Award Holder Cannot Claim Compound Interest When Tribunal Grants Only Simple Interest In Arbitral Award: Meghalaya High Court

The Meghalaya High Court set aside an order of the Commercial Court, Shillong which had accepted the calculation of the award holder's method of calculating interest and directed Power Grid Corporation of India Ltd. (PGCIL) to pay the remaining amount under an arbitral award. The Court held that the Executing Court had effectively modified the award by permitting computation of compound interest when the award simply contemplated only simple interest. Justice B. Bhattacharjee held that “there is no indication of grant of any interest upon interest or compound interest on the principal amount awarded by the Arbitral Tribunal. The respondent did not challenge this aspect of the award. The award has since attained finality and now it is not open to the respondent to claim either compound interest or post award interest on the aggregate of the principal amount and pre award interest by applying general principle of law.” PGCIL had awarded a contract to M/s Mega Electricals in 2012. After disputes arose, arbitration was initiated, and the arbitral tribunal passed an award on 30 December 2016, granting the contractor a total of ₹1.31 crore, along with simple interest @12%, with an escalation up to 18% if payment was not made within 90 days. The power grid corporation challenged the award under section 34 of the Arbitration Act which was dismissed. No appeal under section 37 was filed. However, the contractor filed the execution petition claiming amount of Rs. 3.81 crore, the power grid deposited Rs. 2.98 crore and objected to the calculations of the respondents. The objections of the Power Grid were rejected. The Power Grid had filed a Civil Revision Petition challenging the order. The court observed that the court misapplied Hyder Consulting and wrongly treated pre-award interest as part of the principal for calculating post award interest. It held that “the Arbitral Tribunal has the discretion within overall framework of section 31(7) of the Arbitration and Conciliation Act, 1996, to provide interest till the date of payment. Once such discretion is exercised by the Arbitral Tribunal in granting interest, question of additional or compound interest under clause (b) of sub-section (7) of Section 31 would not arise. The principle of Hyder Consulting (supra) would apply when the Arbitral Tribunal leaves a matter unqualified or silent.” It further observed that the tribunal had neither granted compound interest nor directed interest on the aggregate of principal and pre-award interest. The court held that “there is no indication of grant of any interest upon interest or compound interest on the principal amount awarded by the Arbitral Tribunal. The respondent did not challenge this aspect of the award. The award has since attained finality and now it is not open to the respondent to claim either compound interest or post award interest on the aggregate of the principal amount and pre award interest by applying general principle of law.” Based on the above, the court held that the Executing Court had exceeded its jurisdiction by accepting calculation which amounted to compound interest when the tribunal had only granted simple interest from specified dates until payment. The court further held that Power Grid's deposit of 25% of the awarded amount and its withdrawal by the claimant ceased interest on that portion. Relying on Nepa Ltd. v. Manoj Kumar Agarwal, the court held that “interest is payable only on amount that is not paid and it will be incongruous to hold that person would be liable to pay interest even in respect of amount which has been paid and handed over to decree holder.” Accordingly, the Court allowed the present petition directing the Executing Court to consider the claims of the parties afresh in accordance with law. Case Title: Power Grid Corporation of India Ltd. VERSUS M/s Mega Electricals Case Number: CRP No.7 of 2025 Judgment Date: 14/11/2025 For the Petitioners/Appellant(s) : Mr. A. Kumar, Sr. Adv. with Mr. N. Khera, Adv. Ms. A. Syiem, Adv. For the Respondent(s) : Mr. V. K. Jindal, Sr. Adv.with Mr. S. Goenka, Adv. Click Here To Read/Download The Order

Award Holder Cannot Claim Compound Interest When Tribunal Grants Only Simple Interest In Arbitral Award: Meghalaya High Court

Mohd Malik Chauhan

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