National Project Construction ... vs Construction Rasa Pvt. Ltd.
2016 Latest Caselaw 3639 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                                 DECIDED ON: 16.05.2016
+             EFA (OS) 23/2015, CM APPL.12354 & 12356/2015
     NATIONAL PROJECT CONSTRUCTION CORPORATION
                                                    ..... Appellants
                    Through: Mr. Anuj J. Bhambhani, Sr. Advocate
                    with Mr. Rajat Arora and Mr. Jay Preet Singh,
                    Advocates.

                    Versus

CONSTRUCTION RASA PVT. LTD.                    ..... Respondents

Through: Mr. Rajeeve Mehra, Sr. Advocate with Mr. Chetan Lokur, Ms. Shruti Aggarwal and Mr. Nitish Choudhary, Advocates.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MS. JUSTICE DEEPA SHARMA S.RAVINDRA BHAT, J.(ORAL)

1. This appeal is by a judgment debtor (hereafter called NPCC) which is aggrieved by the refusal- by the single judge, in execution proceedings to interpret the decree of court, arising out of judgment dated 01.11.2011, whereby an award (published under the old Arbitration Act, 1940) was directed to be made rule of court.

2. The issue lies within a narrow range; it is the true interpretation of an award whereby a certain sum (`26,48,484/-) was held to be payable in favor of the Claimant (the decree holder/Claimant, i.e., Construction Rasa Pvt.

EFA(OS)23/2015. Page 1 Ltd). This amount was arrived at after adjusting `3,98,473/- (payable by the claimant under the award, to NPCC) from the larger sum of `30,46,957/- that the claimant was held entitled to. The arbitrator also directed interest @16% p.a. from the date the reference was entered upon: i.e. 22ndJuly, 1989 till the date of the award, i.e., 28th September, 1997. Interest @16% was also directed on the principal amount till date of payment. NPCC's objections (IA 2515/ 1998 in CS (OS) 2172A/1997) were dismissed and the learned single judge only modified the direction to pay interest; he revised it downwards to 9% p.a. both pendente lite and for the future period- by judgment dated 01.04.2011.

3. The Claimant/decree holder preferred execution proceedings, on 03.02.2012 whereby it was submitted that apart from the awarded amount (`26,48,484/-) interest was to be paid in two lots - `19,50,608/- (for the pendente lite period, i.e., date of reference to date of award) and `31,99,638/- (future interest till date of payment). Significantly, both interest amounts were calculated on `26,48,484/- on simple interest basis. The Claimant filed an application (EA 186/2012) claiming that its petition contained an arithmetical error, inasmuch as the interest amount - for future interest- was calculable on the cumulative sum of the pre-award pendente lite added to the principal amount (`26,48,484/-), aggregating to `1,02,25,665/-. This application, and NPCC's stand that the amounts had to be calculated on simple interest basis on the principal amount of (`26,48,484/- which was the "awarded amount") and not on the sum of the two amounts - for future interest purposes, was adjourned to await the judgment of the Supreme Court, which had directed a reference on the

EFA(OS)23/2015. Page 2 question whether - in view of Section 31 (7) of the Arbitration and Conciliation Act- interest could be calculated on compound basis. The prevailing view was State of Haryana v. S.L. Arora& Company (2010) 3 SCC 690. The court adjourned the matter to await the pronouncement of the three Judge Bench of the Supreme Court, which was later delivered in M/s. Hyder Consulting (UK) Ltd. v. Governor, State of Orissa through Chief Engineer 2015 (2) SCC 189.

4. The learned single judge upheld the Claimant's contention, rejecting those of NPCC, and held as follows:

"This Court has in its order dated 2012 explained the reasons why it was unable to accept the above submission. At the stage of execution, this Court cannot alter possibly the judgment dated 1 st April 2011 by which the Award has been made rule of the Court and which judgment has attained finality. That judgment clearly talks of the „awarded amount‟ for the purposes of calculation of the future interest. That expression obviously meant the principal amount plus the pendente lite interest thereon till the date of the Award."

5. Mr. A.J. Bhambhani, learned senior counsel appearing for NPCC urges that the impugned order is erroneous, because it treats the "awarded amounts" as if they were two directions in the award, on separate independent claims. In reality, contends counsel, there was one awarded amount, i.e., ` 26,48,484/- on which simple interest had to be calculated for two periods. In not interpreting the award- and the decree arising from it in that manner, the learned single judge erred in law.

6. Mr. Rajive Mehra, learned senior counsel appearing for the claimant opposed the appeal, urging this court to reject it as unmerited. He relied on

EFA(OS)23/2015. Page 3 the decisions reported as State of Rajasthan v Ferro Concrete Construction Pvt Ltd 2009 (12) SCC 1; Oil & Natural Gas Commission v McClelland Engineers SA 1999 (4) SCC 327 and urged that interest on award becomes part of the principal amount awarded and should be paid by the judgment debtor.

7. As is obvious, the issue that this court is called upon to decide is narrow. The contesting parties are at variance as to the true meaning of what constitutes "the awarded amount"- the Claimant, predictably urges that the awarded amount is the amalgam or sum of the principal and interest calculated till the date of the award, upon which further interest is payable,@ 9% per annum. The NPCC, unsurprisingly argues that though calculation is to be done for two periods, it is essentially on one principal amount, i.e., `26,48,484/-.

8. This court is of the opinion that the appellant NPCC's argument is merited and substantial. There is no indication in the award that the interest on the principal sum awarded, `26,48,484/-upto the date of the award, is to be added, after which further interest is to be calculated. On the contrary, the internal indication in the award is that the two awarded amounts were `3,98,473/- (payable by the claimant to NPCC) and the sum of `30,46,957/- payable by the NPCC to the Claimant. The principal liability of NPCC was fixed at `26,48,484/-. Unlike the question in Ferro Concrete Construction there is no controversy about the power of arbitrators to award interest; or to pay interest on amounts, which had crystallized as delayed interest payments, under the contract in question, as in Oil &Natural Gas

EFA(OS)23/2015. Page 4 Commission. Here the issue is whether the direction to pay interest on `26,48,484/- was itself an award, to be added to that sum.

9. An important factual aspect, which escaped attention of the single judge, is that the single judge never actually interpreted the award as the Claimant sought to do, in execution proceedings. All that was stated while making the award rule of court is extracted as follows:

"The plaintiff is also awarded interest, as stipulated hereinbefore from the date of award till the payment of awarded amount @ 9% simple interest per annum. Decree sheet be drawn. All the pending applications are disposed of. Considering the facts and circumstances, parties are left to bear their own costs."

The gloss which the decree holder/Claimant sought to place over this direction (which is ambiguous) is that it upheld an award of interest on a composite amount of principal amount, plus pendente lite interest. Whilst such awards may certainly be made, this court does not discern the present case to be concerned with one such. The awarded amount alluded to by the judgment of 01.04.2011 was the principal amount of `26,48,484/-. On that amount, pendente lite interest and future interest was payable. There was no question of merging one interest amount with the principal sum due, for one period and then calculating interest on the cumulative "principal". Such a construction of the award is excess of it and simply too strained to be accepted.

10. For the foregoing reasons this court is of opinion that the present appeal has to succeed. Learned counsel for the parties submit that the Claimant/ decree holder has received the amount payable in terms of the

EFA(OS)23/2015. Page 5 present order and the balance constituting the difference between that and the amount calculable on the basis of the Decree holder's interpretation- is lying in court. The Registrar shall disburse the said amounts to the judgment debtor/NPCC. Parties are directed to be present before the Registrar on 31stMay, 2016; the Registrar shall work out the amounts refundable/payable to the appellant NPCC and ensure their due refund.

11. The appeal is allowed in these terms. There shall be no order on costs.

12. A copy of this order be given dasti under the signatures of Courtmaster.

S. RAVINDRA BHAT (JUDGE)

DEEPA SHARMA (JUDGE) MAY 16, 2016

EFA(OS)23/2015. Page 6