Calcutta High Court Orders Enforcement of ₹1.34 Crore Arbitral Award Against L&T

The Calcutta High Court recently directed enforcement of an arbitral award of about Rs.1.34 crore in favour of UK Mechanical Engineering Pvt. Ltd. against Larsen & Toubro Ltd., holding that the award had attained finality and must be executed as it stands, while declining to grant any enhanced interest on the differential amount.

Justice Gaurang Kanth was dealing with an execution petition filed under Section 36 of the Arbitration and Conciliation Act seeking enforcement of the arbitral award dated September 19, 2023. The dispute in execution arose over the computation of pre-award interest, which was contested by the award debtor.

It was an admitted position that Larsen & Toubro had paid Rs 1.47 crore on February 3, 2024, comprising the principal amount of Rs 1.34 crore along with part pre-award and post-award interest. However, a balance of about Rs 9.05 lakh remained outstanding towards the pre-award interest component.

Rejecting the contention that the period for pre-award interest contained a typographical error, the court held that an executing court cannot go behind the award or reinterpret its terms. It emphasized that any correction ought to have been sought under Section 33 of the Act or the award challenged under Section 34, which was not done, and the award had therefore attained finality.

“At this stage, it is apposite to note that the present analysis stands fortified by the settled principles governing the scope of execution and the finality of arbitral awards. It is well established that an executing court cannot go behind the decree or award and is bound to enforce it as it stands, without undertaking any exercise of modification, variation, or reinterpretation. This principle applies with equal force to proceedings under Section 36 of the Arbitration and Conciliation Act, 1996. It is equally settled that where an arbitral award is not challenged under Section 34, nor subjected to correction or interpretation under Section 33, it attains finality and becomes binding on the parties.”

The court held that pre-award interest was liable to be computed strictly in terms of the award for the period from July 1, 2017 to July 19, 2019, and that the award holder was entitled to the differential amount arising from the shortfall. However, it declined the award holder's claim for further interest at 18% per annum on the outstanding sum, observing that the shortfall arose from a bona fide dispute rather than deliberate non-compliance.

“In the considered view of this Court, the said shortfall cannot be construed as a deliberate or contumacious default warranting imposition of further interest at an enhanced rate. The non-payment pertains only to the differential component arising from the disputed period and appears to stem from a misunderstanding of the Award rather than wilful non-compliance.”

The court directed that the balance amount be paid within four weeks and disposed of the execution petition.