In North Delhi Municipal Corporation v. S.A. Builders Ltd., the Hon’ble Supreme Court, while adjudicating a civil appeal by special leave, affirmed that an arbitrator is empowered to grant post-award interest on both the principal amount and the pre-award interest accrued thereon. The case arose from a contractual dispute concerning unpaid amounts related to a construction project. Arbitral proceedings culminated in an award favoring the respondent. While the respondent initiated execution proceedings before the Delhi High Court, the appellant challenged the award under Sections 34 and 37 of the Arbitration & Conciliation Act, 1996. These challenges were dismissed at all stages, prompting the appellant to approach the Supreme Court, arguing that post-award interest could not be levied on pre-award interest. Relying on its earlier decision in Hyder Consulting (UK) Ltd. v. State of Himachal Pradesh (2015) 2 SCC 189, the Supreme Court reiterated that the “sum awarded” includes both the principal and pre-award interest accrued from the date of the cause of action. As per Section 31(7)(b) of the Act, unless otherwise specified in the contract or award, interest at 18% per annum applies to the total sum awarded. Consequently, the Supreme Court dismissed the appeal, upholding the arbitrator’s authority to grant interest on interest. This judgment reinforces the principle that an arbitral award constitutes a monetary decree, and restricting post-award interest on the pre-award interest component would undermine the objective of ensuring just compensation to the successful party.
