Delhi High Court
M/S Poysha Packaging Private ... vs The Oriental Insurance Co.Ltd & ... on 30 September, 2021
$~8
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 30th September, 2021
+ O.M.P. (COMM) NO.27/2020
M/S POYSHA PACKAGING PRIVATE
LIMITED AND ANR. ..... Petitioner
Through: Mr M.N. Singh, Advocate.
Versus
THE ORIENTAL INSURANCE CO. LTD.
& ANR. ..... Respondents
Through: Mr P.K. Seth, Advocate.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
[Hearing Held Through Videoconferencing]
VIBHU BAKHRU, J. (ORAL)
1. The petitioner has filed the present petition under Section 34 of
the Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act')
impugning an arbitral award dated 11.09.2019 (hereafter the
'impugned award') rendered by the Arbitral Tribunal constituted by
Justice (Retd) Sh. K.S. Gupta as the Sole Arbitrator.
2. The petitioners challenge to the impugned award is limited to
the extent that the Arbitral Tribunal has not awarded pendente lite
interest.
3. The petitioner is engaged in the business of manufacturing
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flexible packaging material such as laminated material in rolls and
pouch form, since the year 2006.
4. The petitioner obtained two Standard Fire and Special Perils
Policies from the respondent company on 18.01.2012. The said
policies covered the risk of damages and loss for plant and machinery
and stocks (raw material, semi-finished material and finished material)
from the specified perils mentioned in the said policies.
5. On 03.11.2012, a fire broke out in the factory premises of the
petitioner resulting in extensive damage to the buildings, furniture,
fixtures and fittings as well as to the plant and machinery and stocks.
It is stated that three employees of the petitioner also lost their lives as
a result of the injuries sustained due to the said incident.
6. On 04.11.2012, the petitioner informed the respondent
regarding the incident of the fire and the respondent company
appointed the Surveyors. The petitioner made a claim of
₹1,88,45,120/- against loss to Plant and Machinery; a claim of
₹2,84,04,063/- as loss to Buildings, Furniture, Fittings and Fixtures;
and a claim of ₹9,61,29,217/ on account of loss to stocks.
7. The Surveyor (T.K. Chakraborty) submitted the report on
14.12.2013 assessing the loss in respect of the building, fittings,
fixtures and furniture at ₹1,92,91,288/-. Subsequently, on 12.02.2014,
the Surveyor submitted the report assessing the loss in respect of
stocks at ₹9,34,40,173/-. And on 18.02.2014, the Surveyor submitted
his report assessing the loss in respect of plant and machinery at
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₹1,58,70,533/-.
8. The petitioner claims that the respondent did not communicate
the reports furnished to the petitioner. However, it sought consent of
the petitioner to appoint another agency for inspection. The respondent
thereafter, appointed one Sh R.C. Bajpai, who proceeded to re-
examine and re-assess the claims. The question whether Sh R.C.
Bajpai could be appointed to re-assess the claims is a subject matter of
dispute between the parties. The petitioner claimed that it had
consented to appointment of an inspection agency and not for re-
assessment of the claims.
9. Sh R.C. Bajpai submitted three reports assessing the losses at
figures much lower than as assessed by the Surveyor (T.K.
Chakraborty). Based on the report submitted by Sh R.C. Bajpai, the
respondent released an amount of ₹1,53,90,151/- towards loss to
building, furniture, fixture and fittings; ₹6,90,35,447/- against loss of
stocks; and ₹1,16,02,392/- as damage to plant and machinery. The said
amounts were released to the bank on various dates.
10. According to the petitioner, the payments made by the
respondents were less than its entitlement and in any event, the
investigator (Mr RC Bajpai) appointed by the respondent was not
authorised to reassess the claims as assessed by the Surveyor. In view
of the disputes, the petitioner invoked the agreement to refer the
dispute the arbitration.
11. The parties concurred with the appointment of Justice (Retd)
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Shri K.S. Gupta as the Sole Arbitrator and he was so appointed.
12. Before the Arbitral Tribunal, the petitioner, inter alia, sought
the difference in the amount claimed in respect of the policies and the
amounts as released by the respondent along with interest. The prayers
made by the petitioner in its Statement of Claims are set out below:
"i) award a sum of Rs.4,73,86,982/- (Rupees Four
crore Seventy Three lakh Eighty Six thousand Nine
hundred and Eighty Two only) towards balance
amount of insurance claims together with [email protected]
15% p.a. from 01.09.2018 pendent lite and till the
date of payment, in favour of claimants and against
the respondents;
ii) award a sum of Rs.7,12,90,349/- (Rupees Seven
crore Twelve lakh Ninety thousand Three hundred
and Forty Nine only) being the interest amount as
per details mentioned in para No.27 of the Statement
of Claim, in favour of claimants and against the
respondents;
iii) award a sum of Rs.19,12,000/- (Rupees Nineteen
lakh Twelve thousand only) towards value of
salvage with interest @ 15% p.a. from 10.09.2018
till the date of payment by the respondents to the
claimants; and
iv) award cost of proceedings in favour of claimants
and against the respondents.
13. The Arbitral Tribunal accepted the petitioner's contention that
the respondent could not, in the given facts and circumstances, appoint
another agency to re-assess the losses. Following the decisions of the
Supreme Court in Venkateswara Syndicate v. Oriental Insurance Co.
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Ltd. & Ors.: (2009) 8 SCC 507 and New India Assurance Co. Ltd. v.
Luxtra Enterprises Ltd. & Ors. : 2019 (7) SCALE 206, the Arbitral
Tribunal held that a second surveyor could not be appointed without
any cogent reasons. Accordingly, the Tribunal held that the petitioner
was liable to the difference between the loss as assessed by the
Surveyor (T.K. Chakraborty) and as disbursed by the respondent. The
Arbitral Tribunal found that the difference in the amounts as assessed
by the surveyor and that as disbursed by the respondent worked out to
be ₹2,44,04,726 towards stocks; ₹42,68,141/- in respect of plant and
machinery; and ₹39,01,137/- in respect of building, furniture, fittings
and fixtures. Thus, aggregating a total amount of ₹3,25,74,004/-.
14. The petitioner had claimed interest on the amounts withheld and
had quantified the pre-reference interest at ₹7,12,90,349/-. This was
computed at the rate of 15% per annum on ₹14,34,14,968/- (amount of
loss claimed by the petitioner) as successively reduced by the amounts
as disbursed by the respondents on various dates.
15. The Arbitral Tribunal did not accept that the petitioner was
entitled to the difference between the amounts claimed and disbursed
but only entitled to the difference between the loss as assessed by the
Surveyor (quantified at ₹12,86,01,994/-) and the amounts as disbursed
by the respondent. The Arbitral Tribunal also held that since the
petitioner had not established the rate of interest as charged by the
Nationalized Banks during the relevant period, its claim for interest at
the rate of 15% per annum could not be allowed. The Arbitral
Tribunal was of the view that interest at the rate of 9% per annum was
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reasonable and accordingly, awarded a sum of ₹3,21,42,427/- as
interest for the period prior to disbursement. The relevant extract of
the impugned award indicating the computation of the aforesaid
amount is set out below:-
"(i) Interest on claim on stocks and plant &
machinery as per survey reports (total
being Rs.10,93,10,706/- @ 9% p.a. from
1.5.2014 to 9.3.2017 (rounded off to 34
months) Rs.2,78,74,230/-
(ii) Interest on claim of building & FFF (as per
survey report amount being
Rs.1,92,91,288/- @ 9% p.a. from 1.5.2014
to 16.11.2016 (29 ½ months) -
Rs.42,68,197/-."
16. In addition, the Arbitral Tribunal also computed the amount of
interest for the balance amount remaining unpaid from the date of
disbursement till 31.08.2018 at ₹38,26,218/-. The calculation of the
said amount is reproduced below:-
"(a) Interest on balance claim on Stocks and
plant & machinery of Rs.2,86,72,867/- @
9% from 10.03.2017 to 31.8.2018
(rounded off to 17½ months) -
Rs.37,63,313/-.
(b) Interest on balance claim of building &
FFF of Rs.39,01,137/- from 17.11.2016
to 31.8.2017 (21 ½ months) @ 9% p.a. -
Rs.62,950/- "
17. Thus, the Arbitral Tribunal computed the total amount of
interest payable as ₹3,59,68,645/- (₹3,21,42,427 + ₹38,26,218) and
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awarded the said amount in favour of the petitioner. The operative part
of the impugned award reads as under:-
"In view of my finding on said issues 1 to 6, award
of Rs.3,25,74,004/- towards balance amount of
claims and Rs.3,59,68,645/- towards interest is
passed in favour of claimant No.1 and against
respondent insurance company. Claimant No.1 is
further entitled to the share of arbitrator's fee paid by
it, lawyer's fee, which is assessed at Rs.50,000/- and
stamp duty paid on the award from the insurance
company. Respondent insurance company is allowed
4 weeks' time to pay the awarded amount after
receipt of intimation of claimant No.1 having paid
the deficient stamp duty. If the amount is not paid
within this period the claimant No.1 will be entitled
to pendente lite and future interest on former two
amounts @ 11 °/o p.a. from 18.9.2018, on which the
date statement of claim was received till realization,
from the respondent insurance company."
18. The petitioner is aggrieved by the award to the limited extent
that the Arbitral Tribunal did not award any pendente lite interest in
favour of the petitioner.
19. It is material to note that the Arbitral Tribunal has also reasoned
that a person deprived of the use of money to which he is legally
entitled, has a right to be compensated for the deprivation. The
Arbitral Tribunal has also held that interest rate of 9% per annum is
reasonable. Accordingly, the Tribunal has awarded a sum of
₹3,59,68,645 as pre-reference interest. However, it is evident that the
Arbitral Tribunal has ignored the petitioner's prayer in the Statement
of Claims qua the pendente lite interest. The said claim has not been
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considered by the Arbitral Tribunal. Plainly, rejection of such a claim
would be inconsistent with the reasoning of the Arbitral Tribunal as
noted above.
20. In Sayeed Ahmed & Co vs State of U.P.: (2009) 12 SCC 26, the
Supreme Court had observed, albeit in a different context, that the
difference between pe-reference period and pendente lite interest has
disappeared in so far as award of interest is concerned. Although it
may be open for the Arbitral Tribunal to award interest for the pre-
reference period and yet deny pendente lite interest, the same is
required to be informed by reason.
21. In this case, there is no plausible reason for the Arbitral
Tribunal to have not awarded pendente lite interest after concluding
that the petitioner was entitled to interest as it was deprived of the use
of money.
22. In view of the above, the Arbitral Award in respect of the
petitioner's claim to the extent that it does not grant pendente lite
interest to the petitioner, is set aside.
23. The petition is allowed in the aforesaid terms.
VIBHU BAKHRU, J
SEPTEMBER 30, 2021
Aj/pkv
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