Interest Would Not Stop Running Till Decree Holder Has Due Notice | Delhi High Court Orders NHAI To Pay Arbitral Award Balance With Interest In Three Weeks
Sanchayita Lahkar
The High Court of Delhi Division Bench of Justice Vibhu Bakhru and Justice Tejas Karia held that the deposit of an arbitral award amount by the judgment debtor with the court registry does not by itself extinguish the liability to pay interest unless notice is given or the decree holder is aware and has the opportunity to withdraw it. The court directed the judgment debtor to pay the remaining amount due to the award holder within three weeks, along with interest computed up to the date of payment.
The matter arose out of an arbitral dispute concerning a construction contract for the widening and strengthening of National Highway-5 between Gangam and Sunakhala in Odisha. An agreement dated 20.08.2001 had been executed between the parties for this project. Disputes subsequently arose and were referred to arbitration.
The arbitral tribunal issued an award dated 15.12.2015. The award granted the claimant multiple sums with interest. Specifically:
- A sum of Rs. 6,10,17,434/- for unpaid work under Claim No. 1, with 10% p.a. interest compounded monthly from 03.04.2008 to the date of award.
- A sum of Rs. 5,28,53,000/- for confiscated machinery under Claim No. 3, with 10% p.a. simple interest.
- A sum of Rs. 27,00,30,461/- for encashed bank guarantees under Claim No. 4, with 10% p.a. simple interest.
- Future interest at 12% p.a. on the total sum awarded under Claims 1 to 3 if payment was not made within three months.
The judgment debtor, National Highways Authority of India, challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. The application was dismissed by the Single Judge on 23.03.2022, and the Division Bench also rejected the subsequent appeal on 10.05.2022.
Pursuant to an enforcement petition filed by the award holder under Section 36 of the Act, the Single Judge had directed the judgment debtor to deposit the award amount with the Registry on 06.04.2022. The judgment debtor complied and deposited Rs. 123,67,58,284/- on 13.05.2022.
On 22.07.2022, the counsel for the judgment debtor informed the court of the deposit. The court allowed the award holder to file a response to the computation submitted by the judgment debtor. The award holder claimed an additional sum of Rs. 5,91,71,972/- was payable as of 17.02.2023, and that interest should run on the amount deposited until it was released.
Meanwhile, the judgment debtor filed an application claiming excess payment of Rs. 10,76,294/-, arguing that interest ceased from the date of deposit. The award holder contested this, asserting that the interest must run until the date of release since the funds were not available for use due to resistance from the judgment debtor.
The award amount was eventually released to the award holder on 17.01.2023, after the Supreme Court dismissed the judgment debtor's Special Leave Petition on 31.10.2022.
The Division Bench observed that the central issue was whether the liability to pay interest ceases from the date of deposit with the Registry or continues until the amount is released to the award holder.
The court stated: "It is well settled that it was not necessary for the Judgment Debtor to deposit or pay the entire decretal amount for the interest as awarded to stop running. Even if a part of the decretal amount is deposited in the court or tendered to the decree holder, the same would discharge the decree to the extent of the amount deposited or tendered."
Referring to Prem Nath Kapur v. National Fertilizers Corporation of India Ltd. and Gurpreet Singh v. Union of India, the Bench reiterated that deposits made without notice do not automatically cease interest liability.
The court also observed: "Although no notice of such deposit was formerly issued to the Award Holder; the statement made on behalf of the Judgement Debtor that the amount as aforesaid was deposited was recorded by this Court in order dated 22.07.2022."
Further, the court clarified, "The Award Holder’s contention that deposit of the amount of Rs.1,23,67,58,284/- with the Registry of this Court cannot be construed as part discharge of the amounts as awarded, as the said amount was not released to the Award Holder- militates against the plain language of Order XXI Rule 1 of the CPC."
On the matter of cessation of interest, the court examined several precedents including Mathunni Mathai v. Hindustan Organic Chemicals Ltd., NEPA Ltd. v. Manoj Kumar Agrawal, and DLF Ltd. v. Koncar Generators & Motors Ltd.
It held, "Once the decree holder is made aware that the deposit has been made, the decree holder cannot take advantage of the fact that a formal notice was not served."
Therefore, the court found that since the award holder had notice of the deposit on 22.07.2022, interest liability ceased from that date. The court further held that "the interest accrued on the amount deposited till 22.07.2022 shall be to the credit of the Judgement Debtor. But any interest accrued thereafter would, obviously, be to the credit of the Award Holder."
The court issued specific directions stating that the deposited sum of Rs. 123,67,58,284/-, along with interest accrued until 22.07.2022, should be appropriated first towards interest and the balance towards the principal.
It directed, "The Judgement Debtor shall pay the remaining amount due to the Award Holder within a period of three weeks along with interest computed till the date of payment."
Additionally, it ordered that the judgment debtor must furnish a statement of computation to the award holder. The Bench clarified, "In the event there is any dispute in this regard, the Award Holder has the liberty to revive its petition for enforcement of the Arbitral Award being OMP(ENF)(COMM) No.116/2020."
The appeal was disposed of accordingly, and both parties were left to bear their own costs.
Advocates Representing the Parties:
For the Petitioners: Mr. C Mohan Rao, Senior Advocate with Mr. Lokesh Kumar Sharma, Advocate
For the Respondents: Mr. Manish K. Bishnoi and Mr. Khubaib Shakeel, Advocates
Case Title: PCL STICCO (JV) v. National Highways Authority of India
Neutral Citation: 2025: DHC:3296-DB
Case Number: EFA(OS)(COMM) 5/2024
Bench: Justice Vibhu Bakhru and Justice Tejas Karia
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