IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Ex. Pet. No. 5 of 2023 a/w Ex. Pet. No. 19 of 2023 .
Reserved on : 06.10.2023 Decided on : 17.11.2023
1. Ex. Pet. No. 5 of 2023 E.I.H. Limited and Others.
........... Original Claimants/Decree Holders No.1 and 2.
Versus State of Himachal Pradesh and Others.
.............Original respondents No.1 & 2/Judgment Debtors No.1 & 2.
2. Ex. Pet. No. 19 of 2023 State of Himachal Pradesh and Others.
....Decree Holder/Original Claimant No.2.
Versus E.I.H. Limited and Others.
.......Judgment Debtors/Original Claimant No.1.
Coram The Hon'ble Mr. Justice Satyen Vaidya, Judge. Whether approved for reporting? 1 No 1 Whether reporters of the local papers may be allowed to see the judgment?
::: Downloaded on - 17/11/2023 20:31:59 :::CIS 2For the petitioner(s) : Mr. R.L. Sood, Sr. Advocate, with Mr. Arjun Lall, Advocate, for the petitioner(s) in Ex. Pet. No. 5 of 2023 and for the respondent in .
Ex. Pet. No. 19 of 2023.
For the respondent(s) : Mr. Dhruv Mehta, Sr. Advocate, with Mr. Prabhat Kumar, Advocate, Mr. Shyam Agarwal, and Mr. Vivek Negi, Advocates, for the respondents in Ext.
Pet. No. 5 of 2023 and for the petitioners in Ex. Pet. No. 19 of 2023.
Satyen Vaidya, Judge Both these petitions are being decided by a common order as common questions of facts and law are involved.
2. By way of these petitions, execution of award dated 23.07.2005, passed by the sole Arbitrator {Hon'ble Justice (Retd.) Mr. R.P. Sethi}, has been sought by both the contesting parties before the learned Arbitrator.
3. Petitioners in Execution Petition No. 5 of 2023 have been referred to as claimant No.1 and petitioners in Execution Petition No. 19 of 2023 have been referred to as claimant No.2 in the award. The parties hereto, for the sake of convenience and ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 3 clarity, hereinafter shall be referred to by the same status by which reference was made to them in the .
award under execution.
4. A dispute had arisen inter se claimant No. 1 and claimant No.2, out of the terms of Joint Venture Agreement (for short 'JVA') executed between them on 30.10.1995 with the object to construct and run a 'Five Star Hotel' in joint venture. The JVA had created certain mutual rights and obligations inter se claimant No.1 and claimant No.2. The land belonged to State of Himachal Pradesh of claimant No.2. The construction was to be raised by claimant No.1 at their own cost. 35% equity shares were reserved in favour of the State of Himachal Pradesh of claimant No.2. The value of the land was assessed at Rs. 7.5 Crores and such value was set off against the value of equity shares of State of Himachal Pradesh. The construction was to be raised within a stipulated period and after raising the construction the Hotel was to be made commercially operational within four years. A further period of two years was allowed ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 4 for making the hotel commercially operational against payment of damages @ Rs. 2 Crores per .
year.
5. The disputes between the parties were taken before the Company Law Board and this Court.
Remedies were sought before the Company Law Board under the Companies Act. A Company Appeal was also filed before this Court.
petition and subsequently
r In addition, writ
a review petition also
came before this Court relating to the disputes
arising out of JVA.
6. A Division Bench of this Court, vide order dated 17.12.2003 appointed Hon'ble Justice (Retd.) Mr. R.P. Sethi, as the sole Arbitrator in the matter. The terms of reference for arbitration were directed to include:-
"1) The entire adjudication by the Arbitral Tribunal with respect to the legality or otherwise of the action of the State Government canceling the joint venture agreement and taking consequential action, which was the subject matter of the adjudication by the Company Law Board ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 5 which ultimately became the subject matter of Company Appeal No. 1 of 2003.
.
2) Whether the petitioners have rightly and properly constructed the building of the hotel and as to whether the construction of this building the entire building) is in accordance and in conformity with a valid sanction/permission granted by the competent authority of the State.
3) Whether the petitioners, in raising the construction of the building ( the entire building) or in completion thereof, have r deviated from any sanctioned plan or have they constructed any part of the building in excess, or in violation of any sanction, validity and /or legitimately granted by the Competent Authority of the State.
4) If upon consideration, the Arbitral Tribunal finds that any violation has been committed in the construction of the building, is such violation compoundable under law, or has it already been compounded by the order of any competent authority, if so, with what result and/or consequence, and if not already compounded, is it legally capable of being compounded in future and if so, on what terms and which is the authority to compound?
5) If the Arbitral Tribunal finds that violation(s) if committed in the construction of the ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 6 building, if not compoundable, whether coercive measures can or should be taken by the State and in that event, what could .
be the consequences, including the consequence of demolition of the building or any part of it?
6) If the Arbitral Tribunal ultimately finds, after adjudication, on a totality of circumstances and on consideration of all relevant aspects, that the partnership between the State Government and EIH Ltd. is not workable any more and that in the considered opinion of the Arbitral Tribunal, parting of the ways is, and would be the most ideal and conducive situation, in public interest as well as in the interest of the parties, the Arbitral Tribunal may while passing the arbitral award also indicate the terms on which such parting of ways can best be achieved and also in the process, indicate as to whether fastening of any liability and/or pecuniary or financial obligation upon the parties or any of them would be a consideration for parting of the ways and indicate the terms thereof.
7) It shall be open to the parties to file claims/counter claims before the Arbitral Tribunal, including the claims for compensation/damages with respect to an arising out of any alleged acts of omission or commission against each other."::: Downloaded on - 17/11/2023 20:31:59 :::CIS 7
7. Learned Arbitrator passed the award on .
23.07.2005. The following extract from the award dated 23.07.2005 shall be relevant to be noticed here as the same refers to the executable part of the award.
"In this view of the matter, I have come to this conclusion that after termination of the JVA, the Claimant No. 1 (EIH) be permitted to continue the MRL with all its rights and liabilities, the land being retained by it on the lease hold basis. I am further of the view that the State of Himachal Pradesh, Claimant No. 2 should facilitate transfer of all its shares to Claimant No. 1 on payment of a consolidated sum of Rs. 12 Crores which includes the cost of land being Rs. 7.5 Crores, the penalty amount agreed in terms of Clause 10.1(b) of the JVA reduced to Rs. 3.5 Crores and a sum of Rs. 1 Crore as consolidated amount for the user of the land from termination of the JVA with effect from 17-12-2003 till the date of this award. The lease shall be initially for a period of 40 years from the date of this award, renewable thereafter with the consent of the parties upon conditions mutually agreed for such periods and rent as may be agreed from time to time. In case of disagreement regarding the fixation of rent, the party in possession and running the business of the Hotel and the State of H.P. shall refer the matter to the ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 8 Court as defined in Section 2(e) of the Arbitration and Conciliation Act, 1996, Upon reference, the Court after hearing the parties shall determine the .
rate of rent for the period agreed to be extended.
Such determination shall be finalized by the Court within a period of one month. The lease rent for the first five years shall be Rs. 1.25 Crore annually; for sixth to tenth year Rs. 1.50 Crores annually, for eleventh to fifteenth year Rs. 1.75 Crores annually, for sixteenth to twentieth year Rs. 2 Crores annually; for twenty-first to twenty-fifth year Rs. 2.30 Crores annually; for twenty-sixth to thirtieth year Rs. 2.75 Crores annually; for thirty-first to thirty-fifth year Rs. 3.40 Crores annually; for thirty-
sixth to fortieth year Rs. 4 Crores annually. The lease rent has been determined keeping in mind the offer of Claimant No.1 made to the State of Himachal Pradesh at the initial stage, which is on much lower side than the rate of lease rent offered by M/s. Holiday Inn Hotel Pvt. Ltd.
From the date of the award and transfer of shares to Claimant No. 1, the Claimant No. 2 shall have no right and liability in the MRL, except to the extent of the right of a lessor in the land. Further, Claimant No. 1 shall be entitled to all the rights and subject to liabilities with respect to the MRL and the State shall provide all facilities for properly running the Hotel by Claimant No. 1 in accordance with law. In case Claimant No. 1 does not perform its part of duties under this award within a period of 3 months from the date of the award, the Resolution of the Board of Directors and the Government decision ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 9 taken on 07-03-2002 shall stand revived at the option of Claimant No. 2 and be executed by it as if a fresh decision and action has been taken .
consequent upon the termination of the JVA. In such an eventuality the rights and liability of the parties shall be determined on the basis of inspection of the accounts of the MRL in light of the JVS and other agreements and this award by a reputed concern of Chartered Accountants to be nominated by the High Court. Pending determination and the settlement of accounts, the claimant NO. 2 shall be entitled to take possession and run the "Wildflower Hall Hotel".
Issue No. 16:-
In the light of the findings returned on various issues and decisions arrived at on the disputes between the parties, the following award is made which shall come into force and bind the parties with effect from today: -
(1) That all the terms and conditions of the JVA are legal, valid and binding on the parties to these proceedings including the MRL;
(2) That the Claimant No. 2 was legally entitled to cancel the Joint Venture Agreement and take consequential actions but only after 03-05-2002;
(3) That action of the Claimant No. 2 of terminating the JVA on 04-03-2002 and ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 10 conveying its decision to Claimant No. 1 on 06-03-2002 vide Annexure 'N' page 331, Vol. II-B is not sustainable and is liable to be set .
aside;
(4) That the JVA is declared to have been terminated with effect from 17-12-2003.
The termination of the JVA shall be subject to the directions given while deciding Issue No. 14 that the Claimant No.1 shall continue to hold and possess the property of the MRL upon executing a lease deed in favour of Claimant No. 2 on the terms and conditions as specified while deciding Issue No. 14;
(5) That upon the execution of the lease deed in its favour, the Claimant No. 2 shall transfer all its shares in favour of the Claimant No. 1 or its nominee/nominees. The Claimant No. 2 shall also facilitate the transfer of shares under the provisions of the Companies Act;
(6) That in case the lease deed is not executed as per award, the Resolution and orders passed by Claimant No. 2 on 07-03-2002 shall be deemed to have been revived and passed afresh in the discretion of Claimant No. 2 to be executable against Claimant No. 1 without any further delay;
(7) That in case the Claimant No. 1 opts to execute the lease deed and remain in possession of the property of the MRL, the ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 11 Claimant No. 2 shall stand absolved of all its liabilities but be entitled to the right over the land in dispute as a lessor only;
.
(8) That in case the claimant No. 1 opts to execute the lease deed in favour of the State of H.P., the authorities under The Himachal Pradesh Registration of Tourist Trade Act, 1988 are directed to accord registration of additional 57 rooms in the original certificate of registration Annexure 'HH' of the Hotel without any further delay. The Registration shall, however, be subject to the provisions of the said Act and the MRL under an obligation to maintain the Hotel in accordance with the requirements of law. Till the competent authority accords the registration, the provisional permission granted by the High Court of H.P. on 17-12-2003 shall continue;
(9) That in case the Claimant No. 1 decides not
to obey the conditions of this award, the
Claimant No. 2 shall be entitled to
take immediate possession and
management of the Hotel. The disputed
accounts of the MRL shall be settled by the
reputed Chartered Accountants to be
appointed by the High Court. Non-
settlement of accounts would not disentitle
the Claimant No. 2 to take possession and management of the Hotel;::: Downloaded on - 17/11/2023 20:31:59 :::CIS 12
(10) That the permission granted for construction of the Hotel as per Revised Sanctioned Plan though defective is upheld in .
the interests and for the benefit of the parties.
Such construction is, however, subject to the findings regarded deviations and compounding of such deviations;
(11) That all the deviations are directed to be compounded by the Director Town and Country Planning on payment of lump sum amount of Rs. 5 Lakhs by the MRL;
(12) That no party is found entitled to claim r damages against each other except to the extent as upheld in terms of Clause 10.1(b) of the JVA;
(13) That in view of this award no party is entitled to any further relief as prayed for in the Company Petition, Company Appeal, Writ Petition and Review Petition;
(14) That no party shall have the right to initiate further litigation with respect to the property of the Wild Flower Hall Hotel and the prayers for reserving such a right in terms of Order 2 Rule 2 of the CPC are rejected;
15) That under the peculiar circumstances of
the case and keeping in view that
both the parties have been granted
::: Downloaded on - 17/11/2023 20:31:59 :::CIS
13
reliefs to certain extent. It is directed that
they shall bear their own costs.".
8. The award was challenged by claimant No. 1, under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'The 1996 Act').
Learned Single Judge dismissed the petition of claimant No.1, vide judgment dated 25.02.2016. The claimant No.1, assailed the judgment passed by learned Single Judge in appeal under Section 37 of the 2016 Act, which also came to be dismissed by a Division Bench of this Court, vide judgment dated 13.10.2022, passed in Arbitration Appeal No. 11 of 2016 .
9. The award passed by learned Arbitrator is stated to have attained finality as none of the parties have raised any further challenge.
10. In both the execution petitions, the rival parties have filed their respective objections.
11. Claimants No. 1 and 2 are seeking the execution of award dated 23.07.2005 in their own ways. According to claimant No. 1, the first step for ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 14 implementation of the award is to be initiated by claimant No. 2, whereas claimant No.2 alleges the .
same thing against claimant No.1.
12. Claimant No. 1 contends that they have already deposited the amounts as was required from them under the award in this Court during the pendency of these petitions. Now, it is for the claimant No. 2 to come forward to get the lease deed executed in favour of claimant No. 1 in respect of the land in question after getting the cancellation of earlier sale deed dated 06.02.1997 executed by the State Government in favour of the MRL of claimant No. 1. It is further submitted that claimant No. 2 is also liable to transfer its shares in favour of MRL which will follow their entitlement to the amount assessed to be paid by claimant No. 1 to claimant No.2 under the award.
13. Per contra, claimant No. 2 has contended that the award had bound the claimant No.1 to perform its part obligated under the award within three months and since the claimant No. 1 has failed ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 15 to fulfil such obligation, the said claimant has lost of rights, title and interest in the property and as a .
consequence the claimant No. 2 has become entitled to resume the property, subject to condition imposed in the award. It has also been submitted that nothing has been paid to claimant No.2 in terms of the award by claimant No. 1 till date. The award was passed in the year 2005 and claimant No. 1 has been able to drag the litigation for a period of more than seventeen years with the intent to avoid performance of its obligation under the award. Even after the dismissal of arbitration appeal filed by claimant No. 1, they have not performed their part of the obligation under the award within three months.
A claim for compound interest @ 18% per annum under Section 31(7)(b) of 2016 Act, has been made on the amount that is payable under the award to claimant No. 2, on the premise that claimant No. 2 is to be compensated for undue delay caused at the end of claimant No. 1 in implementation of the award.
::: Downloaded on - 17/11/2023 20:31:59 :::CIS 1614. I have heard learned counsel for the parties and have also gone through the record of the .
case carefully.
15. The fact that both the contesting parties have applied for execution of award passed by learned Arbitrator is sufficient to infer that none of the parties have any doubt regarding executability of the award. Claimant No. 1 has sought assistance of the Court for execution of the award in following terms:-
(i) By directing the Judgment Debtor No.1, to forthwith execute and register a lease deed in favour of EIH Limited (Decree Holder No.1) in respect of the property commonly known as Wildflower Hall, Charabra, (Tehsil Shimla Rural), District Shimla, Himachal Pradesh, bearing Khewat No. 1/14, Khatauni No. 18, Khasra No. 81 to 101 about 77, 471/- sq mts ( i.e. 102.19 bighas) situate at Mauza Chharabra, Pargna Dharthi, Tehsil and District Shimla ("Property"), in terms of the findings returned on issue No. 14 as set out in the Arbitral Award by the Ld. Arbitrator;
(ii) By simultaneously directing the Judgment Debtor No.1, (with the execution and ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 17 registration of the lease deed), to transfer its entire shareholding, in Mashobra Resort Ltd, in favour of the present Decree Holder .
No.1,namely, EIH Ltd, in accordance with and in terms of the requirement of law. The said transfer be directed to take place in terms of the findings on Issue No. 14 as set out in the Arbitral Award;
(iii) By directing the Judgment Debtor No.1 to further facilitate the said transfer, pursuant to paragraph 10(b), above, in accordance with the provisions of the Companies Act, 2013;
(iv) By directing the Judgment Debtor No.2, the Special Area Development Authority, Shimla to compound all deviations as directed under the Arbitral Award after receiving the payment of Rs. 5,00,000/- (Indian Rupees Five Lakh Only) and consequently to issue the necessary Certificate of Completion of the entire structure (s) on the Property;
(v) By directing the Judgment Debtor No.1 and its authorities, to accord Registration of the additional 57 rooms of Hotel Wildflower Hall situated on the Property, in favour of the Decree Holder No. 2, by incorporating the same in the Original Certificate of Registration issued by it, under the Himachal Pradesh Registration of Tourist Trade Act, 1988. Further, by suitably amending he said Certificate of Registration ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 18 and thereafter to issue an amended Certificate of Registration incorporating therein all the rooms;
.
(vi) By any other mode and method deemed fit by this Hon'ble Court;
(vii) Award costs of the present proceedings in favour of the Decree Holders;
(viii) Pass such other and further orders that this Hon'ble Court may deem to be just and necessary in the facts and circumstances of the case.
16. On the other hand, claimant No. 2 has sought the execution of the award in following terms:-
(i) By directing the Judgment Debtors to facilitate and render all necessary assistance required in cancellation of the conveyance deed dated 06.02.1997;
(ii) By directing the Judgment Debtors to
execute and register the lease deed in
accordance with the Award dated
23.07.2005. Draft lease deed to be executed is prepared in accordance with standard lease deed under HP lease Rule 2013 and is annexed as (Annexure P-6);::: Downloaded on - 17/11/2023 20:31:59 :::CIS 19
(iii) By directing the judgment debtors to pay the amount of Rs. 1,67,13,44,057/- towards lease rent under the Award alongwith .
statutory interest u/s 31(7)(b) due from the date of the Award i..e 23.07.2005 till 01.06.2023;
(iv) By directing the judgment debtors to pay the amount of Rs. 2,31,06,36,341/- which includes consolidated sum under the Award alongwith statutory interest u/s 31(7)(b) of the 1996 Act, due from the date of the Award r i.e. 23.07.2005 till 01.06.2023;
(v) By directing the judgment debtors to pay the amount of Rs. 96,27,651/- towards lump sum amount for compounding deviation under the Award alongwith statutory interest u/s 31(7)(b) of the 1996 Act due from the date of the Award i.e. 23.07.2005 till 01.06.023. Copy of the total amount of Rs. 3,99,16,08,049 receivable by the State/Decree Holder under the Award dated 23.07.2005 as on 01.06.2023 is annexed as (Annexure P-7);
(vi) In case the judgment debtors fails to pay any of the amounts at serial No. iii), iv) and
v) above, by attachment and sale of the properties of Judgment Debtors;
(vii) Any other mode deemed fit by this Hon'ble Court;::: Downloaded on - 17/11/2023 20:31:59 :::CIS 20
(viii) Pass such other and further orders deemed fit by this Hon'ble Court in the facts and circumstances of the case.
.
17. The objections raised by claimant No. 2 are that the claimant No. 1 is firstly required to facilitate and render all necessary assistance required in cancellation of conveyance deed dated 06.02.1997.
Thereafter, lease deed is to be proposed draft of lease deed has also been placed on r executed. The record by claimant No. 2. Further, claimant No. 1 is liable to pay statutory interest under Section 31(7)(b) of the 1996, Act. Firstly, on the consolidated amount of Rs. 12 Crores and secondly, on the lease rent that has become due to claimant No. 2 and thirdly, on the amount of Rs. 5 lacs payable by claimant No. 1 to Special Area Development Authority, Kufri of claimant No. 2 as composition fee. Claimant No. 2 has claimed interest @ 18% on due amounts with annual rest. Claimant No. 2 has specifically stated in their objections that they are ready and willing to ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 21 perform their obligation under the award as soon as claimant No. 1 perform their part of the obligation.
.
18. Claimant No. 1 has filed reply to the objections of claimant No. 2 by alleging that common objections on behalf of the State of Himachal Pradesh and Special Area Development Authority, Kufri, were not maintainable. Claimant No. 2 were asking the Executing Court to travel beyond the decree, which was impermissible. The award was silent as to grant of interest and hence the claimant No. 2 was not entitled to any interest. In any case, the interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1966, would be simple interest. It has further been submitted that the liability to pay consolidated amount or lease money as per award would arise against claimant No. 1, once the claimant No. 2 performed its part of the obligation. As per claimant No. 1, the award passed by learned Arbitrator cannot take parlance of a money decree as none of the amounts awarded in the award were in terms of the JVA. The payment of ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 22 amounts by claimant No. 1 to the State of Himachal Pradesh are contingent upon the condition of .
transfer of shares by the State and hence, interest would not accrue until the payment of the amount became due. Similarly, the amount payable as lease money would be due to State only on execution of lease deed and again the liability of interest would become due from the date when amount of lease money becomes payable. Claimant No. 1 has also made a specific assertion that there was no provision in the award for reversion of the property to the State as the Arbitrator had not set-aside the conveyance deed. The liability of payment of interest has also been denied on the ground that in the first instance the execution of award was stayed by implication of law on institution of petition under Section 34 of the Arbitration and Conciliation Act, 1966 and subsequently the Appellate Court had passed an order of status quo against the parties.
19. In Execution Petition No. 19 of 2023, claimant No. 1 has also filed objections and these ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 23 objections, inevitably are the same, which have been taken as grounds for reply filed by claimant No. 1 to .
the objections of claimant No. 2 in Execution Petition No. 05/2023. Similar is the position with respect to the stand taken by the claimant No.2 to the objections of claimant No. 1 in Execution Petition No. 19 of 2023. Claimant No. 2 has replied to the objections of claimant No. 1 in No. 19 of 2023 in the same terms in which r Execution Petition their objections were filed in Execution Petition No. 05/2023. In nutshell, the gist of respective stands of claimants No. 1 and 2 in both the execution petitions is substantially identical.
20. Thus, it becomes evidently clear that notwithstanding the expression of interest by both the parties in execution of the award, none has shown compliance till date on the pretext that it was the other who, under the award, was liable to initiate the first step.
21. It is not in dispute that learned Arbitrator has declared the JVA terminated w.e.f. 17.12.2003.
::: Downloaded on - 17/11/2023 20:31:59 :::CIS 24It has further been declared that the status of the EIH would be that of the lessee. The Arbitrator has .
already crystalized the rights and obligations of the parties as lessor and lessee for forty years from the date of the award, meaning thereby that the lease hold rights in favour of the EIH would be deemed to have come into effect from the date of the award, notwithstanding non-execution of formal lease deed.
The claimant No. 1 having failed in petition under Section 34 and also in appeal under section 37 of the Act, the executability of award will be seen from the date of the passing of the award.
22. Noticeably, in the award, learned Arbitrator has fixed a period of three months for claimant No. 1 to perform its part of the obligation under the award, whereas no such period has been prescribed for claimant No. 2. This observation is being made only in the context of dissipating the doubts, if any, entertained by the parties regarding the sequence in which the parties were under direction to perform their respective obligations.
::: Downloaded on - 17/11/2023 20:31:59 :::CIS 2523. It will be relevant to notice that the Hon'ble Division Bench of this Court while deciding .
Arbitration Appeal No. 11 of 2016 has dealt with the issue of resumption of land in favour of the State in extenso. It has been held that the resumption of land in favour of the State is an automatic and inevitable consequence of the award in view of the specific findings 17.12.2003. It will be r to as to termination of JVA w.e.f.
gainful to reproduce the relevant extract from the judgment passed by Hon'ble Division Bench of this Court in Arbitration Appeal No. 11 of 2016, which reads as under:-
"78. It was further submitted by the appellants that the learned Arbitrator could not have directed that the land would revert to the State Government upon termination of the JVA without cancelling the registered conveyance deed in favour of MRL as per Section 31 of the Specific Relief Act.
81. It was also argued on behalf of the appellants that once the registered conveyance deed stood executed in favour of MRL, any condition in the JVA or the conveyance deed providing for reversion of the property would be in violation of Sections 10 and 11 of the Transfer of Property Act and hence void.::: Downloaded on - 17/11/2023 20:31:59 :::CIS 26
82. We have considered the submission and find that in the instant case the conveyance deed was a .
conditional conveyance under Section 31 of the Transfer of Property Act which provides for conveyances where the transferred interest in the property reverts to the transferor when a particular uncertain event happens or does not happen. This is clearly borne out from a perusal of Clause 3 of the Conveyance Deed (at page 139 of Vol. IIA) which states that the same would be "subject to" the provisions of the JV Agreement. Clause 11.2 of the JV Agreement (at page 22 of Vol. IIA) provides for reversion of the property in favour of the State Government as a consequence of termination.
Therefore, since the conveyance deed was "subject to" the JVA, the provision regarding reversion in the JVA would be deemed to have been incorporated as a condition of transfer in the conveyance deed.
83. In taking this view, we are duly fortified by the judgment rendered by the Hon'ble Supreme Court in Petroleum & Natural Gas Regulatory Board vs. Indraprastha Gas Limited (2015) 9 SCC 209, more particularly, the observations contained in paras 23 and 24, which read as under:-
23. At this stage, it is necessary to appositely understand the said expression. In The Commissioner of Wealth Tax, Andhra Pradesh, Hyderabad v. Trustees of H.E.H. Nizam's Family, 1977 3 SCC 362, this Court was dealing with the expression "subject to" in the context of the Wealth Tax Act, 1957.::: Downloaded on - 17/11/2023 20:31:59 :::CIS 27
Section 3 of the said Act imposed the charge of wealth tax subject to other provisions of the Act. In that context, the Court opined that .
Section 3 has to be made expressly subject to Section 21 and it must yield to that Section insofar as the latter makes a special provision for assessment of a trustee of a trust. In Ashok Leyland Ltd. v. State of T.N. and Another, 2004 3 SCC 1, it has been held that "subject to" is an expression whereby limitation is expressed. In K.R.C.S. Balakrishna Chetty and Sons & Co. v. The State of Madras AIR 1961 SC 1152, this Court was interpreting Section 5 of the Madras General Sales Tax Act, 1939 wherein the Legislature had appended the expression "subject to" and while interpreting the said words, the Court ruled that they are meant to effectuate the intention of law and the correct meaning of the expression is "conditional one".
24. In South India Corporation (P) Ltd. v.
Secretary, Board of Revenue, Trivandrum and another, AIR 1964 SC 207, the Constitution Bench has ruled that the expression "subject to" in the context convey the idea of a provision yielding place to another provision or other provision to which it was made subject to. In B.S. Vadera and another v. Union of India and others AIR 1969 SC 118, this Court while dealing with the expression "any rule so made shall have ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 28 effect, subject to provisions of any Act occurring in the proviso to Article 309" ruled that:-
.
"24. It is also significant to note that the proviso to Article 309, clearly lays down that 'any rules so made shall have effect, subject to the provisions of any such Act'. The clear and unambiguous expressions, used in the Constitution, must be given their full and unrestricted meaning, unless hedged in, by any limitations. The rules, which have to be 'subject to the provisions of the Constitution, shall have effect, 'subject to the provisions of r any such Act'. That is, if the appropriate legislature has passed an Act, under Article 309, the rules, framed under the proviso, will have effect,-subject to that Act; but, in the absence of any Act, of the appropriate legislature, on the matter, 'in our opinion, the rules, made by the President, or by such person as he may direct, are to have full effect, both prospectively, and, retrospectively. Apart from the limitations, pointed out above, there is none other, imposed by the proviso to Article 309, regarding the ambit of the operation of such- rules."
84. In the instant case, the failure of the Appellant to make the hotel fully commercially operational by 03.05.2002 resulted in automatic reversion of the property to the State Government.::: Downloaded on - 17/11/2023 20:31:59 :::CIS 29
The Appellant ceased to enjoy any interest in the said property after 03.05.2002.
.
88. Furthermore, once the learned Sole Arbitrator upheld the termination of the JVA, albeit with effect from 17.12.2003, the consequences must necessarily ensue. The Board Resolution dated 07.03.2002 was itself based on the termination order dated 06.03.2002 which specifically stated that pursuant to the termination of the JVA, the entire Wildflower Hall property inclusive of land and buildings would stand resumed by the State (at r pages 402-03 of Appeal). All necessary formalities, including registration of cancellation deed, would inevitably be performed by the State Government on the basis of the Award."
24. The judgment of Hon'ble Division Bench in Arbitration Appeal No. 11 of 2016, having attained finality, the cancellation of conveyance deed dated 06.02.1997 and up-dation of records of rights remain a mere paper formality and either of the parties can approach the concerned authorities without waiting for the others.
25. It is also clear term of the award that on failure of claimant No. 1 to perform its part of the obligation under award within stipulated period, the ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 30 State shall have the right at its option to resume the property in question pending fulfilment of all .
other obligations under the award. It being so, it would always be in the interest of claimant No. 1 to get the necessary formality completed in order to continue with its lease hold rights unless the said claimant thinks otherwise.
26. As regards, the payment of rent, it will be absurd to consider that the liability r of payment of lease rent by EIH to the State will begin only after execution of formal lease deed. The first party has already utilised the benefits of property by successfully running Hotel Wild Flower Hall from the date of award. On such hypothesis, it is not understood, as to what would the status of EIH or for that matter of claimant No. 1 over the property after the passing of award especially when the JVA stood terminated and the status of claimant No. 1 was declared to be that of lessee.
27. The Arbitration Appeal No. 11 of 2016 was dismissed on 13.10.2022. The challenge to the Award ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 31 by claimant No.1 either by way of petition under section 34 of 1996 Act or by way of appeal under .
section 37 of the Act ibid was always at their own risk and peril. Having failed in the challenge the award attained finality and its execution will relate back to the date of award. The claimant No. 2 had not been able to execute the award on account of pending litigation, the liability of payment of rent will date back to the passing of the award and will entail in payment of interest from the initial date of the award itself. Moreso, when the claimant No. 1 has not paid the arrears of lease money to the State within the stipulated period of three months even after the dismissal of the appeal.
28. The second part of the award i.e. the payment of consolidated amount of Rs. 12 Crores by claimant No. 1 to claimant No. 2 and the obligation of claimant No. 2 to transfer shares in favour of the claimant No. 1, it is clearly mentioned in Clause-V of the award, more particularly, findings on issue No. 16 that the claimant No. 2 has been obligated to ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 32 transfer all its shares in favour of claimant No. 1 or its nominee/nominees upon execution of the lease .
deed. As held above, the formality of execution of lease deed is sine qua non for claimant No. 2 to perform its obligation transferring the shares in favour of claimant No. 1, whereas such formality cannot be considered to inure to the benefit of claimant No. 1 with respect to its liability lease money w.e.f. the date of award. While reading r to pay the findings of learned Arbitrator on issues No. 14 and 16 harmoniously, their remains no doubt that the State of Himachal Pradesh has been further obligated to transfer its shares to claimant No. 1 on payment of consolidated sum of Rs. 12 Crores, which again means that the payment of Rs. 12 Crores is sine qua non for claimant No. 2 to transfer its shares in favour of the claimant No.1. This part of the award has also not been implemented by claimant No. 1 within the stipulated period of three months, thereafter, the amount of Rs. 12 Crores payable by claimant No. 1 to claimant No. 2 will also ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 33 entail the liability of interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1966.
.
29. Similarly, the claimant No. 1 having failed to make the payment of Rs. 5 lacs to Special Area Development Authority, Kufri, within the stipulated time, the said amount shall also entail interest under Section 31(7)(b) of the Arbitration and Conciliation Act, 1966.
30. to
The interest under Section
r 31(7)(b) of the
Arbitration and Conciliation Act, 1966, cannot be compounded, as claimed by claimant No. 2, for the simple reason that the said provision of law provides for default clause, in which no provision for compounding of interest is there. Section 31(7) of 2016 Act reads as under:
"31(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 34 cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral .
award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment."
The Arbitrator did not provide of any interest for pre or post award period on the sum(s) directed to be paid under the award. It being so there is no escape from conclusion that the mandatory nature of Section 31(7)(b) will come into play and the post award interest on the amounts payable therein will be @ 18%.
31. The next question that has arisen is whether the interest payable on the sum(s) payable under award will be simple or compound?
32. Section 31(7)(a) has no application in the case as the Arbitrator has not awarded any pre award interest to the claimant No.2 and for this reason the post award interest will accrue only on the amount(s) payable under the award which admittedly ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 35 does not include any component of pre award interest.
.
33. Since the arbitral award is silent as to award of post award interest also, such interest shall be @18% per annum on the sum directed to be paid by the award from the date of award till its payment by virtue of specific statutory provision as enshrined in Section 31(7)(b) of 2016 Act. The said provision does not talk of compounding of interest or its capitalization after particular period of rest, therefore, in absence of any statutory mandate, the interest payable under aforesaid provision will be construed to mean simple interest @ 18% per annum on the sums payable under the award by claimant No.1 to Claimant No.2 from the date of award till the date of actual payment.
34. In Municipal Council, Thanesar Vs. Virender Kumar, (2020) 15 SCC 364, an identical question was considered and answered by Hon'ble Supreme Court as under:-
::: Downloaded on - 17/11/2023 20:31:59 :::CIS 36"8. The first issue was rightly answered in favour of the respondents. The question is no longer res integra and stands answered in clear terms in .
Para 10 of the judgment of Bobde, J. and paras 27-28 of the judgment of Sapre, J. in Hyder Consulting [Hyder Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC 189 : (2015) 2 SCC (Civ) 38].The view taken by the High Court on this issue is absolutely correct.
9. As regards the second issue, the executing court correctly appreciated that the award did not specifically state that the interest @ 7% p.a. was to be awarded with quarterly rests. In fact, the award did not specify anything; whether it be quarterly rests or yearly rests. It simply awarded interest @ 7% p.a. Since the award was completely silent on that aspect, at the stage of execution, no addition or alteration could be made in the operative directions issued in the award. The award had seen the challenges at three levels and at none of those stages, there was any modification in the operative directions of the award.
6. The appellants being aggrieved, filed aforementioned civil revisions in the High Court which were disposed of on 3-3-2017 [Virender Kumar v. Municipal Council, Thanesar, 2017 SCC OnLine P&H 5357] . The questions that arose for consideration were formulated by the High Court as: (Virender Kumar case [Virender Kumar v. Municipal Council, Thanesar, 2017 SCC OnLine P&H 5357] , SCC OnLine P&H para 9) ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 37 "9. Twin questions that fall for consideration of this Court are : (i) whether the decree-holders are entitled to the statutory .
benefits under Section 31(7)(a) and (b) of the Act; and (ii) whether the decree-holders- petitioners are also entitled to calculate the amount of interest on advance rent and non- refundable security, at the rate of interest offered by nationalised bank i.e. 7% p.a., with quarterly rests."
Relying on the majority view in Hyder Consulting (UK) Ltd. v. State of Orissa [Hyder Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC 189 : (2015) 2 SCC (Civ) 38] , the High Court answered the first issue in favour of the respondents and concluded that they were entitled to post-award interest in terms of Section 31(7)(b) of the Act. As regards the second issue, it was held that the respondents were also entitled to interest @ 7% p.a. with quarterly rests. The view so taken by the High Court is presently under challenge.
7. We have heard Mr Ajay Majithia, learned counsel for the appellants and Mr A. Tewari, Mr Anupam Raina, Mr Raktim Gogoi and Mr Chritarth Palli, learned advocates for the respondents.
10. The executing court found that it was doubtful whether the award of interest was @ 7% with quarterly rests or yearly rests. In fact, the situation was more fundamental, whether there was award of any compound interest at all. The executing court put it with yearly rests which the ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 38 High Court in revisions preferred by the appellants modified to quarterly rests. In our view, both the executing court and the High Court .
completely erred and awarded compound interest in favour of the respondents when the award had stipulated it to be 7% p.a. simpliciter. The award did not even remotely suggest that such award of interest would be with a direction that interest be capitalised on yearly or quarterly basis. It was pure and simple award of interest @ 7% and could not be taken to be a direction to award compound interest.
11. We, therefore, accept the submission made by the learned counsel for the appellants as regards second issue and direct that the direction issued in para 21 of the award shall be construed as simple interest @ 7% p.a.
12. Consequently, the pre-award interest on the amounts in question shall be calculated @ 7% p.a. simple interest. The respondents shall be entitled to the benefit under Section 31(7)(b) of the Act and post award interest shall also be @ 7% p.a. simple interest."
35. Since, the award grants right to the State to resume and take possession of the property immediately on non-compliance of the obligation by claimant No. 1 within the stipulated period and such option has been reserved in favour of claimant ::: Downloaded on - 17/11/2023 20:31:59 :::CIS 39 No. 2, it is for claimant No. 2 to decide on its option and in case it so desires, it is free to resume and .
take possession of the property immediately. In case the State Government does not choose to avail such option, the claimant No. 1 is to take steps with respect to cancellation of conveyance deed dated 06.02.1997 and up-dation of revenue records of rights and thereafter to immediately take steps for execution of lease deed.
36. In light of what has been held above, the prayers made by claimant No. 1 in the execution petitions are pre-mature. Claimant No. 1 is also to deposit the sum of Rs. 12 Crores with interest @ 18% simple per annum from the date of passing of the award. Similarly, it is liable to pay lease rent to claimant No. 2 w.e.f. the date of award with proportionate interest @ 18 % per annum thereon.
On execution of the lease deed and payment of amount due, claimant No. 2 shall transfer its shares in favour of claimant No. 1 and shall also facilitate such transfer under the Companies Act.
::: Downloaded on - 17/11/2023 20:31:59 :::CIS 4037. The objections of the parties are decided accordingly. All objections of claimant No. 1 except .
objection as to claim of compound interest, are rejected.
38. In the first instance, the parties to show their respective compliances as under:-
(i) Claimant No.2 to reveal its option whether State of H.P. intends to resume the property by taking its possession in terms of the Award.
(ii) Claimant No.1 to provide a time schedule for execution of cancellation deed for cancellation of conveyance deed dated 6.2.1997 and for further execution of lease deed in terms of the Award.
(iii) Claimant No.1 and Claimant No.2 will provide their respective calculations in respect of the sum(s) payable under the Award by Claimant No.1 to Claimant No.2 alongwith simple interest @ 18% per annum thereon.::: Downloaded on - 17/11/2023 20:31:59 :::CIS 41
38. List for compliance on 15.12.2023.
.
(Satyen Vaidya)
17th November, 2023 Judge
(sushma)
r to
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