Allahabad High Court | Executing Court Empowered Under Section 36 Arbitration Act To Grant Statutory Post-Award Interest Even If Not Specified In Award
Safiya Malik
The High Court of Allahabad Single Bench of Justice Piyush Agrawal has dismissed a writ petition challenging orders passed by the Commercial Court, Agra. The court held that there was no illegality or perversity in directing the payment of simple interest at the rate of 18 percent per annum for a twelve-year period and in ordering the attachment of bank accounts. The judicial determination clarified that the execution court was correct in granting post-award interest from the date of the arbitral award until the date of actual payment. In consequence, the petition questioning such directives was rejected in its entirety.
The dispute originated from a contract for the construction of a gymnastic hall at Iklavya Sports Stadium in Agra. The contractor, identified as an approved contractor, entered into an agreement with the petitioners. Due to disputes arising during the course of construction, the matter was referred to arbitration at the behest of the contractor. The arbitral tribunal passed an award in favor of the contractor, granting a sum of Rs. 40,61,264 along with costs and simple interest at 18 percent per annum for the period between 31 March 2000 and 26 August 2007.
The petitioners, being aggrieved by the arbitral award, sought recourse under Section 34 of the Arbitration and Conciliation Act before the District Judge. The application under Section 34 was rejected. A First Appeal From Order (FAFO) under Section 37 of the Act was subsequently filed, which also came to be dismissed. Thereafter, the matter was carried to the Supreme Court by way of a Special Leave Petition (SLP), which too was dismissed.
While the Section 34 proceedings were still pending, the contractor initiated execution proceedings under Section 36 of the Arbitration and Conciliation Act, seeking enforcement of the arbitral award along with applicable interest. In the execution proceedings, the Commercial Court, Agra, through orders dated 18 July 2023 and 27 July 2023, directed the petitioners to pay simple interest at the rate of 18 percent per annum for a period of twelve years beginning from 17 December 2010. Additionally, the Commercial Court ordered the attachment and freezing of bank accounts belonging to the Executive Engineer and Superintendent Engineer.
The petitioners approached the High Court under Article 227 of the Constitution of India, challenging the legality of these orders. They argued that the arbitral tribunal had restricted the award of interest to the period between 31 March 2000 and 26 August 2007, explicitly rejecting the prayer for post-award interest until actual payment. It was contended that imposing post-award interest in execution proceedings was impermissible when the arbitral tribunal had consciously declined such relief.
The petitioners further argued that the 2015 Amendment to the Arbitration and Conciliation Act, although generally prospective, contained provisions of a procedural nature that operate retrospectively. According to them, procedural laws include provisions concerning the grant of post-award interest, which should be applied retrospectively. It was submitted that the executing court had acted beyond its authority in granting interest beyond the scope of the arbitral award.
The respondents, represented by their counsel, supported the impugned orders. They maintained that the executing court was within its jurisdiction to grant post-award interest in accordance with statutory provisions, particularly Section 31(7)(b) of the Arbitration and Conciliation Act, 1996. They stated that the arbitral tribunal’s determination of pre-award interest did not eliminate the statutory entitlement to post-award interest.
Justice Piyush Agrawal carefully examined the record and the arguments presented by both sides. The court recorded that the arbitral tribunal had indeed awarded the claimant a sum of Rs. 40,61,264 in addition to simple interest at the rate of 18 percent per annum for the period from 31 March 2000 to 26 August 2007. However, the High Court noted that the execution proceedings sought to enforce the award along with interest accruing beyond that date.
The court observed that in BCCI v. Kochi Cricket Pvt. Ltd. & Anr. (MANU/SC/0256/2018), the Supreme Court had settled the law on the prospective operation of the 2015 Amendment to the Arbitration and Conciliation Act. The judgment clarified that while the Amendment Act is generally prospective, certain procedural provisions could have retrospective application. The High Court extracted a portion of the Supreme Court’s reasoning, noting that Section 26 of the Amendment Act was designed to ensure that court proceedings commenced after 23 October 2015 would be governed by the amended provisions.
The High Court also relied upon a recent decision of the Delhi High Court in Union of India and Anr. v. Sudhir Tyagi (2025:DHC:2621). In that case, the Delhi High Court had clarified the interpretation of Section 31(7)(b) of the Arbitration and Conciliation Act. The Allahabad High Court quoted the following observation: “The grant of post-award interest under Section 31(7)(b) is mandatory. The only discretion which the Arbitral Tribunal has is to decide the rate of interest to be awarded. Where the Arbitrator does not fix any rate of interest, then statutory rate, as provided in Section 31(7)(b), shall apply.”
Further quoting from the Delhi High Court’s decision, Justice Piyush Agrawal noted: “Section 31(7)(b) of the Act specifically states that the Arbitral award shall carry an interest unless the award otherwise directs.” It was therefore recorded that unless the award specifically excluded the grant of post-award interest, the statutory mandate applied by default.
The High Court recorded its conclusion as follows: “Keeping in the view the above-mentioned judgement, the executing court under Section 36 is empowered to carry out the award with full effect, including grant of interest constituting a component of the award. The Tribunal’s determination of interest for 2000 to 2007 did not foreclose the statutory entitlement to interest for the balance period; the executing court correctly calculated interest for the period 17.12.2010 to 17.12.2022 at 18% p.a., and ordered recovery thereof.”
After considering these judicial precedents and statutory provisions, the High Court found that the Commercial Court’s orders were in accordance with law. It concluded: “This Court, thus, finds no illegality or perversity in the impugned orders dated 18.07.2023 and 27.07.2023, passed by the learned executing court.”
The High Court’s final directive stated: “The petition is, accordingly, dismissed.”
Advocates Representing the Parties
For the Petitioners: Shri Manish Goyal, learned Additional Advocate General, assisted by Shri Amit Kumar Singh, learned Additional Chief Standing Counsel
For the Respondents: Shri Tarun Agarwal, learned counsel, along with Shri Shashank Bharti, learned counsel
Case Title: State of U.P. and 2 Others v. M/S Satish Chandra Shiv Hare-Brothers
Neutral Citation: 2025: AHC:146428
Case Number: Matters Under Article 227 No. 11680 of 2023
Bench: Justice Piyush Agrawal
