* HIGH COURT OF DELHI AT NEW DELHI
+ F.A.O. No.375/2011 & C.M. No.16262/2011
F.A.O. No.377/2011 & C.M. No.16270/2011
F.A.O. No.379/2011 & C.M. No.16279/2011
F.A.O. No.399/2011 & C.M. No.17005/2011
F.A.O. No.402/2011 & C.M. No.17049/2011
Decided on : 2nd July, 2014
DHARMENDER SHARMA & ANR ..... Appellants
Through: Mr. Sanjeev Sagar, Advocate.
versus
SRIRAM TRANSPORT FINANCE CO LTD & ANR
..... Respondents
Through: Mr. Sourabh Leekha, Advocate.
WITH
+ F.A.O. No.376/2011 & C.M. No.16265/2011
F.A.O. No.378/2011 & C.M. No.16271/2011
F.A.O. No.381/2011 & C.M. No.16383/2011
F.A.O. No.390/2011 & C.M. No.16541/2011
LOKESH KUMAR & ANR ..... Appellants
Through: Mr. Sanjeev Sagar, Advocate.
versus
SRIRAM TRANSPORT FINANCE CO LTD & ANR
..... Respondents
Through: Mr. Sourabh Leekha, Advocate.
WITH
F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 1 of 10
F.A.O. No.398/2011 & C.M. No.17002/2011
NEERAJ BHOLA & ANR ..... Appellants
Through: Mr. Sanjeev Sagar, Advocate.
versus
SRIRAM TRANSPORT FINANCE CO LTD & ANR
..... Respondents
Through: Mr. Sourabh Leekha, Advocate.
AND
F.A.O. No.400/2011 & C.M. No.17009/2011
RAVINDER KUMAR & ANR ..... Appellants
Through: Mr. Sanjeev Sagar, Advocate.
versus
SRIRAM TRANSPORT FINANCE CO LTD & ANR
..... Respondents
Through: Mr. Sourabh Leekha, Advocate.
CORAM:
HON'BLE MR. JUSTICE V.K. SHALI
V.K. SHALI, J.
1. These are eleven appeals under Section 37 of the Arbitration and Conciliation Act, 1996 against the order dated 27.5.2011 passed by the learned Additional District Judge, South District, Delhi, rejecting the F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 2 of 10 objections of the appellants under Section 34 of the Arbitration and Conciliation Act, 1996, against the award dated 15.2.2010.
2. The learned counsel for the appellants has raised the question only with regard to reduction of rate of interest from 18 per cent per annum, as awarded by the learned arbitrator and upheld by the learned Additional District Judge, to 10 per cent per annum or such amount as may be deemed reasonable by this court. For this purpose, the learned counsel for the appellants has placed reliance on the judgment of the Apex Court in M/s. MSK Projects (I) (JV) Ltd. vs. State of Rajasthan & Anr.; AIR 2011 SC 2979.
3. I have heard the learned counsel for the appellants as well as the learned counsel for the respondents and have also gone through the record.
4. Before dealing with the submissions of the learned counsel for the appellants for the reduction of the rate of interest as awarded by the learned arbitrator, it will be worthwhile to mention that in all these cases the facts are almost similar inasmuch as the loan was drawn by the appellants for the purchase of commercial vehicle for which standard format documents were signed by the parties apart from hypothecation of F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 3 of 10 the vehicle. The facts of the appeal being F.A.O. No.375/2011 are only being given and in rest of the cases, the facts being on similar lines, the same need not be repeated herein to make the record bulky as the issue is with regard to payment of interest.
5. The appellant No.1 is the borrower and the appellant No.2 is the guarantor. The appellant No.1 had availed of finance for purchase of a commercial vehicle from respondent No.1 by way of a loan-cum- hypothecation agreement dated 28.11.2006. The loan was to be repaid in 47 installments. The first and the second installments were to be of a sum of Rs.19,955/- and the remaining installments were of Rs.19,940/-. The appellant No.1 paid a sum of Rs.1,47,322/- only upto 31.5.2007. Since the appellants failed to adhere to the terms and conditions of the loan agreement, therefore, the respondent No.1 recalled the loan and issued a demand notice dated 2.7.2009 to the appellants and terminated the agreement. The respondent also exercised its option to have the dispute referred to a sole arbitrator for the recovery of balance outstanding amount of Rs.7,89,888/- apart from other expenses, insurance, OD of delayed installment which turned out to be a total sum of Rs.9,31,369/-. It may be pertinent here to mention that in terms of the loan agreement, it F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 4 of 10 is not in dispute that in the event of their being any default on the part of the appellants in repayment of the loan, the respondent was entitled to delayed payment charges @ 3 per cent per month which turns out to be @ 36 per cent per annum. The interest was claimed @ 36 per cent per annum by the respondent/claimant with effect from 1.3.2009 apart from re-possession of the vehicle and the disposal of the same.
6. Vide ex parte award dated 15.2.2010, the sole arbitrator allowed the claim of the respondent for a sum of Rs.9,31,369/- along with interest @ 18 per cent per annum with effect from 1.3.2009 in addition to re- possession of the vehicle and disposal of the same. This award was passed ex parte against the appellants as they had failed to respond to the notice despite the service having been affected on them.
7. The appellants, after receipt of the copy of the award, challenged the same before the court of Additional District Judge by filing objections under Section 34 of the Arbitration and Conciliation Act, 1996 on the ground that they have not been validly served. On merits as well as on interest also, a challenge was laid which was partly allowed by the learned Additional District Judge to the extent that award of expenses of Rs.9730/- or interest @ 18 per cent per annum with effect from 1.3.2009 F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 5 of 10 was held to be beyond agreement and the award and, therefore, to that extent the award was set aside.
8. The appellants, feeling aggrieved from the impugned order dated 27.5.2011 have filed the present appeals in which the learned counsel for the appellants has confined his submissions only with regard to reduction of rate of interest from 18 per cent per annum to 10 per cent per annum. In this regard, the learned counsel has referred to M/s. MSK Projects's case (supra) wherein the Supreme Court has upheld the reduction of rate of interest from 18 per cent per annum to 10 per cent per annum.
9. I have gone through the judgment cited by the learned counsel for the appellants; however, I do not feel that the aforesaid judgment is of any help to the appellants in the instant case. This is on account of the fact that there is no proposition of law laid down by the Apex Court in the said case that reduction of rate of interest from 18 per cent per annum to 10 per cent per annum can be granted in each and every case on account of the lowering of the rates of interests by the banks on the deposits made with it, as a matter of course. It is in the facts of that particular case and the view taken by the judicial forums, that is, both by the Additional District Judge as well as the High Court which granted the interest @ 10 F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 6 of 10 per cent per annum, the Supreme Court has taken the view that the reduction of rate of interest from 18 per cent per annum to 10 per cent per annum was justified. This was a case where there was a dispute with regard to payment of damages to M/s. MSK Projects (I) (JV) Ltd. with State of Rajasthan regarding the delay in issuing of notification for the construction of bye-pass connecting Bharatpur with Mathura measuring approximately 10 kms because of which the appellant M/s. MSK Projects (I) (JV) Ltd. had claimed damages. The damages were awarded in its favour by the arbitrator and on the damages to the tune of Rs.9,90,00,000/- or so, the arbitrator had directed payment of interest @ 18 per cent from 31.12.2003.
10. Feeling aggrieved by the said arbitral award, the State of Rajasthan had filed objections under Section 34 of the Arbitration and Conciliation Act, 1996, on various grounds which were adjudicated and the rate of interest was reduced by the District Judge from 18 per cent to 10 per cent per annum. The reduction of aforesaid interest from 18 per cent to 10 per cent was upheld by the High Court keeping in view Section 31 sub- Section (7) and sub-clause (b) of the Act and also observing that "economic realities whereby the rate of interest had been reduced by the F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 7 of 10 Banks in India" and rate of interest of 10 per cent was deemed to be adequate. It is in this background that the appellant M/s. MSK Projects (I) (JV) Ltd. had gone to the Apex Court where the aforesaid rate of interest was upheld.
11. Unlike in the present case where there is an agreement between the parties which provides realization of charges @ 3 per cent per month on the delayed payment which is nothing but in the nature of interest which turns out to be @ 36 per cent per annum. I do not agree with the observation of the learned Additional District Judge that this cannot be treated as a rate of interest or that no rate of interest has been fixed by the parties by the agreement. In my view, the rate of interest fixed by the parties is @ 36 per cent per annum.
12. The language of Section 31 of the Arbitration and Conciliation Act, 1996 is starting with words "unless agreed to the contrary" thereby meaning that if something has been agreed upon to the contrary by the parties then that shall be overriding and prevailing or governing the relationship of the parties. So, in the instant case, as a matter of fact, the appellants themselves had cut off their hands by signing that agreement and agreeing to pay rate of interest @ 36 per cent which has been reduced F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 8 of 10 by the arbitrator to 18 per cent keeping in view Section 37 (7) (b) of the Act payable from 1.3.2009. Merely because the rates of interest by the banks have been reduced or that in one particular judgment, the rate of interest granted by the Apex Court is 10 per cent, does not ipso facto make that rate of interest applicable as the rate of interest payable by the appellants. The appellants, in my opinion, have been rightly saddled with an interest of 18 per cent per annum. Further even otherwise, the facts of the case are so glaring that the loan has been availed of by the appellants in the year 2006, the value of money has substantially depreciated over a period of time and more than eight years have gone by and still the amount is yet to be recovered from the appellants. In my view, the rate of interest which has been awarded by the learned arbitrator is a deterrent for the award debtors for using it as a delaying tactic to ward off their liability. It would be hardly resulting in equalization of the value for money. Reliance with regard to upholding the rate of interest in the instant case, can be placed on number of judgments of the Apex Court which would warrant that the rate of interest need not be tinkered with. Reference is made in this regard to State of Haryana vs. S.L. Arora and Company; (2010) 3 SCC 690, Bhagawati Oxygen Ltd. vs. Hindustan F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 9 of 10 Copper Ltd. AIR 2005 SC 2071, Bihar Sponge Iron Ltd. (BSIL) vs. Rail India Technical & Economic Services Ltd. (RITES); 132 (2006) DLT 489, M/s. Sayeed Ahmed & Co. vs. State of U.P.; (2009) 12 SCC 26, M/s. Maharashtra Apex Corporation Ltd. vs. Sandesh Kumar & Ors.; AIR 2006 Karnataka 138, M/s. Steeman Ltd. vs. The State of Himachal Pradesh & Ors.; (1997) CLT 123 (SC), Modi Rubber Ltd. vs. Morgan Securities & Credits Pvt. Ltd. & Anr.; 165 (2009) DLT 113, Municipal Committee, Patiala vs. Krishan Kumar Bansal; 2002 (3) RAJ 15 (pg.4), Ramrameshwari Devi & Ors. Vs. Nirmala Devi & Ors.; (2011) SLT 196, Sanjeev Kumar Jain vs. Raghubir Saran Charitable Trust & Ors.; 2011 SLT 678 and DDA vs. Wee Aar Constructive Builders and Others.
13. In view of the aforesaid reasoning, I feel that the appeals of the appellants for reduction of rate of interest are totally misconceived and do not have any merit and the same are accordingly dismissed.
V.K. SHALI, J.
JULY 02, 2014 'AA' F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011 Page 10 of 10