Delhi High Court
M/S Associated Builders & ... vs M/S Sahyadri Cooperative Group ... on 25 July, 2011
Author: Vipin Sanghi
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 15.07.2011
% Judgment delivered on: 25.07.2011
+ EX.P. 38/2010
M/S ASSOCIATED BUILDERS & CONTRACTORS ..... Decree Holder
Through: Mr. Sandeep Sharma, Mr. Vikash
Sharma and Mr. Anuj Malhotra,
Advocates
versus
M/S SAHYADRI COOPERATIVE GROUP HOUSING
SOCIETY LTD ..... Judgement Debtor
Through: Mr. C.V. Francis, Mr. Amit George,
Mr. Arun Francis and Ms. Manpreet
Kaur, Advocates
AND
+ EX.P. 165/2010
SAHYADRI COOPERATIVE GROUP HOUSING
SOCIETY LTD ..... Decree Holder
Through: Mr. C.V. Francis, Mr. Amit George,
Mr. Arun Francis and Ms. Manpreet
Kaur, Advocates
versus
M/S ASSOCIATED BUILDERS & CONTRACTORS .....
Judgement Debtor
Through: Mr. Sandeep Sharma, Mr. Vikash
Sharma and Mr. Anuj Malhotra,
Advocates
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
1. Whether the Reporters of local papers may
be allowed to see the judgment? : No
2. To be referred to the Reporters or not? : Yes
3. Whether the judgment should be reported
in the Digest? : Yes
EX.P. 38/2010 & 165/2010 Page 1 of 15
JUDGMENT
VIPIN SANGHI, J.
1. These are two execution petitions preferred in relation to and
arising out of the arbitral award dated 29.08.2009 made by Mr. Justice
R.P. Gupta (Retd.), the Arbitral Tribunal. While Execution Petition No.
38/2010 has been preferred by M/s Associated Builders & Contractors,
who acted as the contractor, Execution Petition No. 165/2010 has been
preferred by M/s Sahyadri Cooperative Group Housing Society Limited,
the Cooperative Society.
2. Before I deal with the respective submissions of the parties, I
may first set out a few relevant facts. The parties entered into a
contract on 11.10.1995, whereunder the contractor agreed to raise
construction of residential flats for the society. The work was to be
completed within 18 months. The work order was issued on
01.01.1996 and the date of completion of the work was 31.07.1997.
The Society terminated the contract on 01.01.1999. Disputes arose
between the parties. The society preferred O.M.P. No. 27/1999 before
this court to seek interim measures under Section 9 of the Arbitration
& Conciliation Act, 1996. The Contractor claimed that its dues were
outstanding. On 12.05.1999, the parties agreed that on the society
depositing Rs.39 Lakhs with the Registry of this court, it shall be open
to the society to engage another agency for completing the balance
work of the dwelling units. The court also appointed a Local
Commissioner to measure the work done by the contractor. It was
agreed that the possession of the site shall be handed over by the
contractor to the society immediately after measurement work is
completed by the Local Commissioner and after the deposit of the
amount of Rs.39 Lakhs with the Registry of this court.
3. On 29.03.2000, the said O.M.P. was taken up by the court as an
application had been preferred by the society to seek appointment of
another Local Commissioner. However, the society, with a view to
save time, withdrew its application to seek appointment of another
Local Commissioner. The court also recorded on 29.03.2000, that the
society had deposited the amount of Rs.39 Lakhs. The society was
held entitled to possession of the work site. The contractor was
directed to hand over the possession of the site within a week. In
relation to the deposit made by the society, the court directed that
"the question of entitlement to Rs.39 Lakhs lying in deposit will be
decided after the arbitration proceedings are over". The O.M.P. was
disposed of by the court.
4. Subsequently, the contractor filed I.A. No. 3027/2001 for release
of the amount of Rs.39 Lakhs deposited by the society in this court.
I.A. No. 3027/2001 was taken up for consideration by the court on
04.02.2002. The court allowed the said application and directed that
the amount of Rs.39 Lakhs deposited by the society in this court be
released to the contractor on the contractor furnishing a bank
guarantee to securitise the said amount and on furnishing an
undertaking that the contractor shall keep the bank guarantee alive
and that it will refund the amount to this court without demur as and
when required by the court.
5. I may note that the arbitration agreement was invoked by the
society a few days before the passing of the said order.
6. The order dated 04.02.2002 was challenged in appeal in FAO(OS)
No. 96/2002 without much success. It was further challenged before
the Supreme Court by filing SLP (Civil) No. 12180/2002, again, without
much success. The result was that the contractor after furnishing the
bank guarantee for Rs.39 Lakhs withdrew the said amount on
08.08.2002.
7. Before the Arbitrator, both the parties raised their claims and
counter-claims.
8. The learned Arbitrator made the aforesaid award which has been
accepted by both the parties. No objections to the award were filed by
either of them. The learned Arbitrator, after adjusting the claims and
counter-claims, which were partially allowed, awarded a net amount of
Rs.19,74,472/- as the principal liability in favour of the contractor and
against the society. He also awarded interest on the amount of
Rs.9,74,472/- from 01.01.1999 to 11.05.1999 amounting to Rs.31,671/-
The amount of Rs.10 lacs (the refundable security) was held payable
on 01.01.2000 and, therefore, was not to carry interest from
01.01.1999.
9. Thus the total amount payable under the award to the contractor
was quantified as Rs.20,06,143/-. The learned Arbitrator also held that
"the future rights between the parties after 11.05.1999 are
determinable by and within the jurisdiction of the High Court". He also
held that as to "what are the rights of the parties in respect of the
amount deposited and disbursed under the order of the High Court is
not to be decided in these proceedings but remains within the
jurisdiction of the High Court". The ultimate and effective relief
granted in the award reads as follows:
"In view of my findings on above issues, I pass an Award
that the Contractor is entitled to recover from the Society a
sum of Rs.20,06,143/- including interest upto 11.5.1999
when the order of deposit of Rs.39 Lacs by the Society was
passed by the High Court and Society deposited as per
those orders. Consequential effect of the deposit thereof
and rights of the parties thereunder are within the
jurisdiction of the Hon'ble High Court to decide."
10. The contractor in its execution petition has claimed that the
amount payable as on 12.05.1999 was Rs.20,06,143/-. The contractor
further claims interest @ 18% from 12.05.1999 till 01.02.2010 (the
date of filing of the execution petition) on the amount of Rs.20,06,143/-
which comes to Rs.38,91,886/-. Thus, the total amount claimed is
Rs.58,88,029/-. After granting adjustment of Rs.39 lakhs received by
the contractor, in its execution petition the contractor claims
Rs.19,88,029/-. The contractor also claims bank guarantee charges
from 08.08.2002 till 07.08.2010 quantified at Rs.3,28,233/-. Thus, final
amount claimed in the execution is Rs.23,16,262/- along with future
interest @ 10% per annum from 02.02.2010 on the amount of
Rs.23,16,262/-.
11. Mr. Sharma, learned counsel for the contractor, places reliance
on P.S.L. Ramanathan Chettiar and Ors. Vs. O. Rm. P. Rm.
Ramanathan Chettiar, AIR (1968) SC 1047, to contend that the
deposit by the society in this court and the withdrawal of the said
amount by the contractor from this court does not tantamount to
payment under the decree, and the withdrawal of such amount by the
decree holder upon furnishing of security would not prevent the
accruing of interest in favour of the decree holder. Reliance is placed
on the following extracts from this decision:
"12. On principle, it appears to us that the facts of a
judgment-debtor's depositing a sum in court to purchase
peace by way of stay of execution of the decree on terms
that the decree-holder can draw it out on furnishing
security, does not pass title to the money to the decree-
holder. He can if he likes take the money out in terms of
the order; but so long as he does not do it, there is nothing
to prevent the judgment-debtor from taking it out by
furnishing other security, say, of immovable property, if the
court allows him to do so and on his losing the appeal
putting the decretal amount in court in terms of Order 21
Rule 1 C.P.C. in satisfaction of the decree.
13. The real effect of deposit of money in court as was
done in this case is to put the money beyond the reach of
the parties pending the disposal of the appeal. The decree-
holder could only take it out on furnishing security which
means that the payment was not in satisfaction of the
decree and the security could be proceeded against by the
judgment-debtor in case of his success in the appeal.
Pending the determination of the same, it was beyond the
reach of the judgment-debtor."
12. He also places reliance on an order passed by the Division Bench
of this court in Delhi Development Authority v. Saraswati
Construction & Co. in EFA(OS) No. 01/2007 dated 22.01.2009,
wherein the Division Bench referred to and relied upon the judgment of
the Supreme Court in P.S.L. Ramanathan Chettiar (supra) and other
decisions and observed as follows:
"The principal which emerges is that where a party
chooses to challenge the decree before the appellate
forum and the appeal court grants conditional stay, the
amount deposited was only keep the portion of the decree
in abeyance and the amount so deposited was not akin to
a tender of the amount to the decree holder. In such a
situation, the interest would not stop running. If the deposit
amount in court has earned some interest, they would
enure to the benefit of the judgment debtor."
13. He also places reliance on the judgment of this court in
Engineering Projects (India) Limited Vs. Arvind Construction
Company Limited, EFA(OS) Nos. 4 & 6/2008 reported as
MANU/DE/0744/2009, wherein the Division Bench of this court, inter
alia, observed as follows:
"17. .............................................Sub-rule 1 of Rule 1 of
Order 21 of the said Code provides for payment to be
made under the decree and the manner of the same. A
deposit in Court has to be before the Court, which has to
execute the decree. The executing court is the court which
passed the decree and not the appellate court. Clause (b)
refers to payment out of court and the latter provision of
the said clause cannot be read de hors the original
provision "out of court". The object of sub-rule 1 of Rule 1
of Order 21 of the said Code is only where money is paid
unconditionally in the manners provided, such payment
should be treated towards the decree and that is when
interest would stop as per Clauses 4 & 5 of Rule 1 of Order
21 of the said Code. The significant aspect is that these are
unconditional payments towards the decree and not
payments made partial or in whole for obtaining stay of the
decree. We may notice that the amount has been released
to the respondent on the condition of furnishing a bank
guarantee and the respondent has incurred a large amount
as costs towards furnishing bank guarantee in terms of
averments made in the application. This is, thus, not
payment towards the decree.
18. The respondent cannot charge the bank guarantee
charges which bank guarantee was furnished to withdraw
the amount but the payment cannot be construed as a
payment towards the decree. Thus, the amounts as
specified in the decree would continue to earn interest till
the decision in the matter and only at the stage of the
decision in appeal would the question arise of adjustments
of the amount of Rs.1.5 crore towards the amount of
principal and interest due thereon since at that stage on
dismissal of the appeal, the bank guarantee would be
discharged and the amount would be unconditionally
available to the respondent."
14. On the other hand, the society in its execution petition claims Rs.
39 Lakhs along with interest @ 18% per annum on the said amount
from 08.08.2002 (the date on which the contractor withdrew the
amount of Rs. 39 Lakhs from this court) up to the date of filing of the
execution petition, i.e. 25.05.2010. After granting adjustment of the
amount claimed by the contractor of Rs.58,88,029/-, the society claims
recovery of Rs.34,85,167/- from the contractor.
15. Learned counsel for the society places reliance on Union of
India Vs. Raman Iron Foundry, (1974) 2 SCC 231, to submit that
until the making of the award there was no debt or liability on the
society to make any payment. He submits that in case this court holds
that the contractor is entitled to any interest, the same principle has to
apply to the society as well. He relies on Indian Hume Pipe
Company Limited Vs. State of Rajasthan, (2009) 10 SCC 187,
wherein the Supreme Court, inter alia, observed:
"If the appellant was not entitled to claim interest then how
the respondent State would get powers or competence to
receive it. Same doctrine should have been made
applicable for the respondent's case also. Two persons,
similarly situated, could not have been treated differently
as the same may amount to discrimination."
16. He also relies on a decision of this court in Sudha Gupta Vs.
BSES Rajdhani Power Limited, MANU/DE/1426/2011, wherein the
court while quashing the demand of the respondent BSES Rajdhani
Power Limited and granting refund to the consumer had directed the
said refund with 7% interest.
17. The issue which arise for consideration is as to which of the two
parties is liable to pay to the other any amount under the award, and
the second issue is about the quantification of the amount.
18. The decisions relied upon by Mr. Sharma, learned counsel for the
petitioner, in my view, have absolutely no application in the present
fact situation. Those are all cases, where the liability had already been
adjudicated upon and, consequently, there was a debt which was due
and recoverable. However, that is not the position in the case in hand.
When the Contractors received the amount of Rs.39 lacs, there was no
ascertained liability of the Society. The principle stated by the
Supreme Court in P.S.L. Ramanathan Chettiar & Ors. (supra),
which has been followed in Engineering Projects (India) Ltd.
(supra), and Saraswati Construction & Co. (supra), has no
application in the present fact situation. The contention of Mr. Sharma
that the Contractor should continue to earn interest on the
subsequently awarded amount, even after the date of receipt of the
amount of Rs.39 lacs cannot be accepted. If the amount of Rs.39 lacs
had continued to remain in the deposit in this Court, the position would
have been different. The Contractor would have, in that situation,
continued to earn interest on the awarded amount till the date of
receipt by him of the awarded amount.
19. The Society deposited the amount of Rs.39 lacs in this Court with
a view to ensure that its construction project is not unduly held up, as
the contractor was retaining possession of the project. Under Section
9 of the Act, upon making out a deserving case, the Contractor could
have asked for security from the Society of the amount in dispute in
the arbitration. There was no admitted liability of the Society and,
consequently, no direction was passed by the Court to release any
amount, whatsoever, to the Contractor unconditionally. As aforesaid,
the amount was deposited by the Society in pursuance of the order
dated 12.05.1999 some time after 12.05.1999 and before 29.03.2000.
20. Without getting the extent of the Society's liability determined,
the Contractor on its own, and at its own peril, moved I.A.
No.3027/2001 for release of the entire amount of Rs.39 lacs lying
deposited in this Court. At the Contractors' behest, that application
was allowed and the amount of Rs.39 lacs was directed to be released
upon furnishing of a bank guarantee by the Contractor.
21. It has been found by the learned Arbitrator that the Contractor
was entitled to payment of Rs.9,74,472/- on 01.01.1999, i.e. the date
of termination of the contract. The Contractor was also entitled to
payment of Rs.10 lacs after one year, i.e. on 01.01.2000. The learned
arbitrator takes note of the fact that the amount of Rs.39 lacs was
deposited by the Society under the order of this Court dated
12.05.1999 and the amount was released under the subsequent order
dated 04.02.2002.
22. The learned arbitrator has awarded interest on the amount of
Rs.9,74,472/- upto 11.05.1999, i.e. the date of the passing of the order
by this Court requiring the Society to deposit the amount of Rs.39 lacs.
He has also held that interest for the subsequent period is a matter
within the jurisdiction of this Court. As aforesaid, while arriving at the
figure of Rs.20,06,143/-, the learned arbitrator has computed interest
on the amount of Rs.9,74,472/- from 01.01.1999 to 11.05.1999 @ 9%
p.a., i.e. Rs.31,671/-.
23. In my view, the Contractor would be entitled to interest at the
same rate, i.e. 9% p.a. on the amount of Rs.9,74,472/- from
12.05.1999 till the date of withdrawal of Rs.39 lacs by the Contractor
from this Court. On the amount of Rs.10 lacs (security deposit),
interest would accrue from 01.01.2000 till the date of withdrawal (i.e.
08.08.2002) of Rs.39 lacs by the Contractor. The said amounts add up
as follows:
i) Interest on Rs.9,74,472/- @ 9% p.a. from
12.05.1999 to 08.08.2002 - Rs.2,84,252/-
ii) Interest on Rs.10 lacs @ 9% p.a. from
01.01.2000 to 08.08.2002 - Rs.2,34,473/-
------------------
Total = Rs.5,18,725/-
========
24. The total amount recoverable by the Contractor as on
08.08.2002 was Rs.20,06,143/- plus Rs.5,18,725/- is equal to
Rs.25,24,868/-. The amount, in fact, released to the Contractor as on
08.08.2002 was Rs.39 lacs. Therefore, the excess amount recovered
by the Contractor as on 08.08.2002 was Rs.39 lacs minus
Rs.25,24,868/- = Rs. 13,75,732/-.
25. Since the arbitrator has granted interest @ 9% on the claims of
the Contractor, in my view, it would be fair and equitable if the same
rate of interest is granted on the amount to be refunded to the Society
from 08.08.2002 onwards till the amount is so refunded.
26. The Contractor would, however, be entitled to partial payment
towards the cost of maintaining the bank guarantee. On the date on
which the Contractor received the payment, i.e. 08.08.2002, the
Contractor was entitled to receive Rs.25,24,868/-, as aforesaid.
Therefore, the bank guarantee charges incurred by the Contractor
after 08.08.2002 in respect of that amount i.e. Rs.25,24,868/- are
recoverable by the Contractor. He would, however, not be entitled to
recover the bank guarantee charges as pertain to the amount of
Rs.13,75,732/-, to which the Contractor was, in fact, not entitled.
27. The Contractor has claimed bank guarantee charges of
Rs.3,28,233/-. However, no documents have been filed on record to
substantiate the said claim. The Contractor is directed to place on
record the documents evidencing the incurring of expenditure of
renewal of bank guarantee and also to file alongwith an additional
affidavit, a computation of the said charges for the amount of
Rs.25,24,868/- within two weeks.
28. So far as the entitlement towards the interest accrued on the
amount of Rs.39 lacs, from the date of its deposit in this Court, till the
date of its withdrawal by the Contractor is concerned, the said amount,
in my view, certainly cannot be claimed by the Contractor. The said
amount has to be released in favour of the Society, as the Contractor
has been fully compensated by grant of interest for the period for
which the Contractor was found to be so entitled. I, therefore, direct as
follows:
i) The Society shall be entitled to withdraw the amount of interest
accrued on the deposit of Rs.39 lacs from the date of its deposit
till the date of its withdrawal by the Contractor, which is lying in
this Court, forthwith;
ii) The Contractor shall pay to the Society the amount of
Rs.13,75,732/- alongwith interest @ 9% p.a. from 08.08.2002 till
the date of its payment;
iii) The Contractor shall be entitled to adjustment from the aforesaid
amount stated in para (ii) above, the bank guarantee charges
incurred in relation to the bank guarantee amount of
Rs.25,24,868/- for keeping the bank guarantee alive after
08.08.2002 till date;
iv) In case the Contractor does not pay the amount, as aforesaid,
within three weeks, the bank guarantee furnished by the
Contractor shall be encahsed by the Registrar General of this
Court for the amount of Rs.13,75,732/- plus 9% interest thereon
from 08.08.2002 till the date of encashment, and the proceeds
shall be forthwith released in favour of the Society.
29. List the matter for compliance on 26.08.2011.
(VIPIN SANGHI)
JUDGE
JULY 25, 2011
sr/bsr
