Indian Courts Define Interest Rules on Arbitration Deposits
Indian courts decide full deposits stop interest on arbitral awards.
Why it matters: This impacts how GCs manage financial exposure by clearly outlining deposit requirements to cease interest, aiding in budget planning.
- Delhi High Court ruled full deposit stops interest on July 22, 2022.
- Full deposit includes principal and accrued interest, with notice to holder.
- Partial deposits or those without notice keep accruing interest.
- Calcutta High Court confirmed this legal stance in a separate ruling.
Recent rulings by Indian courts set clear standards for when interest accrual on arbitral awards ceases. The Delhi High Court held on July 22, 2022, in PCL STICCO (JV) v. National Highways Authority of India that interest halts only when the award-debtor makes a full deposit of both the principal and accrued interest, and the award-holder is formally notified.
This clarity is crucial for general counsels in controlling legal costs and planning budgets, as failure to adhere to these guidelines can lead to continued interest liabilities.
In another case, Shenzhen Shandong Nuclear Power Construction Co. Ltd. v. Vedanta Ltd., the Delhi High Court emphasized that deposits must be fully accessible to the award-holder to stop interest. Bank guarantees or partial payments that don't fulfill this condition mean interest will continue to accrue.
The Calcutta High Court, in State of West Bengal v. BBM Enterprise, reiterated that deposits need to comprise both the principal amount and any interest that has already accrued to effectively halt further interest.