'Sum' U/S 31(7)(b) A&C Act Excludes Pendente Lite Interest Unless Expressly Included: Delhi High Court In Award Execution Plea Against BSNL
The Delhi High Court held that if pre-award or pendente lite interest is not added to the principal amount in an arbitral award or on appeal, then post-award interest under Section 31(7)(b) cannot be charged on it.Justice Amit Bansal dismissed the decree-holder's contention that the Supreme Court's use of the phrase 'statutory interest' entitled it to post-award interest on both principal...
The Delhi High Court held that if pre-award or pendente lite interest is not added to the principal amount in an arbitral award or on appeal, then post-award interest under Section 31(7)(b) cannot be charged on it.
Justice Amit Bansal dismissed the decree-holder's contention that the Supreme Court's use of the phrase 'statutory interest' entitled it to post-award interest on both principal and pendente lite interest.
An arbitral award dated 26.09.2000 directed BSNL to pay over INR 6.07 crore, which included interest at 18.5% compounded quarterly, to BWL Limited. The award was set aside by a Single Judge of the Calcutta High Court (vide Order dated 15.10.2004) but restored (with modifications) by a Division Bench.
The Division Bench by Order dated 29.06.2010 upheld the award but limited pendente lite interest to a lump sum of INR 67,62,366 in full and final settlement of the interest claim, and directed that if BSNL failed to pay within two months, the principal sums of INR 48,23,819 and INR 8,11,486 would carry further interest at 18% per annum from the expiry of that period.
The Supreme Court further modified the judgment by granting statutory interest for the period when the award had remained in force 26.09.2000 to 15.10.2004 but did not alter the Division Bench's direction restricting post-award interest to the 'sum' so modified by the Division Bench.
The awarded amount stood paid to the Decree Holder and the issue before the bench remained to the extent of interest, specifically whether post award interest must be computed on only the principal amount alone (Judgment Debtor's submission) or the principal amount plus the pendente lite interest (Decree Holder's submission).
Justice Amit Bansal rejected the decree-holder's interpretation, holding that the Supreme Court's order expanded only the time period for which interest was payable and not the base amount on which post-award interest would accrue.
The Court observed that since the Division Bench had not capitalised pendente lite interest into the 'sum' of the award, Section 31(7)(b) could not be invoked to expand the scope of post-award interest.
The Court clarified that Hyder Consulting (UK) Limited v. Governor, State of Orissa does not mandate automatic inclusion of pendente lite interest. Rather, the 'sum' depends on what the arbitral tribunal (or appellate court) has actually incorporated. The court noted “In the present case, while modifying the Award, since pendente lite interest was specifically not added to the principal 'sum' on which post award interest was directed to be paid by the Division Bench, it cannot be included in the 'sum directed to be paid by an arbitral award' as provided under Section 31(7)(b) of the Act”.
The Court held that BSNL had already satisfied the decree and no further interest was payable. The execution petition was accordingly disposed of.
Case Title – BWL Limited (formerly known as Bhilaw Wires Ltd.) v. Bharat Sanchar Nigam Limited
Citation: 2025 LiveLaw (Del) 1575
Counsel(s) For Decree Holder –Ms. Monisha Handa and Mr. Arnav Chaudhary
Counsel(s) For Judgment Debtor – Ms. Leena Tuteja and Ms. Ishita Kadyan