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TMI Blog2024 (8) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... eal that the interest is payable on the principal sum adjudged and not on interest part of the award. The Interest Act, 1978 vide Sub-Section (3) of Section 3 specifically lays down that nothing in Section 3 which permits the court to award interest shall empower the court to award interest upon interest. It means that ordinarily the courts are not entitled to award interest upon interest unless specifically provided either under any statute or under the terms and conditions of the contract. It is evident that ordinarily courts are not supposed to grant interest on interest except where it has been specifically provided under the statute or where there is specific stipulation to that effect under the terms and conditions of the contract. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Arbitration Act, 1940 hereinafter referred to as the Act . It was made the rule of the court under Section 14 read with Section 17 of the Act and a decree was accordingly drawn. 3. The award vide its paragraph 12 provided for the interest on the amount awarded. The interest was awarded for two periods viz. (i) from the date of completion of the work up to the date of the award @ 12% per annum (simple interest); and (ii) @ 15% per annum from the date of the award till the date of its payment or the date of the court decree, whichever is earlier. 4. The portion of the award which is relevant for our purpose concerning interest is reproduced hereinbelow: 12. Interest:- The Union of India shall pay to M/s D Khosla Company simple interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warded plus 12% simple interest on the said amount. In other words, petitioner sought to include 12% interest in the principal amount of compensation awarded for the purposes of claiming 15% simple interest for the post-award period. 8. The Principal Senior Civil Judge, Khambhalia, in Execution Petition No.9 of 2006 preferred by the petitioner, refused to accept the contention of the petitioner so as to award 15% interest on the principal amount of compensation awarded plus 12% simple interest thereof. In a way, he declined to grant interest upon interest for the reason that the Arbitrator has not awarded it in so many words. 9. In the petition preferred by the petitioner before the High Court, the same view was adopted by the High Court vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest for the subsequent period would be payable on the principal sum adjudged including interest for the first period. 14. The sole simple issue herein for our opinion is whether interest is payable on interest or whether 15% interest per annum awarded would be on the principal sum award plus 12% per annum interest on it for the preaward period. 15. Section 29 of the Act provides that the court may in the decree order interest at the rate deemed reasonable to be paid on the principal sum as adjudged by the award meaning thereby in drawing the decree, the court may order for payment of interest on the principal sum as adjudged by the award. In other words, the court cannot order for payment of interest on interest but only on the principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim made was in two parts, and in the second part, interest on delayed payment was also claimed. In that situation, the court held that the interest awarded would form part of the damages or compensation for delayed payment and would become part of the principal amount and thus, in that circumstances, Arbitrator has the power to grant interest on interest which partakes the compensation awarded. 20. In State of Haryana and Others vs. S.L. Arora and Company (2010) 3 SCC 690 , it was observed that interest, unless otherwise specified, refers to simple interest and that interest is payable only on principal amount and not on any accrued interest. It was further held that the compound interest can be awarded if there is a specific provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts are not supposed to grant interest on interest except where it has been specifically provided under the statute or where there is specific stipulation to that effect under the terms and conditions of the contract. There is no dispute as to the power of the courts to award interest on interest or compound interest in a given case subject to the power conferred under the statutes or under the terms and conditions of the contract but where no such power is conferred ordinarily, the courts do not award interest on interest. 24. Neither the Act specifically empowers the Arbitrator or the court to award interest upon interest or compound interest nor there is any other provision which provides for grant of compound interest or interest upon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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