Dharmender Sharma & Anr vs Sriram Transport Finance Co Ltd & ...
2014 Latest Caselaw 2882 Del

*                  HIGH COURT OF DELHI AT NEW DELHI

+                     F.A.O. No.375/2011 & C.M. No.16262/2011
                      F.A.O. No.377/2011 & C.M. No.16270/2011
                      F.A.O. No.379/2011 & C.M. No.16279/2011
                      F.A.O. No.399/2011 & C.M. No.17005/2011
                      F.A.O. No.402/2011 & C.M. No.17049/2011

                                                   Decided on : 2nd July, 2014

DHARMENDER SHARMA & ANR                ..... Appellants
            Through: Mr. Sanjeev Sagar, Advocate.

                                versus

SRIRAM TRANSPORT FINANCE CO LTD & ANR
                                       ..... Respondents
             Through: Mr. Sourabh Leekha, Advocate.

                                          WITH

+                     F.A.O. No.376/2011 & C.M. No.16265/2011
                      F.A.O. No.378/2011 & C.M. No.16271/2011
                      F.A.O. No.381/2011 & C.M. No.16383/2011
                      F.A.O. No.390/2011 & C.M. No.16541/2011

LOKESH KUMAR & ANR                                         ..... Appellants
            Through:                     Mr. Sanjeev Sagar, Advocate.

                                versus

SRIRAM TRANSPORT FINANCE CO LTD & ANR
                                     ..... Respondents
                 Through: Mr. Sourabh Leekha, Advocate.

                                          WITH


F.A.O. Nos.375-379, 381, 390, 398-400 & 402/2011                       Page 1 of 10
                       F.A.O. No.398/2011 & C.M. No.17002/2011

NEERAJ BHOLA & ANR                                         ..... Appellants
             Through:                    Mr. Sanjeev Sagar, Advocate.

                                versus

SRIRAM TRANSPORT FINANCE CO LTD & ANR
                                     ..... Respondents
                 Through: Mr. Sourabh Leekha, Advocate.

                                           AND

                      F.A.O. No.400/2011 & C.M. No.17009/2011

RAVINDER KUMAR & ANR                   ..... Appellants
            Through: Mr. Sanjeev Sagar, Advocate.

                                versus

SRIRAM TRANSPORT FINANCE CO LTD & ANR
                                     ..... Respondents
                 Through: Mr. Sourabh Leekha, Advocate.

CORAM:
HON'BLE MR. JUSTICE V.K. SHALI

V.K. SHALI, J.

1. These are eleven appeals under Section 37 of the Arbitration and

Conciliation Act, 1996 against the order dated 27.5.2011 passed by the

learned Additional District Judge, South District, Delhi, rejecting the

objections of the appellants under Section 34 of the Arbitration and

Conciliation Act, 1996, against the award dated 15.2.2010.

2. The learned counsel for the appellants has raised the question only

with regard to reduction of rate of interest from 18 per cent per annum, as

awarded by the learned arbitrator and upheld by the learned Additional

District Judge, to 10 per cent per annum or such amount as may be

deemed reasonable by this court. For this purpose, the learned counsel

for the appellants has placed reliance on the judgment of the Apex Court

in M/s. MSK Projects (I) (JV) Ltd. vs. State of Rajasthan & Anr.; AIR

2011 SC 2979.

3. I have heard the learned counsel for the appellants as well as the

learned counsel for the respondents and have also gone through the

record.

4. Before dealing with the submissions of the learned counsel for the

appellants for the reduction of the rate of interest as awarded by the

learned arbitrator, it will be worthwhile to mention that in all these cases

the facts are almost similar inasmuch as the loan was drawn by the

appellants for the purchase of commercial vehicle for which standard

format documents were signed by the parties apart from hypothecation of

the vehicle. The facts of the appeal being F.A.O. No.375/2011 are only

being given and in rest of the cases, the facts being on similar lines, the

same need not be repeated herein to make the record bulky as the issue is

with regard to payment of interest.

5. The appellant No.1 is the borrower and the appellant No.2 is the

guarantor. The appellant No.1 had availed of finance for purchase of a

commercial vehicle from respondent No.1 by way of a loan-cum-

hypothecation agreement dated 28.11.2006. The loan was to be repaid in

47 installments. The first and the second installments were to be of a sum

of Rs.19,955/- and the remaining installments were of Rs.19,940/-. The

appellant No.1 paid a sum of Rs.1,47,322/- only upto 31.5.2007. Since

the appellants failed to adhere to the terms and conditions of the loan

agreement, therefore, the respondent No.1 recalled the loan and issued a

demand notice dated 2.7.2009 to the appellants and terminated the

agreement. The respondent also exercised its option to have the dispute

referred to a sole arbitrator for the recovery of balance outstanding

amount of Rs.7,89,888/- apart from other expenses, insurance, OD of

delayed installment which turned out to be a total sum of Rs.9,31,369/-.

It may be pertinent here to mention that in terms of the loan agreement, it

is not in dispute that in the event of their being any default on the part of

the appellants in repayment of the loan, the respondent was entitled to

delayed payment charges @ 3 per cent per month which turns out to be @

36 per cent per annum. The interest was claimed @ 36 per cent per

annum by the respondent/claimant with effect from 1.3.2009 apart from

re-possession of the vehicle and the disposal of the same.

6. Vide ex parte award dated 15.2.2010, the sole arbitrator allowed

the claim of the respondent for a sum of Rs.9,31,369/- along with interest

@ 18 per cent per annum with effect from 1.3.2009 in addition to re-

possession of the vehicle and disposal of the same. This award was

passed ex parte against the appellants as they had failed to respond to the

notice despite the service having been affected on them.

7. The appellants, after receipt of the copy of the award, challenged

the same before the court of Additional District Judge by filing objections

under Section 34 of the Arbitration and Conciliation Act, 1996 on the

ground that they have not been validly served. On merits as well as on

interest also, a challenge was laid which was partly allowed by the

learned Additional District Judge to the extent that award of expenses of

Rs.9730/- or interest @ 18 per cent per annum with effect from 1.3.2009

was held to be beyond agreement and the award and, therefore, to that

extent the award was set aside.

8. The appellants, feeling aggrieved from the impugned order dated

27.5.2011 have filed the present appeals in which the learned counsel for

the appellants has confined his submissions only with regard to reduction

of rate of interest from 18 per cent per annum to 10 per cent per annum.

In this regard, the learned counsel has referred to M/s. MSK Projects's

case (supra) wherein the Supreme Court has upheld the reduction of rate

of interest from 18 per cent per annum to 10 per cent per annum.

9. I have gone through the judgment cited by the learned counsel for

the appellants; however, I do not feel that the aforesaid judgment is of

any help to the appellants in the instant case. This is on account of the

fact that there is no proposition of law laid down by the Apex Court in the

said case that reduction of rate of interest from 18 per cent per annum to

10 per cent per annum can be granted in each and every case on account

of the lowering of the rates of interests by the banks on the deposits made

with it, as a matter of course. It is in the facts of that particular case and

the view taken by the judicial forums, that is, both by the Additional

District Judge as well as the High Court which granted the interest @ 10

per cent per annum, the Supreme Court has taken the view that the

reduction of rate of interest from 18 per cent per annum to 10 per cent per

annum was justified. This was a case where there was a dispute with

regard to payment of damages to M/s. MSK Projects (I) (JV) Ltd. with

State of Rajasthan regarding the delay in issuing of notification for the

construction of bye-pass connecting Bharatpur with Mathura measuring

approximately 10 kms because of which the appellant M/s. MSK Projects

(I) (JV) Ltd. had claimed damages. The damages were awarded in its

favour by the arbitrator and on the damages to the tune of

Rs.9,90,00,000/- or so, the arbitrator had directed payment of interest @

18 per cent from 31.12.2003.

10. Feeling aggrieved by the said arbitral award, the State of Rajasthan

had filed objections under Section 34 of the Arbitration and Conciliation

Act, 1996, on various grounds which were adjudicated and the rate of

interest was reduced by the District Judge from 18 per cent to 10 per cent

per annum. The reduction of aforesaid interest from 18 per cent to 10 per

cent was upheld by the High Court keeping in view Section 31 sub-

Section (7) and sub-clause (b) of the Act and also observing that

"economic realities whereby the rate of interest had been reduced by the

Banks in India" and rate of interest of 10 per cent was deemed to be

adequate. It is in this background that the appellant M/s. MSK Projects

(I) (JV) Ltd. had gone to the Apex Court where the aforesaid rate of

interest was upheld.

11. Unlike in the present case where there is an agreement between the

parties which provides realization of charges @ 3 per cent per month on

the delayed payment which is nothing but in the nature of interest which

turns out to be @ 36 per cent per annum. I do not agree with the

observation of the learned Additional District Judge that this cannot be

treated as a rate of interest or that no rate of interest has been fixed by the

parties by the agreement. In my view, the rate of interest fixed by the

parties is @ 36 per cent per annum.

12. The language of Section 31 of the Arbitration and Conciliation Act,

1996 is starting with words "unless agreed to the contrary" thereby

meaning that if something has been agreed upon to the contrary by the

parties then that shall be overriding and prevailing or governing the

relationship of the parties. So, in the instant case, as a matter of fact, the

appellants themselves had cut off their hands by signing that agreement

and agreeing to pay rate of interest @ 36 per cent which has been reduced

by the arbitrator to 18 per cent keeping in view Section 37 (7) (b) of the

Act payable from 1.3.2009. Merely because the rates of interest by the

banks have been reduced or that in one particular judgment, the rate of

interest granted by the Apex Court is 10 per cent, does not ipso facto

make that rate of interest applicable as the rate of interest payable by the

appellants. The appellants, in my opinion, have been rightly saddled with

an interest of 18 per cent per annum. Further even otherwise, the facts of

the case are so glaring that the loan has been availed of by the appellants

in the year 2006, the value of money has substantially depreciated over a

period of time and more than eight years have gone by and still the

amount is yet to be recovered from the appellants. In my view, the rate of

interest which has been awarded by the learned arbitrator is a deterrent

for the award debtors for using it as a delaying tactic to ward off their

liability. It would be hardly resulting in equalization of the value for

money. Reliance with regard to upholding the rate of interest in the

instant case, can be placed on number of judgments of the Apex Court

which would warrant that the rate of interest need not be tinkered with.

Reference is made in this regard to State of Haryana vs. S.L. Arora and

Company; (2010) 3 SCC 690, Bhagawati Oxygen Ltd. vs. Hindustan

Copper Ltd. AIR 2005 SC 2071, Bihar Sponge Iron Ltd. (BSIL) vs. Rail

India Technical & Economic Services Ltd. (RITES); 132 (2006) DLT 489,

M/s. Sayeed Ahmed & Co. vs. State of U.P.; (2009) 12 SCC 26, M/s.

Maharashtra Apex Corporation Ltd. vs. Sandesh Kumar & Ors.; AIR

2006 Karnataka 138, M/s. Steeman Ltd. vs. The State of Himachal

Pradesh & Ors.; (1997) CLT 123 (SC), Modi Rubber Ltd. vs. Morgan

Securities & Credits Pvt. Ltd. & Anr.; 165 (2009) DLT 113, Municipal

Committee, Patiala vs. Krishan Kumar Bansal; 2002 (3) RAJ 15 (pg.4),

Ramrameshwari Devi & Ors. Vs. Nirmala Devi & Ors.; (2011) SLT 196,

Sanjeev Kumar Jain vs. Raghubir Saran Charitable Trust & Ors.; 2011

SLT 678 and DDA vs. Wee Aar Constructive Builders and Others.

13. In view of the aforesaid reasoning, I feel that the appeals of the

appellants for reduction of rate of interest are totally misconceived and do

not have any merit and the same are accordingly dismissed.

V.K. SHALI, J.

JULY 02, 2014 'AA'