This Supreme Court judgment clarifies that an arbitral award granting a composite interest rate from the cause of action until the date of repayment, based on a contract between the parties, excludes the default application of separate post-award interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996. Party autonomy governs, and a decree-holder cannot claim compound interest at the execution stage if it was not stipulated in the contract or awarded by the tribunal, as this would amount to impermissibly modifying the award.
Facts Of The Case:
The dispute originated from a Memorandum of Understanding (MoU) dated 09.04.2014 between HLV Limited and PBSAMP Projects Pvt. Ltd. for the sale of land in Hyderabad. PBSAMP paid an advance of Rs. 15.5 crores to HLV. After the MoU was terminated, the matter was referred to arbitration. The arbitral tribunal, vide its award dated 08.09.2019, directed HLV to refund the Rs. 15.5 crores advance with simple interest at 21% per annum from the respective dates of disbursement until the date of actual repayment. HLV complied by paying a total of approximately Rs. 44.42 crores, claiming it was in full and final satisfaction of the award. However, PBSAMP approached the Executing Court, demanding additional compound interest on the awarded sum. The Executing Court rejected this claim, but the High Court set aside this order and remanded the matter for fresh consideration. The core factual dispute before the Supreme Court was whether PBSAMP was entitled to interest upon interest, over and above the 21% simple interest already awarded for the entire period until repayment.
Procedural History:
The arbitral award dated 08.09.2019 was challenged by HLV Limited under Section 34 of the Arbitration and Conciliation Act, 1996, but the Special Court dismissed this petition. Upon the award attaining finality, PBSAMP filed an execution petition (CEP No. 05 of 2021). The Executing Court rejected PBSAMP’s claim for compound interest and closed the petition, holding that the amount paid by HLV was in full satisfaction. Aggrieved, PBSAMP filed a Civil Revision Petition under Article 227 of the Constitution before the Telangana High Court. The High Court set aside the Executing Court’s order, labelling it as “cryptic and cavalier,” and remanded the matter for fresh consideration. This led HLV to file the present appeal before the Supreme Court, which granted leave and ultimately allowed the appeal, restoring the order of the Executing Court.
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Court Observation:
The Supreme Court observed that the discretion of an arbitral tribunal to award interest under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 is subservient to the agreement between the parties, emphasizing the supremacy of party autonomy. It held that where the tribunal, bound by the contractual terms in the MoU, awards a composite simple interest from the date of the cause of action until the date of repayment, the question of applying a separate, additional post-award or compound interest under Section 31(7)(b) does not arise. The Court clarified that the principle in Hyder Consulting applies only when the award is silent on post-award interest, and it is impermissible for an executing court to rewrite or enlarge the award by introducing a claim for compound interest that was neither stipulated in the contract nor granted by the tribunal.
Final Decision & Judgement:
The Supreme Court allowed the appeal, set aside the impugned judgment of the High Court, and restored the order of the Executing Court. It held that the respondent, PBSAMP, was not entitled to any compound interest or additional post-award interest. The Court concluded that the arbitral award, which granted simple interest at 21% per annum from the date of disbursement until the date of actual repayment in strict compliance with the MoU, was comprehensive and left no room for the application of the default interest regime under Section 31(7)(b) of the Act. Consequently, the amount already paid by HLV Limited was in full and final satisfaction of the arbitral award.
Case Details:
Case Title: HLV LIMITED (FORMERLY KNOWN AS HOTEL LEELAVENTURE PVT. LTD.) vs. PBSAMP PROJECTS PVT. LTD. Citation: (Arising out of SLP (Civil) No. 10732 of 2024) Date of Judgement: September 24, 2025 Judges/Justice Name: Justice Manoj Misra and Justice Ujjal Bhuyan
Download The Judgement Here