Housing & Urban Development ... vs Leela Hotels Limited
2013 Latest Caselaw 1170 Del

          *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                    Date of decision: 8th March, 2013

+                               EFA(OS) 34/2012
       HOUSING & URBAN DEVELOPMENT
       CORPORATION LTD.                          ..... Appellant
                   Through: Mr. Harish Malhotra, Sr. Adv. & Mr.
                            Rajeeve Mehra, ASG with Mr. Sanjay
                            Kumar & Ms. Mehak Nakra, Advs.
                                    Versus
       LEELA HOTELS LIMITED                            ..... Respondent

                         Through:      Mr. Rajiv Nayyar, Sr. Adv. with Mr.
                                       Abhimanyu Mahajan, Adv.
CORAM:-
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J

1. The appellant impugns the order dated 06.09.2012 of the learned

Single Judge in the course of execution of an arbitral Award dated

25.06.2002 having force of a decree under Section 36 of the Arbitration &

Conciliation Act, 1996 (Arbitration Act).

2. The arbitral Award dated 25.06.2002, insofar as relevant for the

present purposes, awarded interest to the respondent / decree holder against

the appellant / judgment debtor on the amounts awarded, at the rate of 20%

per annum pre-arbitration and pendente lite and at the rate of 15% per

annum from the date of the Award till the date of recovery.

3. OMP No.308/2002 under Section 34 of the Arbitration Act preferred

by the appellant / judgment debtor impugning the said Award was dismissed

on 20.01.2003.

4. FAO(OS) No.59/2003 preferred by the appellant / judgment debtor

thereagainst was also dismissed on 09.11.2004.

5. Civil Appeal No.1094/2006 arising out of SLP(Civil) 3777/2005

preferred by the appellant/judgment debtor was also dismissed on

12.02.2008. However, the Supreme Court reduced the rate of interest

awarded by the Arbitrator for the pre-award period from 20% to 18%.

6. The respondent / decree holder then applied for execution of the

Award. During the execution proceedings a question arose whether the

amounts deposited by the appellant / judgment debtor in terms of interim

orders during the proceedings aforesaid, are to be appropriated first towards

interest or principal. Order dated 19.11.2008 of the executing Court in this

regard was challenged in EFA(OS) No.4/2009 and the order dated

20.07.2009 of the Division Bench in the said appeal became the subject

matter of Civil Appeal No.9763/2011 (arising out of SLP (Civil)

18509/2009) disposed of by the Supreme Court on 15.11.2011. Need is

however not felt to discuss in detail the controversy in the said proceedings,

the same having been succinctly set out in the impugned order of the learned

Single Judge and the same having not much relevance to the issue in hand.

7. Thereafter a dispute arose as to whether the interest awarded of 15%

per anuum from the date of the Award to the date of the recovery, was to be

on the principal amount awarded only or also on interest awarded (as

reduced by the Supreme Court) for the pre- arbitration period and pendente

lite the arbitration proceedings. EA No.696/2011 was filed by the

respondent / decree holder giving the calculation of the amount of

Rs.1,54,40,86,168/- due till then.

8. An affidavit in opposition was filed by the appellant / judgment debtor

thereto, claiming that only a sum of Rs.1,46,76,45,561/- was due under the

Award and which had already been paid. The difference in the two

calculations was on account of the fact that while the respondent / decree

holder was claiming post award interest at 15% per annum besides on the

principal amount, also on the amount due towards pre-award interest and the

appellant/ judgment debtor was calculating the same only on the principal

amount awarded and not on the amount towards pre-award interest.

9. The learned Single Judge in paras No.10 to 12 of the impugned order

has noticed that though in the earlier round of appeal during the execution

proceedings, the appellant / judgment debtor had before the Supreme Court

raised the said issue but the Supreme Court did not pronounce of the said

submission.

10. The learned Single Judge further held the judgment of the Supreme

Court in State of Haryana Vs. S.L. Arora & Company 2010 (3) SCC 690,

relied upon by the appellant/judgment debtor, to be not applicable in view of

the Award in the present case providing for post-award interest also on the

amount due towards pre-award interest and the said part of the Award

having not been interfered with, neither by the Single Judge nor by the

Division Bench nor by the Supreme Court and for the reason of award of

such post-award interest on pre-award interest amount, not amounting to

compound interest.

11. The senior counsel for the appellant / judgment debtor has invited our

attention to paras No.22 to 24 of the judgment dated 15.11.2011 of the

Supreme Court in the appeal aforesaid in the earlier round of litigation

arising from the execution proceedings, where it is noted that the issue

relating to charging of compound interest did not survive since the parties

had agreed that no compound interest would be payable in terms of the

Award and that only simple interest was to be paid and he has on the basis

thereof contended that the respondent / decree holder could not claim post-

award interest on the pre-award interest amount, and which would amount

to, compound interest. He has thus argued, that the learned Single Judge, in

the impugned order, has erred in observing that there is nothing to show any

agreement between the parties that no compound interest is payable in terms

of the Award. Reliance is again placed on para No.18 of S.L. Arora &

Company supra, laying down that Section 31(7) of the Arbitration Act

makes no reference to payment of compound interest or payment of interest

upon interest nor does it require the interest, which accrues till the date of

the Award, to be treated as part of the principal, from the date of Award for

calculating the post Award interest and that the arbitral Tribunals do not

have the power to award interest upon interest, or compound interest, either

for the pre-award period or for the post-award period.

12. Per contra, the senior counsel for the respondent / decree holder has

invited our attention to para No.21.9(e) of the arbitral Award in the present

case, where the appellant / judgment debtor has been held liable to pay to the

respondent / decree holder interest at 20% per annum on the monies

(including interest) awarded to the respondent / decree holder by the Award,

from the date of the Award to the date of recovery, and has argued that even

though in the operative para of the Award, future interest has been restricted

to 15% per annum only from the date of the Award to the date of recovery,

but it will be not only be on the principal amount but also on the pre-arbitral

proceedings and pendente lite arbitration proceedings interest amount also,

in terms of the said paragraph of the Award and this part has not been

interfered with in the challenge proceedings to the Award. He has further

invited our attention to para No.13 of the judgment dated 15.11.2011 supra

of the Supreme Court to show, that the compound interest qua which the

agreement between the parties is recorded in the said judgment, was qua the

claim earlier being made by the respondent /decree holder for interest with

yearly rests and has argued that it was the said claim only which was not

pressed by the respondent / decree holder and not the claim for post-award

interest on pre-award interest amount.

13. We have weighed the rival contentions. The operative part of the

Award awards future interest at 15% per annum from the date of the Award

to the date of recovery, without specifying whether the said interest is to be

also on pre-award interest amount also or not. Of course, in the substantive

part of the Award, in para No.29.1 (e) supra, while awarding future interest,

it was specified that the future interest would also be on the monies due

under the Award including towards interest. Though there is inconsistency

in the rate of future interest specified in the substantive part of the Award

and in the operative part of the Award but there is no dispute that the rate of

interest specified only in the operative part of the Award will apply and in

our view the said inconsistency does not affect the award of future interest

on interest due till the date of the Award also.

14. It is also very clear from the judgments of the Single Bench and

Division Bench of this Court in challenge proceedings to the Award that the

appellant/judgment debtors did not challenge the Award to the extent

awarding post-award interest on the pre-award interest amount also. No such

objection is shown to have been taken before the Supreme Court also in the

challenge proceedings.

15. Though the appellant/judgment debtor, when approached the Supreme

Court in SLP/Appeal from order in execution proceedings, challenged award

of post-award interest on pre-award interest amount also, but the Supreme

Court did not pronounce on the same and the necessary corollary is that the

said objection was not accepted by the Supreme Court.

16. We however do not find any merit in the contention of the

appellant/judgment debtor that the respondent/decree holder, in the aforesaid

round before the Supreme Court, agreed not to claim post-award interest on

pre-award interest amount. The agreement between the parties, recorded in

order dated 15.11.2011 supra, of the Supreme Court is found to be only in

respect of the claim then being made by the respondent/decree holder of

interest with yearly rests and it was only such claim which was given up by

the respondent/decree holder.

17. What follows in the aforesaid light is that the award of the post-award

interest (at such rate as modified by the Supreme Court) not only on the

principal amount but also on the pre-award interest amount has attained

finality. The question which arises is, whether in execution, the said Award,

which under Section 36 supra has to be enforced in the same manner as if it

were a decree of the Court, can be interfered with.

18. The settled principle of law is that the executing Court cannot go

behind the decree. Reference if any required in this regard can be made to

the five Judge judgment in Gurpreet Singh Vs.Union of India (UOI) (2006)

8 SCC 457, Food Coporation of India Vs. S. N. Nagarkar (2002) 2 SCC

475, Deepa Bhargava Vs. Mahesh Bhargava (2009) 2 SCC 294, Coal

Linker Vs. Coal India Ltd. (2009) 9 SCC 491 and Morepen Laboratories

Ltd. and Ors. Vs. Morgan Securities and Credits Pvt. Ltd.

MANU/DE/1110/2008

19. Before coming to the dicta of the Supreme Court in S. L. Arora &

Company we may notice that the consistent view of this Court has been that

future interest on the interest till the date of the decree or Award is

permissible. Reference in this regard may be made to Saraswati

Construction Co. Vs. Delhi Development Authority AIR 2004 Delhi 412

where, relying on Oil and Natural Gas Commission Vs. M. C. Clelland

Engineers, S.A (1999) 4 SCC 327, it was held that the pre-suit and

pendente lite interest crystallizes into the decretal amount and the future

interest becomes payable on the entire amount comprised of the claims, as

well as the pre-suit and pendente lite interest and interest from the date of

the passing of the decree is not to be calculated merely on the amount of

claims upheld by the Arbitrator / Court but also on amount of interests

awarded by the Arbitrator or the Court.

20. On an appeal against the aforesaid, the Division Bench in Delhi

Development Authority Vs. Saraswati Construction Co. 114 (2004) DLT

385 held that interest awarded in lieu of compensation or damages becomes

principal amount for which a party would be entitled for interest on account

of it being withheld by the opposite party.

21. A constitution Bench of the Supreme Court in Central Bank of India

Vs. Ravindra 2002 (1) SCC 367 upheld compound interest though in the

context of Banking business.

22. Mention may however be made of dicta of a subsequent Division

Bench of this Court in Pt. Munshi Ram and Associates (P) Ltd. Vs. Delhi

Development Authority MANU/DE/2115/2010, where, relying on S.L.

Arora & Company supra, Saraswati Construction Co. was held to be not

good law. However, the Division Bench in this case was answering a

reference and the question, whether the award, in execution could be

interfered with, did not arise.

23. That brings us to S. L. Arora & Company; the Supreme Court in the

said judgment was concerned with the interpretation of Section 31 (7) of the

Arbitration Act and while doing so held that Section 31(7) makes no

reference to payment of compound interest or payment of interest upon

interest and does not require the interest which accrues till the date of

Award, to be treated as part of the principal from the date of Award for

calculating post-award interest. It was further held that in the absence of any

provision for interest upon interest in the contract, Arbitral Tribunals do not

have the power to award interest upon interest or compound interest either

from the pre-award period or from the post-award period.

24. We have considered, whether a distinction can be carved out from S.

L. Arora & Company, for the reason of the question in the present case

having arisen in execution and the Award having attained finality. However,

what we find is that S. L. Arora & Company also was a case of execution

only and though this aspect of the arbitral Award in that case also having

attained finality was not addressed or adjudicated but the Supreme Court

nevertheless interfered with the Award of post-award interest on pre-award

interest amount also, even at stage of execution.

25. We are however of the opinion that in the face of the established

proposition aforesaid noticed, of it being impermissible to in execution go

behind the decree and on which aspect S.L. Arora & Company is quiet, S.L.

Arora & Company cannot be said to be a judgment allowing going behind

the decree in an execution. The Supreme Court in a catena of decisions has

held that a decision is an authority for what it decides and not for what can

logically be deduced therefrom. (See Bhavnagar University v. Palitana

Sugar Mill Pvt. Ltd (2003) 2 SCC 111, Bharat Forge Co. Ltd. v. Uttam

Manohar Nakate (2005) 2 SCC 489 and Inderpreet Singh Kahlon v. State

of Punjab AIR 2006 SC 2571). Lord Halsbury in Quinn v. Leathem [1901]

A.C. 495 said, "...The other is that a case is only an authority for what it

actually decides. I entirely deny that it can be quoted for a proposition that

may seem to follow logically from it. Such a mode of reasoning assumes that

the law is necessarily a logical code, whereas every lawyer must

acknowledge that the law is not always logical at all...". The Supreme

Court in Bharat Petroleum Corporation Ltd. Vs. N.R. Vairamani (2004) 8

SCC 579 cited Lord Denning with approval opining that each case depends

on its own facts and a close similarity between one case and another is not

enough because even a single significant detail may alter the entire aspect. It

was further held that the temptation to decide cases by matching the colour

of one case against the colour of another is to be avoided.

26. We may also notice that the judgment in S.L. Arora & Company has

vide order in Hyder Consulting (Uk) Ltd. Vs. Governor State of Orissa Tr.

Chief Eng. MANU/SC/0288/2012 been referred to a larger bench.

27. Thus, though we are bound by S.L. Arora & Company but since in the

facts of the present case, where the Award expressly grants post-award

interest on pre-award interest amount also and where the appellant/judgment

debtor in the proceedings challenging the Award failed to challenge the

Award on the said ground and the Award has thus become final and has the

effect of a decree, it is not open to the appellant/judgment debtor to at the

stage of execution proceedings challenge the Award on the said ground.

Such challenge if entertained by us, would amount to going behind the

decree and which is impermissible. In Morepen Laboratories Ltd. supra,

also the Division Bench of this Court was concerned with challenge to the

rate of interest awarded at the stage of execution and held the same to be

impermissible.

28. For the aforesaid reasons, we hold the appellant/judgment debtor to be

bound by the Award of post-award interest on the pre-award interest amount

also, notwithstanding the dicta in S.L. Arora & Company.

29. We therefore do not find any merit in this appeal and dismiss the

same. However, in the legal scenario aforesaid, no costs.

RAJIV SAHAI ENDLAW, J

CHIEF JUSTICE

MARCH 8th, 2013 'gsr'..