/2022 INSC 0888/
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION 
CIVIL APPEAL NO. 8990 OF 2017
EXECUTIVE ENGINEER (R AND B) 
AND OTHERS           ...APPELLANT(S)
VERSUS
GOKUL CHANDRA KANUNGO (DEAD) 
THR. HIS LRS. ...RESPONDENT(S)
J U D G M E N T
B.R. GAVAI, J.
1. The   appellants   have   challenged   the   judgment   dated
18 th
  April   2012   passed   by   the   learned   Single   Judge   of   the
High   Court   of   Orissa   in   Arbitration   Appeal   No.   25   of   2007,
thereby dismissing the appeal filed by the appellants.
2. The facts in brief giving rise to the present appeal are
as under:
The   respondent   was   awarded   the   contract   for
construction   of   3   kilometers   missing   link   on   NH­6   from
Kanjipani to Kuntala on 16 th
  December 1971.   The work was
to be completed within one year that is before 15 th
 December
1972.     The   contract   amount   was   Rs.4,59,330/­.     However,
1

the work could not be completed by the stipulated date and it
was completed only on 30 th
  August 1977, by which date, the
respondent was already paid an amount of Rs.3,36,465/­. 
3. The   respondent,   on   25 th
  July   1989,   issued   a   notice
to   the   appellant   regarding   his   claim.     The   said   notice   was
replied   to   by   the   appellant   on   10 th
  August   1989   stating
therein   that,   as   against   the   claim   of   Rs.3,34,744/­,   the
respondent had been paid an amount of Rs.3,36,465/­.   The
respondent thereafter filed a suit being O.S. No. 206 of 1989
before   the   Court   of   Civil   Judge   (Senior   Division),
Bhubaneswar   (hereinafter   referred   to   as   the   “trial   court”)
under Section 20 of the Arbitration Act, 1940 (for short, “the
1940 Act”) seeking reference of the dispute to arbitration. By
order   of   the   trial   court   dated   14 th
  February   1990,   the   suit
was decreed in favour of the respondent and he was directed
to file the original F­2 agreement in the court for referring the
dispute   to   arbitration.     However,   the   respondent   did   not   file
the original F­2 agreement as directed.  In the meantime, the
1940   Act   was   repealed   and   the   Arbitration   and   Conciliation
Act, 1996 (for short, “the 1996 Act”) came into force.
2

4. The respondent thereafter filed an application in the
disposed   of   suit   before   the   trial   court,   praying   for
appointment   of   an   arbitrator   under   the   provisions   of   the
1996 Act.  The same was rejected by the trial court vide order
dated   4 th
  February   2000   for   lack   of   jurisdiction.     The
respondent   thereafter   moved   an   application   being   MJC   No.
36 of 2000 under Section 11 of the 1996 Act before the High
Court   for   appointment   of   an   arbitrator.     The   learned   Single
Judge of the High Court, vide order dated 15 th
 October 2001,
allowed   the   said   application   and   appointed   Shri   S.K.
Mohanty,   former   Judge   of   the   same   High   Court   as   the
Arbitrator. 
5. On   15 th
  March   2002,   the   respondent   filed   his   claim
of Rs.1,45,28,198/­ under 15 heads of claim and demanded
19.5% interest from  1 st
  April 1976 to  15 th
  March 2002.   The
learned   Arbitrator,   vide   award   dated   24 th
  August   2004,
awarded a sum of Rs.9,20,650/­ in respect of head Nos. 1 to
14.     The   learned   Arbitrator   also   awarded   interest   pendente
lite  with effect from 1 st
 April 1976 to the date of the award at
the  rate  of  18%  per  annum  which   came  to  Rs.  46,90,000/­.
The learned Arbitrator further  directed the future interest to
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be   paid   at   the   rate   of   18%   per   annum   on   the   total   of   the
aforesaid   two   amounts  till  actual   payment.     Being   aggrieved
thereby,   the   appellants   filed   a   petition   being   Arbitration
Petition   No.   153   of   2004   before   the   Court   of   District   Judge,
Cuttack   under   Section   34   of   the   1996   Act   for   setting   aside
the   award.     The   same   was   rejected   by   an   order   dated   25 th
July   2007.   Being   aggrieved   thereby,   the   appellants   filed   an
appeal   under   Section   37   of   the   1996   Act   before   the   High
Court.     The   same   was   also   dismissed   vide   the   impugned
judgment.  Being aggrieved thereby, the present appeal.
6. We   have   heard   Shri   Sibo   Sankar   Mishra,   learned
counsel   appearing   on   behalf   of   the   appellants   and   Shri
Ashok Panigrahi, learned counsel appearing on behalf of the
respondents.
7. Shri   Mishra   submitted   that   the   learned   Arbitrator
has   grossly   erred   in   awarding   interest   for   the   period   from
1977   to   1989   inasmuch   as   the   respondent   was   in   deep
slumber   for   a   period   of   twelve   years   and   did   not   take   any
step   for   raising   his   claim.     It   is   further   submitted   that   the
learned Arbitrator has also erred in awarding interest for the
period from the year 1990 to 2000 inasmuch as, though vide
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decree   dated   14 th
  February   1990,   the   respondent   was
directed   to   file   the   original   F­2   agreement   for   referring   the
dispute   to   arbitration,   the   respondent   did   nothing   in   that
regard.     It   is   further   submitted   that   the   interest   awarded   at
the   rate   of   18%   per   annum   is   totally   unreasonable.       It   is
submitted   that   the   interest   amount   of   Rs.46,90,000/­   is
almost   five   times   that   of   the   main   award   amount   of
Rs.9,20,650/­.  He relies on the judgment of this Court in the
cases   of   Rajendra   Construction   Co.   v.   Maharashtra
Housing   &   Area   Development   Authority   and   Others 1
,
Krishna   Bhagya   Jala   Nigam   Ltd.   v.   G.   Harischandra
Reddy and Another 2
  and   Mcdermott International Inc. v.
Burn   Standard   Co.   Ltd.   and   Others 3
  in   support   of   the
proposition   that   the   exorbitant   amount   of   interest   awarded
by  the Arbitrator and upheld by the learned Single Judge of
the High Court would be contrary to the interest of justice.
8. Shri Panigrahi, on the contrary, submitted that there
is no reason to interfere with the rate of interest awarded by
the   learned   Arbitrator,   which   has   been   concurrently   upheld
by   the   District   Judge   as   well   as   the   High   Court.     He
1   (2005) 6 SCC 678
2   (2007) 2 SCC 720
3   (2006) 11 SCC 181
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submitted that in view of the provisions of sub­section (7) of
Section   31   of   the   1996   Act,   which   has   been   construed   by   a
three­Judges   Bench   of   this   Court   in   the   case   of   Hyder
Consulting   (UK)   Limited   v.   Governor,   State   of   Orissa
Through   Chief   Engineer 4
,   no   interference   would   be
warranted in the present case.
9. Section 31(7)(a) of the 1996 Act reads as under:
“ 31.  Form and contents of arbitral award.
        …………………
(7)(a)     Unless   otherwise   agreed   by   the   parties,
where and in so 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.”
10. The provisions of Section 31(7)(a) of the 1996 Act fell
for   consideration   before   this   Court   in   many   cases   including
in  the cases of   Hyder   Consulting  (UK)  Limited   (supra)  and
Delhi   Airport   Metro   Express   Private   Limited   v.   Delhi
Metro   Rail   Corporation 5
.     A   perusal   of   clause   (a)   of   sub­
section (7) of Section 31 of the 1996 Act would reveal that, no
4   (2015) 2 SCC 189
5   2022 SCC OnLine SC 549
6

doubt,   a   discretion   is   vested   in   the   arbitral   tribunal   to
include in the sum for which the award is made interest, 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. However, it
would  reveal that  the section  itself requires interest  to  be  at
such rate as the arbitral tribunal deems reasonable.  When a
discretion   is   vested   to   an   arbitral   tribunal   to   award   interest
at   a   rate   which   it   deems   reasonable,   then   a   duty   would   be
cast   upon   the   arbitral   tribunal   to   give   reasons   as   to   how   it
deems the rate of interest to be reasonable.   It could further
be   seen   that   the   arbitral   tribunal   has   also   a   discretion   to
award interest on the whole or  any  part of the  money  or  for
the whole or any part of the period between the date of cause
of   action   and   the   date   on   which   the   award   is   made.     When
the arbitral tribunal is empowered with such a discretion, the
arbitral   tribunal   would   be   required   to   apply   its   mind   to   the
facts   of   the   case   and   decide   as   to   whether   the   interest   is
payable   on   whole   or   any   part   of   the   money   and   also   as   to
whether   it   is   to   be   awarded   to   the   whole   or   any   part   of   the
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period   between   the   date   on   which   the   cause   of   action   arose
and the date on which the award is made.
11. A   perusal   of   the   award   as   also   the   judgment   and
order   of   the   District   Judge   as   well   as   the   High   Court   would
reveal   that   no   such   exercise   has   been   done.     The   learned
Arbitrator,   without   assigning   any   reasons,   has   awarded   the
interest  at   the  rate of   18%  per  annum   for  the   period  during
which   the   proceedings   were   pending   and   also   at   the   same
rate after the award was made till the actual payment.
12. The   undisputed   position   is   that   though   final
measurement was done on 30 st
  August 1977, for a period of
twelve years, i.e., till 25 th
  July  1989, the  respondent  did not
take any step to raise his claim.   It is only on that date, i.e.,
25 th
  July   1989,   the   respondent   issued   a   notice   to   the
appellants regarding  his claim. As such, the very  conduct of
the   respondent   for   remaining   silent   for   such   a   long   period
would disentitle him for the interest during the said period.  
13. Similarly,   though   a   decree   was   passed   on   14 th
February   1990   and   the   respondent   was   directed   to   file   the
original agreement, he took no step till 4 th
 February 2000.  In
the meantime, the 1996 Act came into force.   Thereafter, the
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respondent filed an application in the disposed of suit which
came   to   be   dismissed   on   4 th
  February   2000.     Thereafter,   he
moved   an   application   being   MJC   No.   36   of   2000   before   the
High Court for appointment of arbitrator under Section 11 of
the 1996 Act which came to be allowed on 15 th
 October 2001.
It   could   thus   be   seen   that   for   a   period   of   almost   ten   years,
the   respondent   was   again   in   silent   mode.     Had   he   filed   the
original   agreement   immediately   after   the   decree   was   passed
on   14 th
  February   1990,   the   arbitration   proceedings   would
have  commenced  and   concluded  immediately   thereafter.     As
such,   the   learned   Arbitrator   was   not   justified   in   awarding
interest   for   the   period   from   14 th
  February   1990   to   4 th
February   2000.   A   party   cannot   be   permitted   to   derive
benefits from its own lapses.  
14. It   is   further   to   be   noted   that,   though   after   the
commencement   of   the   1996   Act,   the   respondent   could   not
have moved an application in the disposed suit, he chose to
do so and only after dismissal of the said application on the
ground of lack of jurisdiction, did he move an application for
appointment   of   an   arbitrator   under   Section   11   of   the   1996
Act before the High Court, which was allowed on 15 th
 October
9

2001.     We   therefore   find   that   the   respondent   would   not   be
entitled for interest for the period from 14 th
 February 1990 to
15 th
 October 2001.
15. That   leaves   us   with   the   rate   of   interest   awarded   by
the learned Arbitrator which has been upheld by the District
Judge and the High Court.   It will be apposite to refer to the
following observations of this Court in the case of   Rajendra
Construction Co.  (supra):
“ 30.   The question then remains as to interest.
The   appellant   had   claimed   interest   in   the
suits.   The   arbitrator   awarded   interest   at   the
rate of 18 per cent per annum on the principal
amount   from   the   date   of   the   suits   to   the   date
of awards and also from the date of the awards
to   the   date   of   payment   or   up   to   the   date   of
decrees,  “whichever   is earlier”. This  Court  has
dealt with the power of the arbitrator to award
interest   for   ( i )   pre­reference   period   ( Executive
Engineer,   Dhenkanal   Minor   Irrigation
Division   v.   N.C. Budharaj   [(2001) 2 SCC 721] );
( ii )   pendente   lite   ( Secy.,   Irrigation   Deptt.,   Govt.
of Orissa   v.   G.C. Roy   [(1992) 1 SCC 508] ); and
( iii ) post­award period ( Hindustan Construction
Co.   Ltd.   v.   State   of   J&K   [(1992)   4   SCC   217]   ).
In   Bhagawati Oxygen Ltd.   v.   Hindustan Copper
Ltd.   [(2005)   6   SCC   462   :   AIR   2005   SC   2071   :
JT  (2005)   4  SC   73]   ,  one   of   us   (C.K.   Thakker,
J.)   had   an   occasion   to   consider   the   relevant
decisions   on   the   power   of   the   arbitrator   to
award   interest   at   all   the   three   stages.   It   was
held   that   the   arbitrator   had   power   to   award
interest.   Keeping   in   view   the   facts   and
circumstances   of   the   present   case   that   the
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contract   was   entered   into   in   1987,   the   work
was completed in 1990 after extension granted
by   MHADA   and   the   arbitrator   passed   awards
in   1995,   it   would   be   proper,   equitable   and   in
the   interest   of   justice   if   we   reduce   the   rate   of
interest to 10 per cent per annum.”
16. This Court, after referring to the earlier decisions on
the power of the Arbitrator to award interest at all the three
stages   that   is   pre­reference   period,   pendente   lite   and   post
award   period,   found   that,   in   the   facts   and   circumstances   of
the   said   case,   it   would   be   proper,   equitable   and   in   the
interest  of   justice  to   reduce  the  rate of  interest  to   10%  from
18% per annum.
17. This Court, in the case of  Mcdermott International
Inc. ,   has observed thus:
“ 154.   The   power   of   the   arbitrator   to   award
interest   for   pre­award   period,   interest
pendente lite and interest post­award period is
not   in   dispute.   Section   31(7)( a )   provides   that
the   Arbitral   Tribunal   may   award   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   award   is   made   i.e.   pre­award   period.
This,   however,   is   subject   to   the   agreement   as
regards   the   rate   of   interest   on   unpaid   sums
between   the   parties.   The   question   as   to
whether interest would be paid on the whole or
part   of   the   amount   or   whether   it   should   be
11

awarded in the pre­award period would depend
upon   the   facts   and   circumstances   of   each
case.   The   Arbitral   Tribunal   in   this   behalf   will
have to  exercise  its discretion as  regards ( i ) at
what   rate   interest   should   be   awarded;   ( ii )
whether   interest   should   be   awarded   on   the
whole   or   part   of   the   award   money;   and   ( iii )
whether   interest   should   be   awarded   for   the
whole or any part of the pre­award period.
155.   The   1996   Act   provides   for   award   of   18%
interest.   The   arbitrator   in   his   wisdom   has
granted   10%   interest   both   for   the   principal
amount   as   also   for   the   interim.   By   reason   of
the   award,   interest   was   awarded   on   the
principal   amount.   An   interest   thereon   was   up
to the date of award as also the future interest
at the rate of 18% per annum.
156.   However,   in   some   cases,   this   Court   has
resorted   to   exercise   of   its   jurisdiction   under
Article   142   in   order   to   do   complete   justice
between the parties.
157.   In   Pure   Helium   India   (P)   Ltd.   [(2003)   8
SCC   593]   this   Court   upheld   the   arbitration
award   for   payment   of   money   with   interest   at
the   rate   of   18%   p.a.   by   the   respondent   to   the
appellant.   However,   having   regard   to   the   long
lapse   of   time,   if   award   is   satisfied   in   entirety,
the   respondent   would   have   to   pay   a   huge
amount   by   way   of   interest.   With   a   view   to   do
complete   justice   to   the   parties,   in   exercise   of
jurisdiction   under   Article   142   of   the
Constitution   of   India,   it   was   directed   that   the
award   shall   carry   interest   at   the   rate   of   6%
p.a. instead and in place of 18% p.a.
158.   Similarly   in   Mukand   Ltd.   v.   Hindustan
Petroleum   Corpn.   Ltd.   [(2006)   9   SCC   383   :
(2006) 4 Scale 453], while this Court confirmed
the   decision   of   the   Division   Bench   upholding
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the modified award made by the learned Single
Judge, the Court reduced the interest awarded
by the learned Single Judge subsequent to the
decree   from   11%   per   annum   to   7½	  %   per
annum observing that 7	
½	 % per annum would
be the reasonable rate of interest that could be
directed   to   be   paid   by   the   appellant   to   the
respondent   for   the   period   subsequent   to   the
decree.
159.   In this case, given the long lapse of time,
it will be in furtherance of justice to reduce the
rate of interest to 7	
½	 %.”
18. It   could   thus   be   seen   that   while   exercising   the
jurisdiction   under   Article   142   of   the   Constitution   of   India,
this   Court   has   reduced   the   rate   of   interest   to   7.5%   per
annum.
19. Again, in the case of   Krishna Bhagya Jala Nigam
Ltd.   (supra),   this   Court,   while   reducing   the   rate   of   interest,
observed thus:
“ 11.   On   the   merits   of   the   claims   made   by   the
contractor   we   find   from   the   impugned   award
dated   25­6­2000   that   it   contains   several
heads.   The   arbitrator   has   meticulously
examined   the   claims   of   the   contractor   under
each separate head. We do not see any reason
to interfere except on the rates of interest and
on  the   quantum  awarded   for  letting  machines
of the contractor remaining idle for the periods
mentioned in the award. Here also we may add
that we do not wish to interfere with the award
except   to   say   that   after   economic   reforms   in
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our   country   the   interest   regime   has   changed
and  the rates have  substantially  reduced  and,
therefore,   we   are   of   the   view   that   the   interest
awarded   by   the   arbitrator   at   18%   for   the   pre­
arbitration  period,  for  the  pendente  lite  period
and future interest be reduced to 9%.”
20. Noticing   the   similarity   between   the   aforesaid   cases
and the present case, we find that the present case is also a
fit case wherein this Court needs to exercise its powers under
Article 142 of the Constitution  of  India  to  reduce the rate of
interest.   As   already   discussed   hereinabove,   taking   into
consideration   the   conduct   of   the   respondent   in   delaying   the
proceedings   at   every   stage   which   led   to   a   long   pendency   of
the dispute, we are of the view that, though it will not be in
the   interest   of   justice   to   interfere   with   the   principal   award,
this is a fit case wherein the interest at all the three stages,
that   is   pre­reference   period,   pendente   lite   and   post­award
period, requires to be reduced.
21. In the result, we partly allow the appeal and pass the
following order:
(i) The respondent would not be entitled to any interest
for   the   period   between   30 th
  August   1977   and   25 th
July   1989   and   for   the   period   between   14 th
  February
2000 and 15 th
 October 2001;
14

(ii) In   respect   of   the   remaining   period   at   all   the   three
stages, that is pre­reference period,  pendente lite  and
post­award   period,   the   respondent   would   be   entitled
to interest at the rate of 9% per annum.
22. We   are   informed   that   the   execution   proceedings   are
still   pending.   The   parties   shall   submit   their   calculation
before   the   Executing   Court   in   accordance   with   what   has
been   held   by   us   hereinabove   within   a   period   of   one   month
from  the date of this judgment.   The Executing Court would
quantify   the   amount   in   accordance   with   the   aforesaid
directions   within   a   period   of   one   month   thereafter.   The
appellants   shall   make   the   payment   of   the   amount   as
determined   by   the   Executing   Court   within   a   period   of   one
month thereafter.
23. Pending application(s), if any, shall stand disposed of
in the above terms.  No order as to costs.
.…..….......................J.
[B.R. GAVAI]
 ……….......................J.       
[B.V. NAGARATHNA]
NEW DELHI;
SEPTEMBER 30, 2022.
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