25 January 2022, Tuesday

1 year ago

Award restored by upholding the tribunal’s power to grant compound interest and interpret the contract terms: Supreme Court of India

07 January 2022 | UHL Power Company Ltd. v. State of HP | Civil Appeal No. 10341 of 2011 | State of HP v. UHL Power Company Ltd. | Civil Appeal No. 10342 of 2011 | Supreme Court of India | NV Ramana, AS Bopanna & Hima Kohli JJ | 2022 SCC OnLine SC 19

The case involved an award favouring UHL set aside under Section 34 ACA but restored by the appellate court except for the compound interest component. In further appeal by both parties under Article 136 of the Constitution of India, the matter was decided by a 3-judge bench of the Supreme Court:

  1. The court restored the award on compound interest also following its earlier 3-judge bench ruling in Hyder Consulting (2015) 2 SCC 189. To recap, as per Section 31 (7) (a) ACA, unless parties otherwise agree, the tribunal may grant interest on the “sum for which the award is made” (for any period between the date on which the cause of action arose and the date on which the award is made). Hyder—a case mainly on post-award interest—ruled, per SA Bobde CJ, that the “sum” awarded may be only principal or principal plus interest. Sapre J supplemented but reasoned a bit differently. He said that the amount awarded under Section 31 (7) (a) ACA constitutes the “sum” (whether with interest or not). He added what the provision authorises is interest in the sum. So, the issue should not be looked at in terms of the expression “grant of interest on interest.”
  2. The court upheld the appellate court’s decision to restore the award on an interpretation issue. The dispute was if the determination by the State of the contract was premature. The tribunal interpreted the contract terms and concluded that it was premature. The set-aside court “re-appreciating the tribunal’s findings” on the issue and set it aside. The Supreme Court agreed with the appellate court’s ruling that even a different view was possible, it was not open to set aside court to take a different view [referring to MMTC (2019) 4 SCC 163, K Sugumar (2020) 12 SCC 539, SEAMAC (2020) 5 SCC 164, Dyna (2019) 20 SCC 1.
  3. The court upheld the appellate court’s restoration of the award on the arbitrator’s jurisdiction. The judgment is not particularly clear on this point. Still, the State seems to have run an argument that because there were two separate agreements-- a memorandum of understanding of 1992 followed by an implementation agreement of 1997—the disputes under the latter agreement could not include a dispute under the former. The court affirmed the appellate court’s ruling that the memorandum merged with the implementation agreement. The court noted that the definition of “agreement” in the latter document included the memorandum (an appendix), and “it is apparent that the MOU was made part and parcel of the Implementation Agreement.”

Read the decision here.


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