Bombay High Court
Konkan Railway Corporation Pvt. ... vs M/S B T Patil And Sons Belagum ... on 20 December, 2021
Bench: C.V. Bhadang
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 2489 OF 2021
Konkan Railway Corporation Pvt. Ltd.
Having office at Belapur Bhavan,
Plot No.6, Sector II, CBD Belapur,
Navi Mumbai - 614. ..Petitioner
Vs.
M/s. B. T. Patil & Sons Belagum
(Construction) Pvt. Ltd.
Having Corporate office at Patson
House, 4112, Poona Bangalore Road,
Belgaum - 590 003. ..Respondent
----
Ms. Kiran Bhagalia a/w. Mr. Musharaf Shaikh i/b. Ms. Chitra
Phadake, for the Petitioner.
Mr. Nikhil Sakhardande, Senior Advocate i/b. Mr. Mandar Soman,
for the Respondent.
----
CORAM : C.V. BHADANG, J.
RESERVED ON : 15 SEPTEMBER 2021
PRONOUNCED ON : 20 DECEMBER 2021
Judgment :
. Rule made returnable forthwith. Mr. Soman, the learned
counsel waives service for the Respondent. Heard finally by consent
of parties.
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2. The present Petition involves an issue about the calculation /
computation of the amount payable to the Respondent - Decree
holder under the award of the arbitrator.
3. The Petitioner is a Public Sector undertaking. The Petitioner
had awarded a contract to the Respondent for construction of the
BG Single Line Tunnel through shaft No.3 (Karbudhe) in Ratnagiri
North Section vide an agreement dated 18 November 1993. As
disputes and differences arose between the parties, the matter was
referred to arbitration. The Arbitral Tribunal by an award dated 28
March 2007 allowed the claim of the Respondent with interest
@12% per annum from the date of the award. A corrigendum was
issued to the award on 17 April 2007, as to Claim No.9, with which
we are not presently concerned.
4. According to the Petitioner, the calculation of the principal
amount alongwith interest payable to the Respondent was made and
after deducting taxes, the Petitioner under its advice dated 27 April
2007 informed the Respondent about the amount due and payable
and issued a cheque in respect thereof which was accepted by the
Respondent without any demur.
5. The Petitioner subsequently received a notice in Special
Execution Proceeding No.503/2019 on the file of the learned Senior
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Civil Judge at Ratnagiri directing the Petitioner to pay an amount of
Rs.67,11,263/- to the Respondent. It appears that the Petitioner
filed an Application for review of the order dated 27 January 2021
claiming that the said amount was not payable to the Respondent
under the said award. The learned Executing Court by an order
dated 24 February 2021 rejected the Application for review.
Principally, the order dated 27 January 2021 and the one refusing to
grant the Application for review dated 24 February 2021 are subject
matter of challenge in this Petition.
6. It appears that the Petitioner had filed an Application (Exh.18)
for amendment of its reply and Application (Exh.20) to withdraw
from the joint pursis (Exh.16) and the undertaking. The Executing
Court rejected Application (Exh.20) by an order dated 27 January
2021 and the Application (Exh.20) was rejected by an order dated 7
September 2020. By virtue of an amendment to the Petition, the
Petitioner has incorporated challenge to both these orders also.
7. I have heard Ms. Kiran Bhagalia, the learned counsel for the
Petitioner and Mr. Nikhil Sakhardande, Senior Advocate, for the
Respondent. With the assistance of the learned counsel for the
parties, I have gone through the record.
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8. It is submitted by the learned counsel for the Petitioner that
the present Petition only pertains to Claim No.10 which is in respect
of the interest on Claim Nos.1 to 9 and 11. It is pointed out that as
per Para No.4.10, the Arbitral Tribunal has held the Respondent to
be entitled to simple interest @ 14% p.a. w.e.f. 7 December 1995
(the date when the final bill was passed) till 31 December 2000 and
@ 12% p.a. w.e.f. 1 January 2001 till the date of the award. It is
submitted that accordingly the calculation was made arriving at a
total figure of Rs.2,48,03,572/-. The Petitioner had issued a cheque
for Rs.2,12,99,602/- after deducting the taxes of Rs.35,03,970/-
which was accepted by the Respondent without any demur. It is
submitted that in reply (Exh.12) filed to the Execution Proceedings,
there was an inadvertent error on account of a misconception and
calculation made by the concerned Deputy Engineer which is not
binding on the Petitioner. It is submitted that the concerned officer
of the Petitioner, on the basis of a misinterpretation of the decision
of the Supreme Court in M/s. Hyder Consulting (UK) Ltd. Vs.
Governor, State of Orissa 1 had arrived at an incorrect figure. It is
submitted that only the interest pendente lite gets merged in the
amount of the award on which future interest has to be calculated. It
is submitted that therefore, the Executing Court could not have
acted on the basis of the reply filed or the joint pursis / undertaking
(Exh.16). It is submitted that the issue is only regarding calculation /
1 (2015) ALL SCC 189
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computation of the amount in terms of the award and cannot govern
itself on the basis of any admission as such by the parties.
9. The learned counsel for the first Respondent has supported
the impugned order. It is submitted that the pre-award interest is
not independent of the 'sum' awarded under Section 31(7)(a) of the
Arbitration and Conciliation Act, 1996, as held by the Supreme
Court in Hyder Consulting (supra). It is submitted that the
Petitioner cannot extricate itself out of the admissions in the reply
(Exh.12) and the undertaking (Exh.16) and in any event, the
amount has rightly been held to be payable to the Respondent under
the Arbitral award.
10. I have carefully considered the rival circumstances and the
submissions made.
11. The issue only pertains to the manner in which the interest has
to be calculated / computed. Claim No.10 was regarding interest
and the Arbitral Tribunal has granted the said Claim in the
following terms.
4.10 Claim No.10 - Interest on Claim No.1 to 9 and
Claim No.11.
The Claimants have asked interest to be paid w.e.f.
date of completion till the date of payment @ 24% for
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which they had already served notice on the
Respondents. They have also submitted documents
from their bankers as proof of prevailing Interest rates.
The Respondents mentioned that the payment of
Interest is not permitted under clause 15.4 of GCC of
KRCL and as such should not be paid on the sums
due under the Contract. Further they pointed out
that though they had taken action to constitute an
arbitration tribunal vide their letter dated 16-05-03
after the disposal of SLP by the Hon. Supreme Court
in Jan.'02, the Claimants refused to accept it and filed
a writ petition in the High Court and continued to
follow legal remedies. It was only in 2006 that they
agreed to accept the appointment of Arbitrators.
The Tribunal based on facts presented before it
considers that the Respondents had taken recourse to
contest the High Court's appointment of an Arbitrator
by filing a SLP in Supreme Court in 1996 and only
after the disposal of SLP in 2002 that they decided to
constitute an Arbitration Tribunal in 2003 and as
such the major role for delay in the case is attributable
to them. Tribunal thus considers the claim for
Interest to be paid on the sum of the award to the
Claimants. Tribunal is of the opinion that the Interest
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rates which had been at a high of 16-18% in around
1995-96 has come down after 2001 and as such a
differential rate of Interest be paid for claims against
which amount has been awarded to the Claimants at a
simple interest of I) 14% p.a. w.e.f. 07/12/95 (the date
when final bill had been passed) till 31/12/2000, and
ii) at 12% w.e.f. 1/1/2001 to the date of award.
(Emphasis supplied)
It can thus clearly be seen that as the Arbitral Tribunal found
that the Petitioner (the Respondent before the Arbitral Tribunal)
was responsible and had major role in the delay in deciding the
claim, the interest was granted for the pre-award period in two parts.
For the period from 7 December 1995 (the date when final bill had
passed) till 31 December 2000, it is granted at a higher rate of 14%
p.a. and for the subsequent period from 1 January 2001 to the date
of the award i.e. 28 March 2007, it has been granted @ 12% p.a.
12. It is undisputed that the Petitioner has paid an amount of
Rs.2,12,99,602/- to the Respondent by cheque under a covering
letter dated 27 April 2007.
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13. The Respondent filed the Execution Case in which the
calculation of the amount for Claim No.10 to arrive at 'the sum of
the award' the Respondent has given the computation as under.
Claim Date. Award Total
No. of
Principal Int @ 14% Total (3+4 = 5) Int. @ 12%
Refere
(7.12.1995 to (01.01.2001 to
nce
31.12.2000) 28.03.2007)
1A 4708893.75 3344991.7 8053885.45 6031808.57 14085694.02
9 2258267 1604173.88 3862440.88 2892703.67 6755144.56
11 2131429.5 1514074.08 3645503.58 2730232.49 6375736.08
9098590.25 6463239.67 15561829.91 11654744.73 27216574.65
Less Amount Received 2,48,03,572.00
-------------------
Balance Receivable 24,13,002.65
Add: Interest on balance amount for failure to pay
in 30 days as per the direction of Tribunal at the rate
of 12% from the date of award 29.03.2007 to 31.10.2018 33,58,899.69
------------------
57,71,902.35
14. It can thus clearly be seen that on the principal amount, the
Respondent has first calculated the interest @ 14% p.a. from 7
December 1995 to 31 December 2000 and after arriving at an
amount inclusive of such interest, the further interest @ 12% from 1
January 2001 to 28 March 2007 has been calculated, which in my
considered view, is clearly unsustainable. The award nowhere
stipulates that the interest for the subsequent period from 1 January
2001 till passing of the award has to be calculated on the principal
sum alongwith the interest for the previous period i.e. from 7
December 1995 to 31 December 2000. If such an interpretation is
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made and the manner of computation of the interest by the
Respondent is accepted, it will result into grant of pre-award interest
much in excess of 14% p.a. which was never the object of the award.
Although, on behalf of the Respondent, reliance is placed on the
decision of the Supreme Court in Hyder Consulting, in my humble
opinion, the issue involved in the said case was entirely different
than the dispute and the issue in the present Petition.
15. In Hyder Consulting, a two Judge Bench had made a reference
to the Larger Bench to examine the correctness of the decision in
State of Haryana Vs. S. L. Arora and Co. 1. Precisely, the question
was whether the decision of the Supreme Court in S. L. Arora and
Co. (wherein it is held that an award of interest on interest, 'from the
date of award,' is not permissible under sub-Section 7 of Section 31
of Arbitration and Conciliation Act, 1996) is in consonance with
earlier decisions of the Court. The Supreme Court by majority view
held that S.L. Arora's case is wrongly decided. The issue which
essentially fell for the decision of the Supreme Court was regarding
the 'post award interest'.
16. The issue in the present case is purely of the interpretation and
the manner of calculation of the pre-award interest in terms of the
award passed by the Arbitral Tribunal on Claim No.10 in which the
pre-award interest is granted in two parts. Thus, in my humble
1 (2010) 3 SCC 690
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opinion, the issue involved in the present Petition is one of the 'pre-
award interest', in terms of the award of the Tribunal, quite to the
contrary from the issue involved in the case of Hyder Consulting
which related to interpretation of Section 31(3), in the context of
post award interest.
17. Coming to the admission / concession made in the reply
(Exh.12) and the joint pursis (Exh.16), in my considered view, the
same cannot override the express terms of the award. It is necessary
to emphasise that the Executing Court is required to execute the
award, as it is and as it stands and the issue cannot be governed by
any concession/admission, so as to result into any estoppel. Thus,
the Executing Court has to examine the computation of interest vide
Claim No.10 and to execute the same in accordance with the letter
and spirit of the award and not govern itself by any admission, which
may result into any unjust enrichment at the cost of the Petitioner,
which is a Public Sector undertaking.
18. I have perused the pursis (Exh.16) and although the concerned
officer has signed on behalf of the Petitioner, it is not shown as to
whether there was any specific authority given on behalf of the
Petitioner -Corporation to admit the correctness of the computation
of Rs.67,11,263/- as on 31 October 2018. In any event, the
Executing Court as noticed earlier, has to go by the terms of the
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award and to execute it and the computation and calculation of the
amount alongwith interest being a matter of mathematical
calculations, will not govern itself by any admission of the parties or
otherwise, particularly when the public money of the Petitioner -
Corporation is involved.
19. In the result, the Petition is allowed. The impugned orders are
hereby set aside. The Applications (Exh.18 and 20) stand allowed,
as prayed.
It will be open to the Respondent - Decree holder to file a
fresh computation of the amount after calculating the interest @
14% and 12% on the principal amount, for the two periods
separately and then to claim the balance amount, if any. If such an
Application alongwith calculation / computation is filed, the
Executing Court shall pass appropriate orders for recovery of the
amount, if any, in terms of the said award.
In the circumstances, there shall be no order as to costs.
20. At this stage, the learned counsel for the Respondent prays for
some protection as the Petitioner - Corporation has deposited an
amount approximately Rs.65 Lakhs before the Executing Court. He
pointed out that if the amount is withdrawn by the Corporation, it
may prejudice the Respondent.
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21. The learned counsel for the Petitioner states that the Petitioner
being a Corporation and a Public Sector undertaking, the interest of
the Respondent are sufficiently protected.
22. Considering the over all circumstances, it is directed that the
amount deposited by the Corporation before the Executing Court
shall not be permitted to be withdrawn for six weeks.
C.V. BHADANG, J.
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