Allahabad High Court
Union Of India Thru. Secy. Ministry Of ... vs Lieutenant Colonel Sudhakar Nath Kapur ... on 4 August, 2025
Author: Pankaj Bhatia
Bench: Pankaj Bhatia
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH Neutral Citation No. - 2025:AHC-LKO:47968 Court No. - 6 Case :- MATTERS UNDER ARTICLE 227 No. - 3596 of 2025 Petitioner :- Union Of India Thru. Secy. Ministry Of Defence New Delhi And Another Respondent :- Lieutenant Colonel Sudhakar Nath Kapur (Retd.) And 3 Others Counsel for Petitioner :- Sudhanshu Chauhan Counsel for Respondent :- Sachin Garg Hon'ble Pankaj Bhatia,J.
1. Heard Shri Sudhanshu Chauhan, learned counsel for the petitioners as well as Shri N.K. Seth, learned Senior Advocate assisted by Shri Sachin Garg, learned counsel for respondent(s) and perused the material brought on record.
2. The present petition has been filed by the petitioners challenging the judgment and order dated 22.01.2025, whereby the objection filed by the petitioners in terms of the award was rejected.
3. The main contention of learned counsel for the petitioners is that on the basis of, the proceedings for assumption initiated in respect of Bungalow No.14, owned by the respondent, disputes arose, which were referred and were decided by the Arbitrator in terms of the Arbitrator Award dated 09.03.2012. He draws my attention that while determining the compensation payable to the respondents, following was observed:-
"मौके पर बंगला अस्तित्व में नहीं है निर्माण वर्ष में उभय पक्ष सहमत हुए कि बंगला निं0-10 व 17 के समकालीन है अतः इसका निर्माण वर्ष 1937 मानकर सहमाना की जाती है। बाउण्ड्री के बारे में भी उभय पक्ष सहमत है बाउण्ड्री के साथ गेट का लगा होना स्वाभाविक है अतः बाउण्ड्री की दर 12/- प्रति फिट एवं गेट का मूल्यांकन 1000/- निर्धारित किया जाता है कूप अधिग्रहण के समय अप्रयुक्त बताया गया है अतः इनका मूल्यांकन देना उचित नहीं है। पुलिया सड़क का पार्ट होने के कारण इसका प्रतिकर देय नहीं है। पूर्व बंगला स्वामी/ उत्तराधिकारी पूर्व में दी गई धनराशि घटाकर नियमानुसार ब्याज के साथ मुआवजा पाने के अधिकारी है। गणनापत्र संलग्न किया गया है जिसके अनुसार कुल मूल्यांकन मु0-333147.87 होता है।"
4. It is argued that after the award was pronounced in the year 2012, the same was challenged before this Court by filing a writ bearing Misc. Bench (M/B) No. 8699 of 2018, however, this Court did not interfere and the parties were granted liberty to pursue their remedies as prescribed under the Arbitration and Conciliation Act, 1996. It is stated that no objections were filed to the award under Section 34 of Arbitration and Conciliation Act, 1996 and, thus, the award dated 09.03.2012 attained finality.
5. It is argued that, subsequently, the award in question was put to execution by means of a detailed application dated 23.07.2019, the said execution application is on record as Annexure No.8 in terms of the prayer being made in execution application, following amounts were demanded:-
(a) Amount awarded by the Arbitration Committee Rs. 3,33,148.87/-
(b) Interest at the rate of 9% from 20.12.1970 to 19.12.1971 on Rs. 3,33,148.87 Rs. 29,983.40/-
(c) Interest at the rate of 15% from 20.12.1971 to 31.12.1996 on Rs. 3,33,148.87/-
Rs. 12,50,951.18
(d) Interest at the rate of 18% from 01.01.1997 to 22.07.2019 on Rs. 3,33,148.87 Rs. 13,52,620.91/-
(e) Total Amount Rs. 29,66,704.36/-
(f) Less amount received by decree holders Rs. 3,10,917/-
(g) Balance Rs. 26,55,787.36/-
(h) Less amount of Rent paid for the period 21.12.1970 to 12.11.2002.
Rs. 79,209.66/-
(i) Payment outstanding................
Rs. 25,76,577.70/-
Plus interest @ 18% from 23.07.2019 till its actual payment.
6. It is further stated that the execution application was resisted by the petitioners by filing objections, mainly on the ground that, once the amount had been quantified by the arbitrators, no amount could be claimed over and above, which was awarded by the arbitrators apart from the interest, which is statutory and described under Section 31(7)(b) of the Arbitration and Conciliation Act. He further argued that despite, the statutory position being clear, the execution authority has rejected the objection filed by the petitioner.
7. He draws my attention, to argue that the claims in the execution application over and above what was awarded by the arbitrator and over and above, the statutory interest, to which, the decree holder were entitled, the other claims in any case could not have been raised in the execution proceedings. He, thus, argues that the order dated 22.01.2025 is erroneous and is liable to be rejected.
8. Shri N.K. Seth, learned Senior Advocate, extensively argues that in respect of his assumption of the bungalows, which is the subject matter of assumption, he argues that in respect of, one of the bungalows, the bungalow no.12, the award was passed in which, interest was also awarded as per the stipulations contained in the own letter of the petitioners dated 11.09.2006 (Annexure No.9) and, thus, the claim of the respondent before the executing Court were confined and within the scope of, the interest as prescribed in the communication dated 11.09.2006.
9. He further argues that the same petitioner, arising out of the same award, have paid the interest to the owner of bungalow no.12, whereas, in the present case, the same is being contested, which is said is arbitrary.
10. He further argues that the submission of counsel for the petitioner that the interest, can be awarded only in terms of the prescriptions contained under Section 31(7)(b) of the Arbitration and Conciliation Act, is liable to be rejected on the ground that prior to its amendment on 23.10.2015, the rate of interest described was 18 % per annum from the date of the award to the date of the payment. It is argued that admittedly, the award in question was pronounced prior to 2015 and, thus, the submission to that extent merits rejection.
11. In some and substance, it is argued by Shri N.K. Seth that once, the interest has been given by the petitioners in respect of similarly situated bungalow being bungalow no.12, the same amount should have been awarded to the respondents. He further draws the attention of this Court towards the provisions contained in the Land Acquisition Act, which is described for grant of interest at the rate of 9% till the possession is taken and, thereafter, 15% interest is described till the actual payment/realisation. He further argued that, even in the amended Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, similar prescriptions are contained. He, thus, argued that the respondents have been contesting for grant of interest, which is the sole dispute in between the parties since 1971.
12. Shri Sudhanshu Chauhan, learned counsel appearing for the petitioners, in rejoinder states that the contention of the counsel for the respondents, with regard to the claim of interest, as prescribed under Section 31(7)(b) of the Arbitration and Conciliation Act, is erroneous in view of the law, as explained by the Supreme Court in the case of 'Board of Control for Cricket in India vs. Kochi Cricket Private Limited and others', (2018)6 SCC 287, to argue that after the amendments being carried out under Section 31(7)(b) of the Arbitration and Conciliation Act, the interest, as prescribed in the amended provision would apply, even in respect of the awards, which have pronounced prior to the said date.
13. The said submission is resisted by the counsel for the respondent, based upon the same Judgement in the case of Board of Control for Cricket in India (supra). Prior to the effect that the prescriptions contained in the amended Act would not apply and the prescriptions as contained in the Act prior to the amendment would apply.
14. Shri N.K. Seth, learned Senior Advocate has also placed reliance on the Judgment of the Supreme Court in the case of 'Interstate Construction vs. National Projects Construction Corporation Ltd.' reported in 2025 SCC OnLine SC 1127. In the said case, the issue with regard to grant of interest post reference period, pendente lite interest and interest subsequent to the passing of the award were under consideration.
15. The Hon'ble Supreme Court after considering the facts, recorded as under:-
"34. Thus, what Section 31(7)(a) has done is that there is now a statutory recognition of the power of the arbitral tribunal to grant pre-reference interest from the date on which the cause of action arose till the date on which the award is made. There was a vacuum in the Arbitration Act, 1940 as there was no such provision for granting pre-reference interest. It was through judicial pronouncements that such power of the arbitrator to grant pre-reference interest was conferred. Now under Section 31(7) (a) of the 1996 Act, such power is statutorily recognized.
35. Let us revert back to clause (a) of sub-section (7) of Section 31 of the 1996 Act. A careful and minute reading of this provision will make it clear that the arbitral tribunal has the discretion to include in the sum awarded interest at such rate as it deems reasonable on the whole or any part of the money awarded for the whole or any part of the period from the date on which the cause of action arose till the date on which the award is made. We may exclude that part of the sentence 'on the whole or any part of the money from our analysis since this is not relevant to the controversy. If we exclude this portion, what then becomes discernible is that the arbitral tribunal has the discretion to include in the sum awarded firstly, interest at such rate as it deems reasonable and secondly, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. This would mean that the arbitral tribunal can exclude a period from the date on which the cause of action arose till the date on which the award is made for the purpose of grant of interest, as has been done in the present case. It would also mean that the arbitral tribunal can grant interest for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. It can be a composite period or the said period can be further sub-divided, as done in the present case i.e from the date of cause of action to filing of the claim and from the date of filing of the claim till the date of the award excluding the period when the appellant was found to be remiss. It would also mean that there can be one rate of interest for the whole period or one or more rates of interest for the sub-divided periods as has been done in the instant case. In our opinion, this would be the correct approach to interpret Section 31(7)(a), given the scheme of the 1996 Act.
36. That being the position, we are of the view that the Division Bench had fallen in error by holding that the arbitral tribunal had no jurisdiction to award interest for two periods ie. pre-reference and pendente lite when the statute provides for only one period viz. from the date when the cause of action arose till the date of the award. The view expressed by the High Court is not the correct interpretation of Section 37(1)(a) of the 1996 Act as explained by us supra as well as in Pam Developments Private Limited (supra) and S.A. Builders Ltd. (supra).
37. This brings us to the second issue on which the High Court set aside the directions of the arbitral tribunal contained in paragraph 58 (b) of the award. According to the Division Bench, the arbitral tribunal had committed an illegality in forging the principal amount with interest while computing the awarded amount on which future interest is to be paid. Interest awarded for the past period could not have been subjected to further levy of interest during the pendente lite or post award period on merger with the principal amount as this would amount to levy of compound interest."
The Supreme Court, thereafter, considered the second issue raised with regard to the interest which would amount to granting of compound interest and recorded as under:-
"39. In State of Haryana v. S.L.. Arora, a two-Judge Bench of this Court observed that as regards pre-award period, interest has to be awarded as specified in the contract and in the absence of any contract. as per the discretion of the arbitral tribunal. However, with regard to the post-award period, the interest is payable as per the discretion of the arbitral tribunal and in the absence of exercise of such discretion, at the mandatory statutory rate of 18 percent per annum. Award of interest like award of cost are ancillary matters. Therefore, the expressions sum for which the award is made and the sum directed to be paid by an arbitral award contextually refers to the award on the substantive claims and not ancillary or consequential directions relating to interest or cost. It was held that arbitral tribunals did not have the power to award interest upon interest or compound interest either for the pre-award period or for the post-award period.
40. A three-Judge Bench of this Court in Hyder Consulting (UK) Ltd. v. Governor. State of Orissa, opined that it was not possible to agree with the conclusion in S.L. Arora (supra) that Section 31(7) of the 1996 Act does not require that interest which accrues till the date of the award be included in the sum from the date of the award for calculating the post-award interest. Justice Bobde (as His Lordship then was) authoring the majority opinion was of the view that the conclusion reached in S.L. Arora (supra) did not seem to be in consonance with the clear language of Section 31 (7) of the 1996 Act. Hyder Consulting (UK) Ltd. (supra) declared that S.L. Arora (supra) was wrongly decided in that it held that a sum directed to be paid by an arbitral tribunal and the reference to the award on the substantive claim did not refer to interest pendente lite awarded on the sum directed to be paid upon award and that in the absence of any provision of interest upon interest in the contract, the arbitral tribunal did not have the power to award interest upon interest or compound interest either for the pre-award period or for the post-award period. It has been clarified that the 'sum' includes the principal as adjudged together with the interest granted.
41. A three-Judge Bench of this Court in UHL Power Company Ltd. v. State of Himachal Pradesh declared that the judgment in S.L. Arora (supra) has since been overruled by a three-Judge Bench of this Court in Hyder Consulting (UK) Ltd. (supra). The majority view in Hyder Consulting (UK) Ltd. (supra) is that post-award interest can be granted by an arbitrator on the interest amount awarded." and ultimately held as under:-
"43. Finally, in S.A. Builders (supra), this Bench after a thorough analysis of Section 31(7)(a) and Section 31(7)(b) of the 1996 Act came to the following conclusion:
38. Natural corollary to the above analysis would be that the 'sum' so awarded by the arbitral tribunal which may include interest from the date when the cause of action arose to the date of the award, would carry further interest of 18 percent from the date of the award to the date of payment unless the arbitral award otherwise directs (referring to the pre 23.10.2015 position). Thus, the legislative intent is that the awarded sum whether inclusive of interest or not. in case included, then from the date of cause of action to the date of award, would carry further interest from the date of the award to the date of payment.
44. It has been held that the sum awarded would mean the principal amount plus the interest awarded from the date of cause of action upto the date of the award. The sum awarded in Section 31 (7) (a) would mean principal amount plus the interest awarded. Thereafter, as per Section 31(7) (b) of the 1996 Act, the sum (principal amount + interest) would carry further interest at the rate of 2 per cent higher than the current rate of interest prevalent on the date of the award to the date of payment."
16. In the light of the arguments advanced, as recorded above, and the judgments relied upon, in the present case admittedly, the arbitrator vide his award, did not grant any interest either for the pre-reference period or any interest for the subsequent to the award period and the amount of award quantified was fixed. The fact remains that the award was not put to challenge and all these issues were raised for the first time in the executing court when the award was put to execution.
17. It is essential to notice the mandate of Section 31(7) of the Arbitration and Conciliation Act, which is quoted hereunder:-
"(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
[(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment."
18. In the present case, as the award was quantified in terms of the money payable, the prescriptions contained under Section 31(7)(b) of the Arbitration and Conciliation Act will apply and the executing court is bound to grant interest at the rate prescribed under Section 31(7)(b) of the Arbitration and Conciliation Act, even if, no award has been passed directing the payment of interest for the period subsequent to the passing of award. Thus, to that extent, the order passed by the Commercial Court No.1, Lucknow dated 22.01.2025 in Arbitration Execution Case No. 469 of 2019 needs to be set-aside, in so far as it directs the decree holder to submit a computation claiming interest for the period 21.12.1970 to 20.12.1971 at the rate of 9% and from 21.12.1971 to 31.12.1996 at the rate of 15% and from 01.01.1997 till payment at the rate of 18% per annum.
19. The said order is modified to the extent with clarification that the decree holder would be entitled of receives the amount, as quantified by the Arbitrator along with interest, as prescribed under Section 31(7)(b) of the Arbitration and Conciliation Act from the date of award till payment of the realisation.
20. The decree holder would be entitled to submit a fresh computation before the executing court on the terms and conditions, as directed herein-above, which shall be executed by the Commercial Court No.1, Lucknow in accordance with law, with all expedition.
21. Petition stands disposed of in terms of the aforesaid directions.
Order Date: 04.08.2025/Praveen