Holding

The arbitrator may, at its discretion, award post‑award interest on any part of the sum, and Section 31(7)(b) only qualifies the rate of interest, not the quantum of the sum.

Summary

The appellant, Morgan Securities, obtained an arbitral award granting post‑award interest of 18% only on the principal sum, while the appellant argued that interest should apply to the total award including pre‑award interest. The dispute centered on the interpretation of Section 31(7)(b) of the Arbitration and Conciliation Act, 1996, specifically whether the arbitrator's discretion extends to the quantum of the sum on which post‑award interest is payable or merely to the rate. The Supreme Court examined the language of the provision, the qualifying phrases in clauses (a) and (b), and the precedents set in SL Arora and Hyder Consulting. It held that the phrase “unless the award otherwise directs” qualifies only the rate, and the arbitrator retains full discretion to decide the part of the sum to which post‑award interest applies. Consequently, the arbitrator’s award of interest on the principal alone was not an error apparent. The Court dismissed the appeal, upholding the High Court’s decision.

Issues considered

Whether Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 limits the arbitrator's discretion to the rate of post‑award interest or also to the sum on which it is calculated.
Whether post‑award interest can be awarded on a part of the award sum, such as the principal alone, rather than the whole sum including pre‑award interest.
Interpretation of the phrase ‘unless the award otherwise directs’ in Section 31(7)(b).
Whether the arbitrator’s award of post‑award interest on the principal amount constitutes an error apparent under Section 34 of the Act.

Legislation cited

Arbitration and Conciliation Act, 1996s. 31(7)(a), s. 31(7)(b), s. 34

Subjects

ArbitrationPost‑award interestPre‑award interestSection 31Discretion of arbitratorStatutory interpretationInterest on interestArbitral award

Judgment

[2022] 9 S.C.R. 819 819

MORGAN SECURITIES AND CREDITS PVT. LTD. A
v.
VIDEOCON INDUSTRIES LTD.
(Civil Appeal No. 5437 of 2022)
SEPTEMBER 01, 2022 B
[DR DHANANJAYA Y CHANDRACHUD AND
A S BOPANNA, JJ.]
Arbitration and Conciliation Act 1996: s. 31(7)(a), 31(7)(b)
– Post award interest on principal sum – Grant of – Discretion of
C
arbitrator – On facts, arbitral award in favour of the appellant –
Post-award interest fixed at the rate of 18% on the principle sum,
from the date of award to the date of payment – Challenge to, by
the appellant that the post-award interest of 18% pa should be
granted on the total sum awarded, both inclusive of principal and
pre-award interest – Single Judge held that the arbitrator had in D
his discretion restricted the post-award interest to the principal
amount and that the court would not interfere with the exercise of
discretion – On appeal, held: Abitrator has the discretion to award
post-award interest on a part of the sum – There is nothing in the
provision which restricts the discretion of the arbitrator for the grant
E
of post-award interest on the part of the sum, which the arbitrator
otherwise holds inherent to their authority – Discretion of the
arbitrator can only be restricted by an express provision to that
effect – Phrase ‘unless the award otherwise directs’ in s. 31(7)(b),
only qualify the rate of post-award interest – As per s. 31(7)(b), if
the arbitrator does not grant post-award interest, the award holder F
is entitled to post-award interest at eighteen percent – Arbitrator
must exercise the discretion in good faith, must take into account
relevant and not irrelevant considerations, and must act reasonably
and rationally taking cognizance of the surrounding circumstances
– Thus, the award of the arbitrator granting post award interest on
G
the principal amount does not suffer from an error apparent.
Dismissing the appeal, the Court
HELD 1.1 While, clause (a) of Section 31(7) of the
Arbitration and Conciliation Act, 1996 is qualified by the arbitration
agreement, clause (b) is qualified by the arbitration award. H
819
820 SUPREME COURT REPORTS [2022] 9 S.C.R.

A However, the placement of the phrases is crucial to their
interpretation. The words, “unless otherwise agreed by the
parties” occurs at the beginning of clause (a) qualifying the entire
provision. However, in clause (b), the words, “unless the award
otherwise directs” occurs after the words ‘a sum directed to be
paid by an arbitral award shall’ and before the words ‘carry interest
B
at the rate of eighteen per cent”. Thereby, those words only qualify
the rate of post-award interest. [Para 18][833-F-G]
1.2 Section 31(7)(a) confers a wide discretion upon the
arbitrator in regard to the grant of pre-award interest. The
arbitrator has the discretion to determine the rate of reasonable
C interest, the sum on which the interest is to be paid, that is
whether on the whole or any part of the principal amount, and the
period for which payment of interest is to be made - whether it
should be for the whole or any part of the period between the
date on which the cause of action arose and the date of the award.
D When a discretion has been conferred on the arbitrator in regard
to the grant of pre-award interest, it would be against the grain of
statutory interpretation to presuppose that the legislative intent
was to reduce the discretionary power of the arbitrator for the
grant of post-award interest under clause (b). Clause (b) only
contemplates a situation where the arbitration award is silent on
E post-award interest, in which event the award-holder is entitled
to a post-award interest of eighteen percent. [Para 19][833-H;
834-A-C]
1.3 The arbitrator has the discretion to grant post-award
interest. Clause (b) does not fetter the discretion of the arbitrator
F to grant post-award interest. It only contemplates a situation in
which the discretion is not exercised by the arbitrator. Therefore,
the observations Hyder Consulting’s case on the meaning of ‘sum’
will not restrict the discretion of the arbitrator to grant post-award
interest. There is nothing in the provision which restricts the
G discretion of the arbitrator for the grant of post-award interest
which the arbitrator otherwise holds inherent to their authority.
[Para 20][834-C-E]
1.4 The purpose of granting post-award interest is to ensure
that the award- debtor does not delay the payment of the award.
H
MORGAN SECURITIES AND CREDITS PVT. LTD. v. VIDEOCON 821
INDUSTRIES LTD.

With the proliferation of arbitration, issues involving both high A
and low financial implications are referred to arbitration. The
arbitrator takes note of various factors such as the financial
standing of the award-debtor and the circumstances of the parties
in dispute before awarding interest. The discretion of the
arbitrator can only be restricted by an express provision to that
B
effect. Clause (a) subjects the exercise of discretion by the
arbitrator on the grant of pre-award interest to the arbitral award.
However, there is no provision in the Act which restricts the
exercise of discretion to grant post-award interest by the
arbitrator. The arbitrator must exercise the discretion in good
faith, must take into account relevant and not irrelevant C
considerations, and must act reasonably and rationally taking
cognizance of the surrounding circumstances. [Para 21][834-E-
G]
1.5 The judgment of the two-Judge Bench in SL Arora’s
case was referred to a three-Judge Bench in Hyder Consulting’s D
case on the question of whether post-award interest could be
granted on the aggregate of the principal and the pre-award
interest arrived at under Section 31(7)(a) of the Act wherein it
was held that the arbitrator may grant post-award interest on the
aggregate of the principal and the pre-award interest. The opinion
did not discuss the issue of whether the arbitrator could use their E
discretion to award post- award interest on a part of the ‘sum’
awarded under Section 31(7)(a). The phrase ‘unless the award
otherwise directs’ in Section 31(7)(b) only qualifies the rate of
interest. According to Section 31(7)(b), if the arbitrator does not
grant post- award interest, the award holder is entitled to post- F
award interest at eighteen percent. Section 31(7)(b) does not
fetter or restrict the discretion that the arbitrator holds in granting
post-award interest. The arbitrator has the discretion to award
post-award interest on a part of the sum. The arbitrator must
exercise the discretionary power to grant post- award interest
reasonably and in good faith, taking into account all relevant G
circumstances. By the arbitral award dated 29 April 2013, a post-
award interest of eighteen percent was awarded on the principal
amount in view of the judgment of this Court in SL Arora’s case.
The arbitrator has the discretion to award post-award interest on
a part of the ‘sum’; the ‘sum’ as interpreted in Hyder Consulting’s H
822 SUPREME COURT REPORTS [2022] 9 S.C.R.

A case. Thus, the award of the arbitrator granting post award interest
on the principal amount does not suffer from an error apparent.
[Para 22][834-H; 835-A-F]
Hyder Consulting Ltd. v. State of Orissa (2013) 2 SCC
719; State of Haryana v. SL Arora (2010) 3 SCC 690 :
B [2010] 2 SCR 297 – referred to.
Case Law Reference
(2013) 2 SCC 719 referred to Para 10
[2010] 2 SCR 297 referred to Para 10
C CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5437
of 2022.
From the Judgment and Order dated 26.02.2020 of the High Court
of Delhi at New Delhi in FAO (OS) (COMM) No. 9 of 2020.
Abhishek Puri, Ms. Aruna Gupta, Ms. Surabhi Gupta, Advs. for
D
the Appellant.
Nakul Dewan, Sr. Adv., Arjun Pall, Ms. Sadhika Gulati, Ms. Neelu
Mohan, Sathvik Chandrasekhar, S. S. Shroff, Advs. for the Respondent.
The Judgment of the Court was delivered by
E DR DHANANJAYA Y CHANDRACHUD, J.
1. This appeal arises from a judgment dated 26 February 2020 of
the High Court of Delhi by which the appeal under Section 37 of the
Arbitration and Conciliation Act 19961 against a judgment of the Single
Judge dated 7 February 2019 has been dismissed. At the core, the issue
F is whether the arbitrator has the discretion to grant post-award interest
only on the principal sum due under Section 31(7)(b) of the Act.
Facts
2. On 27 January 2003, the appellant and the respondent entered
into an agreement under which the respondent availed of bill discounting
G
facilities from the appellant. The appellant disbursed Rs. 5,00,32,656
pursuant to the agreement. The dues remained unpaid. The appellant
issued a notice to the respondent on 10 January 2006 demanding the

1
H “The Act”
MORGAN SECURITIES AND CREDITS PVT. LTD. v. VIDEOCON 823
INDUSTRIES LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

payment of the principal amount of Rs. 5,00,32,656 as on 17 April 2003, A
which is the date of default, along with an overdue interest. Since the
respondent did not pay the amount as demanded, the appellant issued a
notice on 31 January 2006, invoking the arbitration clause of the
agreement.
3. The sole arbitrator rendered an arbitral award in favour of the B
appellant on 1 March 2013. The award was corrected on 29 April 2013
and decrees the claim of the appellant in the amount of Rs. 5,00,32,656.
Interest at the rate of (i) twenty one percent per annum has been granted
from the date of default to the date of the demand notice; (ii) thirty six
percent per annum with monthly rests from the date of the demand
notice to the date of award (“pre-award interest”); and (iii) eighteen C
percent per annum on the principal amount of Rs. 5,00,32,656 from the
date of award to the date of payment (“post-award interest”). The
relevant extract of the award is set out below:
“ In view of the findings of the Tribunal above, Respondent No. 2
is liable to pay a sum of Rs. 5,00,32, 656 (Rupees five crores D
thirty two thousand six hundred and fifty six only) to the Claimant
along with interest at 21% p.a till the date of demand notice. After
the date of the demand notice, i.e 10.01.2006, the Claimant is
entitled to receive interest at the rate 36% p.a with monthly rests.
Further, in terms of the aforesaid decision in S.L Arora, the E
Claimant is entitled to receive post- award interest at the
rate of 18% p.a only on the principal amount of Rs
5,00,32,656/”
(emphasis supplied)
4. The appellant challenged the arbitral award 2 in a petition under F
Section 34 before the Delhi High Court raising objections on the grant of
post-award and pre-award interest. The respondent also filed a petition3.
The appellant urged that the post-award interest of eighteen percent per
annum should be granted on the total sum awarded, inclusive both of
principal and pre-award interest. By a judgment dated 7 February 2019, G
the Single Judge of the Delhi High Court dismissed the petition filed by
the appellant on the grant of post-award interest. The Single Judge held
that the Arbitrator had in his discretion restricted the post-award interest

2
OMP No. 972 of 2013
3
OMP 665 of 2013 H
824 SUPREME COURT REPORTS [2022] 9 S.C.R.

A to the principal amount and that the court would not interfere with the
exercise of discretion:
The appeal against the judgment of the Single Judge was dismissed
by the Division Bench of the High Court by a judgment dated 26
February 2020. The counsel for the appellant before the High
B Court placed reliance on the decision of a three-Judge Bench of
this Court in Hyder Consulting (UK) Limited v. Governor,
State of Orissa4 and contended that post-award interest ought to
be granted on the sum directed to be paid under the arbitral award,
which also includes the pre-award interest. Counsel for the
respondent contended that reliance ought not to be placed on the
C judgment in Hyder Consulting (supra) since the decision in State
of Haryana v. SL Arora5 was the applicable law when the petition
under Section 34 was instituted. The Division Bench of the High
Court observed that the judgment in Hyder Consulting (supra)
clarifies that when the arbitral award is silent on post-award
D interest, it would be payable on the ‘sum’ awarded, which would
include both the principal and the pre-award interest. The Division
Bench held that in this case since the arbitral award is not silent
on post-award interest, the provisions of Section 31(7)(b) of the
Act would not be applicable.
E Both the Single Judge and the Division Bench of the Delhi High
Court also decided on the other objections of the appellant and the
respondent.
5. Proceedings under Article 136 of the Constitution were initiated
for challenging the judgment of the Division Bench of the Delhi High
F Court dated 26 February 2020. On 16 July 2021, this Court issued notice
confined to the issue of post-award interest. The order reads as follows:
“1 Issue notice confined to the post award interest. We are not
entertaining the Special Leave Petition as regards the award of
interest prior to the date of the award.
G 2 The Arbitrator, in awarding interest at the rate of 18% post
award on the principal sum, based the award on the decision in
State of Haryana v SL Arora. The decision in S L Arora was
overruled in Hyder Consulting (UK) Ltd. v. State of Orissa.
4
(2015) 2 SCC 189
H 5
(2010) 3 SCC 690
MORGAN SECURITIES AND CREDITS PVT. LTD. v. VIDEOCON 825
INDUSTRIES LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

3. In view of the above premises, we issue notice confined to the A
above issue returnable in eight weeks.”
Submissions
6. Mr. Abhishek Puri, learned counsel appearing for the appellant
made the following submissions:
B
(i) In view of the provisions of Section 31(7) of the Act and the
judgment of this Court in Hyder Consulting (supra), if pre-
award interest is awarded on the principal sum, the aggregate
of the principal and the pre-award interest is the ‘sum’ on
which post-award interest must be granted;
C
(ii) According to the majority opinion in Hyder Consulting
(supra), once pre-award interest is granted on the principal
sum under Section 31(7)(a) of the Act, the interest award
loses its character as interest and takes the color of the
awarded ‘sum’ for the purposes of post-award interest under
Section 31(7)(b) of the Act; D
(iii) The arbitral award is silent on post-award interest on the
component of interest. Therefore, the appellant is entitled to
the statutory rate of interest on the aggregate of the principal
and pre-award interest under Section 31(7)(b) of the Act;
E
(iv) Even according to the decision in SL Arora (supra), the
discretion of the arbitral tribunal under Section 31(7)(b) of
the Act was only with respect to the rate of the post-award
interest. In this case, the arbitrator has awarded post-award
interest only on the principal sum solely in view of the judgment
in SL Arora (supra); F
(v) The arbitrator only has the discretion to determine the rate
post-award interest. The Arbitrator does not have the
discretion to determine the ‘sum’ on which the post-award
interest is to be granted; and
(vi) The contention that Section 31(7)(b) of the Act would be G
inapplicable in cases where the arbitrator has awarded post-
award interest by exercising discretion is not borne out of the
decisions in SL Arora (supra) or Hyder Consulting (supra).
7. Mr Nakul Dewan, learned senior counsel for the respondent
made the following submissions: H
826 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (i) Section 31(7)(b) is qualified by the phrase “unless the award
otherwise directs”. Therefore, Section 31(7)(b) would only
be applicable where an arbitral award is silent on the
component of post-award interest;
(ii) Under Section 31(7)(b) of the Act, the arbitrator has the
B discretion to (a) grant post-award interest; (b) determine the
quantum over which the post-award interest should be
granted; and (c) determine the rate at which the interest should
be calculated; and
(iii) In Hyder Consulting (supra), a three-Judge Bench of this
C Court overruled SL Arora (supra) to the extent that the latter
decision held that the arbitral tribunal does not have the power
to award interest over interest. However, in Hyder
Consulting (supra), it was not held that it is mandatory that
the post-award interest ought to only be granted on the
aggregate of the principal and the pre-award interest.
D
Analysis
8. Section 31 provides for the “form and content of arbitral award”.
Sub-section 7 of Section 31 deals with pre-award and post-award interest.
Section 31(7)(a) provides for pre-award interest, that is for the period
E between the date on which the cause of action arose and the date on
which the award is made. Section 31(7)(b) provides for post-award
interest, between the date of award to the date of payment. Section
31(7) reads as follows:
(7) (a) Unless otherwise agreed by the parties, where and in so
F far as an arbitral award is for the payment of money, the arbitral
tribunal may include in the sum for which the award is made
interest, at such rate as it deems reasonable, on the whole or
any part of the money, for the whole or any part of the period
between the date on which the cause of action arose and the date
on which the award is made;
G
(b) A sum directed to be paid by an arbitral award shall,
unless the award otherwise directs, carry interest at the rate of
eighteen per centum per annum from the date of the award to the
date of payment.
(emphasis supplied)
H
MORGAN SECURITIES AND CREDITS PVT. LTD. v. VIDEOCON 827
INDUSTRIES LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

9. In SL Arora (supra) this court had to interpret the expression A
‘sum’ in Section 31(7). This Court framed the following issue:
“(i) Whether Section 31(7) of the Act authorises and enables
Arbitral Tribunals to award interest on interest from the date of
award?”
Justice R V Raveendran writing for a two-Judge Bench held that B
Section 31(7) does not enable the arbitral tribunal to provide interest on
interest from the date of the award. While arriving at this conclusion, the
court observed that:
(i) Section 31(7) does not make any reference to the payment
of compound interest or interest on interest. The phrase “sum C
directed to be paid by the award” refers to the award of
“sums on substantive claims”, that is, the principal amount.
In the absence of a provision enabling the grant of compound
interest, such a power cannot be read into the provisions either
for the pre-award period or for the post-award period; D
(ii) A high rate of interest at eighteen percent is statutorily
recognised in Section 31(7)(b) for the post-award period to
deter the award-debtor from delaying the payment of monies
as directed in the award;
(iii) Section 31(7)(a) confers the arbitrator with the discretion to E
determine the rate of interest, the period for which the interest
is to be paid, and the quantum on which interest is to be
awarded. However, the discretionary power of the arbitrator
is subject to the contract between the parties. Section 31(7)(b)
provides the arbitrator the discretion to award interest for the F
post-award period. The discretion is not subject to any
contract. If the arbitrator does not exercise the discretion by
awarding post-award interest, then the mandated interest of
eighteen percent shall be awarded; and
(iv) If the award provides interest at a specified rate till the date
G
of payment, then Section 31(7)(b) of the Act will not be
invoked. Section 31(7)(b) will be invoked only if the award is
silent on the post-award interest.

H
828 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 10. A two-judge bench of this Court6 referred the correctness of
the decision in SL Arora (supra) to a three-Judge Bench. In Hyder
Consulting (supra), a three-Judge Bench overruled the decision in SL
Arora (supra). Three separate judgments were authored. In order to
determine the ratio decidendi in Hyder Consulting (supra), it is
necessary that all three opinions are carefully analysed. Justice SA Bobde,
B
observed that the view in SL Arora (supra) that pre-award interest should
not be included in the ‘sum’ for calculating post-award interest is
erroneous:
“2. It is not possible to agree with the conclusion in S.L. Arora
case that Section 31(7) of the Act does not require that interest
C which accrues till the date of the award be included in the ‘sum’
from the date of award for calculating the post-award interest. In
my humble view, this conclusion does not seem to be in consonance
with the clear language of Section 31(7) of the Act.”
Referring to Section 31(7)(a), Justice Bobde observed that (i)
D since Parliament has not qualified the phrase ‘sum’ with the word
‘principal’, (as in Section 34 of the Code of Civil Procedure 1908) the
word ‘sum’ only takes the meaning of ‘a particular amount of money’;
(ii) the ‘sum’ would include both principal and interest; and (iii) when
interest is directed to be paid on the principal under Section 31(7)(a), the
E aggregate amount after merging pre-award interest and the principal
would be the ‘sum’, where the two components of principal and interest
would have lost their identities. The relevant observations are extracted
below:
7. Thus, when used as a noun, as it seems to have been used in
F this provision, the word “sum” simply means “an amount of
money”; whatever it may include — “principal” and “interest” or
one of the two. Once the meaning of the word “sum” is clear, the
same meaning must be ascribed to the word in clause (b) of sub-
section (7) of Section 31 of the Act, where it provides that
a sum directed to be paid by an arbitral award “shall … carry
G interest …” from the date of the award to the date of the payment
i.e. post-award. In other words, what clause (b) of sub-section
(7) of Section 31 of the Act directs is that the “sum”, which
is directed to be paid by the award, whether inclusive or

6
H Hyder Consulting Ltd. v. State of Orissa, (2013) 2 SCC 719
MORGAN SECURITIES AND CREDITS PVT. LTD. v. VIDEOCON 829
INDUSTRIES LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

exclusive of interest, shall carry interest at the rate of A
eighteen per cent per annum for the post-award period,
unless otherwise ordered.
[…]
13. Thus, it is apparent that vide clause (a) of sub-section (7) of
Section 31 of the Act, Parliament intended that an award for B
payment of money may be inclusive of interest, and the “sum” of
the principal amount plus interest may be directed to be paid by
the Arbitral Tribunal for the pre-award period. Thereupon, the
Arbitral Tribunal may direct interest to be paid on such
“sum” for the post-award period vide clause (b) of sub- C
section (7) of Section 31 of the Act, at which stage the
amount would be the sum arrived at after the merging of
interest with the principal; the two components having lost
their separate identities.”
(emphasis supplied) D
11. Justice AM Sapre in his concurring opinion noted that while
the grant of pre-award interest is at the discretion of the arbitral tribunal;
post-award interest is mandated by the statute where the arbitrator only
has the discretion to decide the rate of interest. That is, if the arbitral
tribunal has used its discretion to grant post-award interest at a particular E
rate, then such rate as directed would prevail, otherwise, the rate of
interest mentioned in the statute would be applicable. The relevant extract
of the judgment reads as follows:
“26. […] Pre-award interest is at the discretion of the Arbitral
Tribunal, while the post-award interest on the awarded sum F
is mandate of the statute—the only difference being that of
rate of interest to be awarded by the Arbitral Tribunal. In
other words, if the Arbitral Tribunal has awarded post-award
interest payable from the date of award to the date of payment at
a particular rate in its discretion then it will prevail else the party
will be entitled to claim post-award interest on the awarded sum G
at the statutory rate specified in clause (b) of Section 31(7) of the
Act i.e. 18%. Thus, there is a clear distinction in time period and
the intended purpose of grant of interest.”
(emphasis supplied)
H
830 SUPREME COURT REPORTS [2022] 9 S.C.R.

A Justice Sapre agreed with Justice Bobde on the meaning of the
expression ‘sum’ and held that once the interest is ‘included in the sum’,
then the interest and the principal component cannot be segregated :
“28. Therefore, for the purposes of an award, there is no distinction
between a “sum” with interest, and a “sum” without interest. Once
B the interest is “included in the sum” for which the award is
made, the original sum and the interest component cannot
be segregated and be seen independent of each other. The
interest component then loses its character of an “interest”
and takes the colour of “sum” for which the award is made.
C 29. There may arise a situation where, the Arbitral Tribunal may
not award any amount towards principal claim but award only
“interest”. This award of interest would itself then become the
“sum” for which an award is made under Section 31(7)(a) of the
Act. Thus, in a pre-award stage, the legislation seeks to
make no distinction between the sum awarded and the
D interest component in it.
[…]
31. […] Interest under clause (b) is granted on the “sum”
directed to be paid by an arbitral award wherein the “sum”
E is nothing more than what is arrived at under clause (a)”
(emphasis supplied)
12. The view of Chief Justice HL Dattu in his dissenting opinion
was that :
(i) The phrase ‘sum’ in Section 31(7)(a) refers to ‘money’ in
F
common parlance. Section 31(7)(a) states that interest may
be awarded on the ‘sum’, which would mean the interest
awarded on the money for which the arbitral award is made.
Therefore, sum refers to the ‘principal’ amount awarded;
(ii) The phrase ‘sum’ as used in clause (b) is used in the same
G context as in clause (a). Therefore, the phrase ‘sum’ in clause
(b) also means the ‘principal’ amount; and
(iii) The words ‘unless the award otherwise directs” in Section
31(7) (b) would mean that if the arbitral tribunal directs post-
award interest to be paid, then Section 31(7)(b) would be
H
MORGAN SECURITIES AND CREDITS PVT. LTD. v. VIDEOCON 831
INDUSTRIES LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

inapplicable. The corollary is that even if the award directs A
that no post-award interest is to be granted, clause (b) cannot
be invoked. The observations in the dissent are extracted
below:
“81. […] The said clause uses the phrase “unless the award
otherwise directs”, which would mean that in the event the Arbitral B
Tribunal, in its award, makes a provision for interest to be imposed
in this second stage as envisaged by sub-section (7) of Section 31
of the 1996 Act, clause (b) would become inapplicable. By the
said award, the Arbitral Tribunal has the power to impose an
interest for the post-award period which may be higher or lower
than the rate as prescribed under clause (b). Even if the award C
states that no interest shall be imposed in the post-award period,
clause (b) cannot be invoked.
82. If the arbitral award is silent on the question of whether there
would be any post-award interest, only in that situation could clause
(b) be made applicable. In the said situation, it would be mandatory D
as per law that the award could carry interest at the rate of 18%
per annum from the date of the award to the date of payment.
The term used in the given clause is “shall”, therefore, if applicable,
the imposition of interest as per clause (b) would be mandatory.”
13. The contention of the respondent is that Section 31(7)(b) could E
be invoked only when the arbitration award is silent on post-award
interest. That is, if the award does not make a specific provision for
post-award interest, then in view of Section 31(7)(b) of the Act, post-
award interest of eighteen percent shall be paid on the ‘sum’, for which
purpose the ‘sum’ shall be the aggregate of the principal and pre-award F
interest. The argument of Mr Nakul Dewan is that the arbitral tribunal
has the discretion to determine- a) whether post-award interest should
be granted; b) the ‘sum’ on which the post-award interest is to be granted;
and c) the rate of such interest.
14. The interpretation of Section 31(7)(b) has to focus on the G
meaning of two phrases - first, the expression “sum”; and second, “unless
the award otherwise directs”. The phrase ‘sum’ has been interpreted in
the opinion of Justice Bobde and in the concurring opinion of Justice
Sapre in Hyder Consulting (supra) to mean the amount directed to be
paid by an arbitral award as arrived in Section 31(7)(a), which would
H
832 SUPREME COURT REPORTS [2022] 9 S.C.R.

A include the aggregate of the principal and the pre-award interest. While
Justice Sapre was of the view that the arbitrator only has the discretion
to determine the rate of post-award interest, Justice Bobde did not
expressly discuss the ambit of discretion of the arbitrator while granting
post-award interest. In Justice Bobde’s opinion, there was no discussion
on whether the arbitrator had the discretion to order post-award interest
B
on a part of the ‘sum’ that was arrived under Section 31(7)(a).
15. On the interpretation of the words ‘unless the award otherwise
directs’, Justice Sapre interpreted them to mean that post-award interest
is a statutory mandate and that the arbitrator only has the discretion to
determine the rate of interest to be awarded. Justice Bobde did not
C specifically interpret the phrase ‘unless the award otherwise directs’.
The learned Judge made a passing reference to the phrase in paragraph
7 of the judgment, where he observed that “In other words, what clause
(b) of sub-Section (7) of Section 31 of the Act directs is that the
“sum”, which is directed to be paid by the award, whether inclusive
D or exclusive of interest, shall carry interest at the rate of eighteen
per cent per annum for the post-award period, unless otherwise
ordered.” However, in paragraph 13 of the judgment, the learned Judge
observed, “Thereupon the Arbitral Tribunal may direct interest to be
paid on such ‘sum’ for the post-award period vide clause (b) of
sub-section (7) of Section 31 of the Act, at which stage the amount
E would be the sum arrived at after the merging of interest with the
principal; the two components having lost their separate identities.”
16. The use of the words ‘may direct interest to be made’ in
paragraph 13 of Justice Bobde’s opinion could be interpreted to mean
either that the arbitrator has the discretion to decide not to grant post-
F award interest or as recognising the discretion of the arbitrator on whether
to grant interest on the aggregate of the principal and the pre-award
interest. Nothing in the observations extracted above limit the discretion
of the arbitrator in awarding post-award interest. This conclusion is
further fortified by the issue framed in Hyder Consultancy (supra),
G where the Court was to determine if the conclusion in SL Arora (supra)
is correct to the extent that it holds that post-award interest cannot be
granted on the aggregate of principal and pre-award interest. In the
concluding paragraph of Justice Bobde’s opinion , it has been observed
that SL Arora (supra) was wrongly decided:

H
MORGAN SECURITIES AND CREDITS PVT. LTD. v. VIDEOCON 833
INDUSTRIES LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

“24. In the result, I am of the view that SL Arora case is wrongly A
decided in that it holds that a sum directed to be paid by an Arbitral
Tribunal and the reference to the award on the substantive claim
does not refer to interest pendent lite awarded on the “sum directed
to be paid upon award” and that in the absence of any provision
of interest upon interest in the contract the Arbitral Tribunal does
B
not have the power to award interest upon interest, or compound
interest either for the pre-award period or for the post0award
period. Parliament has the undoubted power to legislate on the
subject and provide that the Arbitral Tribunal may award interest
on the sum directed to be paid by the award, meaning a sum
inclusive of principal sum adjudged and the interest, and this has C
been done by Parliament in plain language.”
17. The decision in Hyder Consulting (supra) was on the limited
issue of whether post-award interest could be granted on the aggregate
of the principal and the pre-award interest. As noted above, the opinion
authored by Justice Bobde was limited to this aspect of post-award D
interest. It was in the concurring opinion of Justice Sapre that it was
held that the arbitrator only has the discretion to determine the rate of
post-award interest. Therefore, the issue of whether the arbitrator could
award post-award interest on a part of the aggregate sum was not
conclusively decided the opinions forming a part of the majority in Hyder
Consulting (supra). E

18. The issue before us is whether the phrase ‘unless the award
otherwise directs’ in Section 31(7)(b) of the Act only provides the arbitrator
the discretion to determine the rate of interest or both the rate of interest
and the ‘sum’ it must be paid against. At this juncture, it is crucial to note
that both clauses (a) and (b) are qualified. While, clause (a) is qualified F
by the arbitration agreement, clause (b) is qualified by the arbitration
award. However, the placement of the phrases is crucial to their
interpretation. The words, “unless otherwise agreed by the parties” occurs
at the beginning of clause (a) qualifying the entire provision. However,
in clause (b), the words, “unless the award otherwise directs” occurs G
after the words ‘a sum directed to be paid by an arbitral award shall’
and before the words ‘carry interest at the rate of eighteen per cent”.
Thereby, those words only qualify the rate of post-award interest.
19. Section 31(7)(a) confers a wide discretion upon the arbitrator
in regard to the grant of pre-award interest. The arbitrator has the
H
834 SUPREME COURT REPORTS [2022] 9 S.C.R.

A discretion to determine the rate of reasonable interest, the sum on which
the interest is to be paid, that is whether on the whole or any part of the
principal amount, and the period for which payment of interest is to be
made - whether it should be for the whole or any part of the period
between the date on which the cause of action arose and the date of the
award. When a discretion has been conferred on the arbitrator in regard
B
to the grant of pre-award interest, it would be against the grain of statutory
interpretation to presuppose that the legislative intent was to reduce the
discretionary power of the arbitrator for the grant of post-award interest
under clause (b). Clause (b) only contemplates a situation where the
arbitration award is silent on post-award interest, in which event the
C award-holder is entitled to a post-award interest of eighteen percent.
20. The arbitrator has the discretion to grant post-award interest.
Clause (b) does not fetter the discretion of the arbitrator to grant post-
award interest. It only contemplates a situation in which the discretion is
not exercised by the arbitrator. Therefore, the observations Hyder
D Consulting (supra) on the meaning of ‘sum’ will not restrict the discretion
of the arbitrator to grant post-award interest. There is nothing in the
provision which restricts the discretion of the arbitrator for the grant of
post-award interest which the arbitrator otherwise holds inherent to their
authority.
21. The purpose of granting post-award interest is to ensure that
E the award-debtor does not delay the payment of the award. With the
proliferation of arbitration, issues involving both high and low financial
implications are referred to arbitration. The arbitrator takes note of various
factors such as the financial standing of the award-debtor and the
circumstances of the parties in dispute before awarding interest. The
F discretion of the arbitrator can only be restricted by an express provision
to that effect. Clause (a) subjects the exercise of discretion by the
arbitrator on the grant of pre-award interest to the arbitral award.
However, there is no provision in the Act which restricts the exercise of
discretion to grant post-award interest by the arbitrator. The arbitrator
must exercise the discretion in good faith, must take into account relevant
G and not irrelevant considerations, and must act reasonably and rationally
taking cognizance of the surrounding circumstances.
22. In view of the discussion above, we summarise our findings
below:
(i) The judgment of the two-Judge Bench in SL Arora (supra)
H was referred to a three-Judge Bench in Hyder Consulting
MORGAN SECURITIES AND CREDITS PVT. LTD. v. VIDEOCON 835
INDUSTRIES LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

(supra) on the question of whether post-award interest could A
be granted on the aggregate of the principal and the pre-
award interest arrived at under Section 31(7)(a) of the Act;
(ii) Justice Bobde’s opinion in Hyder Consulting (supra) held
that the arbitrator may grant post-award interest on the
aggregate of the principal and the pre-award interest. The B
opinion did not discuss the issue of whether the arbitrator
could use their discretion to award post-award interest on
a part of the ‘sum’ awarded under Section 31(7)(a);
(iii) The phrase ‘unless the award otherwise directs’ in Section
31(7)(b) only qualifies the rate of interest;
C
(iv) According to Section 31(7)(b), if the arbitrator does not
grant post-award interest, the award holder is entitled to
post-award interest at eighteen percent;
(v) Section 31(7)(b) does not fetter or restrict the discretion
that the arbitrator holds in granting post-award interest. The
arbitrator has the discretion to award post-award interest D
on a part of the sum;
(vi) The arbitrator must exercise the discretionary power to grant
post-award interest reasonably and in good faith, taking into
account all relevant circumstances; and
(vii) By the arbitral award dated 29 April 2013, a post-award E
interest of eighteen percent was awarded on the principal
amount in view of the judgment of this Court in SL Arora
(supra). In view of the above discussion, the arbitrator has
the discretion to award post-award interest on a part of the
‘sum’; the ‘sum’ as interpreted in Hyder Consulting F
(supra). Thus, the award of the arbitrator granting post
award interest on the principal amount does not suffer from
an error apparent.
23. For the reasons indicated above, the appeal against the judgment
of the Delhi High Court dated 26 February 2020 is dismissed.
G
24. All pending application(s), if any, are disposed of.

Nidhi Jain Appeal dismissed.
(Assisted by : Shashwat Jain, LCRA)

H