Delhi High Court Partly Sets Aside Religare Arbitral Award; Holds Unreasoned 10% Pendente Lite and Post-Award Interest Patently Illegal but Preserves Principal Award Under Section 34
Delhi High Court Applies Gayatri Balasamy and Severs Invalid Interest Portion From Arbitral Award; Preserves Remaining Determinations
Facts
The petition was filed by Religare Finvest Limited, a non-banking financial company, under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award dated 2 August 2023 and a subsequent order dated 20 September 2023.
Atelier Automobiles Pvt. Ltd. had availed a loan facility of ₹11.50 crore under a loan agreement dated 14 March 2016. The loan carried floating interest initially at 13% per annum, which was subsequently revised to 14% per annum with effect from 20 February 2021. The facility was secured, inter alia, by mortgage of immovable property in Saharanpur, Uttar Pradesh.
Following defaults, Religare recalled the loan and invoked arbitration. It claimed approximately ₹10.13 crore as outstanding as on 9 October 2019. A unilateral arbitral appointment was later replaced after the respondents approached the Delhi High Court under Sections 14 and 15, and the Court appointed a sole arbitrator on 7 December 2022.
The arbitrator awarded Religare ₹9,98,32,582 as principal, together with pendente lite interest at 10% per annum, post-award interest at 10% per annum and proportionate arbitration costs. The respondents were permitted to discharge the award in 36 monthly instalments.
After both parties moved Section 33 applications, the arbitrator modified the award to provide 10% interest from 14 October 2019 until the date of the award and allowed adjustment of payments made during the relevant period.
Issues
The principal issue before the High Court was narrow: whether the arbitrator’s award of 10% pendente lite and post-award interest, without giving reasons for choosing that rate despite the contractual floating rate of 13%-14%, could survive scrutiny under Section 34.
The Court also had to consider whether Religare was estopped from challenging the interest component because it had demanded or accepted payments under the award, and whether the interest portion could be severed from the rest of the award.
Petitioner’s Arguments
Religare argued that the arbitrator had erred in reducing the rate of interest to 10% per annum despite the contractual rate being 13% and later 14%.
Its primary grievance was not with the principal amount awarded but with the arbitrator’s failure to give any reasons for fixing pendente lite and post-award interest at 10%.
Religare therefore sought interference only with the interest component.
Respondents’ Arguments
The respondents argued that Religare had acted upon the repayment arrangement and accepted payments pursuant to the award and was therefore estopped from challenging the interest rate.
They relied upon the principle against approbation and reprobation, contending that a party cannot accept the benefit of an award and subsequently challenge it.
Reliance was placed upon Rajasthan State Industrial Development and Investment Corporation v. Diamond & Gem Development Corporation, Sporty Solutionz Pvt. Ltd. v. Badminton Association of India, and M.S. K.S. Jain Builders v. Indian Railway Welfare Organisation.
Analysis of the Law
Arbitrator’s Power Under Section 31(7)
The Court examined Section 31(7)(a), which permits an arbitral tribunal to award interest at such rate as it considers reasonable unless otherwise agreed by the parties.
Here, the parties had expressly agreed to a floating rate which ultimately stood at 14% per annum. Yet the arbitrator awarded only 10% without identifying any evidentiary basis, prevailing market rate or other rationale.
The Court held that such an award of pendente lite interest, unsupported by any reasons or discernible basis, violated Section 31(7)(a) and also fell foul of the requirement of reasons under Section 31(3).
Post-Award Interest Also Required a Rational Basis
The Court separately examined Section 31(7)(b), which provides the statutory framework for post-award interest and refers to the “current rate of interest” as understood under the Interest Act, 1978.
The arbitrator had again fixed post-award interest at 10% without determining the prevailing rate or disclosing any basis for the figure.
The Court therefore held that this part of the award was non-speaking, bereft of discernible reasoning and patently illegal.
Precedent Analysis
The respondents relied on Sporty Solutionz Pvt. Ltd. v. Badminton Association of India to argue that Religare, having accepted benefits under the award, could not challenge it.
The Court distinguished that decision. In Sporty Solutionz, the claimant had withdrawn its earlier Section 34 petition and thereafter unconditionally accepted the awarded compensation, before attempting a fresh challenge. That factual position was materially different.
The Court also held that M.S. K.S. Jain Builders did not decide whether acceptance of principal amount bars a challenge specifically to the interest component, and therefore did not assist the respondents.
As regards Rajasthan State Industrial Development and Investment Corporation, the Court accepted the general principle that a party cannot approbate and reprobate, but emphasised that the doctrine is equitable and cannot be mechanically applied contrary to fairness and good conscience.
Most significantly, the Court relied upon Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1, where the Supreme Court recognised that while a court under Section 34 cannot modify an arbitral award, it may sever and set aside an invalid portion while preserving the valid remainder.
Court’s Reasoning
The Court found that Religare was not challenging the principal liability under the award. Indeed, the principal sum was undisputed between the parties.
Its demand for payment of the awarded amount therefore did not amount to waiver of its independent statutory remedy against the interest determination.
Likewise, Religare’s email dated 1 September 2023 demanding recovery did not contain any express or unequivocal relinquishment of its right to invoke Section 34.
The Court held that mere demand for payment under an award cannot be construed as unconditional acceptance of every component of the award in the absence of a clear waiver.
On the merits, the arbitrator had not explained why the contractual interest rate of 13%-14% was departed from, why 10% was considered reasonable, or what prevailing interest rate was considered for the post-award period.
The Court therefore found Issue No. 3 relating to interest patently illegal.
Importantly, however, the interest determination was completely severable from the principal amount and other adjudicated claims. There was therefore no justification to set aside the entire award.
Conclusion
The Delhi High Court partly allowed the Section 34 petition.
It held that the award of pendente lite and post-award interest at 10% was contrary to Sections 31(7)(a), 31(7)(b) and 31(3) and suffered from patent illegality.
Applying the severability principle recognised in Gayatri Balasamy, the Court set aside only the interest component of the arbitral award, while leaving the remaining award—including the principal amount—intact.
The judgment therefore reinforces that a Section 34 court may preserve valid and independent portions of an arbitral award while setting aside a severable component that is legally unsustainable.
Case Details
Case: Religare Finvest Limited v. Atelier Automobiles Pvt. Ltd. & Ors.
Court: Delhi High Court
Case Number: O.M.P. (COMM) 533/2023
CNR: DLHC010555102023
Judge: Justice Avneesh Jhingan
Reserved: 7 September 2026
Pronounced: 10 September 2026
Result: Section 34 petition partly allowed; pendente lite and post-award interest component set aside as patently illegal; remainder of arbitral award preserved.
