Delhi High Court
Smt. Shakuntla Educational And ... vs S.E. Investments Ltd. on 29 May, 2017
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 29.05.2017
+ O.M.P. (COMM) 194/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S.E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 195/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 196/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 197/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 198/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
O.M.P. (COMM.) 194/2017& Other Connected Matters Page 1 of 33
versus
S. E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 199/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
+ O.M.P. (COMM) 200/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
+ O.M.P. (COMM) 201/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
+ O.M.P. (COMM) 202/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
O.M.P. (COMM.) 194/2017& Other Connected Matters Page 2 of 33
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
+ O.M.P. (COMM) 203/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
+ O.M.P. (COMM) 208/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 209/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 210/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
O.M.P. (COMM.) 194/2017& Other Connected Matters Page 3 of 33
WITH
+ O.M.P. (COMM) 211/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
+ O.M.P. (COMM) 212/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
+ O.M.P. (COMM) 213/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
+ O.M.P. (COMM) 214/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
WITH
O.M.P. (COMM.) 194/2017& Other Connected Matters Page 4 of 33
+ O.M.P. (COMM) 215/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 216/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
WITH
+ O.M.P. (COMM) 219/2017
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Petitioners
versus
S. E. INVESTMENTS LTD. ..... Respondent
AND
+ O.M.P. (COMM) 220/2017
S.E. INVESTMENTS LIMITED ..... Petitioner
versus
SMT. SHAKUNTLA EDUCATIONAL AND
WELFARE SOCIETY & ORS. ..... Respondents
Advocates who appeared in this case:
For the Smt. Shakuntla
Educational & Welfare Society : Dr Abhishek Manu Singhvi, Senior
Advocate with Mr Ashwini Mata, Senior
O.M.P. (COMM.) 194/2017& Other Connected Matters Page 5 of 33
Advocate with Mr Sanjeev Narula, Mr
Sunil Dalal, Ms Sangeeta and
Mr Anshuman Upadhyay
For the S.E. Investment Ltd. : Mr P. Nagesh, Ms Shuchi Sejwal and Mr
Sanskar Agarwal, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. These petitions are filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereafter 'the Act') impugning an arbitral award
dated 23.01.2017 (hereafter 'the impugned award') passed by the sole
arbitrator, Justice R.C. Chopra (Retired).
2. The impugned award was rendered in the context of disputes that
had arisen in respect of loans - ten in number - advanced by S.E.
Investments Ltd. (hereafter 'SEIL') to Smt. Shakuntla Educational and
Welfare Society (hereafter 'the Society'). M/s Galgotias Hotels & Resorts
Private Limited, M/s Galgotia Publications Private Limited, Sh. Suneel
Galgotia and Smt. Padmini Galgotia had agreed to be jointly and severally
liable along with the Society for repayment of the loans, interest and late
fees in terms of the loan agreements. Sh. Dhruv Galgotia also guaranteed
one of the loans (that is, loan no. LD2926). The aforementioned two
companies and the three individuals are hereafter collectively referred to as
'the Guarantors'; the said expression would exclude Sh. Dhruv Galgotia
when used in the context of loans other than the loan under Code LD2926.
3. SEIL is a Non-Banking Financial Company (NBFC) which is duly
registered with the Reserve Bank of India under Section 45-IA of the
Reserve Bank of India Act, 1934. The Society is a registered society under
the Societies Registration Act, 1860 and is stated to be the primary sponsor
of several educational institutions including Galgotias University. Sh.
Suneel Galgotia, Smt. Padmini Galgotia and Sh. Dhruv Galgotia are office
bearers of the governing body of the Society; Sh. Suneel Galgotia is the
President, Smt. Padmini Galgotia is the Secretary and Sh. Dhruv Galgotia
is the executive member. The said persons are closely related; Smt.
Padmini Galgotia is the wife of Sh. Suneel Galgotia and Sh. Dhruv
Galgotia is the son of Sh. Suneel Galgotia and Smt. Padmini Galgotia. M/s
Galgotias Hotels & Resorts Private Limited and M/s Galgotia Publications
Private Limited are companies incorporated under the Companies Act,
1956.
4. The Society failed to repay the loans in terms of the loan agreements
entered into between the parties. The Guarantors also failed to discharge
the liability when called upon to do so. This led to disputes between the
parties which were referred to the sole arbitrator appointed by this Court
with the consent of the parties.
5. There is no dispute that the Society had availed the loans in terms of
the loan agreements entered into between the parties. The said loans were
to carry interest at the rate of 26% p.a. flat and were to be paid in 23 equal
monthly instalments (EMIs) excluding the advance EMI. It was also
stipulated that default in paying any of the EMIs would result in liability to
pay late fee at the rate of ₹2 per thousand per day or such other rate as may
be specified by SEIL.
6. Admittedly, the parties had a long standing relationship and SEIL
had extended loans on various occasions in the past to the Society and
other related parties. It is also stated that the total finance extended by
SEIL to such parties during the period from 2000 to 2011 exceeded ₹100
crores. All such loans were extended on interest rates ranging between
20% p.a. to 26% p.a. flat. The said loans (advanced in the past) had also
been repaid by the Society/related parties. During the period April 2011 to
November 2012, SEIL extended loans aggregating ₹37,60,00,000/- to the
Society. The loan documents executed included pro-notes, loan
agreements, guarantee agreements, undertakings, etc. SEIL also received
post dated cheques (PDCs) for the EMIs for all the loans, calculated on the
basis of interest payable at the rate of 26% p.a. flat.
7. The details of the amounts borrowed (₹37,60,00,000/-) against the
loan agreements (identified by the respective Codes) are as under:-
Code Date of Agreement Finance Amount
(in Rs.)
LD2518 06.04.2011 2,25,00,000
LD2734 28.12.2011 2,00,00,000
LD2739 30.12.2011 4,00,00,000
LD2757 21.01.2012 3,00,00,000
LD2758 21.01.2012 3,40,00,000
LD2759 21.01.2012 3,60,00,000
LD2792 21.01.2012 5,00,00,000
LD2808 02.03.2012 5,00,00,000
LD2816 20.03.2012 4,00,00,000
LD2926 29.11.2012 5,35,00,000
TOTAL: 37,60,00,000
8. SEIL filed its claims for recovery of the loan amounts along with
interest and late fee charges in terms of the loan agreements. SEIL also
made a claim for costs. The Society/Guarantors contested the aforesaid
claims on several fronts. The relevant facts and defence set up by the
Society/Guarantors before the arbitral tribunal are summarized as under:
8.1 It was the case of the Society/Guarantors before the arbitral tribunal
that in the year 2011-12, the Society was in desperate need for funds for
the purposes of furthering its philanthropic goals including establishment
of the Galgotias University which was at its "nascent stage". The Society
also needed funds for financing other educational institutions viz.
Galgotias College of Engineering and Technology, Galgotia Institute of
Management and Technology and Galgotias Business School.
Accordingly, the Society had entered into loan agreements (ten in number)
on various dates for availing loans aggregating ₹37,60,00,000/-.
8.2 It is stated that the Society had also given a sum of ₹2.75 crores
towards security deposit. However, SEIL claims that a sum of ₹2.45 crores
had been paid as consideration for a separate transaction for providing
consultancy services.
8.3 The Society/Guarantors claimed that SEIL being aware of the
Society's precarious financial position took undue advantage of the same
and abused its dominant position to provide finance on unconscionable
terms and conditions. Such terms were incorporated in loan
agreements/documents made on standard templates. SEIL did not permit
the said documents to be changed or any new clause to be incorporated. As
signing the said loan agreements was a pre-condition for grant of loan,
therefore, the Society had no alternative but to agree to the imposition of
enormous, harsh, usurious and exorbitant rates of interest and other penal
charges.
8.4 The Society/Guarantors claimed that during the first half of the
financial year 2012-13, the financial condition of the Society was under
enormous stress occasioned by completion of establishment of the
Galgotias University coupled with high rate of interest being charged by
SEIL in respect of the loans granted (except loan under LD2926 which was
availed subsequently in November 2012). Thus, on or about middle of
October 2012, a meeting took place between Sh. Suneel Galgotia in his
capacity as the President of the Society and Sh. Sunil Aggarwal, the
Managing Director of SEIL and a settlement was arrived at between the
parties on the following terms:-
"(i) other than cheques (for October 2012) already banked,
Claimant would bank no other cheques;
(ii) EMI cheques for remainder tenure of the captioned
nine loan agreements would be returned to Respondent
No.1;
(iii) the remaining outstanding amounts in each of the nine
loan agreements would be treated (subject to final
application of agreed rate of interest mentioned below
to be applicable from the date of commencement of
each loan account respectively) as principal for a new
advance/loan;
(iv) each of the nine loan accounts would carry an agreed
interest @12.5 per annum. There would be a
moratorium on repayment of both principal and
interest for a period of two years ending on
31.10.2014.
(v) fresh loan, agreements would be executed for which
Respondent No.1 would be required to pass necessary
resolutions."
8.5 It is asserted that the aforesaid terms were accepted by both the
parties; thus, bringing about a "new/novated agreement/ arrangement/
understanding", which substituted the obligations under the loan
agreements entered into earlier. It is asserted that in terms of the said
understanding/agreement, SEIL stopped banking EMI cheques from
October 2012 onwards. SEIL also returned several PDCs to the Society
and also promised to return the remainder cheques. It is stated that
Society/Guarantors once again sought and were granted a further loan of
₹5,35,00,000/- from SEIL in November 2012 to meet some unanticipated
expenses. This loan was also guaranteed by Sh. Dhruv Galgotia.
Admittedly, the loan agreement in respect of this loan (LD2926 dated
29.11.2012 for a sum of ₹5,35,00,000/-) was also executed on similar
terms as the earlier loan agreements; that is, on interest at the rate of 26%
p.a. flat.
8.6 The Society/Guarantors claimed that thereafter ad hoc payments
aggregating to ₹5.28 crores were made after June 2013 as "a goodwill
gesture" and SEIL was reminded to execute fresh loan agreements on
revised terms.
8.7 On 07.12.2013, SEIL sent a letter claiming that the Society had
defaulted in making payments and hence the late fee penalty/penal interest
had been increased to ₹3 per thousand per day. SEIL claimed that an
amount of ₹17,91,43,799/- was due on account of "late fee on overdue
instalments". The Society/Guarantors claimed that the said late fee was
unilaterally increased from ₹11,94,29,206/- as on 01.12.2013 by increasing
the charges with retrospective effect.
8.8 Thereafter, SEIL sent another notice dated 18.12.2013 invoking the
guarantees and called upon the Guarantors to discharge the amounts as
claimed. It is averred that thereafter the parties made efforts to resolve the
disputes amicably and held several meetings for the said purpose.
8.9 On 29.03.2014, SEIL sent a signed settlement letter by Mr Sarmesh
Aggarwal along with a board resolution in his favour recording an
agreement that a sum of ₹32,04,10,466/- would be paid by the Society on
or before 20.04.2014 towards full and final settlement of all claims/
outstanding amounts and all legal action initiated by the parties would be
withdrawn.
8.10 Although Sh. Suneel Galgotia took delivery of the said letter, he did
not execute the same as according to the Society/Guarantors, the amount
mentioned in the settlement letter dated 29.03.2014 was not in accordance
with the arrangement/understanding/agreement arrived at between the
parties in October 2012. According to the Society/Guarantors, an aggregate
amount of ₹15,90,66,935/- was agreed as payable as on 29.03.2014.
9. SEIL disputed the contentions advanced on behalf of the
Society/Guarantors. Insofar as the settlement agreement dated 29.03.2014
is concerned, SEIL stated that no such agreement could fructify because
Sh. Suneel Galgotia refused to sign the said settlement and also refused to
return the original copy. Further, the said settlement was premised on the
basis that the payment would be made by 20.04.2014, which was
admittedly, not done and, therefore, there was no agreement between the
parties. A complaint was also filed with the Commissioner of Police,
Gurgaon for the acts of the Guarantors after 29.03.2014.
Impugned Award
10. The arbitral tribunal considered the rival contentions and after
examining the evidence and material on record, passed the impugned
award. The arbitral tribunal rejected the contention that the loan
agreements were induced by exerting undue influence and held that the
parties had agreed to the rate of interest and other terms as mentioned in
the loan agreements. The arbitral tribunal also noted that the Society had
been availing loans for the past many years at the rate of interest ranging
from 20% p.a. to 26% p.a. and had also repaid such loans along with the
agreed interest. The arbitral tribunal held that it was unbelievable that in
the ten loan transactions (which were the subject matter of the arbitral
proceedings) and 42 prior loan transactions, the Society/Guarantors had
agreed to pay higher rate of interest under pressure or duress. The arbitral
tribunal also held that the rate of interest did not appear to be in violation
of the RBI guidelines or the Fair Practices Code for NBFCs.
11. The contention that the loan agreements were signed in blank or
under duress was rejected as being baseless. The arbitral tribunal found
that the relationship between the parties was cordial till SEIL sent a legal
notice dated 07.12.2013. The contention that interest rate of 26% p.a. flat
misrepresented the actual rate of interest, which worked out to a yield of
about 49% p.a. on reducing balance, was also rejected as the arbitral
tribunal found that the copies of the "Loan Scheme", which clearly
indicated the "Effective annualised rate of interest" being around 49% p.a.,
was signed by the Society/Guarantors. Thus, there was full disclosure.
12. The contention that interest rate of 26% p.a. was unconscionable and
shocking was rejected. Accordingly, the arbitral tribunal held that the
Society/Guarantors was liable to pay interest at the rate of 26% p.a. flat.
13. Similarly, the arbitral tribunal also rejected the contention that levy
of late fee at the rate of ₹2 per thousand per day was in the nature of
penalty or was punitive. The arbitral tribunal held that the late fee was in
the nature of compensation payable by the Society/Guarantors for default
and delays in paying the EMIs. The RBI also did not debar charging of late
fee and, therefore, such levy was permissible.
14. Insofar as the controversy regarding existence of an oral settlement
purportedly entered into between the parties in October 2012 is concerned,
the arbitral tribunal held that there was certainly an oral agreement
between the parties which envisaged a revision/modification of the terms
of the earlier loan agreements entered into between the parties. However,
the arbitral tribunal held that the Society/Guarantors had failed to prove by
satisfactory evidence as to what rate of interest was agreed to be charged.
The arbitral tribunal held that mere existence of an oral agreement was not
sufficient to return a finding as to the revised rate of interest. However, the
arbitral tribunal held that there was sufficient material to conclude that the
parties had agreed for a moratorium on repayment of loans for a period of
two years from October 2012. The arbitral tribunal concluded the above on
the basis of the oral testimony of Sh. Suneel Galgotia (RW-1) as well as on
the basis that there was no communication issued by SEIL till 07.12.2013,
demanding the instalments. On the contrary, certain PDCs had been
returned and SEIL had also not presented other PDCs for encashment,
which were in its possession.
15. The arbitral tribunal rejected the contention that during the said
period, ₹5.28 crores had been paid by the Society/Guarantors towards the
clearance of outstanding EMIs on the basis that there was no written
document between the parties which indicated the details of the EMIs
which were being cleared by those payments. The arbitral tribunal also
noted that cheques relating to the EMIs pertaining to the loan extended in
November 2012, had also not been presented. After considering the totality
of the evidence, the arbitral tribunal concluded that the parties had orally
agreed that there would be a moratorium on payments for a period of two
years. Resultantly, the arbitral tribunal held that no amount for delayed
charges was payable during the moratorium period.
16. The arbitral tribunal also held that a sum of ₹2.45 crores was not
received towards consultancy charges as claimed by SEIL and the same
was liable to be adjusted from the amounts due under the loan agreements.
17. In view of the above, the claims made by SEIL were allowed to the
extent of the balance amount along with interest from 10.08.2014 till the
date of the award. The arbitral tribunal also awarded future interest at the
rate of 18% p.a. from the date of the award till payment. SEIL was also
awarded cost at the rate of ₹3,00,000/- in each case, thus, aggregating
₹30,00,000/-.
18. The counterclaims (for a sum of ₹595 crores) preferred by the
Society/Guarantors for damages on account of malicious prosecution were
rejected on three grounds. First, the arbitral tribunal held that no finding
had been returned by any court to the effect that the complaint case as well
as FIR filed against Smt. Padmini Galgotia and Sh. Dhruv Galgotia were
false, frivolous and bogus. The FIR (FIR No.862/2004) had been quashed
by the Allahabad High Court for the reason that the ingredients of the
offence alleged were not made out and the disputes between the parties
were of a civil nature. Second, there was no basis to quantify the claim
amount of ₹595 crores. And third, the FIR and complaint case were filed
by two individuals, Mr Samresh Aggarwal and Mr Sanjeev Aggarwal, who
were not parties to the arbitration agreement or the arbitral proceedings and
in absence of the said parties, the counterclaims could not be sustained.
Submissions
19. Mr Singhvi, learned Senior Counsel appearing on behalf of the
Society/Guarantors contended that the rate of interest of 26% p.a. flat was
excessive, harsh, burdensome and usurious and the arbitral tribunal had
grossly erred in not accepting the same. He submitted that the loan
agreements between the parties for charging such interest was void ab
initio. Mr Mata, learned Senior Counsel appearing for the
Society/Guarantors also supplemented the aforesaid contentions. He also
argued that the arbitral tribunal had come to a definite finding that there
was an oral settlement between the parties in October 2012, which entailed
that there would be a moratorium of two years. The arbitral tribunal had
also accepted that such settlement was arrived at on account of a high rate
of interest, which the Society/Guarantors were finding difficult to bear.
However, the arbitral tribunal rejected the claim that the parties had agreed
to reduce the interest rate from 26% p.a. flat to 12.5% p.a. flat on the basis
that the same was not established. He submitted that this course was not
open to the arbitral tribunal as having held that there was an oral
agreement, the arbitral tribunal had to adjudicate and determine the terms
of the said oral agreement and the rate of interest as specified in the loan
agreements (that stood novated) could not be accepted. He submitted that
Sh. Suneel Galgotia (RW-1) had in his evidence set out the terms of the
agreement which included that there would be a reduction in the rate of
interest from 26% p.a. to 12.5% p.a. and his evidence remained
uncontroverted as there was no cross-examination on the same. Thus, the
finding of the arbitral tribunal that there was no material to establish the
reduction in rate of interest, was perverse and the arbitral tribunal's
approach adopted was not judicious.
20. He also contended that in terms of Section 3 of the Usurious Loans
Act, 1918, the Court had to reach the conclusion that the rate of interest
was excessive and the transaction was unfair. The excessive rate of interest
of around 49% (annualised) clearly indicated that the ingredients of
Section 3 of the Usurious Loans Act, 1918 were fully satisfied. He also
urged that the charging of exorbitant rate of interest was also hit by Section
23 of the Indian Contract Act, 1872.
21. Lastly, he contended that the arbitral tribunal had erred in rejecting
the counterclaims as the decision of the Allahabad High Court in quashing
the FIR clearly indicated that the FIR lodged was vicious and malicious
and, therefore, the counterclaims ought to have been allowed.
22. Mr Nagesh, the learned counsel appearing for SEIL countered the
aforesaid submissions made on behalf of the Society/Guarantors. He
supported the findings of the arbitral tribunal in regard to rate of interest as
well as payment of late fee charges. He, however, stoutly contended that
the decision of the arbitral tribunal that there was an oral agreement was
perverse and wholly unsustainable. He pointed out that the contention that
parties had agreed for a moratorium in October 2012 was plainly belied by
(i) the loan agreement entered into in November 2012, which did not
incorporate any of the terms of the oral agreement allegedly arrived at
between the parties in October 2012; and (ii) the fact that payments to the
extent of ₹5,28,69,710/- were made between June 2013 and 07.12.2013.
He submitted that these payments were made against EMIs. He also
referred to the Society's letter dated 15.10.2013, which specifically
indicated that payment of an aggregate sum of ₹99,13,088/- (₹39,65,220/-
plus ₹59,47,868/-) was against specific cheques issued against EMIs. The
arbitral tribunal had explained away the same by stating that the said
payments would be against EMIs due prior to October 2012. However, the
same was plainly contrary to the letter dated 15.10.2013. He stated that in
all, payments of ₹5,28,69,710/- were admittedly made between June and
November 2013 and the same could not be accepted as ad hoc payments.
Reasoning and Conclusion
23. The first and foremost question to be addressed is whether the
impugned award is liable to be set aside inasmuch as the arbitral tribunal
had rejected the contention of the Society/Guarantors that the contractual
rate of interest was expropriatory and unconscionable and thus opposed to
public policy. The arbitral tribunal had considered the aforesaid
contentions and had held that the parties had agreed to the stipulated rate of
interest and had availed the loans exercising their free will and, therefore, it
was not open for the Society/Guarantors to resile from its agreement and
challenge the loan agreements.
24. The arbitral tribunal had also referred to the decision of the Supreme
Court in the case of Indian Bank v. Blue Jaggers Estates Limited and
Others: (2010) 8 SCC 129 and the decision of this Court in Deepak Bhatia
v. Virender Singh: 2015 SCC OnLine Del 12187 and concluded that it
was not open for a borrower to challenge the rate of interest after having
availed of the loan facilities.
25. In the case of Blue Jaggers Estates (supra), the Supreme Court had
rejected the arguments raised by the respondents therein that the rate of
interest was unconscionable, expropriatory and contrary to law since they
had, at no stage, questioned the terms on which the loans/financial
facilities were extended by the appellant bank (Indian Bank). The
respondents therein had enjoyed the facilities for more than a decade and,
therefore, the Court held that it was not open for them to raise such
contentions at that stage.
26. The ratio decidendi of the said decision would, a fortiori, apply to
the facts of the present case. In the present case, the arbitral tribunal had
noted that the Society/Guarantors/affiliated companies, had entered into 42
loan transactions (other than the subject transactions) over a period of
approximately 12 years and had discharged the liability in terms of the loan
agreements (SEIL claims that the number is even larger and the
Society/Guarantors/affiliated companies had availed of and repaid 47 loans
between the year 2000 and 2012). The Society/Guarantors could not be
permitted to challenge the terms of the loan agreements after having
enjoyed the benefit of the funds lent by SEIL.
27. The above also establishes that the Society/Guarantors were also in
no doubt as to the terms of the loan agreements and had entered upon the
same voluntarily at the effective rate of the interest payable by them.
28. The arbitral tribunal had referred to the decision of a Coordinate
Bench of this Court in Morgan Securities & Credits Pvt. Ltd. v. Morepen
Laboratories Ltd & Anr.: 2006 (3) ArbLR 159 Delhi and the decision of
the Division Bench in Morepen Laboratories Ltd. & Ors. v. Morgan
Securities and Credits Pvt. Ltd.: 2008 (105) DRJ 408 and rejected the
contention that the loan transactions fell foul of the Usurious Loans Act,
1918. This Court finds no infirmity with the aforesaid view.
29. It is also necessary to bear in mind that the transactions between the
parties was a commercial transaction. Although the rate of interest of 26%
p.a. (which would work out to be much higher as it is a flat rate of interest
and not based on reducing balance method) is ex facie a very high rate of
interest; it cannot be denied that the said transactions were entered into by
the parties voluntarily without undue influence, in their commercial
interest and it is not safe for courts to pronounce any value based decision
on the merits of commercial terms as the same are determined by market
forces, given the exigencies of trade and commerce. This is not a case
where the Society/Guarantors are vulnerable parties who were - or could
be - subjected to an exploitative unconscionable agreement. It is also
relevant to mention that the funds provided by SEIL were unsecured and
the loan transactions were plainly perceived as high risks transactions
(from a lender's point of view). It is also apparent that the loan or finances
sought by the Society was unavailable from the normal banking system
and, therefore, the Society/Guarantors had to resort to availing loans from
SEIL.
30. It is common knowledge that NBFCs do provide a source of
resources to entrepreneurs and persons of commerce in cases where such
resources are otherwise unavailable to them. It is also for this reason that it
would not be apposite to curtail or restrict such transactions as they may
have an effect of completely shutting out the only avenue available to
entrepreneurs to avail of such high risk finance.
31. The cost of funds available to NBFCs engaged in lending high risk
finance is also significantly higher and would in most cases also include
significant component of proprietary funds.
32. The task to regulate such transactions and such NBFCs rests with the
Reserve Bank of India and if the Reserve Bank of India has not found fit to
put any cap on the interest rate in such commercial transactions, it would
be wholly inapposite for the courts to venture to re-write the contract
between the parties.
33. This Court in Deepak Bhatia v. Virender Singh (supra) had found
no fault in a transaction which entailed interest at the rate of 20% p.a.
34. In view of the above, this Court finds no infirmity with the decision
of the arbitral tribunal in regard to the rate of interest so as to warrant any
interference under Section 34 of the Act.
35. The next question to be addressed is whether the late fee charges as
included in the agreements are in the nature of penalty. The arbitral
tribunal had concluded that the late fee as envisaged in the loan agreements
was not in the nature of penalty but was in the nature of compensation
payable by the Society/Guarantors to SEIL for defaults and delays in
clearing the stipulated EMIs. The arbitral tribunal had also held that SEIL
was not claiming the late fee as damages and, therefore, it was not
incumbent upon SEIL to prove the loss. Paragraph 94 of the impugned
award is relevant and is quoted as under:-
"94. In my view, the Late Fee as envisaged in the Loan
Agreements was not in the nature of penalty. It was in the
nature of compensation payable by the Respondents to the
Claimant for defaults and delays in clearing the stipulated
EMIs. It does not stand established that the Loan
Documents were signed by the Respondents when the
same were blank or unfilled or that the Claimant had
exercised any pressure, coercion or duress upon the
Respondents for agreeing to Clause relating to the Late
Fees. I also do not agree with the contention of the
Learned Counsel for the Respondents that the Claimant is
not entitled to recover Late Fees without proving the loss
suffered by it. The reason is that non-availability of the
funds to the Claimant as and when the same had fallen
due, was bound to result in financial loss to the Claimant
as it is a Finance Company and requires funds for carrying
out its business. The Claimant is not claiming the Late Fee
as damages so as to make it incumbent upon it to prove the
loss. Clause 7 of the Loan Agreement regarding Late Fee
was neither unreasonable nor arbitrary nor unconscionable
or illegal. This clause was incorporated in the Agreements
to make the Respondents abide by the understanding in
regard to repayment of the loans along with interest on due
dates. The Late fee clause was only to compensate the
Claimant for delay in the clearance of the stipulated EMIs
in regard to the loans and was not aimed at punishing the
Respondents. If the idea had been to punish the
Respondents, Section 138 of NI Act was there, which
could be easily resorted to by the Claimant as and when
any EMI Cheque got dishonored."
36. It is seen from the above that although the arbitral tribunal had
concluded that the late payment fees was to compensate for the delay or
default in honouring the EMIs, there was no material indicated by the
arbitral tribunal in the award, which would support such conclusion. The
late fee charges ranged upward of ₹2 per thousand per day which would
translate to a minimum of ₹730 per thousand p.a., that is, 73% p.a. The
interest payable on the loans was at the rate of 26% p.a., which would
translate to more than 45% p.a. on reducing balance. Yet the late payment
charges were significantly higher at 73% p.a. If the said charges were
increased - as SEIL had attempted to do - to ₹3 per thousand per day, the
late fee would translate into a burden of 109.5% p.a. It is material to note
that such charges would be triggered only if the Society/Guarantors
breached the loan agreements and thus, such charges were clearly in the
nature of damages and thus the arbitral tribunal was plainly wrong in its
conclusion that SEIL was not required to justify the same.
37. SEIL had relied on the decisions of the Supreme Court in Central
Bank of India vs Ravindra and Others: 2002 (1) SCC 369 and Punjab
Urban Planning and Development Authority vs Raghunath Gupta and
Others: AIR 2012 SC 3194 as well as the decision of the Andhra Pradesh
High Court in T. K. Srinivasulu vs Union of India Air : 2002 AP 335.
The said decisions are not authorities for the proposition that a penalty in
terrorem for breach of contract is permissible. The issue before the
Supreme Court in Ravindra's case (Supra) was the interpretation of the
expression " the sum adjudged" as used in Section 34 CPC. The question
whether a bank could levy a higher rate of interest, as penalty for breach of
the obligations by a borrower was not a subject matter of controversy in
that case. Similarly, the decision of the Supreme Court in Punjab Urban
Planning and Development Authrotiy (Supra) is wholly inapplicable. In
that case the court was considering whether the state officer could impose a
penalty at the rate of 2% per month on the amount due from an allottee of a
plot of land. The court considered that the allotment of a plot was made on
'as is where is' basis and thus having accepted such allotment the allottee
was estopped from contending that amenities were not provided by the
authority and further withholding the amounts payable on that ground.
38. The case of T. K. Srinivasulu (Supra) pertains to credit card issued
by a bank. As per the terms of agreement between the parties, the bank was
entitled to recover interest at the rate 2.95% if (i) the payment was not
made on due dates or (ii) partial payment was made or (iii) cash was
withdrawn on the card. A credit card is service provided by the bank (or
any other service provider) and it was entitled to charge interest on
amounts that remained outstanding. The late fee in that case was restricted
to the specified sum further the fee charged for availing the service of cash
advance was also fixed at Rs.2.5% of the transaction value. Thus, these
charges were plainly for the services rendered by the bank. This case is
also not an authority for the proposition that punitive damages could be
levied for breach of a contract.
39. It was SEIL's case that such charges were compensatory. It
explained that once there was a default in payment of the EMIs, there was
no mechanism to charge interest on the funds that were not made available
to SEIL and, therefore, imposition of late fee was included in the loan
agreements for the purposes of compensating SEIL for non-receipt of
funds in time. The arbitral tribunal had readily accepted the aforesaid
contention without examining the difference in the contractual rate of
interest chargeable under the loan agreements and the rate of interest which
the late fee would translate to.
40. Given that the late fee would translate to interest rate in excess of
73.5% p.a. which was significantly higher than the interest rate chargeable
under the loan agreements, coupled with the fact that the interest rate under
the loan agreements was itself extremely high; this Court has little doubt in
accepting that unless SEIL could establish the loss suffered, it would not
be entitled to claim such late fee to the extent of such late fee being in
excess of the contractual rate of interest. SEIL had made no attempt to
claim damages or prove the loss and, therefore, would not be entitled to
such charges.
41. Having stated the above, it is also relevant to mention that the
aforesaid issue is only academic as the learned counsel for SEIL had fairly
conceded that in this case he was not pressing for such charges and in any
event, the arbitral tribunal had not awarded the same as it had held that the
parties had agreed on a moratorium on payments.
42. The next question to be addressed is whether the arbitral tribunal had
erred in holding that the parties had arrived at an oral settlement in October
2012, in terms of which the parties had agreed that there would be a
moratorium on repayment of loans for a period of two years from October
2012 for EMIs other than already paid. The Society/Guarantors had
asserted that there was an oral settlement, which not only entailed a
moratorium on payments for a period of two years but also entailed
reduction in the rate of interest from 26% p.a. flat to 12.5% p.a. flat.
Although the arbitral tribunal had not accepted the contention that there
was any settlement as to reduction of rate of interest, the contention that
the parties had agreed on a moratorium was accepted.
43. Whilst the Society/ Guarantors have challenged the arbitral tribunal's
decision to reject their claim of an oral settlement regarding reduction of
interest, SEIL has challenged the finding that there was any oral agreement
for a moratorium on repayment of loans.
44. Before proceeding further to address the rival contentions, it would
be necessary to refer to the details of the ten loan transactions and the
repayment schedules as agreed under the loan agreements. Tabular
Statements indicating the repayment schedule of the loans and the amounts
received against repayment of these loans are set out below:-
SMT. SHAKUNTALA EDUCATIONAL & WELFARE SOCIETY
CASE NO WISE CHART OF AMOUNT DUE AND RECEIVED
CASE LD 2518 LD2734 LD2739 LD2757 LD2758
MONTH INSTT AMT INSTT AMT INSTT AMT INSTT AMT INSTT AMT
DUE RECD DUE RECD DUE RECD DUE RECD DUE RECD
APR 1,486,957 1,486,957
MAY 1,486,957 1,486,957
JUN 1,486,957 1,486,957
JUL 1,486,957 1,486,957
AUG 1,486,957 1,486,957
SEP 1,486,957 1,486,957
OCT 1,486,957 1,486,957
NOV 1,486,957 1,486,957
DEC 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479
JAN 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
FEB 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
MAR 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
APR 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
MAY 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
JUN 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
JUL 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
AUG 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
SEP 1,486,957 1,486,957 1,321,740 1,321,740 2,643,479 2,643,479 1,982,609 1,982,609 2,246,957 2,246,957
OCT 1,486,957 1,486,957 1,321,740 2,643,479 2,643,479 1,982,609 2,246,957
NOV 1,486,957 1,321,740 2,643,479 1,982,609 2,246,957
DEC 1,486,957 1,321,740 2,643,479 1,982,609 2,246,957
JAN 1,486,957 1,321,740 2,643,479 1,982,609 2,246,957
FEB 1,486,957 1,321,740 2,643,479 1,982,609 2,246,957
MAR 1,321,740 2,643,479 1,982,609 2,246,957
APR 1,321,740 2,643,479 1,982,609 2,246,957
MAY 1,321,740 2,643,479 1,982,609 2,246,957
JUN 1,321,740 2,643,479 1,982,609 2,246,957
JUL 1,321,740 2,643,479 1,982,609 2,246,957
AUG 1,321,740 2,643,479 1,982,609 2,246,957
SEP 1,288,696 1,321,740 2,643,479 2,643,479 1,982,609 2,246,957 2,246,957
OCT 1,321,740 660,870 2,643,479 5,947,868 1,982,609 5,947,829 2,246,957
NOV 2,643,479 1,982,609 1,982,609 2,246,957
TOTAL 34,200,011 29,540,879 30,400,020 13,878,270 60,800,017 35,026,137 45,600,007 25,773,919 51,680,011 22,469,570
CASE LD2759 LD2792 LD2808 LD2816 LD2926
MONTH INSTT AMT INSTT AMIT INSTT AMT INSTT AMIT INSTT AMT
DUE RECD DUE RECD DUE RECD DUE RECD DUE RECD
JAN 2,379,131 2,379,131
FEB 2,379,131 2,379,131 3,304,348 3,304,348
MAR 2,379,131 2,379,131 3,304,348 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479
APR 2,379,131 2,379,131 3,304,348 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479
MAY 2,379,131 2,379,131 3,304,348 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479
JUN 2,379,131 2,379,131 3,304,348 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479
JUL 2,379,131 2,379,131 3,304,348 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479
AUG 2,379,131 2,379,131 3,304,348 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479
SEP 2,379,131 2,379,131 3,304,348 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479
OCT 2,379,131 3,304,348 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479
NOV 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653 3,535,653
DEC 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653
JAN 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653
FEB 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653
MAR 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653
APR 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653
MAY 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653
JUN 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653 3,535,653
JUL 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653 3,535,653
AUG 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653
SEP 2,379,131 3,304,348 3,304,348 3,304,348 2,643,479 2,643,479 3,535,653 3,535,653
OCT 2,379,131 4,758,262 3,304,348 264,348 3,304,348 2,643,479 10,573,916 3,535,653
NOV 2,379,131 3,304,348 3,304,348 2,643,479 3,535,653
DEC 3,304,348 3,304,348 2,643,479 3,535,653
JAN 3,304,348 2,643,479 3,535,653
FEB 3,535,653
MAR 3,535,653
APR 3,535,653
MAY 3,535,653
JUN 3,535,653
JUL 3,535,653
AUG 3,535,653
SEP 3,535,653
TOTAL 54,720,013 26,170,441 76,000,004 30,003,480 76,000,004 29,739,132 60,800,017 34,365,227 81,320,019 14,142,612
45. It is apparent from the above that the first loan (LD2518) was to be
repaid in 23 EMIs commencing April 2011 upto February 2013 and the last
disbursed loan - LD2926, which was disbursed in November 2012 - was to
be repaid in 23 EMIs commencing November 2012 and ending in
September 2014. It is apparent from the above that till September 2012
there was no default in payment of any of the aforesaid loans which were
disbursed prior to the said date. However, the Society/Guarantors defaulted
in repayment of loans thereafter and failed to pay the EMIs due in October
2012 in respect of four loans (LD2734, LD2757, LD2758 and LD2759).
46. The arbitral tribunal had accepted that there was an oral agreement
on the basis of (i) the oral testimony of Sh Suneel Galgotia (RW-1);(ii) the
fact that certain cheques of EMIs had been returned by SEIL;(iii) the fact
that EMI cheques had not been deposited by SEIL; (iv) there being nothing
in writing produced by SEIL to justify its action of not depositing the
cheques and/or return of the cheques; and (v) no written demand for EMIs
having been raised by SEIL.
47. The explanation that the cheques had not been deposited on the
verbal request of the Society/ Guarantors was not accepted as the arbitral
tribunal was of the view that something in writing to that effect was
necessary. However, at the same time, the arbitral tribunal accepted that
the parties had modified their written agreement by an oral agreement
without entering into any document.
48. This Court is unable to concur with the view of the arbitral tribunal
in this regard for several reasons. First of all, the finding that no amount
against EMIs were received after October 2012 till the notice dated
07.12.2013 was issued, is plainly incorrect. SEIL had received a sum of
₹5,28,69,710/- after May 2013. The breakup of that is reflected in the
tabular statements as set out above. The Society/Guarantors claimed that
the said payments were merely ad hoc and at the request of SEIL for
avoiding certain audit objections and tax complications. As to what audit
objections and tax complications would arise is not reflected in the
impugned award. As against this, SEIL had placed on record, the letter
dated 15.10.2013, which reads as under:-
"Date: 15 Oct 2013
To,
M/s S.E. Investment Ltd
M-7, 1st Floor, M-Block Market,
Greater Kailash,
New Delhi 110048.
Sir,
Please find enclosed herewith DD No. 584409 Dt
15.10.2013 for Rs. 39,65,220/- towards repayment of our
Loan No. LD 2734. The Demand Draft has been issued
against cheques number as appeared here under:
Cheque No. Date Amount (Rs.)
629285 28.08.2013 13,21,739/-
629286 28.09.2013 13,21,739/-
629287 28.10.2013 13,21,739/-
39,65,220/-
Also please find enclosed herewith DD No. 584410 Dt
15.10.2013 for Rs 59,47,868/- towards repayment of our
Loan No. LD 2518. The Demand Draft has been issued
against cheques number as appended here under:
Cheque No. Date Amount (Rs.)
971752 06.11.2012 14,86,957/-
971753 06.12.2012 14,86,957/-
971754 06.01.2013 14,86,957/-
971755 06.02.2013 14,86,957/-
59,47,868/-
Please note that with this payment of Rs.59,47,826/- The LD
2518 stands adjusted in full & final.
Yours' Faithfully
For Smt Shakuntla Educational & Welfare Society
SD/-
(Suneel Galgotia)
President"
49. The above letter clearly indicates that the Society had made
payments of ₹39,65,220/- and ₹59,47,868/- against cheques issued earlier.
SEIL had also provided details of the payments aggregating ₹5,28,69,710/-
paid by the Society from 29.06.2013 to 25.11.2013. Out of the aforesaid
payments, one payment was made by RTGS on 26.07.2013; two payments
were made by cheques on 29.06.2013 and 06.09.2013; and the remaining
were made by 14 demand drafts issued on various dates. Plainly, if there
was any arrangement for moratorium of two years, as claimed, there was
no occasion for such demands to be made. Further, as pointed out,
payments were made on 17 occasions.
50. The statement that the above payments were ad hoc payments can
also not be readily accepted.
51. Secondly, the parties had entered into the agreement for loan
disbursed in November 2012 (LD2926) on the same terms as the earlier
loans. If there was any oral settlement as claimed (assuming that an oral
settlement could be set up contrary to a written agreement), the written
agreement executed thereafter would clearly be in terms of the settlement
between the parties and not on terms in variance thereof.
52. More importantly, both the parties are incorporated entities and
courts would be very sceptical in accepting oral settlement between
incorporated entities which are required to keep record of their
transactions. Additionally, in this case there was ample evidence on record
to indicate that the parties entered into agreements by meticulously
documenting the same. As indicated before, SEIL had extended loan on the
basis of loan agreements, pro-notes, deed of guarantees and PDCs.
53. Having stated the above, this Court is also conscious that the scope
of interference in the arbitral award is limited and the arbitral tribunal is the
final authority on appreciation of evidence and findings of facts. The
decision of the arbitral tribunal that there was a moratorium by an oral
agreement falls squarely within the jurisdiction of the arbitral tribunal and
this Court would have to refrain from interfering with the same. However,
even if it is accepted that the parties had verbally agreed on a moratorium,
there was hardly any material to indicate, other than the self serving
testimony of Sh. Suneel Galgotia (RW-1), that the parties had agreed on
the reduction of rate of interest. The arbitral tribunal had rightly accepted
that no such agreement had been established and this Court finds no
infirmity with the said view.
54. The next question to be considered is whether the arbitral tribunal
had erred in rejecting the counterclaims. The Society/Guarantors had
preferred counterclaims for a sum of ₹595 crores in each of the ten cases
pertaining to the respective loan agreements. However, the
Society/Guarantors conceded that their counterclaims may be considered in
only any one of the cases. The counterclaims were based on damages on
account of defamation/malicious prosecution. A complaint and FIR had
been filed against the Guarantors which had resulted in Smt. Padmini
Galgotia and Sh. Dhruv Galgotia being incarcerated.
55. The complaint case is still pending, however, the FIR (FIR No.
862/2004 registered at PS Hari Parvat, Agra) was quashed by the
Allahabad High Court. The High Court held that the allegations made in
the FIR did not satisfy the ingredients of the offences alleged. The
Society/Guarantors had asserted that the decision of the Allahabad High
Court clearly established that the FIR and the complaint were malicious.
They had severely tarnished the image of the Society/Guarantors and thus,
they were entitled to compensation.
56. Without going into the question as to the arbitrability of the said
disputes, it is clear that the counterclaims were premised on the basis that
the Allahabad High Court had found the FIR to be vexatious and
malicious. The arbitral tribunal had rejected the said contention and
concluded that no such findings had come so far in favour of the counter
claimants and the complaint case was still pending before the court. It is
seen that the Allahabad High Court had quashed the FIR on the ground that
ingredients of the alleged offence were not made out.
57. In addition to the above, the arbitral tribunal had also rejected the
counterclaims on the ground that the Society/Guarantors had not led any
evidence in the proceedings to the effect that the statements made in the
FIR were false and the arbitral tribunal was thus not in a position to return
a finding to that effect. The arbitral tribunal also held that the complaint
case as well as the FIR were filed by two individuals who were not parties
to the arbitral proceedings. Lastly and most importantly, the arbitral
tribunal had held that there was nothing in the pleadings or the evidence to
reveal as on what basis the counterclaims have been quantified. This Court
also finds no reason to interfere with the aforesaid findings.
58. Before concluding, it would be necessary to observe that during the
course of proceedings, Mr Nagesh, had readily conceded that to put a
quietus to the disputes, SEIL would not press for any claim regarding late
fee and also accept a reduction in the pendente lite and future interest.
SEIL is bound down to the aforesaid concessions. Accordingly, pendente
lite and future interest is reduced to 15% p.a. and the impugned award is
modified to the aforesaid extent. Needless to mention that if the
Society/Guarantors seek to agitate the matter in appeal, SEIL would not be
bound by its concessions granted.
59. Although, this Court has held that late fee is not payable but no
modification of the impugned award on that ground is necessary because,
as noticed hereinbefore, the arbitral tribunal had held that late fee was
payable, but had not awarded the same for a different reason.
60. The petitions and all pending applications are disposed of with the
aforesaid observations.
VIBHU BAKHRU, J
MAY 29, 2017
RK
