Authority: Calcutta High Court, Commercial Division

Order Date: 27‑08‑2026

Case Overview

  • Parties: Reliance Jute Mills (International) Ltd (Award Holder) vs. Oriental Insurance Company Ltd (Award Debtor).
  • Dispute arose from insurance policy No. 311300/11/2015/12 dated 03‑04‑2014 covering raw materials and goods stored at the mill. A fire on 02‑09‑2014 destroyed finished goods and stocks valued at > Rs 15 crore.
  • Oriental Insurance paid approx. Rs 11.18 crore on 07‑09‑2016 after the claimant executed pre‑formatted discharge vouchers, which were later alleged to have been executed under coercion.
  • The matter was referred to arbitration before Sole Arbitrator Justice Bhaskar Bhattacharya (Retd.) (order dated 06‑07‑2018). The arbitral award dated 02‑03‑2020 declared the discharge vouchers void, awarded Rs 3,67,38,847.21 under five heads, costs of Rs 21,95,604, and interest on the amount already received (Rs 11,17,81,171) for 433 days at 2 % above the bank rate (effective 9 %). Additional interest on the principal and costs was to be at 2 % above the “current rate of interest” as of the award date.
  • Oriental Insurance (Award Debtor) filed a Section 34 application challenging the award and a stay of execution under Section 36(2). The court conditionally stayed the award on 07‑04‑2021, directing the debtor to deposit Rs 7,16,00,000 with the Registrar, Original Side, to be placed in a fixed deposit.
  • The deposit was made on or about 01‑06‑2021. The Section 34 application was dismissed on 20‑05‑2025, and the Registrar was ordered to encash the FD and pay the amount with accrued interest to the award holder within four weeks.
  • The award holder received Rs 8,76,59,688 by cheque on 01‑07‑2025.
  • Reliance Jute Mills then filed Execution Petition I.A. G.A. No. 1 of 2025 seeking an additional Rs 1,09,24,081, arguing that interest at 8.75 % should continue on the composite sum of Rs 7,16,77,738 from 16‑03‑2021 to 01‑07‑2025, and thereafter further interest on the shortfall.
  • The debtor contended that the deposited amount, together with FD interest, constituted full and final satisfaction of the award, relying on Supreme Court precedents that once an amount is appropriated, interest ceases.

Legal Analysis

  • The court examined the conflicting authorities: P.S.L. Ramanathan Chettiar (deposit for stay does not constitute payment, interest continues) versus Gurpreet Singh, V. Kala Bharathi, BHEL, and Elel Hotels (once payment is made, interest stops and cannot be compounded).
  • It held that the two lines of authority apply to different periods: the deposit remained conditional from 01‑06‑2021 to 20‑05‑2025, during which interest continued to accrue; after the release on 01‑07‑2025, the amount must be appropriated first to interest and costs, then to principal, with no further interest.
  • The award specifies three separate interest heads, none of which are compounded:

1. Interest on Rs 11,17,81,171 for the fixed 433‑day period (Rs 1,36,43,428).

2. Simple interest on the principal sum Rs 3,67,38,847.21 from 01‑05‑2015 to actual payment at 8.75 %.

3. Simple interest on costs Rs 21,95,604 from 02‑03‑2020 to actual payment at 8.75 %.

  • Applying simple, non‑compounded interest, the court computed the amount due as of 01‑07‑2025:
  • Interest on the already‑paid sum: Rs 1,36,43,428.
  • Principal interest: Rs 6,94,22,581.25.
  • Costs interest: Rs 32,19,868.30.
  • Total due: Rs 8,62,85,877.55.
  • The amount already paid (Rs 8,76,59,688) exceeds the correct due amount by approximately Rs 13.7 lakh.

Final Outcome

  • The court held that the award is fully satisfied; no further sum, including the claimed Rs 1,09,24,081, is payable.
  • The execution petition and all pending applications are dismissed.

Topics: Arbitration Award, Interest Calculation