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19. This Court, therefore, in the S.L. Arora case (supra) has disagreed with the reasoning laid down in the McDermott case (supra) as well as the Three Circles case (supra). This Court, on perusal of the relevant paragraphs in the aforesaid decisions, held that the observations therein must be treated as per incuriam on the issue around awarding of 'interest on interest' or compound interest. It was observed that:

"28. ...But a careful reading of the decision in Mcdermott, shows that the portion of Mcdermott extracted in Three Circles, assuming it to be the law laid down in Mcdermott, is not a finding or conclusion of this Court, nor the ratio decidendi of the case, but is only a reference to the contention of the respondent in Mcdermott.
29. Paras 1 to 27 (of the SCC report) in Mcdermott state the factual background. Paras 28 and 29 contain the submissions of the learned Counsel for BSCL, the respondent therein. Paras 30 to 44 contain the submissions made by the learned Counsel for Mcdermott, the appellant therein, in reply to the submissions made on behalf of BSCL. The passage that is extracted in Three Circles is part of para 44 of the decision which contains the last submission of the learned Counsel for Mcdermott on the question of interest. The reasoning in the decision starts from para 45. This Court considered the several questions seriatum in paras 45 to 160. The question relating to interest was considered in paras 154 to 159 relevant portions of which we have extracted above. Therefore, the observation in Three Circles that Mcdermott held that interest awarded on the principal amount upto the date of award becomes the principal amount and therefore award of future interest therein does not amount to award of interest on interest, is per incuriam due to an inadvertent erroneous assumption."

20. I am in agreement with the aforesaid view in the S.L. Arora case (supra). The decision in the McDermott case (supra) would not be applicable, since it does not pertain to the issue of granting compound interest on the post-award claim. This Court, in the McDermott case (supra), did not consider the issue pertaining to award of 'interest upon interest' or compound interest. It merely held that the interest must be awarded on the principal amount upto the date of award. Thus, the McDermott case (supra) would be wholly inapplicable to the issue for consideration by this Bench.

GOVERNOR STATE OF ORISSA TH. CHIEF ENG. .. RESPONDENT WITH CIVIL APPEAL No. 3149 OF 2012 CIVIL APPEAL No. 3147 OF 2012 CIVIL APPEAL No. 1390 OF 2013 2 JUDGMENT S. A. BOBDE, J.

1. I have had the advantage of reading the Judgment of my Lord, the Chief Justice. I entirely agree that the findings of this Court in State of Haryana and Others v. S.L. Arora and Company, (2010) 3 SCC 690 that Uttar Pradesh Cooperative Federation Limited v. Three Circles, (2009) 10 SCC 374 was incorrectly founded upon the decision in McDermott International INC v. Burn Standard Co. Ltd., (2006) 11 SCC 181 and that such reliance was not in consonance with the doctrine of precedent. The McDermott case is not an authority on the question whether the Arbitrator may award compound interest nor does that decision sanction post-award interest be imposed on the aggregate sum and interest pendent lite. The Arbitral Tribunal's authority to award "interest on interest" was not discussed therein. This Court, therefore, while deciding State of Haryana and Others v. S.L. Arora and Company, (2010) 3 SCC 690, rightly refused to treat the McDermott case as well as the Three Circles case as authorities for awarding "interest on interest" and held that both were wrongly decided. Further, the decisions in ONGC v. M.C. Clelland Engineers S.A., (1999) 4 SCC 327 as well as the Three Circles case pertain to an Award under the Arbitration Act, 1940, which did not contain a specific provision dealing with the arbitrator's power to grant interest. Likewise, the Central Bank of India v. Ravindra and Others, (2002) 1 SCC 367 case arose under Section 34 of the Code of Civil Procedure, 1908 (hereinafter referred to as "the CPC"), and cannot be treated as an authority for award of interest under clause (7) of Section 31 of the Arbitration Act, 1996 (hereinafter referred to as "the Act").