The appellant, HMT Limited, a Central Government company, invited its employees in 1990 to become entrepreneurs for off-loading auto-component manufacture. Respondents resigned or took VRS, set up units with KSFC loans secured on personal property, and entered into contracts with HMT guaranteeing a minimum workload for 8 years. HMT supplied the assured load for about a year, then reduced it. Respondents invoked arbitration, claiming damages for loss of expected profit. The arbitrator awarded damages plus interest at 20% p.a. from the date of claim. The District Court dismissed HMT's Section 34 challenge. HMT appealed under Section 37.
The High Court (Anu Sivaraman & T.P. Vivekananda JJ.) held:
1. The short supply was admitted; HMT's justifications (market competition, working-capital shortage) were rejected by both the arbitrator and the District Court. In a Section 37 appeal the court cannot re-appraise factual findings.
2. The respondents' continuation of performance did not amount to waiver or acquiescence: they had no realistic alternative because they were bound by KSFC loan obligations and could not obtain work elsewhere.
3. The force-majeure clause did not cover commercial inability to procure raw materials.
4. The 1993 and 2006 Acts prescribe interest rates for delayed payment for goods supplied, not for damages representing presumptive loss of profit. The arbitrator's reliance on the KSFC loan rate (19.5% + 2.5% penal) to award 20% was not sustainable for the entire 26-year period.
5. Citing Gayatri Balaswamy v. ISG Novasoft Technologies (2025) 7 SCC 1, the court held that post-award interest must reflect actual circumstances. Respondents are entitled to 20% p.a. only for the period they were repaying the KSFC loans (date of sanction to date of discharge, subject to proof). For the remaining period, interest is fixed at 12% p.a. under Section 31(7)(b) of the Arbitration Act.
6. The arbitral award and the District Court judgment are confirmed as modified. HMT must recalculate each respondent's entitlement, deduct amounts already disbursed pursuant to Supreme Court orders, and pay the balance in a time-bound manner.
