Delhi High Court
Numaligarh Refinery Ltd. vs Daelim Industrial Co. Ltd. on 26 August, 2013
Author: Reva Khetrapal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ EFA(OS) 31/2009
NUMALIGARH REFINERY LTD. ..... Appellant
Through: Mr. Sudhir Chandra, Sr. Advocate with
Mr. Avneesh Garg and Mr. Parijat Sinha,
Advocates.
versus
DAELIM INDUSTRIAL CO. LTD. ..... Respondent
Through: Mr. Dharmendra Rautray and Ms. Tara
Shahani, Advocates.
% Date of Decision : August 26, 2013
CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL
HON'BLE MS. JUSTICE PRATIBHA RANI
JUDGMENT
: REVA KHETRAPAL, J.
1. This Appeal under Order XXI read with Section 10 of the
Delhi High Court Act, 1966 is directed against the order dated
29.7.2009 passed in Execution Petition No.242/2008 and order dated
7.8.2009 passed in E.A. No.415/2009 in Execution Petition
No.242/2008.
2. Shorn of unnecessary details, the facts are that an award dated
23rd September, 2000 was made in the dispute between the Decree
Holder (Respondent herein) and the Judgment Debtor (Appellant
herein). The Arbitrators by a majority of 2:1 awarded the following
sums to the Respondent:-
"In view of the above decisions, this Tribunal (by
majority) awards that the Defendant (NRL) shall make
the following payments to the claimant (DIC) within a
period of two months (60 days) from the date of receipt
of the award:
1) The sum of Rs.29.76 Crores.
2) Interest pendente lite on the amount of Rs.29.76
Crores with effect from August 7, 1997 to the date
of this Award at the rate of 12 per cent per annum.
3) The amount of US$ 170,000.
In the event of failure on the Defendant (NRL) to pay
the above awarded amounts under (1), (2) and (3)
within the stipulated period indicated above, the
Defendant (NRL) shall make further payment of
interest at the rate of 18 percent per annum for the post
award period on the above awarded amounts i.e.
Rs.29.76 Crores plus the amounts of interest of
pendente lite period and plus Rupee Value of US$
170,000 as prevalent on the date of Award."
3. From the above, it is clear that the Arbitrators had awarded
interest pendente lite on the principal amount of ` 29.76 Crores with
effect from the date of the claim, i.e., August 7, 1997 to the date of
the award, i.e., 23.9.2000 at the rate of 12% per annum and in the
event of failure of the Appellant to pay the said awarded amounts
within the stipulated period, 18% interest per annum was to be paid
for the post award period on the entire awarded amounts, i.e., ` 29.76
Crores plus pendente lite interest plus rupee value of US$ 170,000 as
prevalent on the date of the award towards costs of ICC. This is also
clear from the extracted portion of the award reproduced
hereinbelow:-
"Besides guidance from these decisions, the provisions
of sub-section 7(a) and 7(b) of Section 31 of the
Arbitration and Conciliation Act, 1996 (India) shall
have to be taken into consideration for granting
interest. Interest on post award period has been made
mandatory at the rate of 18 percent per annum under
sub-section 7(b) of 31 of the above Act.
In this case, pendente lite period is from August 7,
1997 to the date of this award. The post award period
is from the date of award till date of payment.
....
Defendant (NRL) shall also be liable to pay interest at
the rate of 18 percent per annum for the post award
period..."
4. On 10.1.2001, the Appellant filed an application (being Misc.
Arbitration No.1 of 2001) under Section 34 of the Arbitration and
Conciliation Act, 1996 in the Court of the District Judge, Golaghat.
The learned District Judge vide his judgment passed on 7.11.2001 set
aside the award dated 23.9.2000. In 2002, the Respondent filed an
appeal in the Guwahati High Court against the judgment dated
7.11.2001 passed by the learned District Judge. The Hon'ble
Guwahati High Court vide its judgment dated 24.8.2006 allowed the
appeal in part upholding the award of the Arbitral Tribunal except so
far as it related to countervailing duty to the extent of ` 8.78 Crores.
The consequence of the said impugned judgment was that the award
of the Arbitral Tribunal aggregating to the amount of ` 20.98 Crores
was upheld. Being aggrieved by the said judgment, the Appellant
filed a Special Leave Petition, being SLP(C) No.20989/2006. On
11.12.2006, the Respondent also filed a SLP, being SLP(C)
No.4409/2007 against the said judgment dated 24.8.2006.
5. By the judgment dated 6.9.2007, leave to appeal was granted in
the SLP filed by the Appellant and the same was allowed in part. The
said SLP which was allowed in part was disposed of as Civil Appeal
No.4079/2007. By the same order, the Civil Appeal No.4080/2007
(arising out of the Respondent's SLP) was dismissed. The Hon'ble
Supreme Court ordered as under:-
" 14. The next claim is with regard to interest.
The majority of the arbitrators have granted interest
on the amount at the rate of 12 per cent pendente lite
and post pendente lite at rate of 18 per cent but the
minority arbitrator, Justice M.M.Dutt has granted 10
per cent interest uniformally. The grant of interest is
discretionary and the majority of the arbitrators has
rightly granted interest at the rate of 12 per cent
pendente lite and at the rate of 18 per cent post
pendent lite. Therefore, no exception can be taken to
grant of such interest. Consequently, we affirm this
finding of the majority of the Arbitrators and of the
High Court.
[Interest at the rate of 12% P.I. & at the rate of 12%
post P.I.]
15. Hence, as a result of our above discussion,
we are of opinion that the claimant DIC is entitled to
Rs.2 crores for substituted material, Rs.8.9 crores for
liquidity damages, Rs.0.2 crore as interest paid on the
delayed funds i.e. Rs.11.1 crore (Rs.2 crore + Rs.8.9
crore + Rs.02 crore) and finally interest at the rate of
12 per cent pendente lite from the date of the claim
petition till realization. The payment should be made
within a period of six months from today failing which
it will carry interest at the rate of 15 per cent per
annum. The appeal arising out of S.L.P (C) No.20989
of 2006 is partly allowed. The order passed by the
High Court is modified as indicated above. The claim
of the DIC is decreed to the extent indicated above.
However, the appeal arising out of S.L.P(C) No.4409
of 2007 filed by the DIC is dismissed. No order as to
costs."
6. On 14.9.2007, the Respondent filed an application under Order
XIII Rule 3 of the Supreme Court Rules, 1966 for correction of a
clerical error in the order dated 6.9.2007, consequent to which the
Supreme Court on 4th January, 2008 passed the following order:-
"I.A. No.4 has been filed by the respondent for
correction of some clerical error in the Judgment
dated September 6, 2007 in Civil Appeal No.4079 of
2007.
We have heard learned counsel for the parties.
We do not find any error in the judgment except a
minor error in paragraph 14 of the judgment with
regard to interest. It should be read "Interest at the
rate of 12 per cent pendente lite and at the rate of 18
per cent post pendente lite."
With this minor modification I.A. No.4 in Civil
Appeal No.4079 of 2007 is disposed of."
7. Prior to the passing of the order dated 4th January, 2008, the
Appellant on 4.10.2007 filed a review petition in the Supreme Court
against the judgment and order dated 6.9.2007. In view of the order
dated 4.1.2008 passed during the pendency of the review petition
dated 4.10.2007, the Appellant filed an application for raising
additional grounds in the review petition stating therein:-
"1. The petitioner/applicant is constrained to file this
application for raising additional grounds in the
above-mentioned review petition (filed against the
judgment and order dt.06.09.2007) qua the order
dt.04.01.2008, whereby interest @ 12% pendente lite
and @ 18% post pendente lite on the amount payable
by the petitioner/applicant to the respondent, has been
granted by this Hon'ble Court, because the grant of
interest itself has been challenged in the said review
petition pending before this Hon'ble Court.
3. ...............As such, it is submitted further that the
said order dt.04.01.2008 passed in I.A No.4 modifying
the said judgment and order dt.06.09.2007 may cause
prejudice to the said grounds taken in the review
petition and it may also be contended that the said
order dt.04.01.2008 finally decides the issue with
regard to interest even though the said review petition
challenging the said issue is still pending.
4. In such circumstances, the petitioner/applicant
craves leave of this Hon'ble Court to seek review of
the said order dt.04.01.2008 granting interest on the
following additional grounds (being numbered in
order/subsequent to the grounds already raised in the
review petition), taken without prejudice to one
another as well as to the grounds taken in the said
review petition.
GROUNDS
............
XI. FOR THAT the grant of interest @ 12% pendente
lite and @ 18% post pendente lite on the amounts that
may become payable by the petitioner/applicant to the
respondent upon disposal of the said review petition is
neither judicious exercise of the discretion vested in
this Hon'ble Court nor in keeping with the provisions
of section 34 of the Code of Civil Procedure, 1908 and
section 3 of the Interest Act, 1978 and the rate ought to
be such that it does not create an unnecessary burden
upon any party; and as submitted in the review
petition, the rate of interest granted by this Hon'ble
Court in the instant case is much higher than the
prevailing rate of interest in relation to commercial
transactions and foists upon the petitioner an
unreasonable burden and liability, which under the
law, the petitioner is not liable to pay; and
XII. FOR THAT in view of the grounds raised in the
review petition and the additional grounds raised in
respect of the order dt.04.01.2008 in this application,
this Hon'ble Court ought to grant another opportunity
of hearing so as to enable the petitioner/applicant to
expound the issues raised by issuing notice in the
review petition."
8. The above review petition was dismissed by the Supreme Court
on 11.3.2008. On 2.7.2008, the Respondent filed Execution Petition
before this Court for execution of decree for a sum of `
34,22,19,014.06. During the pendency of the Execution Petition, on
20th August, 2008, a curative petition was filed by the Appellant
against the order dated 6.9.2007 as well as the order dated 11 th March,
2008 passed in the review petition. On 19.12.2008, the Appellant in
the curative petition filed an application raising additional grounds.
The following grounds which are relevant for the purposes of the
decision of the present appeal are reproduced hereunder:-
"XVIII. FOR THAT:
(a) The award of interest on wrong interpretation of
sub-section 7(b) of Section 31 of Arbitration and
Conciliation Act, 1996 and wrongly holding in the
award "Interest on post award period has been
made mandatory at the rate of 18% per annum
under sub-section 7(b) of 31 of the above Act"and
ignoring the fact that interest rate in India is much
lower than 18% p.a and 0% in Korea;"
.......................
XXXII. FOR THAT the grant of interest @ 12%
pendente lite and @ 18% post pendente lite on the
amounts that may become payable by the petitioner to
the respondent upon disposal of the said review
petition is neither judicious exercise of the discretion
vested in this Hon'ble Court nor in keeping with the
provisions of section 34 of the Code of Civil
Procedure, 1908 and section 3 of the Interest Act, 1978
and the rate ought to be such that it does not create an
unnecessary burden upon any party; and as submitted
in the review petition, the rate of interest granted by
this Hon'ble Court in the instant case is much higher
than the prevailing rate of interest in relation to
commercial transactions and foists upon the petitioner
an unreasonable burden and liability, which under the
law, the petitioner is not liable to pay;
..........................
XL. FOR THAT this Hon'ble Court ought to have
appreciated that the Ld.Arbitral Tribunal while
awarding interest has wrongly proceeded with the
understanding that "interest on past award period has
been made mandatory at the rate of 18 percent per
annum under sub section 7(b) of section 31"of the said
Act and awarded interest accordingly. It is submitted
that interest on post award period has not been made
mandatory @18% p.a. under Section 31(7)(b) of the
said Act, as has been held by the Hon'ble Arbitral
Tribunal, on the basis of which, the Tribunal awarded
interest at the said rate."
9. The aforesaid curative petition filed by the Appellant was
dismissed by the Hon'ble Supreme Court on 28.4.2009.
10. In Execution Petition No.242/2008, a learned Single Judge of
this Court by his order dated 29.7.2009 after observing that there was
a difference in the calculation in the exact decretal amount due to the
Decree Holder held that what in fact appeared to be payable by the
Judgment Debtor to the Decree Holder was "interest @ 12%
pendente lite on the sum of ` 11.1 crores and interest @ 18% per
annum on the sum of ` 11.1 crores plus the pendente lite interest and
rupee value of US$ 170,000 as prevalent on the date of the award.
18% interest was payable for the period of six months from the date
of the order of the Supreme Court i.e. ending on 5 th March, 2008.
For any delay beyond 5th March, 2008 in making payment of the
above amount, it was to carry interest @ 15% per annum".
Accordingly, the learned Single Judge directed that the
Appellant/Judgment Debtor will make payment of the entire sum as
claimed in paragraph 12 of the Execution Petition filed by the
Respondent/Decree Holder together with future interest upto the date
of payment. In other words, interest would be payable at the rate of
18% per annum on the amount due upto 5th March, 2008 and 15% per
annum from 6th March, 2008 till the date of payment.
11. On 6th August, 2009, the Appellant filed a review petition,
being E.A. No.415/2009 seeking review of the order dated 29 th July,
2009 passed by the learned Single Judge, which was dismissed by the
learned Single Judge by his order dated 7th August, 2009.
12. The sole submission raised before us by Mr. Sudhir Chandra,
learned senior counsel for the Appellant is that in paragraph 15 of its
judgment dated 6th September, 2007 the Supreme Court had made a
conscious departure from what it had held in paragraph 14 of the
same judgment with regard to post-pendente lite interest. It is
submitted that while in para 14 the award of 18% post pendente lite
interest by the Arbitrators was affirmed, in the operative portion of
the judgment of the Supreme Court, i.e., para 15, it was categorically
stated that the interest to be paid till the date of realization was 12%
pendente lite and for the failure to pay the amount within six months
from the date of the order of the Supreme Court, interest was payable
@ 15% per annum. In other words, it is the submission of Mr.
Chandra that the Supreme Court did not intend awarding post
pendente lite interest at the rate of 18% per annum. According to Mr.
Chandra, the Supreme Court in paragraph 14 of the judgment clearly
observed that the grant of interest is discretionary and hence for the
purpose of execution the Supreme Court in para 15 of the judgment
awarded interest at the rate of 12% pendente lite from the date of the
claim petition till realization with the direction that the payment
should be made within a period of six months from the date of the
order, failing which it will carry interest at the rate of 15% per annum.
Mr. Chandra contends that the interpretation placed by the learned
Single Judge on para 14 and para 15 of the judgment of the Supreme
Court would mean allowing the Respondent/Decree Holder to claim
compounding of interest, i.e., the claim of 18% interest on the total of
the principal amount of ` 11.1 Crores and interest at the rate of 12%
(` 4,16,99,000/-) thereon.
13. We have heard the learned senior counsel for the Appellant at
length and we do not find any force in the submissions made before
us. First, a look at paragraph 12 of the Execution Petition
No.242/2008, wherein the Decree Holder has shown the calculation
of the amount due to it thus:-
"12. The judgment Debtor in terms of the judgment of
the Hon'ble Supreme Court dated 06.09.2007 and
order dated 4.1.2008 owes the Decree Holder the
amount shown below as on 2nd July, 2008.
(A)
(a) Principal amount = 11,10,00,000.00
(b) Interest @ 12% = 4,16,99,000.00
(from 7.8.1997 to 23.9.2000)
(3 years 1 month 17 days)
Total (a) + (b) = 15,26,99,000.00
Interest @ 18% on (a) + (b)
(from 24.9.2000 to 29.2.2008)
(7 years 5 months 6 days) = 20,43,11,262.50
Total (A) = 35,70,10,262.50
(B)
ICC-Fee (NRL's share) = 78,79,500.00
(USD 1,70,000/- converted
@ 46.35 Indian Rupee/per USD)
Interest @ 18%
(from 24.9.2000 to 29.02.2000)
(7 days 5 months 6 days) = 1,05,42,771.00
Total (B) = 1,84,22,271.00
Total (A) + (B) = 37,54,32,533.50
Part-payment received on
29.2.2008 = (-) 4,98,97,205.00
Amount due (AD)
(as on 29.02.2008) = 32,55,35,328.00
Interest @ 18% on amount due (AD)
(from 1.3.2008 to 5.3.2008)
(5 days) = 8,13,838.32.00
Interest @ 15% on amount due (AD)
(from 6.3.2008 to 2.7.2008)
(3 months 27 days) = 1,58,69,847.24.00
Grand Total = 34,22,19,014.06.00
Rupees Thirty Four Crores Twenty Two Lakhs
Nineteen Thousand Fourteen and Paise Six".
14. From the aforesaid calculations submitted by the Decree
Holder, it is clear that the principal amount works out to `
11,10,00,000/-. Interest at the rate of 12% per annum from the date of
the institution of the claim till the date of the award (i.e., from
7.8.1997 to 23.9.2000) comes to ` 4,16,99,000/- and interest at the
rate of 18% on the principal amount and the interest pendente lite for
a period of 7 years 5 months 6 days (from 24.9.2000 to 29.2.2008)
comes to ` 20,43,11,262.50, totalling ` 35,70,10,262.50. The ICC
fee on conversion works out to ` 78,79,500/- and with interest at the
rate of 18% to ` 1,05,42,771/- from 24.9.2000 to 29.2.2008. The
grand total of the aforesaid amount comes to ` 37,54,32,533/- (`
35,70,10,262.50 + ` 1,05,42,771/-). After deducting the part payment
received on 29.2.2008, the amount due as on 29.2.2008 comes to `
32,55,35,328.50. Interest at the rate of 18% on amount due is
calculated to be in the sum of ` 8,13,838.32 from 1.3.2008 to
5.3.2008 (five days) and thereafter interest at the rate of 15% per
annum is calculated from 6.3.2008 to 2.7.2008. Thus, on
interpretation of the Calculation Chart reproduced above, interest at
the rate of 18% was payable post award for a period of 6 months, i.e.,
from 6.9.2007 till 5.3.2008 and thereafter at the rate of 15% per
annum till realisation. This is also in line with the direction given by
the Supreme Court in paragraph 15 of the judgment that payment
should be made within a period of six months from the date of the
judgment, i.e., September 6, 2007, whereafter (i.e. from 5.3.2008) it
will carry interest at the rate of 15% per annum, meaning thereby that
interest at the rate of 18% per annum on the amount due was to be
paid upto 5th March, 2008 and at the rate of 15% per annum from 6 th
March, 2008 till the date of payment and this is exactly the manner in
which the Decree Holder has calculated the interest.
15. We are fortified in coming to the aforesaid conclusion by the
order dated 4th January, 2008 passed by the Supreme Court directing
that the portion in parenthesis at the foot of para 14 should read as
"Interest at the rate of 12% pendente lite and at the rate of 18% post
pendente lite", passed in I.A. No.4 in Civil Appeal No.4079/2007.
The Respondent contended before the Supreme Court that the portion
in parenthesis was the summation of what was stated in para 14 and
that the award of the Arbitrators of 18% post pendente lite interest
was affirmed and this was in essence accepted by the Supreme Court
in the order dated 4th January, 2008. As regards the submission of the
Appellant with regard to compounding of interest, we find on a
cumulative reading of paras 14 and 15 of the judgment of the
Supreme Court dated 6th September, 2007 (as clarified on 4th January,
2008) that in essence what is payable by the Appellant to the
Respondent is interest at the rate of 12% pendente lite on the sum of `
11.1 Crores and interest at the rate of 18% per annum on the sum of `
11.1 Crores plus the pendente lite interest and rupee value of US$
170,000 as prevalent on the date of the award. Interest at the rate of
18% was payable for the period of six months from 6.9.2007, i.e., the
date of the order of the Supreme Court ending on 5 th March, 2008 as
clarified in para 15 of the judgment. For any delay beyond six
months in making payment of the above amount, it was to carry
interest at the rate of 15% per annum till realization. This is also clear
from the fact that the Supreme Court has clearly stated in para 15 that
the order passed by the High Court is modified as indicated above,
meaning thereby that 18% interest would be payable till 5.3.2008 and
thereafter interest at the rate of 15% per annum would become
payable.
16. Before parting with the case, we may note that learned senior
Counsel for the Appellant in the course of his submissions had placed
reliance on the judgments of the Supreme Court rendered in State of
Rajasthan and Anr. vs. Nav Bharat Construction Co., (2002) 1 SCC
659 and Pure Helium India (P) Ltd. vs. Oil & Natural Gas
Commission, (2003) 8 SCC 593 in support of his case. In Pure
Helium India (P) Ltd. (supra), which was a case under the
Arbitration Act, 1940, the Supreme Court in para 57 of the judgment
specifically observed that in order to do complete justice to the parties
in exercise of jurisdiction under Article 142 of the Constitution of
India, it was thought appropriate to direct that the award shall carry
interest at the rate of 6% per annum instead and in place of 18% per
annum. It was specifically stated that this however shall not be
treated as a precedent. In the case of State of Rajasthan (supra), the
District Court had awarded interest at the rate of 15% from the date of
the decree, which was modified by the Supreme Court to 6% per
annum considering the dispute involved and the overall
circumstances. We do not see the relevancy of the aforesaid
judgments. In any event, the Supreme Court in the instant case has
upheld the award of post pendente lite interest at the rate of 18% per
annum for a period of six months and thereafter reduced the interest
to 15% per annum till the date of realization.
17. We, therefore, affirm the findings of the learned Single Judge
and dismiss the appeal as being without merit. There will be no order
as to costs.
REVA KHETRAPAL
JUDGE
PRATIBHA RANI
JUDGE
August 26, 2013
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