Contractual Interest Framework Governs; No Compound Interest Where Award Covered Repayment Period

A bench of Justices Manoj Misra and Ujjal Bhuyan heard an appeal by HLV Limited against the Telangana High Court’s decision to set aside an executing court order and remand an execution petition arising from enforcement of a 2019 arbitral award; the principal question was whether the decree‑holder could claim “interest upon interest” under Section 31(7) of the Arbitration and Conciliation Act, 1996 when the arbitral award applied the parties’ contractual interest regime.

The Court allowed the appeal, set aside the High Court order dated 22.04.2024 and restored the executing court’s order of 02.11.2023 which had closed the execution petition. The Court held that where the parties’ memorandum of understanding expressly provided for interest at 21% per annum from the dates of disbursement “till actual date of repayment” and the arbitral tribunal incorporated that regime into its award, the decree‑holder could not at the execution stage claim additional or compound post‑award interest. The Court emphasised the primacy of party autonomy under Section 31(7)(a) and reiterated that clause (b) operated only where the award left post‑award interest unqualified. The Court, in its reasoning, observed: “Therefore, in the light of the express provision contained in clause (a) of sub‑section (7) of Section 31, the arbitral tribunal awarded interest in terms of the MoU from the date of the cause of action till the date of repayment. As the arbitral tribunal had expressly provided interest till the date of repayment, question of additional or compound interest under clause (b) of sub‑section (7) of Section 31 of 1996 Act would not arise. The arbitral tribunal in its award dated 08.09.2019 has faithfully complied with the MoU agreed by and between the parties.” The Court therefore held that the executing court had correctly applied the award and that the High Court erred in remanding the matter for reconsideration.

Background The dispute arose from a memorandum of understanding dated 09.04.2014 between HLV Limited (vendor) and PBSAMP Projects Pvt. Ltd. (purchaser) concerning sale of land in Banjara Hills, Hyderabad. The purchaser paid advances totalling Rs. 15.5 crores; the MoU’s clause 6(b) entitled the purchaser on termination to refund of advances with 21% interest per annum from disbursement until repayment. The MoU was terminated and the matter went to a three‑member arbitral tribunal, which awarded Rs. 15.5 crores to the claimant with interest at 21% per annum “from the date it was given to the date it is repaid,” treating the escrow arrangement only for the disputed Rs. 5.5 crores.

HLV challenged the award under Section 34; the Special Court dismissed the challenge and the award attained finality. On execution (CEP No. 05 of 2021) HLV paid Rs. 44,42,05,254.00 in instalments between 22.07.2022 and 31.07.2023, which it treated as full satisfaction of the award. The decree‑holder submitted calculations seeking compound/post‑award interest; the executing court, applying Section 31(7) and precedent, rejected the claim for compound interest and closed the execution petition. The High Court set aside that order as “cryptic and cavalier” and remitted the matter for fresh consideration, without expressing an opinion on merits. The Supreme Court examined Section 31(7)(a) and (b), the parties’ MoU (noting the MoU began clause (a) with “unless otherwise agreed by the parties”), and the sequence of precedents addressing whether post‑award interest could be applied on an aggregated sum. The Court concluded that where an award applied the contractual interest regime covering the pre‑award period “till repayment,” clause (b) did not permit introduction of additional compound post‑award interest at execution. The Supreme Court set aside the High Court’s remand and restored the executing court’s order; the civil appeal was allowed with no order as to costs.

Case Details: Case No.: 2025 INSC 1148 Case Title: HLV Limited (formerly known as Hotel Leelaventures Pvt. Ltd.) v. PBSAMP Projects Pvt. Ltd. Appearances: For the Petitioner(s): Mr. Hemendranath Reddy, Senior Counsel (for HLV Limited) For the Respondent(s): Mr. P.B. Suresh, Senior Counsel (for PBSAMP Projects Pvt. Ltd.)