Himachal Pradesh High Court
E.I.H. Limited And Others vs Original on 17 November, 2023
Bench: Satyen Vaidya
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Ex. Pet. No. 5 of 2023
a/w Ex. Pet. No. 19 of 2023
.
Reserved on : 06.10.2023
Decided on : 17.11.2023
1. Ex. Pet. No. 5 of 2023
E.I.H. Limited and Others.
........... Original Claimants/Decree
Holders No.1 and 2.
Versus
State of Himachal Pradesh and Others.
.............Original respondents No.1
& 2/Judgment Debtors No.1 & 2.
2. Ex. Pet. No. 19 of 2023
State of Himachal Pradesh and Others.
....Decree Holder/Original
Claimant No.2.
Versus
E.I.H. Limited and Others.
.......Judgment Debtors/Original
Claimant No.1.
Coram
The Hon'ble Mr. Justice Satyen Vaidya, Judge.
Whether approved for reporting? 1 No
1 Whether reporters of the local papers may be allowed to see the judgment?
For the petitioner(s) : Mr. R.L. Sood, Sr. Advocate, with
Mr. Arjun Lall, Advocate, for the
petitioner(s) in Ex. Pet. No. 5 of
2023 and for the respondent in
.
Ex. Pet. No. 19 of 2023.
For the respondent(s) : Mr. Dhruv Mehta, Sr. Advocate,
with Mr. Prabhat Kumar,
Advocate, Mr. Shyam Agarwal,
and Mr. Vivek Negi, Advocates,
for the respondents in Ext.
Pet. No. 5 of 2023 and for
of 2023.
Satyen Vaidya, Judge
Both these petitions are being decided by a
common order as common questions of facts and
law are involved.
2. By way of these petitions, execution of
award dated 23.07.2005, passed by the sole
Arbitrator {Hon'ble Justice (Retd.) Mr. R.P. Sethi}, has
been sought by both the contesting parties before
the learned Arbitrator.
3. Petitioners in Execution Petition No. 5 of
2023 have been referred to as claimant No.1 and
petitioners in Execution Petition No. 19 of 2023 have
been referred to as claimant No.2 in the award. The
parties hereto, for the sake of convenience and
clarity, hereinafter shall be referred to by the same
status by which reference was made to them in the
.
award under execution.
4. A dispute had arisen inter se claimant
No. 1 and claimant No.2, out of the terms of Joint
Venture Agreement (for short 'JVA') executed between
them on 30.10.1995 with the object to construct and
run a 'Five Star Hotel' in joint venture. The JVA had
created certain mutual rights and obligations inter se
claimant No.1 and claimant No.2. The land belonged
to State of Himachal Pradesh of claimant No.2. The
construction was to be raised by claimant No.1 at
their own cost. 35% equity shares were reserved in
favour of the State of Himachal Pradesh of claimant
No.2. The value of the land was assessed at Rs. 7.5
Crores and such value was set off against the value
of equity shares of State of Himachal Pradesh. The
construction was to be raised within a stipulated
period and after raising the construction the Hotel
was to be made commercially operational within
four years. A further period of two years was allowed
for making the hotel commercially operational
against payment of damages @ Rs. 2 Crores per
.
year.
5. The disputes between the parties were
taken before the Company Law Board and this Court.
Remedies were sought before the Company Law
Board under the Companies Act. A Company Appeal
was also filed before this Court.
petition and subsequently
r In addition, writ
a review petition also
came before this Court relating to the disputes
arising out of JVA.
6. A Division Bench of this Court, vide order
dated 17.12.2003 appointed Hon'ble Justice
(Retd.) Mr. R.P. Sethi, as the sole Arbitrator in the
matter. The terms of reference for arbitration were
directed to include:-
"1) The entire adjudication by the Arbitral
Tribunal with respect to the legality or
otherwise of the action of the State
Government canceling the joint venture
agreement and taking consequential action,
which was the subject matter of the
adjudication by the Company Law Board
which ultimately became the subject matter
of Company Appeal No. 1 of 2003.
.
2) Whether the petitioners have rightly and
properly constructed the building of the hotel
and as to whether the construction of this
building the entire building) is in
accordance and in conformity with a valid
sanction/permission granted by the
competent authority of the State.
3) Whether the petitioners, in raising the
construction of the building ( the entire
building) or in completion thereof, have
r deviated from any sanctioned plan or have
they constructed any part of the building in
excess, or in violation of any sanction,
validity and /or legitimately granted by the
Competent Authority of the State.
4) If upon consideration, the Arbitral Tribunal
finds that any violation has been committed
in the construction of the building, is such
violation compoundable under law, or has it
already been compounded by the order of
any competent authority, if so, with what
result and/or consequence, and if not
already compounded, is it legally capable of
being compounded in future and if so, on
what terms and which is the authority to
compound?
5) If the Arbitral Tribunal finds that violation(s)
if committed in the construction of the
building, if not compoundable, whether
coercive measures can or should be taken
by the State and in that event, what could
.
be the consequences, including the
consequence of demolition of the building or
any part of it?
6) If the Arbitral Tribunal ultimately finds, after
adjudication, on a totality of circumstances
and on consideration of all relevant aspects,
that the partnership between the State
Government and EIH Ltd. is not workable
any more and that in the considered
opinion of the Arbitral Tribunal, parting of the
ways is, and would be the most ideal and
conducive situation, in public interest as well
as in the interest of the parties, the Arbitral
Tribunal may while passing the arbitral
award also indicate the terms on which such
parting of ways can best be achieved and
also in the process, indicate as to whether
fastening of any liability and/or pecuniary
or financial obligation upon the parties or
any of them would be a consideration for
parting of the ways and indicate the terms
thereof.
7) It shall be open to the parties to file
claims/counter claims before the Arbitral
Tribunal, including the claims for
compensation/damages with respect to an
arising out of any alleged acts of omission or
commission against each other."
7. Learned Arbitrator passed the award on
.
23.07.2005. The following extract from the award
dated 23.07.2005 shall be relevant to be noticed here
as the same refers to the executable part of the
award.
"In this view of the matter, I have come to this
conclusion that after termination of the JVA, the
Claimant No. 1 (EIH) be permitted to continue the
MRL with all its rights and liabilities, the land
being retained by it on the lease hold basis. I am
further of the view that the State of Himachal
Pradesh, Claimant No. 2 should facilitate transfer
of all its shares to Claimant No. 1 on payment of a
consolidated sum of Rs. 12 Crores which includes
the cost of land being Rs. 7.5 Crores, the penalty
amount agreed in terms of Clause 10.1(b) of the
JVA reduced to Rs. 3.5 Crores and a sum of Rs. 1
Crore as consolidated amount for the user of the
land from termination of the JVA with effect from
17-12-2003 till the date of this award. The lease
shall be initially for a period of 40 years from the
date of this award, renewable thereafter with the
consent of the parties upon conditions mutually
agreed for such periods and rent as may be agreed
from time to time. In case of disagreement
regarding the fixation of rent, the party in
possession and running the business of the Hotel
and the State of H.P. shall refer the matter to the
Court as defined in Section 2(e) of the Arbitration
and Conciliation Act, 1996, Upon reference, the
Court after hearing the parties shall determine the
.
rate of rent for the period agreed to be extended.
Such determination shall be finalized by the Court
within a period of one month. The lease rent for the
first five years shall be Rs. 1.25 Crore annually; for
sixth to tenth year Rs. 1.50 Crores annually, for
eleventh to fifteenth year Rs. 1.75 Crores annually,
for sixteenth to twentieth year Rs. 2 Crores
annually; for twenty-first to twenty-fifth year Rs.
2.30 Crores annually; for twenty-sixth to thirtieth
year Rs. 2.75 Crores annually; for thirty-first to
thirty-fifth year Rs. 3.40 Crores annually; for thirty-
sixth to fortieth year Rs. 4 Crores annually. The
lease rent has been determined keeping in mind
the offer of Claimant No.1 made to the State of
Himachal Pradesh at the initial stage, which is on
much lower side than the rate of lease rent offered
by M/s. Holiday Inn Hotel Pvt. Ltd.
From the date of the award and transfer of
shares to Claimant No. 1, the Claimant No. 2 shall
have no right and liability in the MRL, except to the
extent of the right of a lessor in the land. Further,
Claimant No. 1 shall be entitled to all the rights and
subject to liabilities with respect to the MRL and the
State shall provide all facilities for properly running
the Hotel by Claimant No. 1 in accordance with law.
In case Claimant No. 1 does not perform its part of
duties under this award within a period of 3 months
from the date of the award, the Resolution of the
Board of Directors and the Government decision
taken on 07-03-2002 shall stand revived at the
option of Claimant No. 2 and be executed by it as if
a fresh decision and action has been taken
.
consequent upon the termination of the JVA. In
such an eventuality the rights and liability of the
parties shall be determined on the basis of
inspection of the accounts of the MRL in light of the
JVS and other agreements and this award by a
reputed concern of Chartered Accountants to be
nominated by the High Court. Pending
determination and the settlement of accounts, the
claimant NO. 2 shall be entitled to take possession
and run the "Wildflower Hall Hotel".
Issue No. 16:-
In the light of the findings returned on various
issues and decisions arrived at on the disputes
between the parties, the following award is made
which shall come into force and bind the parties with
effect from today: -
(1) That all the terms and conditions of the
JVA are legal, valid and binding on the
parties to these proceedings including the
MRL;
(2) That the Claimant No. 2 was legally
entitled to cancel the Joint Venture
Agreement and take consequential actions
but only after 03-05-2002;
(3) That action of the Claimant No. 2 of
terminating the JVA on 04-03-2002 and
conveying its decision to Claimant No. 1 on
06-03-2002 vide Annexure 'N' page 331, Vol.
II-B is not sustainable and is liable to be set
.
aside;
(4) That the JVA is declared to have been
terminated with effect from 17-12-2003.
The termination of the JVA shall be
subject to the directions given while deciding
Issue No. 14 that the Claimant No.1 shall
continue to hold and possess the property of
the MRL upon executing a lease deed in
favour of Claimant No. 2 on the terms and
conditions as specified while deciding Issue
No. 14;
(5) That upon the execution of the lease deed in
its favour, the Claimant No. 2 shall transfer
all its shares in favour of the Claimant
No. 1 or its nominee/nominees. The Claimant
No. 2 shall also facilitate the transfer of
shares under the provisions of the
Companies Act;
(6) That in case the lease deed is not executed as
per award, the Resolution and orders
passed by Claimant No. 2 on 07-03-2002
shall be deemed to have been revived and
passed afresh in the discretion of Claimant
without any further delay;
(7) That in case the Claimant No. 1 opts to
execute the lease deed and remain in
possession of the property of the MRL, the
Claimant No. 2 shall stand absolved of all its
liabilities but be entitled to the right over the
land in dispute as a lessor only;
.
(8) That in case the claimant No. 1 opts to
execute the lease deed in favour of the
State of H.P., the authorities under The
Himachal Pradesh Registration of
Tourist Trade Act, 1988 are directed to
rooms in the original certificate of
registration Annexure 'HH' of the Hotel
without any further delay. The
Registration shall, however, be subject to
the provisions of the said Act and the
MRL under an obligation to maintain the
Hotel in accordance with the requirements of
law. Till the competent authority accords the
registration, the provisional permission
granted by the High Court of H.P. on
17-12-2003 shall continue;
(9) That in case the Claimant No. 1 decides not
to obey the conditions of this award, the
Claimant No. 2 shall be entitled to
take immediate possession and
management of the Hotel. The disputed
accounts of the MRL shall be settled by the
reputed Chartered Accountants to be
appointed by the High Court. Non-
settlement of accounts would not disentitle
the Claimant No. 2 to take possession and
management of the Hotel;
(10) That the permission granted for
construction of the Hotel as per Revised
Sanctioned Plan though defective is upheld in
.
the interests and for the benefit of the parties.
Such construction is, however, subject to the
findings regarded deviations and
compounding of such deviations;
(11) That all the deviations are directed to be
compounded by the Director Town and
Country Planning on payment of lump
sum amount of Rs. 5 Lakhs by the MRL;
(12) That no party is found entitled to claim
r damages against each other except to the
extent as upheld in terms of Clause 10.1(b) of
the JVA;
(13) That in view of this award no party is
entitled to any further relief as prayed for
in the Company Petition, Company Appeal,
Writ Petition and Review Petition;
(14) That no party shall have the right to
initiate further litigation with respect
to the property of the Wild Flower Hall
Hotel and the prayers for reserving such
a right in terms of Order 2 Rule 2 of the
CPC are rejected;
15) That under the peculiar circumstances of
the case and keeping in view that
both the parties have been granted
reliefs to certain extent. It is directed that
they shall bear their own costs."
.
8. The award was challenged by claimant
No. 1, under Section 34 of the Arbitration and
Conciliation Act, 1996 (for short 'The 1996 Act').
Learned Single Judge dismissed the petition of
claimant No.1, vide judgment dated 25.02.2016. The
claimant No.1, assailed the judgment passed by
learned Single Judge in appeal under Section 37 of
the 2016 Act, which also came to be dismissed by
a Division Bench of this Court, vide judgment dated
13.10.2022, passed in Arbitration Appeal No. 11 of
2016 .
9. The award passed by learned Arbitrator is
stated to have attained finality as none of the parties
have raised any further challenge.
10. In both the execution petitions, the rival
parties have filed their respective objections.
11. Claimants No. 1 and 2 are seeking the
execution of award dated 23.07.2005 in their own
ways. According to claimant No. 1, the first step for
implementation of the award is to be initiated by
claimant No. 2, whereas claimant No.2 alleges the
.
same thing against claimant No.1.
12. Claimant No. 1 contends that they have
already deposited the amounts as was required
from them under the award in this Court during the
pendency of these petitions. Now, it is for the
claimant No. 2 to come forward to get the lease deed
executed in favour of claimant No. 1 in respect of the
land in question after getting the cancellation of
earlier sale deed dated 06.02.1997 executed by the
State Government in favour of the MRL of claimant
No. 1. It is further submitted that claimant No. 2 is
also liable to transfer its shares in favour of MRL
which will follow their entitlement to the amount
assessed to be paid by claimant No. 1 to claimant
No.2 under the award.
13. Per contra, claimant No. 2 has contended
that the award had bound the claimant No.1 to
perform its part obligated under the award within
three months and since the claimant No. 1 has failed
to fulfil such obligation, the said claimant has lost of
rights, title and interest in the property and as a
.
consequence the claimant No. 2 has become entitled
to resume the property, subject to condition imposed
in the award. It has also been submitted that
nothing has been paid to claimant No.2 in terms of
the award by claimant No. 1 till date. The award
was passed in the year 2005 and claimant No. 1 has
been able to drag the litigation for a period of more
than seventeen years with the intent to avoid
performance of its obligation under the award. Even
after the dismissal of arbitration appeal filed by
claimant No. 1, they have not performed their part of
the obligation under the award within three months.
A claim for compound interest @ 18% per annum
under Section 31(7)(b) of 2016 Act, has been made
on the amount that is payable under the award to
claimant No. 2, on the premise that claimant No. 2 is
to be compensated for undue delay caused at the end
of claimant No. 1 in implementation of the award.
14. I have heard learned counsel for the
parties and have also gone through the record of the
.
case carefully.
15. The fact that both the contesting parties
have applied for execution of award passed by
learned Arbitrator is sufficient to infer that none of
the parties have any doubt regarding executability of
the award. Claimant No. 1 has sought assistance of
the Court for execution of the award in following
terms:-
(i) By directing the Judgment Debtor No.1, to
forthwith execute and register a lease deed
in favour of EIH Limited
(Decree Holder No.1) in respect of the
property commonly known as Wildflower
Hall, Charabra, (Tehsil Shimla Rural),
District Shimla, Himachal Pradesh, bearing
Khewat No. 1/14, Khatauni No. 18, Khasra
No. 81 to 101 about 77, 471/- sq mts ( i.e.
102.19 bighas) situate at Mauza Chharabra,
Pargna Dharthi, Tehsil and District Shimla
("Property"), in terms of the findings
returned on issue No. 14 as set out in the
Arbitral Award by the Ld. Arbitrator;
(ii) By simultaneously directing the Judgment
Debtor No.1, (with the execution and
registration of the lease deed), to transfer its
entire shareholding, in Mashobra Resort Ltd,
in favour of the present Decree Holder
.
No.1,namely, EIH Ltd, in accordance with
and in terms of the requirement of law. The
said transfer be directed to take place in
terms of the findings on Issue No. 14 as set
out in the Arbitral Award;
(iii) By directing the Judgment Debtor No.1 to
further facilitate the said transfer, pursuant
to paragraph 10(b), above, in accordance
with the provisions of the Companies Act,
2013;
(iv) By directing the Judgment Debtor No.2, the
Special Area Development Authority, Shimla
to compound all deviations as directed under
the Arbitral Award after receiving the
payment of Rs. 5,00,000/- (Indian Rupees
Five Lakh Only) and consequently to issue
the necessary Certificate of Completion of the
entire structure (s) on the Property;
(v) By directing the Judgment Debtor No.1 and
its authorities, to accord Registration of the
additional 57 rooms of Hotel Wildflower Hall
situated on the Property, in favour of the
Decree Holder No. 2, by incorporating the
same in the Original Certificate of
Registration issued by it, under the
Himachal Pradesh Registration of Tourist
Trade Act, 1988. Further, by suitably
amending he said Certificate of Registration
and thereafter to issue an amended
Certificate of Registration incorporating
therein all the rooms;
.
(vi) By any other mode and method deemed fit
by this Hon'ble Court;
(vii) Award costs of the present proceedings in
favour of the Decree Holders;
(viii) Pass such other and further orders that this
Hon'ble Court may deem to be just and
necessary in the facts and circumstances of
the case.
16. On the other hand, claimant No. 2 has
sought the execution of the award in following
terms:-
(i) By directing the Judgment Debtors
to facilitate and render all necessary
assistance required in cancellation of the
conveyance deed dated 06.02.1997;
(ii) By directing the Judgment Debtors to
execute and register the lease deed in
accordance with the Award dated
23.07.2005. Draft lease deed to be executed
is prepared in accordance with standard
lease deed under HP lease Rule 2013 and is
annexed as (Annexure P-6);
(iii) By directing the judgment debtors to pay
the amount of Rs. 1,67,13,44,057/- towards
lease rent under the Award alongwith
.
statutory interest u/s 31(7)(b) due from the
date of the Award i..e 23.07.2005 till
01.06.2023;
(iv) By directing the judgment debtors to pay
the amount of Rs. 2,31,06,36,341/- which
includes consolidated sum under the Award
alongwith statutory interest u/s 31(7)(b) of
the 1996 Act, due from the date of the Award
r i.e. 23.07.2005 till 01.06.2023;
(v) By directing the judgment debtors to pay
the amount of Rs. 96,27,651/- towards lump
sum amount for compounding deviation
under the Award alongwith statutory interest
u/s 31(7)(b) of the 1996 Act due from the
date of the Award i.e. 23.07.2005 till
01.06.023. Copy of the total amount of
Rs. 3,99,16,08,049 receivable by the
State/Decree Holder under the Award dated
23.07.2005 as on 01.06.2023 is annexed as
(Annexure P-7);
(vi) In case the judgment debtors fails to pay
any of the amounts at serial No. iii), iv) and
v) above, by attachment and sale of the
properties of Judgment Debtors;
(vii) Any other mode deemed fit by this Hon'ble
Court;
(viii) Pass such other and further orders deemed
fit by this Hon'ble Court in the facts and
circumstances of the case.
.
17. The objections raised by claimant No. 2 are
that the claimant No. 1 is firstly required to facilitate
and render all necessary assistance required in
cancellation of conveyance deed dated 06.02.1997.
Thereafter, lease deed is to be
proposed draft of lease deed has also been placed on
r executed. The
record by claimant No. 2. Further, claimant No. 1 is
liable to pay statutory interest under Section 31(7)(b)
of the 1996, Act. Firstly, on the consolidated amount
of Rs. 12 Crores and secondly, on the lease rent that
has become due to claimant No. 2 and thirdly, on the
amount of Rs. 5 lacs payable by claimant No. 1 to
Special Area Development Authority, Kufri of
claimant No. 2 as composition fee. Claimant No. 2
has claimed interest @ 18% on due amounts with
annual rest. Claimant No. 2 has specifically stated in
their objections that they are ready and willing to
perform their obligation under the award as soon as
claimant No. 1 perform their part of the obligation.
.
18. Claimant No. 1 has filed reply to the
objections of claimant No. 2 by alleging that
common objections on behalf of the State of
Himachal Pradesh and Special Area Development
Authority, Kufri, were not maintainable. Claimant
No. 2 were asking the Executing Court to travel
beyond the decree, which was impermissible. The
award was silent as to grant of interest and hence
the claimant No. 2 was not entitled to any interest. In
any case, the interest under Section 31(7)(b) of the
Arbitration and Conciliation Act, 1966, would be
simple interest. It has further been submitted that
the liability to pay consolidated amount or lease
money as per award would arise against claimant
No. 1, once the claimant No. 2 performed its part of
the obligation. As per claimant No. 1, the award
passed by learned Arbitrator cannot take parlance of
a money decree as none of the amounts awarded in
the award were in terms of the JVA. The payment of
amounts by claimant No. 1 to the State of Himachal
Pradesh are contingent upon the condition of
.
transfer of shares by the State and hence, interest
would not accrue until the payment of the amount
became due. Similarly, the amount payable as
lease money would be due to State only on execution
of lease deed and again the liability of interest
would become due from the date when amount of
lease money becomes payable. Claimant No. 1 has
also made a specific assertion that there was no
provision in the award for reversion of the property
to the State as the Arbitrator had not set-aside the
conveyance deed. The liability of payment of interest
has also been denied on the ground that in the first
instance the execution of award was stayed by
implication of law on institution of petition under
Section 34 of the Arbitration and Conciliation Act,
1966 and subsequently the Appellate Court had
passed an order of status quo against the parties.
19. In Execution Petition No. 19 of 2023,
claimant No. 1 has also filed objections and these
objections, inevitably are the same, which have been
taken as grounds for reply filed by claimant No. 1 to
.
the objections of claimant No. 2 in Execution Petition
No. 05/2023. Similar is the position with respect to
the stand taken by the claimant No.2 to the
objections of claimant No. 1 in Execution Petition
No. 19 of 2023. Claimant No. 2 has replied to the
objections of claimant No. 1 in
No. 19 of 2023 in the same terms in which
r Execution Petition
their
objections were filed in Execution Petition
No. 05/2023. In nutshell, the gist of respective
stands of claimants No. 1 and 2 in both the execution
petitions is substantially identical.
20. Thus, it becomes evidently clear that
notwithstanding the expression of interest by both
the parties in execution of the award, none has
shown compliance till date on the pretext that it
was the other who, under the award, was liable to
initiate the first step.
21. It is not in dispute that learned Arbitrator
has declared the JVA terminated w.e.f. 17.12.2003.
It has further been declared that the status of the
EIH would be that of the lessee. The Arbitrator has
.
already crystalized the rights and obligations of the
parties as lessor and lessee for forty years from the
date of the award, meaning thereby that the lease
hold rights in favour of the EIH would be deemed to
have come into effect from the date of the award,
notwithstanding non-execution of formal lease deed.
The claimant No. 1 having failed in petition under
Section 34 and also in appeal under section 37 of
the Act, the executability of award will be seen from
the date of the passing of the award.
22. Noticeably, in the award, learned
Arbitrator has fixed a period of three months for
claimant No. 1 to perform its part of the obligation
under the award, whereas no such period has been
prescribed for claimant No. 2. This observation is
being made only in the context of dissipating the
doubts, if any, entertained by the parties regarding
the sequence in which the parties were under
direction to perform their respective obligations.
23. It will be relevant to notice that the
Hon'ble Division Bench of this Court while deciding
.
Arbitration Appeal No. 11 of 2016 has dealt with the
issue of resumption of land in favour of the State in
extenso. It has been held that the resumption of
land in favour of the State is an automatic and
inevitable consequence of the award in view of the
specific findings
17.12.2003. It will be
r to
as to termination of JVA w.e.f.
gainful to reproduce the
relevant extract from the judgment passed by Hon'ble
Division Bench of this Court in Arbitration Appeal
No. 11 of 2016, which reads as under:-
"78. It was further submitted by the appellants
that the learned Arbitrator could not have directed
that the land would revert to the State Government
upon termination of the JVA without cancelling the
registered conveyance deed in favour of MRL as
per Section 31 of the Specific Relief Act.
81. It was also argued on behalf of the
appellants that once the registered conveyance
deed stood executed in favour of MRL, any
condition in the JVA or the conveyance deed
providing for reversion of the property would be in
violation of Sections 10 and 11 of the Transfer of
Property Act and hence void.
82. We have considered the submission and find
that in the instant case the conveyance deed was a
.
conditional conveyance under Section 31 of the
Transfer of Property Act which provides for
conveyances where the transferred interest in the
property reverts to the transferor when a particular
uncertain event happens or does not happen. This
is clearly borne out from a perusal of Clause 3 of
the Conveyance Deed (at page 139 of Vol. IIA)
which states that the same would be "subject to"
the provisions of the JV Agreement. Clause 11.2 of
the JV Agreement (at page 22 of Vol. IIA) provides
for reversion of the property in favour of the State
Government as a consequence of termination.
Therefore, since the conveyance deed was "subject
to" the JVA, the provision regarding reversion in the
JVA would be deemed to have been incorporated
as a condition of transfer in the conveyance deed.
83. In taking this view, we are duly fortified by
the judgment rendered by the Hon'ble Supreme
Court in Petroleum & Natural Gas Regulatory
Board vs. Indraprastha Gas Limited (2015) 9 SCC
209, more particularly, the observations contained
in paras 23 and 24, which read as under:-
23. At this stage, it is necessary to
appositely understand the said expression.
In The Commissioner of Wealth Tax, Andhra
Pradesh, Hyderabad v. Trustees of H.E.H.
Nizam's Family, 1977 3 SCC 362, this Court
was dealing with the expression "subject to"
in the context of the Wealth Tax Act, 1957.
Section 3 of the said Act imposed the charge
of wealth tax subject to other provisions of
the Act. In that context, the Court opined that
.
Section 3 has to be made expressly subject
to Section 21 and it must yield to that Section
insofar as the latter makes a special
provision for assessment of a trustee of a
trust. In Ashok Leyland Ltd. v. State of T.N.
and Another, 2004 3 SCC 1, it has been held
that "subject to" is an expression whereby
limitation is expressed. In K.R.C.S.
Balakrishna Chetty and Sons & Co. v. The
State of Madras AIR 1961 SC 1152, this
Court was interpreting Section 5 of the
Madras General Sales Tax Act, 1939
wherein the Legislature had appended the
expression "subject to" and while
interpreting the said words, the Court ruled
that they are meant to effectuate the
intention of law and the correct meaning of
the expression is "conditional one".
24. In South India Corporation (P) Ltd. v.
Secretary, Board of Revenue, Trivandrum
and another, AIR 1964 SC 207, the
Constitution Bench has ruled that the
expression "subject to" in the context convey
the idea of a provision yielding place to
another provision or other provision to which
it was made subject to. In B.S. Vadera and
another v. Union of India and others AIR
1969 SC 118, this Court while dealing with
the expression "any rule so made shall have
effect, subject to provisions of any Act
occurring in the proviso to Article 309" ruled
that:-
.
"24. It is also significant to note that the
proviso to Article 309, clearly lays down that
'any rules so made shall have effect, subject
to the provisions of any such Act'. The clear
and unambiguous expressions, used in the
Constitution, must be given their full and
unrestricted meaning, unless hedged in, by
any limitations. The rules, which have to be
'subject to the provisions of the Constitution,
shall have effect, 'subject to the provisions of
r any such Act'. That is, if the appropriate
legislature has passed an Act, under Article
309, the rules, framed under the proviso, will
have effect,-subject to that Act; but, in the
absence of any Act, of the appropriate
legislature, on the matter, 'in our opinion, the
rules, made by the President, or by such
person as he may direct, are to have full
effect, both prospectively, and,
retrospectively. Apart from the limitations,
pointed out above, there is none other,
imposed by the proviso to Article 309,
regarding the ambit of the operation of such-
rules."
84. In the instant case, the failure of the
Appellant to make the hotel fully commercially
operational by 03.05.2002 resulted in automatic
reversion of the property to the State Government.
The Appellant ceased to enjoy any interest in the
said property after 03.05.2002.
.
88. Furthermore, once the learned Sole Arbitrator
upheld the termination of the JVA, albeit with effect
from 17.12.2003, the consequences must
necessarily ensue. The Board Resolution dated
07.03.2002 was itself based on the termination
order dated 06.03.2002 which specifically stated
that pursuant to the termination of the JVA, the
entire Wildflower Hall property inclusive of land
and buildings would stand resumed by the State
(at
r pages 402-03 of Appeal). All necessary
formalities, including registration of cancellation
deed, would inevitably be performed by the State
Government on the basis of the Award."
24. The judgment of Hon'ble Division Bench in
Arbitration Appeal No. 11 of 2016, having attained
finality, the cancellation of conveyance deed dated
06.02.1997 and up-dation of records of rights remain
a mere paper formality and either of the parties can
approach the concerned authorities without waiting
for the others.
25. It is also clear term of the award that on
failure of claimant No. 1 to perform its part of the
obligation under award within stipulated period, the
State shall have the right at its option to resume
the property in question pending fulfilment of all
.
other obligations under the award. It being so, it
would always be in the interest of claimant No. 1 to
get the necessary formality completed in order to
continue with its lease hold rights unless the said
claimant thinks otherwise.
26.
As regards, the payment of rent, it will be
absurd to consider that the liability
r of payment of
lease rent by EIH to the State will begin only after
execution of formal lease deed. The first party has
already utilised the benefits of property by
successfully running Hotel Wild Flower Hall from the
date of award. On such hypothesis, it is not
understood, as to what would the status of EIH or
for that matter of claimant No. 1 over the property
after the passing of award especially when the JVA
stood terminated and the status of claimant No. 1
was declared to be that of lessee.
27. The Arbitration Appeal No. 11 of 2016 was
dismissed on 13.10.2022. The challenge to the Award
by claimant No.1 either by way of petition under
section 34 of 1996 Act or by way of appeal under
.
section 37 of the Act ibid was always at their own
risk and peril. Having failed in the challenge the
award attained finality and its execution will relate
back to the date of award. The claimant No. 2 had
not been able to execute the award on account of
pending litigation, the liability of payment of rent
will date back to the passing of the award and will
entail in payment of interest from the initial date of
the award itself. Moreso, when the claimant No. 1
has not paid the arrears of lease money to the State
within the stipulated period of three months even
after the dismissal of the appeal.
28. The second part of the award i.e. the
payment of consolidated amount of Rs. 12 Crores by
claimant No. 1 to claimant No. 2 and the obligation
of claimant No. 2 to transfer shares in favour of the
claimant No. 1, it is clearly mentioned in Clause-V of
the award, more particularly, findings on issue No.
16 that the claimant No. 2 has been obligated to
transfer all its shares in favour of claimant No. 1 or
its nominee/nominees upon execution of the lease
.
deed. As held above, the formality of execution of
lease deed is sine qua non for claimant No. 2 to
perform its obligation transferring the shares in
favour of claimant No. 1, whereas such formality
cannot be considered to inure to the benefit of
claimant No. 1 with respect to its liability
lease money w.e.f. the date of award. While reading
r to pay
the findings of learned Arbitrator on issues No. 14
and 16 harmoniously, their remains no doubt that
the State of Himachal Pradesh has been further
obligated to transfer its shares to claimant No. 1 on
payment of consolidated sum of Rs. 12 Crores,
which again means that the payment of Rs. 12
Crores is sine qua non for claimant No. 2 to transfer
its shares in favour of the claimant No.1. This part of
the award has also not been implemented by
claimant No. 1 within the stipulated period of three
months, thereafter, the amount of Rs. 12 Crores
payable by claimant No. 1 to claimant No. 2 will also
entail the liability of interest under Section 31(7)(b)
of the Arbitration and Conciliation Act, 1966.
.
29. Similarly, the claimant No. 1 having failed
to make the payment of Rs. 5 lacs to Special Area
Development Authority, Kufri, within the stipulated
time, the said amount shall also entail interest
under Section 31(7)(b) of the Arbitration and
Conciliation Act, 1966.
30. to
The interest under Section
r 31(7)(b) of the
Arbitration and Conciliation Act, 1966, cannot be
compounded, as claimed by claimant No. 2, for the
simple reason that the said provision of law provides
for default clause, in which no provision for
compounding of interest is there. Section 31(7) of
2016 Act 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."
The Arbitrator did not provide of any interest for pre
or post award period on the sum(s) directed to be
paid under the award. It being so there is no escape
from conclusion that the mandatory nature of
Section 31(7)(b) will come into play and the post
award interest on the amounts payable therein will
be @ 18%.
31. The next question that has arisen is
whether the interest payable on the sum(s) payable
under award will be simple or compound?
32. Section 31(7)(a) has no application in the
case as the Arbitrator has not awarded any pre
award interest to the claimant No.2 and for this
reason the post award interest will accrue only on the
amount(s) payable under the award which admittedly
does not include any component of pre award
interest.
.
33. Since the arbitral award is silent as to
award of post award interest also, such interest shall
be @18% per annum on the sum directed to be paid
by the award from the date of award till its payment
by virtue of specific statutory provision as enshrined
in Section 31(7)(b) of 2016 Act. The said provision
does not talk of compounding of interest or its
capitalization after particular period of rest, therefore,
in absence of any statutory mandate, the interest
payable under aforesaid provision will be construed
to mean simple interest @ 18% per annum on the
sums payable under the award by claimant No.1 to
Claimant No.2 from the date of award till the date of
actual payment.
34. In Municipal Council, Thanesar Vs.
Virender Kumar, (2020) 15 SCC 364, an identical
question was considered and answered by Hon'ble
Supreme Court as under:-
"8. The first issue was rightly answered in favour
of the respondents. The question is no longer res
integra and stands answered in clear terms in
.
Para 10 of the judgment of Bobde, J. and paras
27-28 of the judgment of Sapre, J. in Hyder
Consulting [Hyder Consulting (UK) Ltd. v. State of
Orissa, (2015) 2 SCC 189 : (2015) 2 SCC (Civ)
38].The view taken by the High Court on this
issue is absolutely correct.
9. As regards the second issue, the executing
court correctly appreciated that the award did not
specifically state that the interest @ 7% p.a. was
to be awarded with quarterly rests. In fact, the
award did not specify anything; whether it be
quarterly rests or yearly rests. It simply awarded
interest @ 7% p.a. Since the award was
completely silent on that aspect, at the stage of
execution, no addition or alteration could be made
in the operative directions issued in the award.
The award had seen the challenges at three
levels and at none of those stages, there was any
modification in the operative directions of the
award.
6. The appellants being aggrieved, filed
aforementioned civil revisions in the High Court
which were disposed of on 3-3-2017 [Virender
Kumar v. Municipal Council, Thanesar, 2017 SCC
OnLine P&H 5357] . The questions that arose for
consideration were formulated by the High Court
as: (Virender Kumar case [Virender
Kumar v. Municipal Council, Thanesar, 2017 SCC
OnLine P&H 5357] , SCC OnLine P&H para 9)
"9. Twin questions that fall for
consideration of this Court are : (i) whether the
decree-holders are entitled to the statutory
.
benefits under Section 31(7)(a) and (b) of the
Act; and (ii) whether the decree-holders-
petitioners are also entitled to calculate the
amount of interest on advance rent and non-
refundable security, at the rate of interest
offered by nationalised bank i.e. 7% p.a., with
quarterly rests."
Relying on the majority view in Hyder Consulting
(UK) Ltd. v. State of Orissa [Hyder Consulting (UK)
Ltd. v. State of Orissa, (2015) 2 SCC 189 : (2015)
2 SCC (Civ) 38] , the High Court answered the
first issue in favour of the respondents and
concluded that they were entitled to post-award
interest in terms of Section 31(7)(b) of the Act. As
regards the second issue, it was held that the
respondents were also entitled to interest @ 7%
p.a. with quarterly rests. The view so taken by
the High Court is presently under challenge.
7. We have heard Mr Ajay Majithia,
learned counsel for the appellants and Mr A.
Tewari, Mr Anupam Raina, Mr Raktim Gogoi and
Mr Chritarth Palli, learned advocates for the
respondents.
10. The executing court found that it was doubtful
whether the award of interest was @ 7% with
quarterly rests or yearly rests. In fact, the
situation was more fundamental, whether there
was award of any compound interest at all. The
executing court put it with yearly rests which the
High Court in revisions preferred by the
appellants modified to quarterly rests. In our
view, both the executing court and the High Court
.
completely erred and awarded compound interest
in favour of the respondents when the award had
stipulated it to be 7% p.a. simpliciter. The award
did not even remotely suggest that such award of
interest would be with a direction that interest be
capitalised on yearly or quarterly basis. It was
pure and simple award of interest @ 7% and
could not be taken to be a direction to award
compound interest.
11. We, therefore, accept the submission made
by the learned counsel for the appellants as
regards second issue and direct that the direction
issued in para 21 of the award shall be construed
as simple interest @ 7% p.a.
12. Consequently, the pre-award interest on the
amounts in question shall be calculated @ 7% p.a.
simple interest. The respondents shall be entitled
to the benefit under Section 31(7)(b) of the Act and
post award interest shall also be @ 7% p.a. simple
interest."
35. Since, the award grants right to the State
to resume and take possession of the property
immediately on non-compliance of the obligation by
claimant No. 1 within the stipulated period and
such option has been reserved in favour of claimant
No. 2, it is for claimant No. 2 to decide on its option
and in case it so desires, it is free to resume and
.
take possession of the property immediately. In case
the State Government does not choose to avail such
option, the claimant No. 1 is to take steps with
respect to cancellation of conveyance deed dated
06.02.1997 and up-dation of revenue records of
rights and thereafter to immediately take steps for
execution of lease deed.
36. In light of what has been held above, the
prayers made by claimant No. 1 in the execution
petitions are pre-mature. Claimant No. 1 is also to
deposit the sum of Rs. 12 Crores with interest @
18% simple per annum from the date of passing of
the award. Similarly, it is liable to pay lease rent to
claimant No. 2 w.e.f. the date of award with
proportionate interest @ 18 % per annum thereon.
On execution of the lease deed and payment of
amount due, claimant No. 2 shall transfer its shares
in favour of claimant No. 1 and shall also facilitate
such transfer under the Companies Act.
37. The objections of the parties are decided
accordingly. All objections of claimant No. 1 except
.
objection as to claim of compound interest, are
rejected.
38. In the first instance, the parties to show
their respective compliances as under:-
(i) Claimant No.2 to reveal its option
whether State of H.P. intends to
resume the property by taking its
possession in terms of the Award.
(ii) Claimant No.1 to provide a time
schedule for execution of cancellation
deed for cancellation of conveyance
deed dated 6.2.1997 and for further
execution of lease deed in terms of
the Award.
(iii) Claimant No.1 and Claimant No.2 will
provide their respective calculations
in respect of the sum(s) payable
under the Award by Claimant No.1 to
Claimant No.2 alongwith simple
interest @ 18% per annum thereon.
38. List for compliance on 15.12.2023.
.
(Satyen Vaidya)
17th November, 2023 Judge
(sushma)
r to
