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Arbitration & Commercial LawSupreme Court of India

National Highways Authority of India v. M/S NCC-KNR (JV)

Interlocutory Application · Neutral citation not assigned (Interlocutory Application Nos. 4 & 5 in Civil Appeal No. 6158 of 2013)Decided 19 Jan 2016
Interlocutory Application Nos. 4 & 5 in Civil Appeal No. 6158 of 2013
Justice Dipak Misra · Justice Uday Umesh Lalit

Background

This is a sequel to Civil Appeal No. 6158 of 2013, which the Supreme Court had already decided on 24.4.2015, setting aside an arbitral award on "Claim No. 8" in favour of National Highways Authority of India (NHAI). At the interim stage, NHAI had deposited about Rs. 70.65 lakh, which the respondent (NCC-KNR JV) had withdrawn in December 2012 on furnishing a bank guarantee. After the 2015 judgment went against the respondent, the respondent repaid the principal amount, but NHAI filed fresh applications (I.A. Nos. 4 and 5 of 2015) seeking interest on that amount for the roughly three years the respondent had held and used it.

Decision Breakdown

The Supreme Court noted that the underlying Arbitral Tribunal award (dated 9.1.2012) had itself fixed interest at 12% per annum on amounts awarded under various claims, and that NHAI's claim concerned only Claim No. 8, which had been set aside in NHAI's favour. The Court held that since the respondent's entitlement to the withdrawn amount had been negated by the 2015 judgment, fairness required the respondent to pay back the amount together with interest at the same 12% rate that applied under the original award. It accordingly directed the respondent to pay 12% annual interest on Rs. 70,65,039 from the date of withdrawal until the date it was actually repaid, within six weeks, and disposed of both interlocutory applications.

Lesson Learnt

When a party has benefited from money paid out under an interim arbitral/court order that is later reversed, courts will generally require that money to be returned with interest at the same rate fixed in the original award: simply returning the principal is not treated as sufficient once the underlying entitlement has been negated.

National Highways Authority of India v. M/S NCC-KNR (JV) – Legal Case Shots | LegalAware