Deposit Of Arbitral Award Amount In Court Stops Post-Award Interest: Himachal Pradesh High Court

The Himachal Pradesh High Court on 5 March held that deposit of the entire arbitral award amount in the court registry amounts to payment to the decree-holder, and liability to pay post-award interest ceases from the date of deposit.

A Bench of Justice Romesh Verma set aside an execution order against the Himachal Pradesh Power Corporation Ltd. (HPPCL) in its dispute with Arvind Kumar Bansal. He held:

“the deposit of award amount in the Court amounts to payment to the credit of the decree holder. Therefore, once the entire awarded amount along with interest was deposited before this Court on 10.01.2019, therefore, liability of past award interest from 10.01.2019 ceased. The executing Court has erred by holding that no notice was given to the Decree Holder as per mandate of Order 21 Sub Rule (2) of the CPC.”

The dispute arose from arbitration proceedings between HPPCL and Arvind Kumar Bansal. On 10 August 2018, a sole arbitrator passed an award directing payment of Rs. 75,22,300 to Bansal, along with future interest at 18% per annum in the event of delay.

The Corporation challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.

On 21 November 2018, the High Court stayed the award subject to deposit of the entire awarded amount with interest.

Complying with this condition, the Corporation deposited Rs. 81,04,712 in the Court registry on 10 January 2019. The challenge was dismissed on 31 October 2022, and the deposited amount was released to Bansal on 28 December 2022.

However, Bansal initiated execution proceedings before the District Judge on 3 August 2023, claiming that further amounts, including interest, remained payable.

The matter reached the High Court through a petition challenging the District Judge's order dated 1 April 2025, which had rejected the Corporation's objections and directed payment of additional amounts.

The Corporation argued that it had fully satisfied the award by depositing the entire amount with interest pursuant to court directions, and therefore no further liability survived, contending that such deposit amounts to payment in law.

Bansal argued that the Corporation had not complied with Order 21 Rule 1(2) of the Code of Civil Procedure, particularly regarding notice of payment, and therefore interest continued to accrue.

Justice Romesh Verma rejected this contention, holding that deposit of the award amount during pendency of challenge proceedings constitutes satisfaction of the award and that “payment” signifies extinguishment of liability, with deposit in court being equivalent to payment to the decree-holder.

The Court further held that the executing court erred in insisting on CPC compliance where the deposit was made pursuant to judicial directions, reiterating that the Arbitration and Conciliation Act, being a self-contained statute, prevails and CPC applies only where not inconsistent, though it operates mandatorily where expressly provided. It held:

“The applicability of the CPC would only be directory or whereas the provisions of the Arbitration and Conciliation Act are essentially to be first applied.”

Holding that the entire award amount along with accrued interest had been deposited on 10 January 2019, the Court concluded that liability for further interest ceased from that date and found the executing court's reasoning unsustainable.

Accordingly, the High Court allowed the petition, quashed the District Judge's order dated 1 April 2025, and dismissed the execution proceedings initiated by Bansal.

Appearances for petitioner (Himachal Pradesh Power Corporation Ltd.): Advocates Hamender Singh Chandel.

Appearances for respondent (Arvind Kumar Bansal): Advocates Kiran Kanwar.