$~20
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ EX.P. 114/2015
HINDUSTAN PREFAB LTD. ..... Decree Holder
Through : Mr Udit Seth, Advocate.
versus
UNION OF INDIA ..... Judgement Debtor
Through : Mr R.V. Sinha, Advocate and Mr A.S.
Singh, Advocate.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 16.09.2016 VIBHU BAKHRU, J
1. The petitioner (hereafter 'HPL') has filed the present petition for enforcement of an arbitral award dated 07.02.2005 passed by the Sole Arbitrator, Mr Anurag Sharma (the Chief Engineer, Northern Railways at the material time). The said award was made in respect of disputes relating to an Agreement dated 17.03.1997 entered into between the parties for supply of Monoblock Concrete Sleepers.
2. The said award was challenged by the Judgement Debtor (hereafter 'the railways') which was rejected and therefore, undisputedly, the award has become final and is liable to be enforced as a decree of this court.
3. According to the railways, the sum payable under the said award has EX.P. 114/2015 Page 1 of 9 been paid and the award stands satisfied. This is disputed by HPL.
4. The short issue that arises for consideration is whether the Judgment Debtor is also liable to pay interest from the date of the arbitral award till the realization, in terms of Section 31(7)(b) of the Arbitration and Conciliation Act, 1996.
5. Mr Seth, the learned counsel for HPL submits that in so far as pre- award interest is concerned, there is no dispute that the same is not payable to HPL as the arbitrator has rejected the said claim. However, he submits that the arbitrator has not awarded any post-award interest; consequently, in terms of provisions of Section 31(7)(b), HPL would be entitled to interest at the rate of 18% per annum from the date of the award till the date of payment.
6. Mr Sinha, learned counsel appearing for the railways stoutly disputes the aforesaid contention. He has referred to the award and emphasised that the petitioner had claimed interest at the rate of 19.75% on the sums withheld with effect from the date of withholding till the date of realization, which had been rejected. According to him, this clearly meant that the arbitrator had rejected the claim for any post-award interest also. Mr Sinha EX.P. 114/2015 Page 2 of 9 further submits that the award must be read on its plain terms and an executing Court cannot go behind the award which is to be enforced as a decree.
7. I have heard the learned counsel for the parties.
8. It is trite law that the executing court cannot go behind the decree/award, however, the award being enforced must be interpreted for its true meaning and intent. It is thus necessary to refer to the disputes in the context of which the award in question was made.
9. Briefly stated, the controversy between the parties arose in the following context. The railways entered into an agreement with HPL on 17.03.1997 for supply of 637500 pieces of PSC monoblock concrete sleepers at the rate of `396.26 per sleeper (including retainable MODVAT of `41.81) plus Price Variation. The said agreement had a clause which provided that if lower rates were subsequently finalised in an open tender, the same would be applicable to the agreement in question. Thereafter, the railways floated another tender (CS-120-1997) wherein it was stipulated that the rates fixed in the ongoing contracts will not be disturbed even if lower rates were finalised in the tender. A rate of `570 per sleeper was finalised EX.P. 114/2015 Page 3 of 9 which included HTS wire. According to the railways, if the cost of HTS wire was deducted, the finalised price would work out to `279.01 per sleeper. The railways sought to apply the aforesaid rate and withheld amounts due to HPL for supplies of sleeper made by HPL. This led to disputes between the parties which were referred to the sole arbitrator.
10. A plain reading of the arbitral award indicates that HPL made the following claims before the sole arbitrator:
"(A) Claims submitted by the Claimant vide their letter No.HPL/Legal/130/3503 dated 22-2-1999 Claim Illegally withheld amount Rs.4982191.00 No.1 against written agreement with retrospect effect.
Claim Restoration of rates to Rs.396.26 per sleeper No.2 + Price Variation w.e.f. 05.05.1998 till the supply continued.
Claim Interest @ 19.75% on the withheld payment No.3 w.e.f. 09.02.1998 till the realisation of the payment.
Claim Arbitration Cost Rs.100000.00
No.4
11. The Arbitrator published the award on 07.02.2005. In so far as claim Nos. 1 & 2 are concerned, the same were undisputedly awarded in favour of HPL. In other words, the arbitrator held that HPL was entitled to the sums EX.P. 114/2015 Page 4 of 9 withheld by the railways and that railways was liable to pay for the sleepers at the rate as agreed under the agreement dated 17.03.1997 till the supplies continued. However, the claim for interest was rejected. The award also indicates that the claim for interest was rejected on the ground that in terms of the agreement between the parties, no interest was due on the withheld amount. The relevant extract of the award indicating the reason for rejection of the claim of interest on amounts withheld is as under:-
"Reasoning 9.2.1 This claim pertains to interest @ 19.75% on the due payment withheld by the Respondent.
9.2.2 The claimant during the arguments cited that they are a Public Sector Undertaking and funds for the manufacture of sleepers were borrowed by them from the Ministry of Urban Development at an interest rate of 18% per annum. Due to withholding of the payment by the Railway, their internal liabilities have not been met.
9.2.3 In terms of Clause 2401 and 2403 of I.R.S. Conditions of the Contract, which are applicable in the contract, under consideration, no interest is to be paid on withheld amount. I therefore, hold that notwithstanding the court cases cited in support of grant of interest or otherwise, the express provision of the said Contract shall prevail, and therefore, no interest is due on the withheld amount."
12. Thus, in my view, the reasoning provided in the award makes it clear that the arbitrator has only considered the claim for interest in terms of the EX.P. 114/2015 Page 5 of 9 agreement and held that it was not possible to award the same since no interest was payable in terms of the agreement in question. The question whether any interest was payable post award was not in contemplation of the arbitrator. Thus, the award must be read to be silent as to the question of post-award interest on the sum awarded.
13. More importantly, the post-award interest sought to be recovered is on the sum awarded and not on any particular claim. Before the Arbitrator, Claim No.3 was restricted to interest at the rate of 19.75%. p.a on the withheld amount; this is not what HPL seeks to recover in these proceedings.
14. In the above view, the only conclusion that can be drawn is that the arbitral award is silent as to post-award interest and therefore, interest as payable under Section 31(7)(b) of the Act would be payable by the railways. Mr Seth also referred to the decision of the Supreme Court in Hyder Consulting (UK) Limited v. Governor, State of Orissa: (2015) 2 SCC 189 wherein the Court had explained as under:-
"26. Section 31 (7)(a) of the Act deals with grant of pre-award interest while clause (b) of Section 31 (7) of the Act deals with grant of post-award interest. Pre-award interest is to ensure that arbitral proceedings are concluded without unnecessary EX.P. 114/2015 Page 6 of 9 delay. Longer the proceedings, the longer would be the period attracting interest. Similarly, post-award interest is to ensure speedy payment in compliance with the award. Pre-award interest is at the discretion of the Arbitral Tribunal, while the post-award interest on the awarded sum is mandate of the statute--the only difference being that of rate of interest to be awarded by the Arbitral Tribunal. In other words, if the Arbitral Tribunal has awarded post-award interest payable from the date of award to the date of payment at a particular rate in its discretion then it will prevail else the party will be entitled to claim post-award interest on the awarded sum at the statutory rate specified in clause (b) of Section 31(7) of the Act i.e. 18%. Thus, there is a clear distinction in time period and the intended purpose of grant of interest."
15. The Court had further explained that the word "sum" as used in Section 31(7)(a) would include the sum awarded and interest would be payable on the said sum even if the said sum included interest. Thus, a clear distinction had been drawn between the sum awarded and the components of that sum; whereas the petitioner had claimed interest on one of the components of its claims. After the passing of the award, no distinction can be made on account of different claims awarded under the arbitral award; the awarded sum - the aggregate of all claims awarded - must be treated to be the "sum" as referred under Section 31(7)(a) of the Act. This was also clearly explained by the Supreme Court as under:-
"30. Therefore, I am inclined to hold that the amount award under Section 31 (7)(a) of the Act, whether with interest or EX.P. 114/2015 Page 7 of 9 without interest, constitutes a "sum" for which the award is made.
31. Coming now to the post-award interest, Section 31(7)(b) of the Act employs the words, "A sum directed to be paid by an arbitral award..." Clause (b) uses the words "arbitral award" and not the "Arbitral Tribunal". The arbitral award as held above, is made in respect of a "sum" which includes the interest. It is, therefore, obvious that what carries under Section 31(7) (b) of the Act is the "sum directed to be paid by an arbitral award" and not any other amount much less by or under the name "interest". In such situation, it cannot be said that what is being granted under Section 31(7) (b) of the Act is "interest on interest". Interest under clause (b) is granted on the "sum" directed to be paid by an arbitral award wherein the "sum" is nothing more than what is arrived at under clause (a)."
16. Although, the said decision was rendered in the context of whether post-award interest was payable to pre-award interest, it clearly highlighted the distinction in the nature of the sum awarded and its components.
17. As stated earlier, in the present case, the arbitrator has rejected the claim for interest on the sum withheld on the ground that no interest is payable under the agreement for the amount withheld; but it is difficult to accept that that arbitrator has also held that no interest is payable on the sum awarded. No such direction or decision can be read into the award in question. It is also relevant to note that although the award was published on 07.02.2005, the railways did not make any payment till 02.01.2013 - it EX.P. 114/2015 Page 8 of 9 would be patently unfair, if the railways does not compensate HPL for using the awarded sum/ depriving HPL of those funds.
18. In view of the above, the railways is directed to recompute the amount payable to HPL in accordance with the observations made above and ensure that the amount is paid within a period of eight weeks from today.
19. List on 20.02.2017.
20. Order Dasti.
VIBHU BAKHRU, J SEPTEMBER 16, 2016 pkv EX.P. 114/2015 Page 9 of 9