MORGAN SECURITIES AND CREDITS PVT. LTD. versus VIDEOCON INDUSTRIES LTD.

Citation: [2022] 9 S.C.R. 819 · Decided: 01-09-2022 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Dismissed

Cited by 4 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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MORGAN SECURITIES AND CREDITS PVT. LTD.
v.
VIDEOCON INDUSTRIES LTD.
(Civil Appeal No. 5437 of 2022)
SEPTEMBER 01, 2022
[DR DHANANJAYA Y CHANDRACHUD AND
A S BOPANNA, JJ.]
Arbitration and Conciliation Act 1996: s. 31(7)(a), 31(7)(b)
– Post award interest on principal sum – Grant of – Discretion of
arbitrator – On facts, arbitral award in favour of the appellant –
Post-award interest fixed at the rate of 18% on the principle sum,
from the date of award to the date of payment – Challenge to, by
the appellant that the post-award interest of 18% pa should be
granted on the total sum awarded, both inclusive of principal and
pre-award interest – Single Judge held that the arbitrator had in
his discretion restricted the post-award interest to the principal
amount and that the court would not interfere with the exercise of
discretion – On appeal, held: Abitrator has the discretion to award
post-award interest on a part of the sum – There is nothing in the
provision which restricts the discretion of the arbitrator for the grant
of post-award interest on the part of the sum, which the arbitrator
otherwise holds inherent to their authority – Discretion of the
arbitrator can only be restricted by an express provision to that
effect – Phrase ‘unless the award otherwise directs’ in s. 31(7)(b),
only qualify the rate of post-award interest – As per s. 31(7)(b), if
the arbitrator does not grant post-award interest, the award holder
is entitled to post-award interest at eighteen percent – Arbitrator
must exercise the discretion in good faith, must take into account
relevant and not irrelevant considerations, and must act reasonably
and rationally taking cognizance of the surrounding circumstances
– Thus, the award of the arbitrator granting post award interest on
the principal amount does not suffer from an error apparent.
Dismissing the appeal, the Court
HELD 1.1 While, clause (a) of Section 31(7) of the
Arbitration and Conciliation Act, 1996 is qualified by the arbitration
agreement, clause (b) is qualified by the arbitration award.
[2022] 9 S.C.R. 819
819
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SUPREME COURT REPORTS
[2022] 9 S.C.R.
However, the placement of the phrases is crucial to their
interpretation. The words, “unless otherwise agreed by the
parties” occurs at the beginning of clause (a) qualifying the entire
provision. However, in clause (b), the words, “unless the award
otherwise directs” occurs after the words ‘a sum directed to be
paid by an arbitral award shall’ and before the words ‘carry interest
at the rate of eighteen per cent”. Thereby, those words only qualify
the rate of post-award interest. [Para 18][833-F-G]
1.2 Section 31(7)(a) confers a wide discretion upon the
arbitrator in regard to the grant of pre-award interest. The
arbitrator has the discretion to determine the rate of reasonable
interest, the sum on which the interest is to be paid, that is
whether on the whole or any part of the principal amount, and the
period for which payment of interest is to be made - whether it
should be for the whole or any part of the period between the
date on which the cause of action arose and the date of the award.
When a discretion has been conferred on the arbitrator in regard
to the grant of pre-award interest, it would be against the grain of
statutory interpretation to presuppose that the legislative intent
was to reduce the discretionary power of the arbitrator for the
grant of post-award interest under clause (b). Clause (b) only
contemplates a situation where the arbitration award is silent on
post-award interest, in which event the award-holder is entitled
to a post-award interest of eighteen percent. [Para 19][833-H;
834-A-C]
1.3 The arbitrator has the discretion to grant post-award
interest. Clause (b) does not fetter the discretion of the arbitrator
to grant post-award interest. It only contemplates a situation in
which the discretion is not exercised by the arbitrator. Therefore,
the observations Hyder Consulting’s case on the meaning of ‘sum’
will not restrict the discretion of the arbitrator to grant post-award
interest. There is nothing in the provision which restricts the
discretion of the arbitrator for the grant of post-award interest
which the arbitrator otherwise holds inherent to their authority.
[Para 20][834-C-E]
1.4 The purpose of granting post-award interest is to ensure
that the award- debtor does not delay the payment of the award.
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With the proliferation of arbitration, issues i

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