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Hyder Consulting (UK) Ltd. v. Governor, State of Orissa

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 3148 of 2012)Decided 25 Nov 2014
Civil Appeal No. 3148 of 2012
Chief Justice H.L. Dattu · Justice S.A. Bobde · Justice Abhay Manohar Sapre

Background

This judgment answers a question of law; it does not decide the case itself. Hyder sought enforcement of an arbitral award with post-award interest calculated on the principal plus interest accrued before the award. The Orissa High Court required recalculation using S. L. Arora, which treated post-award interest as confined to principal. A larger Bench considered whether that interpretation of section 31(7) of the 1996 Arbitration Act was correct.

Decision Breakdown

This is not a final judgment in the case itself. By a two-to-one majority, the Court rejected S. L. Arora's exclusion of pre-award interest from the sum carrying post-award interest. Bobde and Sapre held that when the tribunal includes pre-award interest in the awarded sum, it becomes part of that sum for section 31(7)(b), unless the award directs otherwise. Dattu dissented, reasoning that accrued interest remained distinct from principal and could not attract post-award interest on this statutory wording. The reference resolved the legal question for adjudication of the connected matters, rather than independently fixing Hyder's final recoverable amount. The statutory fallback rate discussed in the judgment was the then-applicable 18% rate.

Lesson Learnt

A party enforcing an award must examine both its interest directions and the sum on which later interest runs. The majority allowed included pre-award interest to form that base; this did not authorise every form of compounding or fix today's statutory default rate.

Official source (sci.gov.in)View Judgment (PDF)

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