"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Saturday, March 17, 2012

Save on Post Award Interest in Section 34 Proceedings: Deposit the Award Amount in Court

According to a latest decision of the Supreme Court, a party can challenge the award under Section 34 of the Arbitration and Conciliation Act, 1996 (1996 Act) and at the same time save on the post-award interest in case the challenge proceedings ultimately fail by depositing the award amount in the court.

In HP Housing & Urban Development Authority v. Ranjit Singh Rana, a two judge Bench consisting of RMLodha & HLGokhale, JJ, has held that where the award amount is deposited in the court, the applicant is not liable to pay post-award interest from the date of depositing the amount in the court. The facts in brief are that an award in an arbitration between the parties was challenged and the applicant deposited the award amount in the court. On dismissal of the application for setting aside, the court held that the respondent in the petition under Section 34 was entiteld to post-award interest at 18% per annum as per Section 31(7)(b) of the 1996 Act. Section 31(7)(b) reads: 
"A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of 18 per centum per annum from the date of the award to the date of payment."
On appeal, the Supreme Court reversed the decision of the lower court. The Supreme Court construed the expression "date of payment" to include even deposit of the amount in the court, which was only "a payment to the credit of the decree-holder". Thus, it held: 
"The word 'payment' may have different meaning in different context but in the context of Section 37(1)(b); it means extinguishment of liability arising under the award. It signifies satisfaction of the award. The deposit of the award amount into the Court is nothing but a payment to the credit of the decree-holder. In this view, once the award amount was deposited by the appellants before the High Court on [] May 24, 2001, the liability of post-award interest from May 24, 2001 ceased."
The judgement can be accessed from here.

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