Legal Review and Analysis of HLV Limited Formerly Known as Hotel Leelaventure Pvt Ltd vs PBSAMP Projects Pvt Ltd 2025 INSC 1148
1. Heading of the Judgment
HLV Limited (Formerly Known as Hotel Leelaventure Pvt. Ltd.) vs. PBSAMP Projects Pvt. Ltd.
Citation: Civil Appeal No. ______ of 2025 (Arising out of SLP (Civil) No. 10732 of 2024), decided on September 24, 2025.
Court: Supreme Court of India
Coram: Justice Manoj Misra and Justice Ujjal Bhuyan
2. Related Laws and Sections
The judgment primarily interprets and applies the provisions of the Arbitration and Conciliation Act, 1996. The central statutory provision discussed is:
Section 31(7) of the Arbitration and Conciliation Act, 1996, which is subdivided into:
Section 31(7)(a): Grants the Arbitral Tribunal discretion to award interest for the period between the date the cause of action arose and the date of the award, unless otherwise agreed by the parties.
Section 31(7)(b): Mandates that the "sum" directed to be paid by the award shall carry interest at 18% per annum from the date of the award to the date of payment, unless the award otherwise directs.
3. Basic Judgment Details
Appellant: HLV Limited (Judgment Debtor)
Respondent: PBSAMP Projects Pvt. Ltd. (Decree Holder)
Origin of Dispute: A Memorandum of Understanding (MoU) dated 09.04.2014 for the sale of land, which was terminated. The dispute was referred to arbitration.
Arbitral Award Dated: 08.09.2019. The tribunal directed the appellant to refund an advance of Rs. 15.5 crores with interest at 21% per annum "from the date it was given to the date it is repaid."
Procedural History: The award was upheld under Section 34 of the Act. The appellant paid a total of Rs. 44,42,05,254/- claiming full satisfaction. The respondent, in execution proceedings, claimed an additional ~Rs. 13 crores as compound interest. The Executing Court rejected the respondent's claim. The High Court set aside the Executing Court's order and remanded the matter for fresh consideration. The appellant appealed to the Supreme Court against this remand order.
4. Core Principle and Analysis of the Judgment
The core issue before the Supreme Court was the interpretation of an arbitral award and the scope of Section 31(7) of the 1996 Act when the parties have a specific agreement on interest.
The Central Legal Issue
Whether the respondent (Decree Holder) was entitled to "interest upon interest" (compound interest) under Section 31(7)(b) of the Act, over and above the 21% simple interest awarded by the arbitral tribunal for the entire period from the date of disbursement until the date of repayment, as per the terms of the MoU.
The Supreme Court's Analysis and Reasoning
The Supreme Court allowed the appeal, setting aside the High Court's order of remand and restoring the Executing Court's order which had held that no further amount was payable. The Court's reasoning is structured as follows:
A. Primacy of Party Autonomy and the Arbitral Award
The Court emphasized that the foundation of arbitration law is party autonomy. It analyzed Section 31(7)(a), which begins with the phrase "unless otherwise agreed by the parties." This means that if the parties have contractually agreed upon an interest regime, the Arbitral Tribunal's discretion is circumscribed by that agreement. In this case, Clause 6(b) of the MoU explicitly stipulated that upon termination, the advance must be refunded with interest at 21% per annum from the date of disbursement until the date of repayment.
The arbitral tribunal, being bound by this agreement, awarded interest precisely as per the MoU: 21% per annum simple interest from the date the cause of action arose (date of advance payment) until the date of actual repayment. The Court held that the tribunal did not create separate pre-award and post-award interest periods; it awarded a composite interest covering the entire timeline.
B. Inapplicability of Default Statutory Interest under Section 31(7)(b)
The Court clarified that the default interest provision under Section 31(7)(b) – which allows for 18% interest on the awarded "sum" from the award date until payment – is triggered only "unless the award otherwise directs." In this case, the award did otherwise direct. By specifying an interest rate (21%) that was to run until the date of repayment, the arbitral tribunal expressly excluded the application of the default statutory rate under clause (b). The "sum" for the purpose of execution was the principal plus the 21% simple interest calculated up to the date of payment, not a sum that would attract further interest.
C. Distinguishing Precedents on Compound Interest
The respondent relied heavily on the landmark case of Hyder Consulting (UK) Ltd. vs. Governor, State of Orissa, which held that the "sum" in Section 31(7)(b) includes the principal plus pre-award interest, and post-award interest is calculable on this consolidated amount.
The Supreme Court distinguished Hyder Consulting by stating that its principle applies when the arbitral award is silent on post-award interest. It does not apply when the award itself, guided by the parties' agreement, explicitly dictates the interest regime for the entire period until payment. The Court reaffirmed the principles from subsequent judgments like Morgan Securities and Credits Pvt. Ltd. vs. Videocon Industries Ltd. and Delhi Airport Metro Express Pvt. Ltd. vs. Delhi Metro Rail Corpn., which established that when the award specifies the method of paying future interest, Hyder Consulting has no application. The arbitrator's discretion under Section 31(7)(b) is to be exercised within the four corners of the award and the underlying agreement.
D. Impermissibility of Modifying the Award at the Execution Stage
The Court firmly held that the respondent's attempt to claim compound interest was, in essence, an attempt to modify the arbitral award at the stage of execution, which is legally impermissible. The Executing Court's jurisdiction is to enforce the award as it is, not to add terms or recalculate amounts in a manner that alters the award's essence. Since the MoU did not provide for compound interest and the arbitral tribunal did not award it, the respondent could not introduce such a claim during execution.
5. Final Outcome of the Judgment
The Supreme Court held that:
The High Court erred in setting aside the Executing Court's well-reasoned order.
The arbitral award, based on the MoU, granted simple interest at 21% per annum until the date of full repayment, and did not grant separate post-award or compound interest.
The appellant had already paid the entire amount due under the award (Rs. 44,42,05,254/-), which constituted full and final satisfaction.
The respondent was not entitled to any further amount. Consequently, the Supreme Court allowed the appeal, set aside the High Court's order, and restored the Executing Court's order closing the execution proceedings.
6. Multiple Choice Questions Based on the Judgment
Question 1 In the case of HLV Ltd. vs. PBSAMP Projects Pvt. Ltd., why did the Supreme Court rule that the decree holder was not entitled to claim compound interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996?
a) Because the Arbitral Tribunal had explicitly denied any interest in its award.
b) Because the parties' Memorandum of Understanding (MoU) and the consequent arbitral award had already stipulated a simple interest rate of 21% until the date of repayment, leaving no room for statutory default interest.
c) Because the Supreme Court found the rate of 18% per annum under Section 31(7)(b) to be unconstitutional.
d) Because the execution court does not have the jurisdiction to calculate interest.
Answer: b) Because the parties' Memorandum of Understanding (MoU) and the consequent arbitral award had already stipulated a simple interest rate of 21% until the date of repayment, leaving no room for statutory default interest.
Question 2 According to the Supreme Court's interpretation in this judgment, the principle established in Hyder Consulting (UK) Ltd. vs. Governor, State of Orissa is applicable only under which specific condition?
a) When the arbitral award is for the payment of a sum of money exceeding Rs. 10 crores.
b) When the arbitral award grants compound interest for the pre-award period.
c) When the arbitral award is silent on the payment of post-award interest.
d) When the dispute arises from an international commercial arbitration.
Answer: c) When the arbitral award is silent on the payment of post-award interest.