In a significant ruling on arbitration law, the Supreme Court has set aside a Telangana High Court order, affirming that when a contract and a subsequent arbitral award clearly specify the interest payable until the final repayment, no additional compound interest can be claimed during the execution stage. The bench of Justices Manoj Misra and Ujjal Bhuyan, hearing an appeal by HLV Limited (formerly Hotel Leelaventure Pvt. Ltd.), stressed that party autonomy is paramount in arbitration proceedings.
Background
The dispute traces back to a failed land deal in Hyderabad's posh Banjara Hills area. HLV Limited and PBSAMP Projects Pvt. Ltd. had entered into a Memorandum of Understanding (MoU) on April 9, 2014, for the sale of a land parcel. PBSAMP paid an advance of Rs. 15.5 crores. However, the deal soured, leading to arbitration.
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The arbitral tribunal, on September 8, 2019, passed an award directing HLV to refund the Rs. 15.5 crores along with 21% per annum interest "from the date it was given to the date it is repaid". This was based on a specific clause in the MoU the parties had signed. After the award became final, HLV paid a total sum of Rs. 44,42,05,254.00 to PBSAMP by July 31, 2023, believing this settled the entire claim, including interest.
However, PBSAMP filed a new calculation before the executing court, demanding compound interest, taking their total claim to over Rs. 57 crores. While the executing court in Hyderabad rejected this claim and closed the case , the Telangana High Court found this order "cryptic and cavalier" and remanded the matter for fresh consideration, prompting HLV to approach the Supreme Court.
Court’s Observations
The Supreme Court meticulously analyzed Section 31(7) of the Arbitration and Conciliation Act, 1996, which deals with interest on awards. The bench highlighted that the arbitrator’s power to award interest for the period before the award is subject to any agreement between the parties.
The court observed that the MoU itself provided for a 21% interest rate from the date of disbursement until the actual date of payment. The arbitral tribunal had faithfully incorporated this agreement into its final award. The judges made it clear that since the award itself specified the interest and its duration (until repayment), the question of applying a separate, post-award interest under the statute simply did not arise.
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The bench noted, "Allowing such a claim would amount to rewriting the award at the stage of execution which is impermissible". The court reasoned that legal precedents allowing for compound interest apply only when an arbitral award is silent or unclear on future interest. In this case, the award was explicit, leaving no room for interpretation. The court held that the arbitrator's decision was aligned with the legislative intent that the award, reflecting the parties' own agreement, should govern the dispute.
Decision
Allowing the appeal filed by HLV Limited, the Supreme Court quashed the judgment and order of the Telangana High Court dated April 22, 2024. Consequently, the original order of the executing court from November 2, 2023, which had closed the execution petition after finding the payment of Rs. 44.42 crores to be in full satisfaction of the arbitral award, was restored. The civil appeal was allowed without any order as to costs.
Case: HLV Limited vs. PBSAMP Projects Pvt. Ltd.
Case No.: Civil Appeal No. OF 2025 (Arising out of SLP(C) No. 10732 of 2024)
Date of Judgment: September 24, 2025
