Recalibrating Judicial Control Over Post-Award Interest

Authored by - Purvi Singla (Law Student, Rajiv Gandhi National University of Law, Punjab)

The Supreme Court's decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. brings back questions about court involvement in interest parts of arbitration rulings.[1] Although the bench said temporary hearing-time interest should stay mostly untouched by judges, it also backed stronger oversight when it comes to interest after an award is issued. This wider authority stems from Section 31(7)(b) of the 1996 Arbitration and Conciliation Act, which sets a standard rate if post-award interest isn't specified.[2] In effect, the ruling limits freedom arbitrators once had, prompting unease among legal professionals working in dispute resolution.

This piece looks at past rulings shaping arbitrators' power on interest; then explores how Balasamy changes that setup. It contrasts India's method with international trends, suggesting a clearer model balancing court supervision and arbitration independence.

I. Section 31(7)(b): Flexibility for Arbitrators

Should an award omit the post-award interest rate, Section 31(7)(b) clearly triggers a default legal percentage. Its purpose? Prompt enforcement, also addressing omissions when tribunals do not decide. Rather than limiting discretion, Indian rulings view this number as a backup, to apply only if no choice was made.

Morgan Securities v. Modi Rubber set the tone early.[3] When tribunals don't act, the standard rate applies, this was the court's reading of "unless the award otherwise directs." Instead of suspicion from courts, focus shifted to reasoned choices made by panels. Decisions rest on judgment, provided they stay within sensible bounds.

A comparable method showed up in S.L. Arora; here, the court separated pre-award from post-award interest while highlighting that arbitration rests on agreement terms.[4] Since the law meant to allow flexibility, enforcing a fixed statutory rate afterward would make tribunal choices meaningless, clashing directly with how the Act was structured.

The Supreme Court confirmed this point in R.P. Garg, where awards don’t mention interest, it must still apply; however, if the tribunal sets a rate, that ruling takes priority.[5] Under Section 31(7)(b), post-award interest stands apart by nature compared to what's covered in clause (a) before the award. Tribunals have priority; courts act solely if the decision lacks clarity.

II. Global Systems and Minimal Court Involvement

Countries aiming to support arbitration, like Singapore or the UK, stick to a simple principle: after an award, interest falls mainly under tribunal authority.

In Singapore, courts usually leave interest decisions untouched, unless an award faces challenges based on wider issues from the UNCITRAL Model Law.[6] Take L.W. Infrastructure: the Court of Appeal made clear that setting a proper rate falls to the tribunal, while court intervention should stay limited, reflecting the Model Law’s intent.[7]

The UK uses a distinct approach. Under section 49 of the Arbitration Act 1996, arbitrators can allow interest when fairness demands it, showing tribunals hold the main responsibility instead of courts as followed.[8] Statutory interest from courts applies solely once an award becomes part of a judgment through enforcement, per the Judgments Act. This step comes later in time, separate from assessing the tribunal's ruling.

In both areas, the trend is clear: interest rulings belong to tribunals; courts leave them unchanged unless law requires action.

III. How Balasamy changed things

Earlier than Balasamy, some Indian court rulings used Article 142 to adjust interest in arbitration decisions, citing "full justice" as a basis. For instance, McDermott International saw a cut from 10% to 7.5%.[9] Similarly, Ssangyong Engineering highlighted occasional interference by judges.[10]

Balasamy takes an entirely separate path. Rather than relying on Article 142, the approach ties judicial authority straight to Section 34 of the Arbitration Act. In their view:

• Under Section 31(7)(b), arbitrators aren't the only ones who can grant post-award interest, courts have authority here too. While this provision allows arbitral tribunals to set such interest, judicial bodies retain review powers. Thus, final decisions on interest adjustments aren't limited to arbitration panels alone. Courts may intervene when necessary under applicable rules.

• Future uncertainty complicates post-award interest, so picking a fair rate is challenging for arbitrators over time, since conditions shift unpredictably throughout the period involved.

• The legal standard rate ought to direct the panel's decision, while also acting as a reference point for judicial review of rulings.

  
  

For these reasons, the court decided a Section 34 judge can adjust post-award interest when case details support such a change. Still, it warned this authority must not be applied often. Still, the message is clear, arbitral freedom versus court oversight has shifted notably.

IV. The Court’s Logic

1. Misreading Legislative Intent

The decision presumes Section 31(7)(b) quietly allows courts to add post-award interest, despite a tribunal’s discretionary choice. Yet this view clashes with Morgan Securities, S.L. Arora, and R.P. Garg, each seeing Section 31(7)(b) as dependent, applying solely if no rate was set by the panel.

The proper interpretation of the law sets the tribunal's ruling higher than the standard rule, rather than equal to it.

2. The case about "uncertain future" doesn't hold up well

The court argued that since forecasters can't predict economic shifts, judges should adapt interest rates after rulings if needed. Yet the arbitration law includes tools, like sending back or canceling decisions, that already handle these issues.

In Patel Brothers, the Supreme Court made clear that judges must stay within legal limits, even if results seem awkward. Yet Balasamy may stretch those lines. Despite differing circumstances, the principle holds: courts shouldn't adjust laws to fit preferences. Where statutes draw a line, interpretation stops. Though intent matters, it can't override written law. This case walks close to that edge.

A better approach could involve updating legislation so that tribunals reconsider just the interest part of awards under specific, limited conditions, this preserves independence yet adapts to unknowns ahead.

3. Taking the legal rate as a reference narrows arbitration discretion

Over time, the legal rate acted more like protection than a benchmark. Turning it into a tool to judge tribunal rulings leads to more appeals under Section 34, drawing courts back into frequent reviews of interest levels.

Since the legal rate has shifted over time, once set at 18%, now tied to the repo rate plus a margin, linking court oversight directly to it may lead to unpredictability instead of uniformity.

V. Conclusion

Balasamy breaks away from thirty years of established practice, which favoured arbitration when setting post-award interest. While the ruling notes real-world issues, it weakens the core idea, courts should interfere as little as possible, a key part of India’s Arbitration Act. This stance conflicts with prior local rulings; furthermore, it diverges from global standards commonly followed elsewhere.

A different method would need a precise legal update, allowing only tribunals, not courts, to review post-award interest when rare situations arise. That way, tribunal independence stays intact, yet the Court's worries on equity and shifting factors are met.

With India aiming to boost its global image on arbitration, adjusting how much courts oversee tribunals is key, shifting focus toward more independence. While legal clarity matters, leaving space for arbitral judgment supports efficiency without undermining fairness. This fine-tuning helps maintain trust yet avoids excessive intervention. Instead of rigid control, a flexible approach strengthens both process and outcome.

[1] Gayatri Balasamy v. ISG Novasoft Tech. Ltd., 2025 INSC 605 (Apr. 30, 2025).

[2] Arbitration and Conciliation Act, 1996, § 31(7)(b).

[3] Morgan Sec. & Credits Pvt. Ltd. v. Videocon Industries Ltd., 2022 INSC 685 (Sept. 1, 2022).

[4] State of Haryana & Ors. v. S.L. Arora & Co., AIR 2010 SC 1511 (Jan. 29, 2010).

[5] R.P. Garg v. Chief Gen. Manager, Telecom Dep't & Ors., 2024 INSC 743 (Sept. 10, 2024).

[6] U.N. Comm'n on Int'l Trade L., UNCITRAL Model Law on International Commercial Arbitration (1985, amended 2006), U.N. Doc. A/40/17 (1985).

[7] L.W. Infrastructure Pte Ltd. v. Lim Chin San Contractors Pte Ltd., 1 S.L.R. 125 (Sing. C.A. 2012).

[8] La Société pour la Recherche, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures S.P.A. v. Statoil Natural Gas LLC, EWHC 875 (Comm) (Apr. 1, 2014) (Eng.).

[9] McDermott Int'l Inc. v. Burn Standard Co., Ltd. & Ors., 2006 INSC 316 (May 12, 2006).

[10] Ssangyong Engineering & Construction Co., Ltd. v. National Highways Authority of India (NHAI), 2019 INSC 647 (May 8, 2019).