Delhi High Court
Rds Project Ltd vs Chennai-Ennore Port Road Co. Ltd on 5 September, 2016
$~43, 44 & 45
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ EX.P. 467/2015
RDS PROJECT LTD ..... Decree Holder
Through : Ms Asha Jain Madan, Ns Nivedita
Grover and Mr Mukesh Jain,
Advocates.
Versus
CHENNAI-ENNORE PORT ROAD
CO. LTD ..... Judgement Debtor
Through : Ms Gunjan Sinha, Mr Simranjeet
Singh and Mr Mukesh Kumar,
Advocates.
AND
+ EX.P. 476/2015
R.D.S.PROJECT LTD ..... Decree Holder
Through : Ms Asha Jain Madan, Ns Nivedita
Grover and Mr Mukesh Jain,
Advocates.
Versus
CHENNAI ENNORE PORT ROAD
CO. LTD. ..... Judgement Debtor
Through : Ms Gunjan Sinha, Mr Simranjeet
Singh and Mr Mukesh Kumar,
Advocates.
AND
+ EX.P. 477/2015
RDS PROJECT LTD. ..... Decree Holder
Through : Ms Asha Jain Madan, Ns Nivedita
Grover and Mr Mukesh Jain,
Advocates.
versus
EX.P. 467/2015& Ors. Page 1 of 9
CHENNAI-ENNORE PORT ROAD
CO. LTD. ..... Judgement Debtor
Through : Ms Gunjan Sinha, Mr Simranjeet
Singh and Mr Mukesh Kumar,
Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 05.09.2016
VIBHU BAKHRU, J
EA(OS) Nos.19/2016 & 1232/2015 & 540/2016 in EX.P.-467/2015
EX.P. 476/2015 & EA(OS) Nos. 1231/2015 & 547-548/2016
EX.P. 477/2015 & EA(OS) Nos. 1230/2015 & 549-550/2016
1. These are petitions to enforce Arbitral Awards. Since the issues and
the parties are common, the same were taken up together. The Judgement
Debtor (Chennai-Ennore Port Road Co. Ltd. - hereafter „CEPRL‟) states
that it has paid the amounts awarded to the Decree Holder (hereafter 'RDS').
RDS disputes this, as according to RDS, a part of the amount awarded is still
to be discharged by CEPRL.
2. The principal issue that arises for consideration is whether future
interest is also payable on the pre-award interest awarded by the Arbitral
Tribunal. CEPRL contends that the future interest would not be payable on
the pre-suit interest and pendente lite interest awarded by the Arbitral
Tribunal. Ms Gunjan Sinha, learned counsel appearing for CEPRL
submitted that in terms of the awards in question, the Arbitral Tribunal had
not granted future interest on the past interest component and pendente lite
interest component of the amount awarded. She submitted that the same is
clear from the plain language of the awards in question.
3. In addition, she referred to Section 31(7)(a) of the Arbitration and
Conciliation Act, 1996 (hereafter „the Act‟) and on the strength of the said
provision contended that it was within the discretion of the Arbitral Tribunal
to include interest on the amount awarded; and, according to her, in these
cases, the Arbitral Tribunal had specified that future interest would only be
payable on the amount of the claim awarded and not on past interest and
pendent lite interest.
4. Ms Asha Jain, learned counsel appearing for RDS countered the
aforesaid submission and submitted that the awards made it very clear that
the future interest would be payable on the amounts awarded. She submitted
that she had no difficulty to accept that pendente lite interest would not be
payable on the component of past interest; but future interest would be
payable on the amount awarded which included the interest component as
well. She submitted that the total amount awarded by the Arbitral Tribunal
including the amount of claims, past interest and pendente lite interest would
form an indivisible sum and the future interest would be payable on the said
amount. In support of her contention, she referred to Section 31(7)(a) of the
Act and pointed out that the Arbitral Tribunal has a discretion to include past
interest and pendente lite interest "in the sum" so awarded. She submitted
that the future interest would be payable under Section 31(7)(b) of the Act
which specifically contemplated payment of interest on the sum awarded.
She emphasized that the use of the word „sum‟ in Section 31(7)(b) of the
Act referred to the sum as contemplated under Section 31(7)(a) of the Act
which included interest as well.
5. She further referred to a decision of the Supreme Court in Hyder
Consulting (UK) Limited v. Governor, State of Orissa: (2015) 2 SCC 189
in support of her contention.
6. I have heard the learned counsel for the parties.
7. The controversy can be best understood by referring to the language
of the arbitral award dated 12.12.2012,which is sought to be enforced in
Ex.P.467/2015. The relevant extract of the said award reads as under:-
"12.3 AT has come to the conclusion that Claimants are
entitled to the award of Past Interest, Pendente- lite and
Future interest on the awarded amount as stated
hereinafter:-
Past Interest
12.4 The Claimant is entitled for past interest on the
awarded amount from 23rd June2006 on which date AT
entered upon the reference up to 21st June 2011 @
12%Simple interest per annum.
Pendente- lite Interest
12.5 Regarding pendente- lite interest, the AT awards
interest @ 12 % per annum from 22nd June 2011 to 12th Dec
2012 on the awarded amount.
Future Interest
12.6 The Claimants are also entitled to future
[email protected] 12% per annum from 12thDec 2012, the date of
publication of the award to the date of actual payment to the
Claimants. In case, the awarded amounts are paid within
three months from the date of publishing the Award i.e. 12th
Dec 2012, the award will not carry any future interest.
However, in case the Award is not paid in the above
stipulated period the Claimants are entitled for future
interest @ 12% simple interest per annum on the awarded
amount from the date of publishing of Award i.e12 th Dec
2012 till the date of payment."
8. A plain reading of the aforesaid does not support the contention as
advanced by Ms Gunjan Sinha. The express language of the arbitral award
does not exclude the future interest on the pendente lite interest or the past
interest as awarded by the Arbitral Tribunal. On the contrary, the opening
sentence of paragraph 12.6 clearly indicates that the Arbitral Tribunal has
awarded future interest @12% per annum from 12.12.2012, to the date of
actual payment to the claimants. Undisputedly, the amount awarded to RDS
would be (i) the amount awarded against separate claims;(ii) past interest
from 23.06.2006 to 21.06.2011; and (iii) pendente lite interest at the rate of
12% from 22.06.2011 till 12.12.2012. Therefore, on a plain reading of
paragraph 12.6 of the aforementioned award, it is clear that the future
interest has been awarded on the amount awarded which includes interest as
well as the amount against claims. The second sentence of paragraph 12.6
also makes it clear that the future interest would not be payable if the
"awarded amounts" were paid within three months of publishing of the
award. The use of the word "amounts" - in plural - also indicates that future
interest would be payable on all claims including past and pendente lite
interest.
9. The submission of Ms Jain that Section 31(7)(b) of the Act refers to
the sum as referred to under Section 31(7)(a) which includes the interest, is
also merited. The said section reads as under:-
"31(7)(a) Unless otherwise agreed by the parties, where and
in so far as an arbitral award is for the payment of money, the
arbitral tribunal may include in the sum for which the award
is made interest, at such rate as it deems reasonable, on the
whole or any part of the money, for the whole or any part of
the period between the date on which the cause of action
arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall,
unless the award otherwise directs, carry interest at the rate of
eighteen per centum per annum from the date of the award to
the date of payment."
10. The language of clause (b) of Section (31)(7) of the Act makes it
amply clear that the future interest has to be calculated on the amounts as
included "in the sum" as referred to under Section 31(7)(a) of the Act.
11. The express language of Section 31(7)(a) of the Act indicates that the
Arbitral Tribunal may include interest in the sum awarded and in terms of
clause (b), future interest is payable on the said sum. Section 31(7) of the
Act has also been interpreted in the aforesaid matter by the Supreme Court
in Hyder Consulting (UK) Limited (supra). The relevant passage from
Justice Bobde's opinion reads as under:-
"13. Thus, it is apparent that vide clause (a) of sub-section (7)
of Section 31 of the Act, Parliament intended that an award
for payment of money may be inclusive of interest, and the
"sum" of the principal amount plus interest may be directed
to be paid by the Arbitral Tribunal for the pre-award period.
Thereupon, the Arbitral Tribunal may direct interest to be
paid on such "sum" for the post-award period vide clause (b)
of sub- section (7) of Section 31 of the Act, at which stage
the amount would be the sum arrived at after the merging of
interest with the principal; the two components having lost
their separate identities."
12. The aforesaid interpretation has also been clearly explained by Justice
Sapre in his concurring opinion, the relevant extract of which reads as
under:-
"26. Section 31(7)(a) of the Act deals with grant of pre-
award interest while clause (b) of Section 31(7) of the Act
deals with grant of post-award interest. Pre-award interest is
to ensure that arbitral proceedings are concluded without
unnecessary delay. Longer the proceedings, the longer
would be the period attracting interest. Similarly, post-
award interest is to ensure speedy payment in compliance
of the award. Pre-award interest is at the discretion of
Arbitral Tribunal, while the post-award interest on the
awarded sum is mandate of statute - the only difference
being that of rate of interest to be awarded by the Arbitral
Tribunal. In other words, if the Arbitral Tribunal has
awarded post-award interest payable from the date of award
to the date of payment at a particular rate in its discretion
then it will prevail else the party will be entitled to claim
post-award interest on the awarded sum at the statutory rate
specified in clause (b) of Section 31(7) of the Act, i.e., 18%.
Thus, there is a clear distinction in time period and the
intended purpose of grant of interest.
27. Section 31(7)(a) employs the words "...the Arbitral
Tribunal may include in the sum for which the award is
made interest...". The words "include in the sum" are of
utmost importance. This would mean that pre- award
interest is not independent of the "sum" awarded. If in case,
the Arbitral Tribunal decides to award interest at the time of
making the award, the interest component will not be
awarded separately but it shall become part and parcel of
the award. An award is thus made in respect of a "sum"
which includes within the "sum" component of interest, if
awarded.
28. Therefore, for the purposes of an award, there is no
distinction between a "sum" with interest, and a "sum"
without interest. Once the interest is "included in the sum"
for which the award is made, the original sum and the
interest component cannot be segregated and be seen
independent of each other. The interest component then
loses its character of an "interest" and takes the colour of
"sum" for which the award is made.
29. There may arise a situation where, the Arbitral Tribunal
may not award any amount towards principal claim but
award only "interest". This award of interest would itself
then become the "sum" for which an award is made under
Section 31(7)(a) of the Act. Thus, in a pre-award stage, the
legislation seeks to make no distinction between the sum
award and the interest component in it.
30. Therefore, I am inclined to hold that the amount award
under Section 31(7)(a) of the Act, whether with interest or
without interest, constitutes a "sum" for which the award is
made.
31. Coming now to the post-award interest, Section
31(7)(b) of the Act employs the words, "A sum directed to
be paid by an arbitral award...". Clause (b) uses the words
"arbitral award" and not the "Arbitral Tribunal". The
arbitral award, as held above, is made in respect of a "sum"
which includes the interest. It is, therefore, obvious that
what carries under Section 31(7)(b) of the Act is the "sum
directed to be paid by an arbitral award" and not any other
amount much less by or under the name "interest". In such
situation, it cannot be said that what is being granted under
Section 31(7)(b) of the Act is "interest on interest". Interest
under clause (b) is granted on the "sum" directed to be paid
by an arbitral award wherein the "sum" is nothing more
than what is arrived at under clause (a)."
13. Accordingly, CEPRL (the respondent) is directed to recalculate the
amounts payable to RDS by calculating future interest on the amount
awarded including past and pendente lite interest. The amounts so calculated
shall be paid by CEPRL within a period of four weeks from today.
14. List on 19.10.2016.
VIBHU BAKHRU, J
SEPTEMBER 05, 2016
RK
