Calcutta High Court Rejects Reliance Jute Mills' ₹1.09 Cr. Claim Against Over Interest On Interest
The Calcutta High Court on 27 August dismissed Reliance Jute Mills (International) Ltd's execution petition seeking an additional Rs. 1.09 crore from The Oriental Insurance Company Ltd, after finding that Reliance had already received Rs. 8.76 crore under the arbitral award dated 2 March 2020.
Justice Gaurang Kanth held that the amount already paid, together with accrued interest, exceeded the amount payable under the award and that Reliance could not claim further interest by treating accrued interest as part of the principal. The Bench said:
“As against this sum genuinely due under the Award, a sum of Rs. 8,76,59,688/- already stands paid to the Award Holder. It therefore emerges that the amount already paid exceeds, by approximately Rs. 13.7 lakh, the amount actually due on a correct, non-compounded reading of the Award. No further sum is, therefore, payable to the Award holder, and the claim for an additional sum of Rs. 1,09,24,081/- is found to be without merit.”
The dispute arose from a fire that broke out at Reliance Jute Mills' mill premises on 2 September 2014, destroying finished goods and stocks valued at over Rs. 15 crore. The Oriental Insurance Company paid approximately Rs. 11.18 crore to Reliance on 7 September 2016. The arbitral tribunal, by its award dated 2 March 2020, awarded Rs. 3.67 crore under five heads, Rs. 21.95 lakh towards costs and interest.
During the challenge to the award, The Oriental Insurance Company deposited Rs. 7.16 crore in June 2021 pursuant to a conditional stay order. Reliance challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, which provides for setting aside an arbitral award. The challenge was dismissed on 20 May 2025.
Following the dismissal, the deposited amount along with accrued interest was released to Reliance. The company received Rs. 8.76 crore on 1 July 2025. Reliance nevertheless sought an additional Rs. 1.09 crore, contending that interest continued to run on the consolidated amount.
The Court held that the expression “interest on the above amount” in the award meant interest on the specified principal amounts and costs. It found that the award did not direct accrued interest to be added to the principal and made to earn further interest.
It further held that Reliance's method of treating Rs. 7.16 crore, comprising principal and accrued interest, as a fresh base for charging interest at 8.75% amounted to a claim for interest upon interest, which had no support in the award. It held:
“The language of the Award, “interest on the above amount”, makes it clear that interest is to be computed on the stated principal figures, not on any composite or previously inflated base. The Award nowhere directs that accrued interest itself should be added to principal and made to bear further interest.”
On a correct non-compounded calculation, the Bench found that Rs. 8.62 crore was due as on 1 July 2025, whereas Reliance had already received Rs. 8.76 crore. Thus, the amount paid exceeded the amount due by approximately Rs. 13.7 lakh.
Accordingly, the High Court rejected Reliance's claim for the additional Rs. 1.09 crore, holding that the arbitral award had been fully and finally satisfied and that no further principal, interest or costs remained payable by The Oriental Insurance Company Ltd.
For Petitioner: Sabyasachi Choudhury, Sr. Advocate, Advocates S. E. Huda, Shounak Mukhopadhyay, Shreyaan Bhattacharya, A. Guha Ray, Abhijit Guha Ray
For Respondent: Advocate Sanjay Paul