The Delhi High Court has taken a view that Court has power to grant interest in the decree under Section 34 CPC even in cases where the statute does not make any specific provision for payment on interest on awarded sum. ‘Awarded sum’ would mean the composite sum inclusive of the principal as well as the interest awarded by the arbitrators.
The said judgement was passed by the Delhi High Court in the matter of Alimenta S.A. Vs. N.A.C.M.F of India, EX.P. 204/2002 decided on 31.10.2018.
An award was passed in an arbitration proceeding initiated in the year 1981, between the parties which was affirmed in an appeal award as well. In terms of the award, the judgment debtor was directed to pay to the decree holder within 14 days from the date of the appeal award a sum of US$ 4,526,000 with interest thereon @11.25% per annum from 13.02.1981 to the date of the appeal award i.e. 14.09.1990.
Thereafter, the decree holder filed a petition under S. 5 r/w S. 6 of the Foreign Awards (Recognition and Enforcement) Act, 1961 before the Delhi High Court for filing and enforcement of the appeal award read with the original award. The petition was allowed and a decree was passed in terms of the said award which formed part of the decree. It was further directed that the decree holder was entitled to interest @ 18% per annum from the date of the award till the date of realization.
On the above facts one of the three issues for consideration before the Court was – upon which amount the interest @ 18% p.a. is payable viz., either upon the principal amount of $4,526,000 or upon the consolidated amount viz. the principal amount coupled with interest @ 11.25% p.a. as on date of decree.
The judgement debtor referred to Indian Oil Corporation Ltd. Vs. G.S.Jain & Associates MANU/DE/4613/2012 to say that the interest can be charged only upon the principal and there is no provision to charge interest upon interest per Arbitration Act, 1940. The judgement debtor further relied Section 3(3) of the Interest Act, 1978 which states that nothing in this section shall empower the court to award interest upon interest. It was further contended that Section 34 CPC is not applicable as under the said section the future interest cannot increase above 6% p.a. in normal circumstances (though, of course, the court has power otherwise) and the 1996 Act is not applicable on facts.
The Court referring to the decree, held that once the decree specifies that English Law was applicable, the submission of the judgement debtor that the 1940 Act was applicable and, in the view, thereof there can be no interest on interest, could not be accepted. The same would amount to the executing court going behind the decree.
The Court further noted that it is a settled law the Court has power to grant interest in the decree under Section 34 CPC even in cases where the statute does not make any specific provision for payment on interest on awarded sum. The Court has power to award interest from the date of award to date of decree and the award of post award interest in the decree making an award a rule of Court does not amount to interest on interest but rather is an interest on composite sum of principal plus interest awarded by arbitrators. Further even of the sake of arguments if Section 29 of the Arbitration Act 1940 was to apply in the present case, the grant of interest under the said Section on composite sum of principal with interest under the appeal award dated 14.09.1990 would not amount to interest on interest. Similarly, section 3(3)(c) of the Interest Act 1978 does not bar post award interest awarded by the Court in the decree making the award a rule of the Court and it does not take away the power of the Court to grant interest in the decree under Section 34 CPC.
Therefore, the Court held that the interest shall be payable on the consolidated amount viz. upon the principal plus interest as on date of decree.