Recently, the Jharkhand High Court, while dismissing a revision petition under Article 227 of the Constitution, upheld the Commercial Court’s interpretation that interest awarded at “prevalent rate” in an arbitral award must be calculated as per the “current rate of interest” under the Interest Act, 1978. The Court held that no interference was warranted where the arbitrator had already directed the rate conceptually, and the award had not been challenged under Section 34 of the Arbitration and Conciliation Act, 1996.
Brief Facts:
The petitioner, a joint venture between Calcutta Industrial Supply Corporation Limited and Shri Rani Sati Carriers, entered into a contract with Central Coalfields Limited (CCL) pursuant to a tender issued in 2002 for coal extraction and transportation work. Disputes arose and were referred to arbitration. An award dated 22.12.2007 was passed granting the petitioner ₹2,62,02,434/- with interest “at prevalent rates for claim due and ordered, for the period it is due to date of payment.” The respondent's challenge under Section 34 of the Arbitration and Conciliation Act was dismissed by the Sub-Judge, Ranchi in 2015. The appeal under Section 37 and the subsequent SLP before the Supreme Court were also dismissed. Subsequently, the petitioner initiated execution proceedings before the Commercial Court, Ranchi, in Execution Case No. 40 of 2015, claiming interest at 18% per annum under unamended Section 31(7) (b) of the Act. The Commercial Court rejected this claim, holding that interest must be computed in accordance with Section 2(b) of the Interest Act, 1978, interpreting “prevalent rate” as “current rate”.
Contentions of the Petitioner:
The learned counsel appearing on behalf of petitioner contended that the Commercial Court had erred in applying Section 2(b) of the Interest Act, 1978 and had effectively modified the award by replacing the arbitrator’s expression “prevalent rate” with the statutory “current rate.” It was submitted that under the unamended Section 31(7) (b), in absence of a specific rate in the award, 18% interest should be presumed as applicable. The petitioner argued that the Interest Act, 1978 was a general law and could not override the specific mandate of the Arbitration and Conciliation Act.
Contentions of the Respondent:
The learned counsel for respondent that the arbitrator had consciously used the term “prevalent rate,” thereby excluding the default statutory rate of 18%. It was submitted that the execution court merely followed the arbitral award, and did not substitute or modify it. The Commercial Court was right in interpreting “prevalent” using dictionary definitions and correlating it with “current rate” as understood under the Interest Act, 1978.
Observations of the Court:
The Court held that the dispute was limited to the interpretation of the interest direction in Para 25 of the Arbitral Award. It noted that the arbitrator did not fix a numerical rate but used the term “prevalent rate,” thereby making a conscious departure from the statutory default rate of 18% under the unamended Section 31(7) (b). The Court rejected the petitioner’s argument that the expression “prevalent rate” should automatically be interpreted as 18%, observing that the arbitrator had consciously chosen not to assign a specific numerical rate and had not indicated an intention to invoke the statutory default.
In addressing whether the Commercial Court was justified in equating “prevalent rate” with “current rate of interest” under the Interest Act, 1978, the Court affirmed this interpretation. It referred to standard English dictionaries, including the Oxford Advanced Learner’s Dictionary and the Shorter Oxford English Dictionary, to establish that “prevalent” and “current” were synonymous and commonly interchangeable in usage. Based on this linguistic analysis and the commercial court was correct when it interpreted the words ‘prevalent rate of interest’ as ‘current rate of interest’, since it is a probable view.
Further the court stated that if the petitioner had any doubt regarding the scope or meaning of the term “prevalent rate,” it was incumbent upon it to seek clarification under Section 33(1) (b) of the Act within 30 days of the award. Having failed to do so, and having not challenged the award on this ground under Section 34, the petitioner could not now, during execution, attempt to enlarge or reinterpret the award to claim a higher interest rate. Furthermore, the Court held that the executing court had rightly avoided altering the substance of the arbitral award, and had instead attempted to give it workable meaning by linking it to a legally recognised benchmark — namely, Section 2(b) of the Interest Act, 1978.
Relying on precedents such as Estralla Rubber v. Dass Estate (P) Ltd. (2001) and Surya Dev Rai v. Ram Chander Rai (2003), the Court reiterated that supervisory jurisdiction under Article 227 does not permit the High Court to function as an appellate forum over plausible and reasoned decisions of subordinate courts unless such decisions are grossly perverse or patently illegal—which was not the case here. Thus, the Court concluded that the Commercial Court’s view was not only permissible but entirely consistent with the wording of the award, statutory provisions, and judicial precedent. There was no ground for interference under Article 227.
The decision of the Court:
The Court dismissed the revision petition with costs, holding that the Commercial Court rightly interpreted the arbitral award and did not exceed its jurisdiction. The direction to compute interest in accordance with Section 2(b) of the Interest Act, 1978, based on the expression “prevalent rate” in the award was upheld.
Case Title: C.I.S.C.-S.R.S.C. (Joint Venture) vs. Central Coalfields Limited
Coram: Hon’ble Chief Justice M.S. Ramachandra Rao and Hon’ble Mr. Justice Deepak Roshan
Case No: C.M.P. No. 1064 of 2022
Advocate for the Applicant: Mr. Sumeet Gadodia, Mr. Prakash Narayan
Advocate for the Respondent: Mr. Amit Kr. Das
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