Delhi High Court
Delhi Development Authority vs M/S Jagdish Chander Khanna & Sons on 29 July, 2013
Author: Reva Khetrapal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ EFA(OS) 14/2013
DELHI DEVELOPMENT AUTHORITY ..... Appellant
Through: Ms. Amita Singh, Advocate.
versus
M/S JAGDISH CHANDER KHANNA & SONS ..... Respondents
Through: None.
CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL
HON'BLE MS. JUSTICE PRATIBHA RANI
ORDER (ORAL)
: REVA KHETRAPAL, J.
1. This appeal is directed against the order of the learned Single
Judge dated 22nd April, 2013 awarding future interest at the rate of
18% in terms of Sub-Section (7)(b) of Section 31 of the Arbitration
and Conciliation Act, 1996.
2. The sole submission of learned counsel for the Appellant is that
the grant of future interest by the learned Single Judge in execution
proceedings is not in consonance with the award dated 31.10.2008,
the Arbitrator having rejected the claim for present and future interest.
3. By his award dated 31.10.2008, the sole Arbitrator pursuant to
Claim No.8 claiming interest at the rate of 18% pre-suit, pendente lite
and future passed the following awards:-
"I deem it appropriate to award a simple interest @
12% per annum with effect from 16.05.1996 to the date
of award."
4. The learned Single Judge vide the impugned order dated 22nd
April, 2013 after recording the submission of counsel for the Decree
Holder, being that in terms of Section 31(7)(b) of the Arbitration and
Conciliation Act, 1996, the Decree Holder is entitled to interest at the
rate of 18% per annum on the principal amount, i.e., about ` 6 Lakhs,
granted the prayer of the Decree Holder for interest at the statutory
rate of 18%. It may be noted at this juncture that before the learned
Single Judge counsel for the Judgment Debtor made a statement that
his client was agreeable to pay interest at the rate of 18% per annum
as simple interest from the date of the award to the date of payment.
5. We have heard learned counsel for the parties. We do not find
any infirmity or perversity in the order of the learned Single Judge.
The Arbitration and Conciliation Act, 1996 contains a specific
provision dealing with the power of the Arbitral Tribunal to award
interest. The said provision as incorporated in Sub-Section (7) of
Section 31 is, for the sake of ready reference, extracted below:-
"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 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."
6. Thus, while Clause (a) of Section 31(7) of the Act relates to the
pre-award period, Clause (b) relates to the post award period. It is
settled law that the Arbitral Tribunal though has discretion under this
clause with regard to the rate, the period and the quantum of interest,
such discretion is always subject to the contract between the parties
and the parties may even opt to contract out of interest. Insofar as
Clause (b) is concerned, though this clause too gives discretion to the
Arbitral Tribunal to award interest for the post award period, but that
discretion is not relatable to the contract between the parties. If,
however, the discretion to award interest is not exercised by the
Arbitral Tribunal, the Act mandates the payment of interest at the
statutory rate of 18% per annum for the post award period unless the
same is specifically refused by the Arbitrator or unless the Arbitrator
chooses to award interest at a lower rate than that mandated.
7. The summation of the law with regard to Section 31(7)(a) and
(b) is lucidly contained in the judgment of the Hon'ble Supreme
Court rendered in State of Haryana and Others vs. S.L. Arora and
Company, (2010) 3 SCC 690. Since the present case relates only to
post award interest, the relevant portion of the judgment is extracted
hereinbelow:-
"24.6 Clause (b) of Section 31(7) is intended to
ensure prompt payment by the award-debtor once the
award is made. The said clause provides that the "sum
directed to be paid by an arbitral award" shall carry
interest at the rate of 18% per annum from the date of
award to the date of payment if the award does not
provide otherwise in regard to the interest from the
date of the award. This makes it clear that if the award
grants interest at a specified rate up to the date of
payment, or specifies the rate of interest payable from
the date of award till the date of payment, or if the
award specifically refused interest, clause (b) of
Section 31 will not come into play. But if the award is
silent in regard to the interest from the date of award,
or does not specify the rate of interest from the date of
award, then the party in whose favour an award for
money has been made, will be entitled to interest at
18% per annum from the date of award. He may
claim the said amount in execution even though there
is no reference to any post-award interest in the
award. Even if the pre-award interest is at much lower
rate, if the award is silent in regard to post-award
interest, the claimant will be entitled to post-award
interest at the higher rate of 18% per annum. The
higher rate of interest is provided in clause (b) with the
deliberate intent of discouraging award-debtors from
adopting dilatory tactics and to persuade them to
comply with the award.
34. Thus it is clear that Section 31(7) merely
authorises the Arbitral Tribunal to award interest in
accordance with the contract and in the absence of any
prohibition in the contract and in the absence of
specific provision relating to interest in the contract, to
award simple interest at such rates as it deems fit from
the date on which the cause of action arose till the date
of payment. It also provides that if the award is silent
about interest from the date of award till the date of
payment, the person in whose favour the award is
made will be entitled to interest at 18% per annum on
the principal amount awarded, from the date of award
till the date of payment."
8. In view of the above, enunciation of the law, we do not find
any merit in the present appeal, which is accordingly dismissed.
REVA KHETRAPAL
JUDGE
PRATIBHA RANI
JUDGE
July 29, 2013
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