Delhi High Court
M/S Jayaswals Neco Ltd. vs Union Of India And Anr. on 2 August, 2016
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 02.08.2016
+ EX.P. 224/2010
M/S JAYASWALS NECO LTD. ..... Decree Holder
versus
UNION OF INDIA AND ANR. ..... Judgment Debtors
Advocates who appeared in this case:
For the Decree Holder : Mr Shatadru Chakraborty and Ms Kartika
Chaudhary.
For the Judgment Debtors: Mr R. V. Sinha & Mr R. N. Singh.
CORAM:-
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The present petition has been filed by the Decree Holder (hereafter
'JNL') to enforce an arbitration award dated 09.10.2002. According to the
Judgment Debtors (hereafter 'the railways'), an excess payment of `12,483/-
has been made which is required to be recovered from JNL. JNL disputes
this and claims that as on 11.02.2015, a sum of `2,53,481/- was outstanding
after adjustment of the amounts paid by the railways and this amount is
payable along with further interest at the rate of 18% p.a. till the date of
payment.
2. The central controversy relates to the manner in which payments
already made by the railways are to be adjusted; the railways claim that the
amounts paid by it are to be appropriated partly towards the award of claim
no.1 - which the railways terms as the principal amount- and partly towards
interest in terms of the calculation sheet forwarded to JNL at the time of
making the remittance. JNL, on the other hand, claims that the amounts paid
by the railways are to be first appropriated towards interest and the balance
towards the awarded amount.
3. The aforesaid controversy arises in the context of the following facts,
which are briefly narrated as under:
3.1 The parties entered into a contract bearing no.99/Track-
II/22/14/8/70248 dated 18.06.1999 (hereafter 'the Contract'), in terms of
which JNL agreed to supply and the railways agreed to purchase 7 lakh
pieces of SGCI inserts. The railways short closed the Contract and that
gave rise to disputes between the parties. The Contract contained an
arbitration clause and, accordingly, the disputes were referred to Arbitration.
The arbitration proceedings culminated into an Award dated 09.10.2002
(hereafter 'the Award') in favour of JNL; the operative parts of which is
quoted below:
"8.1 Claim no. 1
...Therefore, the Respondents shall pay to the Claimants
the difference between the rate agreed between the
parties in their agreement dated 18.6.1999 and the rate
as actually paid for 98,219 nos. inserts.
Simple interest of 12% over and above the price
differential between the amount due and the amount
actually paid from 45 days after the above payment
become due till the date of declaration of the award is
considered to be reasonable and is, therefore, allowed.
xxxxx xxxxxx xxxxx xxxxx
11. Respondents are directed to arrange payment of this
award as stated within a period of 90 days from the
publication of this award, failing which interest @ 18%
shall be payable by the Respondents to the Claimant till the
payment of this arbitration award."
3.2 The railways impugned the Award before this Court in OMP
No.45/2003 which was dismissed by an order dated 14.12.2005. The
railways appealed against the aforesaid order before a Division Bench of
this Court (in FAO(OS) Nos.578, 579 of 2006) which was also rejected by
an order dated 06.08.2007. The railways carried the matter to the Supreme
Court by way of a Special Leave Petition (being SLP(C) No.13848-13849
of 2008) which was also dismissed by an order dated 04.02.2010.
3.3 Since the railways had not paid the amount as awarded, JNL filed the
instant petition under Section 36 of the Arbitration and Conciliation Act,
1996 (hereinafter the „Act‟) read with Order XXI Rule 10 of the Code of
Civil Procedure, 1908 (hereafter „the CPC‟) seeking recovery of a sum of
`1,12,01,529.32/- which included interest till 17.02.2010.
3.4 JNL's main claim in the arbitration - Claim no 1 - related to loss
arising out of abrupt short closure of the Contract. The Arbitrator awarded
the aforesaid claim in favour of JNL and held that expected supplies from
JNL till 09.03.2000 should have been to the order of 6,48,219 inserts against
4,90,000 inserts actually accepted; therefore, the Arbitrator held that JNL's
loss be computed as the difference between the rate agreed between the
parties as per the Contract and the rate actually paid for 98,219 inserts.
3.5 There were certain controversies regarding the above calculation of
loss; the railways asserted that JNL had, admittedly, supplied 5,85,000
inserts and not 4,90,000 inserts and, therefore, the loss as awarded was to be
computed only in respect of 63,219 and not 98,219 inserts as stated in the
Award. The railways further claimed that the loss was to be computed at
the rate of ` 3.22 per insert and not ` 6.80 per insert as indicated in the
Award.
3.6 This Court - by an order dated 17.07.2013 - accepted the railways‟
stand that the figure of 98,219 inserts as stated in the award was an obvious
error and the loss awarded was to be computed for 63,219 inserts and not
98,219 inserts. However, the contention that the difference in the price per
insert was ` 3.22 and not ` 6.80 was rejected.
3.7 In the meantime, the railways remitted a draft of ` 6,24,119/- to JNL
under the cover of remittance note dated 18.06.2010 along with a
calculation sheet. The said calculation sheet indicated that the railways
computed the loss awarded at `2,03,565/- (for 63,219 inserts at the rate of `
3.22 each) and had, accordingly, worked out that a sum of ` 6,19,086/-
would cover the entire awarded amount including interest upto 10.05.2010.
3.8 Immediately on receipt of the aforesaid remittance, JNL filed an
application dated 02.08.2010 under Order XXI Rule 11(2) r.w. Order XXI
Rule 2(1) of the CPC, inter alia, stating that it had accepted the said
remittance of `6,24,119/- as part payment without prejudice to its rights
and contentions and further prayed that this Court may record the said
receipt as part payment towards the amount due from the railways.
3.9 The said application was disposed of by an order dated 13.08.2010.
3.10 The railways paid a further sum of `8,71,791/- on 18.11.2013 and this
according to the railways fully satisfied the Award. JNL disputes the
aforesaid contention as according to it, a further sum of `2,11,753/- was
payable as on that date. In view of the difference in calculation of the
amount payable, this Court, by an order dated 20.11.2014 directed the
parties to appear before the Registrar General, who was directed to examine
their respective calculations and submit a report. In compliance with the
aforesaid order, the Registrar General heard extensive arguments on behalf
of the parties and submitted a report on 18.09.2015, inter alia, accepting the
stand of the railways that an excess payment of `12,483/- had been paid to
JNL.
4. A perusal of the said report indicates that the difference in the
calculation as submitted by JNL and the railways stems from the manner of
appropriation of the part payments made by the railways.
Submissions
5. Mr Sinha, the learned Senior Standing counsel appearing for the
railways submitted that remittance of a sum of `6,24,119/- was made to JNL
partly on account of principal and partly on account of interest. Since, JNL
had accepted the same without protest, it was not open for JNL to now
contend that it had appropriated the aforesaid sum only towards interest and
not in the manner as indicated in the calculation sheet enclosed along with
the remittance note. He further referred to the decision of a Constitution
Bench of the Supreme Court in Gurpreet Singh v.Union of India: (2006) 8
SCC 457 and on the strength of the said judgment contended that if a
Judgment Debtor while making a deposit indicates that the same is towards
a specified debt, it is not open for the Judgment Debtor to appropriate the
amount deposited towards any other head. He referred to Section 59 to 61 of
the Indian Contract Act, 1872 (hereafter „the Contract Act‟) and submitted
that the principles of appropriation embodied therein are also applicable to
part payments made towards a decree. He submitted that in the present
case, the railways had specifically indicated in the calculation sheet
submitted with the remittance note dated 18.06.2010 that out of the sum of `
6,24,119/-, `2,03,565/- was towards the principal amount. He contended
that, therefore, JNL could not appropriate the amounts paid by the railways
towards interest.
6. Mr. Sinha further contended that if the amounts paid by the railways
was appropriated in the manner as canvassed by JNL, it would amount to
the railways paying interest on interest.
7. Mr Chakraborty, the learned counsel for JNL countered Mr Sinha‟s
submission and submitted that the remittance note dated 18.06.2010 - under
the cover of which a sum of `6,24,119/- was remitted to JNL - did not
specify that any amount was to be appropriated towards principal. He
further submitted that immediately on receipt of the aforesaid remittance,
JNL had filed an application dated 02.08.2010 which clearly stated that the
amount had been accepted without prejudice to the rights and contentions of
JNL and, therefore, it could not be stated that JNL had lost its right to adjust
the aforesaid sum towards interest due on the decretal amount.
8. Mr Chakraborty further submitted that it is settled law that in absence
of an agreement between the parties and/or any specific direction from the
Court, the amount paid by the Judgment Debtor would have to be first
appropriated towards interest followed by adjustment towards the principal
amount.
9. He also relied on the decisions of the Supreme Court in Leela Hotels
Limited v. Housing and Urban Development Corporation Ltd.: (2012) 1
SCC 302, V. Kala Bharathi & Others v. Oriental Insurance Company
Limited, Branch Chitoor: (2014) 5 SCC 577 and Gurpreet Singh (supra).
He also referred to the decision of the Division Bench of this Court in Ircon
International Ltd. v. M. Moolji (Bombay): (2012) 188 DLT 52 (DB) in
support of his contentions.
Reasoning and Conclusion
10. In the present petition, JNL has quantified the amount recoverable
under the award as `1,12,01,529.32/-. The manner in which the aforesaid
sum is computed is stated in paragraph 4 of the petition and is quoted
below:-
S. Particulars Amount (In
No. Rs.)
1. i) Cost of 60,000 Inserts (58219-98219)
@ Rs.31.95 Rs.19,17,000.00
ii) Cost of 98219 inserts @ Rs.6.80
(Amended Contract price 31.95 - paid Rs.6,67,889.20
price 27.45)
Total Payable to JNL Rs.25,84,889.20
2. Interest for 960 days @12% Award
allows payment if interest @12% from
45 days after the due date of payment to
be made. As per award, last supply date
taken 09.03.2000. Due date of payment
taken as 09.04.2000 45 days after the
due date taken as 24.05.2000. Award
allows this interest to be paid up to 90
days after the award. Award date is
09.10.2002. 90 days after the award is
09.01.2003. Therefore interest is for the Rs.8,15,833.52
period 24.05.2000 to 09.01.2003 which
comes to 960 days.
3. Interest for 2617 days @18% Award
allows payment of interest @18% after
90 days of award, if not paid within this
time, till the date of payment. Hence,
interest from 10.01.2003 to 17.02.2010. Rs.
78,00,806.00/-
Total amount with interest
Rs.01,12,01,529.32
(Rs. One crore twelve lacs one thousand five hundred and twenty
nine and paise thirty two only)
11. In so far as the sum of `19,17,000/- on account of the cost of 60,000
inserts is concerned, there is no dispute that the same has not been awarded
in the Award. Against the aforesaid claim, the railways remitted a sum of
`6,24,119/- on 18.06.2010 enclosing therewith a calculation sheet which
was captioned "Tentative calculation of Liabilities arising out of Arbitration
Award". The said calculation sheet is reproduced below:-
S Claim by claimant (2) Amount as per Amount as per
No. claimant (3) award (4)
1. 1) Cost of 60,000 Inserts Not part of
(58219 - 98219 @ Rs. 31.95 Rs. 19,17,000.00 award. Hence,
disallowed
ii) Cost of 98219 inserts @
Rs. 6.80 Rs. 6,67,889.20 Rs. 2,03,565
(Amended Contract price (63219 X 3.22)
31.95 -paid price 27.45 Ref. Annexure 'C'
for details
Total payable to JNL Rs.25,84,889.20 Rs.2,03,565
2. Interest for 960 days
@12% Award allows
payment If interest
@12% from 45 days Rs.8,15,833.52 Rs. 58,091.32
after the due date of (on item 1 for 960 (on item 1 for
payment to be made. As days) 868 days from
per award, last supply 25.5.2000 to
date taken 09.03.2000. 09.10.2002)
Due date of payment
taken as 09.04.2000 45
days after the due date
ken as 24.05.2000. Total 1+2
Award allows this Rs.2,61,656.32/-
interest to be paid up to
90 days after this award.
Award date is 09.10.2002, To be verified
90 days after the award is by FA& CAO,
09.01.2003. C. Rly
Therefore, interest is for
the period 24.05.2000 to
09.01.2003 which comes
to 960 days.
3. Interest for 2617 days
@18%. Award allows
payment of interest @18% Rs. 78,00,806.60 Rs, 3,57,429.70
after 90 days of award, if (on
not paid within this time, Rs.2,61,656.32/-
till the date of payment. for 2770 days @
Hence, interest from 18% from
10.01.2003 to 10.03.2010. 10.10.2002
till
10.05.2010)
To be verified
by FA&CAO,
C. Rly
Total Rs.1,12,01,529.3
2 Tentative
Rs.6,19,086/-
upto
10.05.2010
Tentative per day Interest beyond 10.05.2010 is Rs.129.04/-
12. According to the railways, the amount awarded to JNL against claim
no.1- loss due to abrupt short closing of the contract - was `2,03,565/-; this
was calculated by taking the number of inserts as 63,219 inserts and by
taking the difference in the value as `3.22 (the amount awarded is calculated
by multiplying the number of inserts by the difference in the rate). JNL, on
the other hand, computed the amount awarded against claim no.1 as
`6,67,889.20/-; this was calculated by taking the number of inserts as
98,219 (as mentioned in the Award) and taking the difference in the
amended cost price and the price paid as `6.80.
13. The controversy as to the number of inserts short purchased and the
difference in rates was considered by this Court on 17.07.2013. This Court
accepted the contention advanced by the railways that the number of inserts
ought to be taken at 63,219 and not 98,219 as indicated in the Award. The
Court found that the same was an apparent error. However, this Court did
not accept the railway‟s contention that the difference in rate was `3.22 and
not `6.80 as stated in the Award.
14. In terms of the order passed on 17.07.2013, the amount awarded to
JNL against Claim no.1 was crystallised as `4,29,889/- (multiplying 63,219
inserts at the rate of `6.80). In the order dated 17.07.2013, the Court noted
that the railways had already paid a sum of `6,24,119/- against the decretal
amount and further directed that the remaining money be paid along with
interest on the unpaid balance within a period of four weeks from that date.
Although, JNL had initially claimed that interest at the rate of 12% p.a.
awarded on the aforesaid amount of loss would be payable for 960 days -
that is, from 24.05.2000 till 09.01.2003 - the same was erroneous as the
interest awarded was to be computed till the date of the award, that is, for a
period of 868 days from 24.05.2000 till 19.10.2002. There is no dispute
between the parties on this aspect.
15. Thus, admittedly, the amount awarded to JNL in terms of the award is
`5,52,567/- (`4,29,889 plus `1,22,677/- being interest @ 12% p.a. for 868
days). On the aforesaid basis, JNL submitted its calculation for the amount
due till 11.02.2015. The said calculation is reproduced below:-
S. Particulars Interest Amount
No.
(In Rs.) (in Rs.)
1. Cost of 63,219 inserts @ ₹6.80 4,29,889
(differentia between rate agreed
to be paid and the rate actually
paid)
2. Interest for 868 days @ 12% 1,22,677 5,52,567
(begins to run 45 days from due
date of payment i.e. from
24.05.2000 till the date of award
i.e. 09.10.2002)
3. Interest for 2715 days @ 18% 7,39,834
(begins to run 90 days after the
date of award i.e. 10.01.2003 till
17.06.2010 since in the present
case, the part payment of ₹
6,24,119/- was received on
18.06.2010
Total interest ₹12,92,400
₹ 8,62,511
4. Payment received from Judgment ₹6,24,119
Debtor on 18.06.2010
5. Balance as on 18.06.2010 ₹ 2,38,392 ₹6,68,281
6. Interest for 1247 days @ 18% ₹ 4,10,966 ₹ 10,79,247
(from 19.06.2010 till 17.11.2013
since in the present case, part
payment of ₹ 8,71,791/- was
received on 18.11.
2013)
7. Total interest ₹ 10,79,247
- ₹ 6,49,358
8. Payment received from judgment ₹8,71,791
debtor on 18.11.2013
9. Balance as on 18.11.2013 0 ₹2,07,456
10. Interest for 42 days @ 18% from ₹ 4,297 ₹2,11,753
19.11.2013 till 31.12.2013
11. Interest for 365 days @18% from ₹ 37,342 ₹ 2,49,095
01.01.2014 till 31.12.2014
12. Interest for 42 days @ 18% from ₹ 4,386 ₹2,53,481
01.01.2015 till 11.02.2015
16. The railways also forwarded their calculation sheet (to Mr. Sinha)
according to which the entire decretal amount stood paid. The said
calculation is reproduced below:-
S. Admissible Claim Amount
No.
1. Cost of 63219 insert @ Rs.3.58 Rs. 2,26,324.02
(6.80-3.22+3.58); payment @
Rs.3.22 has already been done by
Central Railway for total
Rs.6,24,119/- vide cheques dated
18.06.2010
2. Interest for 868 days @ 12%. Rs. 64,586.06 (on S. No.1
Award allows payment of interest for 868 days from
@ 12% from 45 days after due 25.05.2000 to 09.10.2002
payment to be made. As date of total (1)+(2) = 2,90,910.075
award is 09.10.2002 interest @
12% is payable from 24.05.2000
to 09.10.2002 i.e. 868 days
3. Interest for 4036 days @ 18% Rs.5,79,014.66
Award allows payment @ 18% Total (1)+(2)+(3)=
after 90 days of award if not paid Rs.8,69,924.74 say
within this time till date of Rs.8,69,925/-
payment. Say it will be paid by
31.10.2013, hence interest from
10.10.2002 till 31.10.2002
4. Extra interest beyond 31.10.2013 Rs.1866/-
@ Rs.1435 per day for 13 days as Total=Rs.8,69,925+1866=R
payment done on 13.11.2013 s.871791
17. An examination of the aforesaid calculation sheet submitted by the
railways indicate that they have proceeded on the assumption that the entire
payment of `6,24,119/- made on 18.06.2010 was liable to be appropriated as
per the calculation sheet forwarded along with the remittance note dated
18.06.2010; that is, `2,03,565/- against award of claim no. 1 and the balance
against interest (both pre and post award). Accordingly, the railways
computed the loss on differential amount payable on account of cost of
inserts at `2,26,324.02/- (`4,29,889/- less `2,03,565/- remitted on
18.06.2010) and further worked out the interest on the aforesaid amount.
18. According to JNL, the entire amount of `6,24,119/- was to be
adjusted against the interest (post award) outstanding as on that date i.e. on
18.06.2010.
19. Thus, the only issue to be addressed is whether the amount paid by the
railways was to be appropriated in the manner as indicated by them in their
calculation sheet annexed with their remittance note dated 18.06.2010.
20. It is ex facie apparent that the calculation submitted by the railways is
fundamentally flawed. In terms of the award, amount awarded to JNL is
`5,52,567/- (`4,29,889 plus interest @ 12% p.a. for 868 days - `1,22,677/-
). This is the decretal amount that the railways were liable to pay to JNL.
The assumption that it consisted of multiple debts, one on account of award
against claim no. 1 and another on account of interest is palpably erroneous.
The award in favour of JNL is a single indivisible award. And, the interest
awarded (at the rate of 12% p.a.) is subsumed under the Award. The
contention that it was open for the railways to dissect this amount and
decide as to how much of its remittance was to be appropriated against
claim no.1 and how much against interest is plainly erroneous.
21. The next aspect to consider is whether JNL was entitled to
appropriate the amount remitted on 18.06.2010 towards post award interest.
22. The law as to appropriation of payments towards decretal amount is
now well settled. In M/s Industrial Credit and Development Syndicate v.
Smithaben H. Patel and Ors: (1999) 3 SCC 80, the Supreme Court had
observed as under:-
"In view of what has been noticed hereinabove, we hold
that the general rule of appropriation of payments towards a
decretal amount is that such an amount is to be adjusted
firstly strictly in accordance with the directions contained in
the decree and in the absence of such direction,
adjustments, be made firstly in payment of interest and
costs and thereafter in payment of the principal amount.
Such a principle is, however, subject to one exception, i.e.
that the parties may agree to the adjustment of the payment
in any other manner despite the decree. As and when such
an agreement is pleaded, the onus of proving is always
upon the person pleading the agreement contrary to the
general rule or the terms of the decree schedule. The
provisions of Sections 59 to 61 of the Contract Act are
applicable in cases where a debtor owes several distinct
debts to one person and do not deal with cases in which the
principal and interest are due on a single debt."
23. In view of the above, Mr Sinha's contention that JNL was obliged to
appropriate the remittance made towards the award first and then towards
post award interest is not merited. In order for the railways to succeed in the
aforesaid contention, they would have to establish that the parties had
agreed that the payments made by them would be appropriated in the
manner as indicated in the calculation sheet.
24. In the facts and circumstances of the case, it is difficult to accept that
the parties had arrived at any such agreement. The remittance note dated
18.06.2010 does not indicate as to under which head the remittance was
being made by the railways. The calculation sheet annexed with the
remittance only indicates that it is a tentative calculation of liabilities arising
out of the Arbitration Award. JNL had accepted the same and had
immediately applied to the Court indicating that it had received the
remittance of `6,24,119/- without prejudice to all its rights and contentions.
25. Mr Sinha's contention that Section 59 of the Contract Act is
applicable to part payments made towards a decree and, therefore, JNL
would be obliged to apply the payments made by the railways towards the
specified heads is also without merit. First and foremost, Section 59, 60 &
61 of the Contract Act has no application to post decretal payments. This
was unequivocally held by the Supreme Court in Industrial Credit and
Development Syndicate (supra) in the following words :-
".....We are of the opinion that Sections 59 and 60, Contract
Act, would be applicable only in pre-decretal stage and not
thereafter. Post-decretal payments have to be made either in
terms of the decree or in accordance with the agreement arrived
at between the parties though on the general principles as
mentioned in Sections 59 and 60 of the Contract Act. As and
when such an agreement either express or implied is relied
upon, the burden of proving it would always be upon its
propounder. The judgment debtors, in the instant case, are
proved to have failed in discharging such an onus. There does
not appear to be any obligation on the decree holder to intimate
the judgment debtor that the amount paid to him had not been
accepted in the manner specified by him in the letter
accompanying the payment insisting upon such a course would
result in unnecessary burden upon the financial institutions and
conferment of unwanted unilateral discretion in favour of the
defaulters. Acceptance of the plea that the amount paid first
should be adjusted in the principal amount would not only be
against the provision of law but against the public policy as
well. To provide security, continuity and certainty in business
transaction, the Legislature has been making specific provisions
in that regard which may be found in various provisions of the
Negotiable Instruments Act or Order 37, CPC and other
statutory provisions."
26. Further, the Supreme Court held in Gurpreet Singh (supra) that
Sections 59 to 61 of the Contract Act "would not get attracted when there is
only one debt due. Nor have they any direct application in a case where the
debt due has merged in a decree and the applicable rule then would be what
is provided in the decree itself or the general rule applicable in execution of
money decrees."
27. In Meghraj & Ors. v. Mst. Bayabai & Ors.: (1969) 2 SCC 274, the
Supreme Court considered the effect of deposit made by a Judgment
Debtor-Mortgager towards the decretal debt in terms of Order XXI Rule 1
of the CPC and observed as under:-
"..... any payment made by the Debtor is in the first instance to
be applied towards satisfaction of interest and thereafter to the
principal. It was for the mortgagors to plead and prove an
agreement that the amount which were deposited in Court by
the Mortgagors were accepted by the Mortgagees subject to a
condition imposed by the Mortgagors....."
28. The rationale behind the principle of permitting JNL to appropriate
the amounts received, first towards interest was explained by the Supreme
Court in Leela Hotels (supra) in the following words:-
"The philosophy behind the principle set out in Meka
Venkatadri's case (supra) and as reiterated in Rai Bahadur
Seth Nemichand's case (supra) and also in Smithaben's
case (supra) and then consistently followed by this Court,
is that a debtor cannot be allowed to take advantage of his
default to deny to the creditor the amount to which he
would be entitled on account of such default, by way of
elimination of the principal amount due itself, unless, of
course, the provisions of Section 59 of the Indian Contract
Act, 1872, were attracted or there was a separate
agreement between the parties in that regard. That is not so
in the instant case and, accordingly, the creditor cannot be
denied its dues on a unilateral stipulation that the amount
of Rs.89.78 crores was being deposited as against the
principal sum due in terms of the Award. Since the said
amount was accepted by the Appellant on protest, it would
be entitled to appropriate the same against the interest
which was due and payable till that date on the principal
amount, as has been asserted by it."
29. Mr Sinha's contention that accepting the JNL's calculation would
amount to directing payment of interest on interest is also unsustainable.
The Arbitrator had awarded loss due to abrupt short closure of the contract
as well as simple interest at the rate of 12% over the price differential
between the amount due and actually paid from 45 days after the above
payments became due till the date of declaration of the Award. The railways
were directed to make the payment of the aforesaid sum (that is loss, plus
interest) within a period of 90 days, failing which the Arbitrator directed
that railways would be liable to pay interest at the rate of 18% till the date of
payment. The claims awarded by the Arbitrator namely loss on account of
abrupt short closure of contract and simple interest at the rate of 12%
indicated the amount awarded by the Arbitrator. The amount so awarded is
not amenable to being split into principal and interest.
30. In the aforesaid view, there was no question of considering further
payment of interest at the rate of 18% p.a. on the awarded sum as an interest
on interest. This view is also supported by the following observations made
by the Supreme Court in V. Kala Bharthi (supra):-
"The next finding of the High Court is with regard to
interest on interest. In money suit, the amount consists
of principal and interest till the suit is filed. But, in case
of award passed under the Act, the question of inclusion
of any interest on the decretal amount does not arise.
Unfortunately, the High Court proceeded on the
assumption that it amounts to interest on interest which
is prohibited under Section 3(3)(c) of Interest Act, 1978
(for short, 'the Interest Act').This is not so, as in the
facts and circumstances of the present case, the decree
passed by the trial Court or the appellate Court does not
contain the mode of appropriation and in the absence of
any such direction, the decree-holder is entitled to
appropriate the amount deposited by the judgment
debtor first towards interest, then cost and thereafter
towards principal."
31. In the aforesaid circumstances, the railways are directed to make
payment of `2,07,456/- and interest calculated at the rate of 18% on the said
amount from 18.11.2013 till the date of payment within a period of four
weeks from today.
32. List on 15.09.2016.
VIBHU BAKHRU, J
AUGUST 02, 2016
MK/RK
