HONOURABLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SMT. JUSTICE M.G.PRIYADARSINI
CIVIL REVISION PETITION No.5636 of 2015
Date: 10.06.2022
Between :
Sri P.Bhaskara Rao s/o. late P.Krishnaiah,
Aged 67 years, r/o.Block-A, Flat No.A-501,
Fortune Towers, Madhapur, Hyderabad
and another.
.... Petitioner/
Decree-Holders
and
M/s. Lodha Healthy Constructions &
Developers Private Limited (LHCPL),
having its Office at No.216, Shah & Nagar
Industrial Estate, Dr. E.Moses Road,
Worli, Mumbai, rep.by its Managing
Director, also having its Regional Office
at East Bolock, Eden Square, KPHB Road,
Near Hi-tech City, MMTS Station,
Hyderabad.
.... Respondent/
Judgment-debtor This Court made the following :
PNR,J & MGP,J CRP No.5636 of 2015 2 HONOURABLE SRI JUSTICE P.NAVEEN RAO AND HON'BLE SMT. JUSTICE M.G.PRIYADARSINI CIVIL REVISION PETITION No.5636 of 2015 ORDER : (per Hon'ble Sri Justice P.Naveen Rao) Heard Mr. Y.Ratnakar, learned counsel for the petitioners/ Decree-holders and Mr. A.Venkatesh, learned counsel for the respondent /Judgment-debtor.
2. This Revision is preferred by the petitioners aggrieved by the order dated 19.10.2015 passed in E.P.No.14 of 2015 on the file of II Additional Chief Judge, City Civil Court, Hyderabad in Arbitration Award dated 15.06.2013 passed by the learned Sole Arbitrator.
3. The judgment debtor has taken up construction of residential apartment called Belmont in the Lodha Bellezza complex. The decree holder had purchased flat having carpet area of 3200 sq.ft. along with three car parkings for a total consideration of Rs.2,42,30,799/-. While so, a dispute arose between the parties that even after accepting the entire sale consideration respondent has not delivered the possession of the flat in time. Hence, the dispute has been referred to the learned Sole Arbitrator.
PNR,J & MGP,J CRP No.5636 of 2015 3
4. The learned Sole Arbitrator having followed due process passed award dated 15.06.2013 directing the judgement debtor to refund the entire sale consideration that was paid by the decree holders with interest at 9% p.a calculated from the date of receipt of the respective amounts in instalments, within a period of three months from the date of passing of the award.
5. Thereafter, Decree-holders filed Execution Petition vide No.14 of 2014 in O.P.No.1940 of 2013 before the II Additional Chief Judge, City Civil Court, Hyderabad for enforcement of the said Arbitration award dated 15.06.2013. The said petition was ordered on 19.10.2015. The Execution Court considered two aspects. First on claim to pay interest on interest awarded by the Arbitrator on principal amount and second on interest at the rate of 18% post-award. The Execution Court rejected on the first aspect and granted relief to decree-holder on second aspect directing Judgment- Debtor to pay interest @ 18% from 14.09.2013 to 10.07.2015.
6. Aggrieved by the order in E.P.No.14 of 2014 to the extent of directing Judgment-debtors to pay 18% interest, the JDRs preferred Civil Revision Petition No.4904 of 2015 PNR,J & MGP,J CRP No.5636 of 2015 4 before this Court. The same was dismissed by order dated 26.11.2015.
7. The present Civil Revision Petition is filed by the petitioners/Decree-holders against denying interest on interest portion of sum awarded by the Arbitrator.
8. Learned counsel for petitioner contended that the Execution Court erred in not awarding interest @ 18 % per annum on the sum awarded by the Arbitrator including interest up to 13.09.2013. Hence, the post-award interest after 13.09.2013 till the date of payment has to be calculated at 18% per annum on the sum directed to be paid by the Arbitrator which is the principal amount plus the pre-award interest for which the award is made; and that the Tribunal erred in not considering the decision of the Hon'ble Supreme Court in Hyder Consulting (UK) Ltd. Vs. Governor, State of Orissa1 for calculating the payment of post- award interest.
9. On the other hand, learned counsel for the respondent contended that the award passed by the learned Sole Arbitrator makes it abundantly clear that only 9% per annum interest has to be calculated from the date of receipt of the respective amounts in instalments, and that the Decree-holder is not entitled to claim interest on interest.
1 (2015) 2 S.C.C. 189 PNR,J & MGP,J CRP No.5636 of 2015 5 9.1. It was vehemently contended by the learned counsel for respondent that the present Revision is not maintainable on the ground that principle of constructive res judicata is applicable to the facts on hand. According to the learned counsel, assailing the order of civil Court in E.P.No.14 of 2014 awarding interest at 18% per annum after expiry of three months from the date of award, respondent filed C.R.P.No.4904 of 2015. This Court did not find merit in the said contention and dismissed the revision. During the course of hearing of the said revision, petitioner has not raised plea as urged now and therefore it is deemed that this issue is already considered by this Court in the earlier revision and petitioner is restrained from raising that plea again. He would also submit that no independent CRP is maintainable once the order in the E.P.No.14 of 2014 has become final.
9.2. He would contend that the executing court has not committed any error in denying interest on interest and prayed to dismiss the Revision. Learned counsel placed reliance on the decision of the Hon'ble Supreme Court in Municipal Council, Thanesar and others v. Virender Kumar and others2. 2 (2020) 15 SCC 364 PNR,J & MGP,J CRP No.5636 of 2015 6
10. The point for consideration is whether the decree-holder is entitled to interest at the rate of 18% per annum on the sum awarded by the Arbitral Tribunal that includes interest ?
11. To appreciate the issue relevant provision is Section 31(7)3 of Arbitration and Conciliation Act, 1996 (for short, 'the Act').
12. Clause (a) of Sub-Section (7) of Section 31 provides that where an award is made for payment of money the arbitral tribunal may include interest in the sum for which the award is made and that the arbitral tribunal may award 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 cause of action arose and the date on which the award is made. The sum so determined including interest becomes the sum awarded and in civil law, it is the decretal amount.
13. The contention urged by the learned counsel for the petitioner flows out of provision in Section 31(7)(b) as was in force at the relevant time and the decision of the Hon'ble Supreme Court in Hyder Consulting (supra). Clause (b) of Section 31(7) envisages 3 "S.31. Form and contents of arbitral award:- 7(a). Unless otherwise agreed by the parties, where and insofar 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 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. After amendment of Clause 7(b) of S.31:
7(b). A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment."
PNR,J & MGP,J CRP No.5636 of 2015 7 payment of 18% interest on the sum awarded by the Arbitrator. It is no more res integra that sum awarded by the Arbitrator includes the claim made by the claimant as accepted by the Arbitrator and interest payable on that amount from the date of arising of cause of action to passing of award by the Arbitrator. This aspect has been made clear by the Hon'ble Supreme Court in Hyder Consulting.
14. In Hyder Consulting (supra) majority opinion held that claimant is entitled to claim interest for post-award period on sum awarded by the Arbitrator including interest for the pre-award period. After elaborately discussing the relevant provisions, the Hon'ble Justice S.A.Bobde, speaking for majority, as he then was, held in paragraph-10 as under:
"10. In this view of the matter, it is clear that the interest, the sum directed to be paid by the arbitral award under clause (b) of sub- section (7) of Section 31 of the Act is inclusive of interest pendente lite.
14.1. In concurrent judgment, Hon'ble Justice Abhay Manohar Sapre opined 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 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.
27. Section 31(7)(a) employs the words "... the Arbitral Tribunal may include in the sum for which the award is made interest ...". The words "include in the sum" are of utmost importance. This would mean that pre-award interest is not PNR,J & MGP,J CRP No.5636 of 2015 8 independent of the "sum" awarded. If in case, the Arbitral Tribunal decides to award interest at the time of making the award, the interest component will not be awarded separately but it shall become part and parcel of the award. An award is thus made in respect of a "sum" which includes within the "sum" component of interest, if awarded.
"28. Therefore, for the purposes of an award, there is no distinction between a 'sum' with interest, and a "sum" without interest. Once the interest is "included in the sum" for which the award is made, the original sum and the interest component cannot be segregated and be seen independent of each other. The interest component then loses its character of an "interest" and takes the colour of "sum" for which the award is made."
15. In Municipal Council (supra), Hon'ble Supreme Court followed the decision in Hyder Consulting and upheld the decision of the High Court in holding that the claimant was entitled to post award interest in terms of Section 31 (7)(b) of the Act. Paragraph-8 of the order reads as under:
"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. The view taken by the High Court on this issue is absolutely correct."
16. The Arbitral Tribunal fixed time frame of three (03) months period for payment of the sum due with interest at the rate of 9% p.a., i.e., from 15.06.2013 to 14.09.2013. The sum directed to be paid by the Arbitrator was not paid within the time stipulated by the arbitrator. Since the Judgment-debtor did not make the payment within the time granted by the Arbitrator, invariably Clause (b) of Sub-Section (7) of Section 31 attracts and the judgment-debtor cannot escape from the liability to pay interest at the rate of 18% p.a. for the period subsequent to expiry of three (03) months on the sum determined by the Arbitral Tribunal. It is PNR,J & MGP,J CRP No.5636 of 2015 9 pertinent to note that high interest rate prescribed for the post- award period is to ensure speedy compliance of the Award.
17. In the present case, the Arbitrator has directed refund of amount paid by claimant. This is the sum awarded by the Arbitrator. The sum awarded by the Arbitrator includes principal amount and interest. On this sum interest at the rate of 18% has to be paid for the delayed period of payment. This does not amount to award of interest on interest.
18. The Decree-holders claim that the sum payable under the arbitral award is Rs.3,08,18,706/- that includes principal amount of Rs.2,33,59,285/- and interest at the rate of 9% upto 13.09.2013 which comes to Rs.74,59,421/-. On 10.07.2015, Judgment-debtor paid Rs.3,46,48,990/-. This does not include interest on interest component of the award. In the said manner, by then, post-award interest at the rate of 18% accumulated to Rs.1,01,06,847/-. Thus, by 10.07.2015, the respondent was required to pay Rs.62,76,563/- more. Later some more amounts are paid. According to decree-holder on the balance amount remained unpaid further interest accrues. A detailed calculation sheet is filed by the petitioner as shown below. According to this calculation sheet, after adding further interest, total amount due as on 18.03.2022 is shown as Rs.51,13,546/-. Calculation is as under:
PNR,J & MGP,J CRP No.5636 of 2015 10 Sl.No. Particulars Principal Interest Amount (Rs.) (Rs.) directed to be paid (Rs.) 1 Amount paid by DHRs to 2,33,59,585 2,33,59,285 JDR 2 Interest @ 9% per 74,59,421 74,59,421 annum based on dates of payment till 13.09.2013 3 Sum directed to be paid 3,08,18,706 3,08,18,706 to the DHRs (1+2) 4 Post Award interest as 1,01,06,847 per Sec.31(7)(b) from 14.9.2013 to 10.7.2015 @ 18% per annum 5 Total payable by JDR as 3,08,18,706 1,01,06,847 4,09,25,553 on 10.7.2015 6 Paid by JDR on 2,45,42,143 1,01,06,847 3,46,48,990 10.7.2015 7 Balance payable by JDR 62,76,563 62,76,563 as on 10.7.2015 8 Interest from 11.7.2015 3,25,005 to 23.10.2015 @ 18% on Rs.62,76,565/- for 105 days 9 Interest from 24.10.2015 39,207 to 16.11.2015 @ 9.5% on Rs.62,76,563/- for 24 days 10 Amount payable by JDR 62,76,563 3,64,212 66,40,775 as on 16.11.2015 11 Paid by JDR on 30,77,858 3,64,212 34,42,070 16.11.2015 12 Balance payable by JDR 31,98,705 31,98,705 as on 16.11.2015 13 Interest from 17.11.2015 19,14,841 to 18.3.2022 @ 9.5% p.a. for 2300 days on Rs.31,98,705/-
14 Amount payable as on 31,98,705 19,14,841 51,13,546 18.3.2022
19. In CRP No.4904 of 2015, respondent herein assailed the order of the Civil Court in O.P.No.1940 of 2013 on the issue of PNR,J & MGP,J CRP No.5636 of 2015 11 computation of interest @ 18% after expiry of three months and rejected the contention of the respondent herein that for the remaining period also, only 9% interest should be awarded. The issue for consideration was, whether direction issued by the Execution Court to Judgment-Debtors to pay 18% interest for the period subsequent to 14.09.2013 to 10.07.2015, on which date payment was made, was valid. Following decision of the Hon'ble Supreme Court in Hyder Consulting (supra), the decision of the Execution Court was upheld.
20. In the instant revision, petitioner is assailing the decision of Execution Court rejecting their claim to grant interest for the entire sum awarded. The said issue was not put in issue before this Court in the earlier revision petition, wherein petitioners herein were respondents. There was no occasion for the petitioners to raise plea as urged herein. Therefore, principle of constructive res judicata is not attracted.
21. Accordingly, the Civil Revision Petition is allowed as above. Pending miscellaneous petitions if any shall stand closed.
_______________________________ JUSTICE P.NAVEEN RAO _______________________________ JUSTICE M.G.PRIYADARSINI Date : 10.06.2022 Ndr/kkm PNR,J & MGP,J CRP No.5636 of 2015 12 HONOURABLE SRI JUSTICE P.NAVEEN RAO AND HON'BLE SMT. JUSTICE M.G.PRIYADARSINI CIVIL REVISION PETITION No.5636 of 2015 Date: 10.06.2022 Ndr/kkm