M/S INTERSTATE CONSTRUCTION versus NATIONAL PROJECTS CONSTRUCTION CORPORATION LTD.

M/S INTERSTATE CONSTRUCTION versus NATIONAL PROJECTS CONSTRUCTION CORPORATION LTD.

The Division Bench erred in holding that Section 31(7) permits only two discrete periods and forbids subdivision of the pre-award period; Section 31(7)(a) permits an arbitral tribunal to award interest for the whole or any part of the period from cause of action to award and to subdivide that period and apply different rates or exclude periods (e.g. laches), and the sum awarded may include interest such that post-award interest under Section 31(7)(b) may operate on the awarded sum (principal plus pre-award interest); accordingly the Division Bench's setting aside of paragraph 58(b) was unsustainable and its judgment dated 01.08.2023 was set aside and the appeal allowed.

Parties
Appellant: M/s Interstate Construction; Respondent: National Projects Construction Corporation Ltd.
Jurisdiction
India
Judgment Date
15 May 2025
Procedural Posture
Civil Appeal / Judgment on Appeal (supreme Court)
Outcome
Appeal allowed
Legal Topics
Pendente Lite Interest, Pre Reference Interest, Post Award/future Interest, Section 31(7) Arbitration and Conciliation Act, 1996, Section 34 and Section 37 of the 1996 Act, Interest Calculation, Compound Interest
Arbitration Contract Law Civil Procedure Pendente Lite Interest Pre Reference Interest Post Award/future Interest Section 31(7) Arbitration and Conciliation Act, 1996 Section 34 and Section 37 of the 1996 Act +2 more

Case Brief

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Parties

M/s Interstate Construction

Appellant

National Projects Construction Corporation Ltd.

Respondent

Procedural Posture

Civil Appeal / Judgment on Appeal (supreme Court)

Legal Issues

  1. 1 Whether Division Bench of High Court was justified in setting aside arbitral directions relating to pendente lite interest
  2. 2 Whether an arbitral tribunal may carve the pre-award period into sub-periods (pre-reference and pendente lite) and award different rates for such sub-periods under Section 31(7)(a)
  3. 3 Whether interest awarded for pre-award periods can be merged with principal and attract further post-award interest (i.e. whether interest-on-interest/compound interest is permissible)

Ratio Decidendi

The Division Bench erred in holding that Section 31(7) permits only two discrete periods and forbids subdivision of the pre-award period; Section 31(7)(a) permits an arbitral tribunal to award interest for the whole or any part of the period from cause of action to award and to subdivide that period and apply different rates or exclude periods (e.g. laches), and the sum awarded may include interest such that post-award interest under Section 31(7)(b) may operate on the awarded sum (principal plus pre-award interest); accordingly the Division Bench's setting aside of paragraph 58(b) was unsustainable and its judgment dated 01.08.2023 was set aside and the appeal allowed.

Court Disposition

Appeal allowed

Orders

  • Impugned judgment and order dated 01.08.2023 of the Division Bench of the High Court of Delhi is set aside
  • Civil Appeal No. 3461 of 2025 is allowed