No Pre-Claim Compound Interest: Supreme Court Clarifies Award Restored in UHL Power Hydro Project Dispute

Himachal Pradesh invited offers in 1990 for hydro-electric projects; the appellant signed an MoU in 1992 and, after surveys on the Uhl, a tributary of the Beas, an implementation agreement in 1997 for a 100 MW plant, and the dispute went to arbitration (para 9). The 2003 award granted ₹26,08,89,107.35 as expenses, with 9% interest from the claim to the award, besides damages and costs (para 6). Under Section 37 the High Court cut the expenses to the principal ₹9,10,26,558.74 with simple 6% interest; the Supreme Court later restored the award's interest component (paras 6-7, 11-12). The appellant says the execution court then wrongly followed the High Court's figure (para 4).

The question was whether the earlier restoration of the interest component covered only the 9% and 18% rates for the arbitration and post-award periods, or also the interest capitalised into the pre-claim expenses (para 7). The award had accepted the claimant's computation in toto: interest on expenses from 1991-92 to 2002-03 at varying rates of 12-16%, compounded, with no reasoning for the rates or the capitalisation; and expenses could not run from the project's inception in 1992 (paras 8, 10-11). That presumably led the High Court to bring the expenses down to the principal (para 11). Reading its earlier order with the High Court's modification extracted at para 14, the Court held that only the grant of interest was restored as per the award: 9% from the claim to the award and 18% thereafter, capitalised annually in each period (para 15). It could not read the earlier order as restoring capitalised interest for the pre-claim period, and modified the impugned order so that execution follows these directions (paras 15-16).