Delhi High Court
Bharat Heavy Electricals Ltd. vs Aanuj Infra Projects Pvt. Ltd. on 19 November, 2014
$~31
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. 1408/2014
BHARAT HEAVY ELECTRICALS LTD ..... Petitioner
Through: Mr Ajay Kapur, Sr. Adv. with Mr
Arvind Chaudhary, Adv.
versus
AANUJ INFRA PROJECTS PVT LTD ..... Respondent
Through: Mr Sameer Parekh, Ms R.S. Bodbe &
Ms Sanjana Ramachandran, Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
ORDER
% 19.11.2014
OMP 1408/2014 & IA 22133/2104 (Condonation of delay in re-filling)
1. This is a petition filed under Section 34 of the Arbitration &
Conciliation Act, 1996 (in short 1996 Act). By virtue of this petition, award
dated 06.06.2014, passed by the learned arbitrator, is impugned.
2. Mr Ajay Kapur, learned senior counsel for the petitioner, assails the
award on one singular ground, which is that, the interest awarded by the
learned arbitrator was contrary to the provisions of the contract. In this
connection, he referred me to clause 6.7 of the contract, which is also
extracted in the petition. The said clause reads as follows: "No interest shall
be payable by BHEL on Security Deposit or on any money due to the
contractor".
2.1 The learned arbitrator has directed not only payment of interest but
also directed its compounding.
3. Quite clearly, therefore, the directions contained in paragraphs 62.2 to
62.4 in the award, in this regard appear to be ex-facie contrary to the
provisions of the contract and, the principle of law enunciated by the
Supreme Court.
3.1 In respect of payment of interest by the arbitral tribunal, where there
is a bar provided in the agreement for grant of interest, the arbitrator's power
under the 1996 Act to grant interest from the date of cause of action till the
date of award, is circumscribed. The reason for this is that Section 31(7)(a)
of the 1996 Act begins with expression "unless otherwise agreed by parties".
In this case parties have agreed otherwise and, therefore, the arbitrator could
not have granted interest for either the pre-reference period or the pendente
lite period. [See Sayeed Ahmed & Co. vs State of U.P. & Ors. (2009) 12
SCC 26 paragraphs 7 to 10 and Sree Kamatchi Amman Constructions vs
The Divisional Railway Manager (Works), Palghat & Ors. (2010) 8 SCC
767 paragraphs 5 & 10]. The prohibition in contract qua interest would not
be beyond the date of the award. Under section 31(7)(b) of the 1996 Act,
unless the award directs otherwise, interest would run at 18% per annum
from the date of the award till payment. (See paragraph 15 of the judgement
in the case of Sayeed Ahmed & Co. vs State of U.P. & Ors.)
3.2 As regards the other direction, whereby the compounding of interest
is mandated in the impugned award, the same, as is obvious, could not have
been granted because there is a bar on grant of interest. Even otherwise,
compounding of interest cannot be directed by an arbitrator unless the
contract provide for the same. [See State of Haryana & Ors. vs S.L. Arora
& Company (2010) 3 SCC 690].
3.3 These aspects were put to the learned counsel for the respondent.
4. Learned counsel for the respondent sought to give some explanation
as to why the directions contained in paragraphs 62.2 to 62.4 of the award,
were tenable.
5. However, after arguments, both counsels agree that the petition could
be disposed of based on the following directions:
(i) That the award could be sustained after excising the directions
contained in paragraphs 62.2 to 62.4 of the award.
(ii) The sum crystallized in paragraph 62.1 of the award, which is, Rs.
32,28,570/- would be paid by the petitioner, as expeditiously as possible,
though not later than four weeks from today.
(iii) In case the amount, as referred to in clause (ii) above, is not paid,
interest at the rate of 18% would run on the said amount.
6. Accordingly, the petition and the captioned application stand disposed
on the aforesaid agreed terms.
7. Dasti under the signatures of the Court Master.
RAJIV SHAKDHER, J
NOVEMBER 19, 2014
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