme Court in the case of Hyder Consulting (UK) Ltd. V. State of Orissa, while overruling the earlier judgment of the Hon’ble Supreme Court in the case of State of Haryana Vs. S.L. Arora & Co.,⁴ , had held as follows:

“5……

“21. In the result , I am of the view that S.L. Arora case is wrongly decided in that it holds that a sum directed to be 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 Aribtral Trinunal does not have the power to award interest upon interest, or compound interest either for the pre-award period or for the post-awrd 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.”

“6…….

“31. 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…‟. 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

4 (2010) 3 SCC 690

16

RRR,J & TCDS,J C.M.A.No.46 of 2009

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 under 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 clause (a).””

This judgment was followed by a subsequent three-Judge Bench of the Hon’ble Supreme Court in the case of UHL Power Company Limited Vs.

State of Himachal Pradesh in the following manner:

“7. As the judgment in S.L. Arora, on which reliance has been placed by the Division Bench of the High Court of Himachal Pradesh, has since been overruled by a three-Judge Bench of this Court in Hyder Consulting (UK), the findings returned by the appellate court in the impugned judgment to the effect that the Arbitral Tribunal is not empowered to grant compound interest or interest upon interest and only simple interest can be awarded in favour of UHL on the principal amount claimed, is quashed and set aside. As a result, the findings returned in para54(a) of the impugned judgment insofar as it relates to grant of the interest component, are reversed while restoring the arbitral award on the above aspect in favour of UHL.”

The Hon’ble Supreme Court in the case of M/s. D. Khosla and Company Vs. The Union of India, after referring to the judgments of the Hon’ble Supreme Court in the cases of Hyder Consulting (UK) Ltd. V. State

of Orissa and UHL Power Company Limited Vs. State of Himachal

Pradesh, had held as follows:

“24. Neither the Act specifically empowers the Arbitrator or the court to award interest upon interest or compound interest nor there is any other provision which provides for grant of compound interest or interest upon interest. Even Section 34 CPC is silent in this regard whereas Sub-Section (3) of Section 3 of the Interest Act specifically prohibits the same.”

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However, a closer look at the said judgment would make it clear that, the Hon’ble Supreme Court was referring to the provisions of the Arbitration Act, 1940. As the present case arises under the Arbitration and Conciliation Act, 1996 and not under the provisions of the Arbitration Act, 1940, the ratio laid down by the Hon’ble Supreme Court in the cases of Hyder Consulting (UK) Ltd. V. State of Orissa and UHL Power Company Limited Vs. State of Himachal Pradesh , would apply to the present case and the grant of interest @ 18% on the award amount, cannot be termed to be in violation of the principles laid down by the Hon’ble Supreme Court or any provision of law. It would also be pertinent to notice that Section 31(7)(b) itself provides for grant of interest, as the amount awarded @ 18%, initially, till it was amended in 2016. This rate of interest had been modified to be interest @ 2% over and

above the bank rate, applicable at that point of time. As the Award was passed, in 2002, before the amendment in 2016, the said rate of interest is also in accordance with the provisions of the Arbitration and Conciliation Act, 1996.

Accordingly, we do not find any reason to intervene with the Award, passed by the learned Arbitrator, dated 15.03.2002 and this Civil Miscellaneous Appeal is dismissed.

There shall be no order as to costs.

18

RRR,J & TCDS,J C.M.A.No.46 of 2009

As a sequel, pending miscellaneous applications, if any, shall stand

closed.

_______________________

R. RAGHUNANDAN RAO, J

________________ T.C.D. SEKHAR, J

Date: 09.12.2025 KPV

19

RRR,J & TCDS,J C.M.A.No.46 of 2009

14

THE HON’BLE SRI JUSTICE R. RAGHUNANDAN RAO

AND

THE HON'BLE SRI JUSTICE T.C.D.SEKHAR

CIVIL MISCELLANEOUS APPEAL No.46 of 2009

(per Hon‟ble Sri Justice R. Raghunandan Rao)

09.12.2025

KPV