Telangana High Court

Sri P. Bhaskara Rao vs M/S. Lodha Healthy Constructions ... on 10 June, 2022

Bench: P Naveen Rao, M.G.Priyadarsini

            HONOURABLE SRI JUSTICE P.NAVEEN RAO
                            AND
            HON'BLE SMT. JUSTICE M.G.PRIYADARSINI

            CIVIL REVISION PETITION No.5636 of 2015

                        Date: 10.06.2022

Between :

Sri P.Bhaskara Rao s/o. late P.Krishnaiah,
Aged 67 years, r/o.Block-A, Flat No.A-501,
Fortune Towers, Madhapur, Hyderabad
and another.
                                               .... Petitioner/
                                              Decree-Holders
                and
M/s. Lodha Healthy Constructions &
Developers Private Limited (LHCPL),
having its Office at No.216, Shah & Nagar
Industrial Estate, Dr. E.Moses Road,
Worli, Mumbai, rep.by its Managing
Director, also having its Regional Office
at East Bolock, Eden Square, KPHB Road,
Near Hi-tech City, MMTS Station,
Hyderabad.
                                              .... Respondent/

Judgment-debtor

This Court made the following :

PNR,J & MGP,J CRP No.5636 of 2015

HONOURABLE SRI JUSTICE P.NAVEEN RAO AND HON'BLE SMT. JUSTICE M.G.PRIYADARSINI

CIVIL REVISION PETITION No.5636 of 2015

ORDER : (per Hon'ble Sri Justice P.Naveen Rao)

Heard Mr. Y.Ratnakar, learned counsel for the petitioners/

Decree-holders and Mr. A.Venkatesh, learned counsel for the

respondent /Judgment-debtor.

2. This Revision is preferred by the petitioners aggrieved by the

order dated 19.10.2015 passed in E.P.No.14 of 2015 on the file of II

Additional Chief Judge, City Civil Court, Hyderabad in Arbitration

Award dated 15.06.2013 passed by the learned Sole Arbitrator.

3. The judgment debtor has taken up construction of

residential apartment called Belmont in the Lodha Bellezza

complex. The decree holder had purchased flat having carpet

area of 3200 sq.ft. along with three car parkings for a total

consideration of Rs.2,42,30,799/-. While so, a dispute arose

between the parties that even after accepting the entire sale

consideration respondent has not delivered the possession of

the flat in time. Hence, the dispute has been referred to the

learned Sole Arbitrator.

PNR,J & MGP,J CRP No.5636 of 2015

4. The learned Sole Arbitrator having followed due process

passed award dated 15.06.2013 directing the judgement

debtor to refund the entire sale consideration that was paid

by the decree holders with interest at 9% p.a calculated from

the date of receipt of the respective amounts in instalments,

within a period of three months from the date of passing of

the award.

5. Thereafter, Decree-holders filed Execution Petition vide

No.14 of 2014 in O.P.No.1940 of 2013 before the II

Additional Chief Judge, City Civil Court, Hyderabad for

enforcement of the said Arbitration award dated 15.06.2013.

The said petition was ordered on 19.10.2015. The Execution

Court considered two aspects. First on claim to pay interest

on interest awarded by the Arbitrator on principal amount

and second on interest at the rate of 18% post-award. The

Execution Court rejected on the first aspect and granted

relief to decree-holder on second aspect directing Judgment-

Debtor to pay interest @ 18% from 14.09.2013 to

10.07.2015.

6. Aggrieved by the order in E.P.No.14 of 2014 to the

extent of directing Judgment-debtors to pay 18% interest,

the JDRs preferred Civil Revision Petition No.4904 of 2015 PNR,J & MGP,J CRP No.5636 of 2015

before this Court. The same was dismissed by order dated

26.11.2015.

7. The present Civil Revision Petition is filed by the

petitioners/Decree-holders against denying interest on interest

portion of sum awarded by the Arbitrator.

8. Learned counsel for petitioner contended that the Execution

Court erred in not awarding interest @ 18 % per annum on the

sum awarded by the Arbitrator including interest up to

13.09.2013. Hence, the post-award interest after 13.09.2013 till

the date of payment has to be calculated at 18% per annum on the

sum directed to be paid by the Arbitrator which is the principal

amount plus the pre-award interest for which the award is made;

and that the Tribunal erred in not considering the decision of the

Hon'ble Supreme Court in Hyder Consulting (UK) Ltd. Vs.

Governor, State of Orissa1 for calculating the payment of post-

award interest.

9. On the other hand, learned counsel for the respondent

contended that the award passed by the learned Sole Arbitrator

makes it abundantly clear that only 9% per annum interest has to

be calculated from the date of receipt of the respective amounts in

instalments, and that the Decree-holder is not entitled to claim

interest on interest.

(2015) 2 S.C.C. 189 PNR,J & MGP,J CRP No.5636 of 2015

9.1. It was vehemently contended by the learned counsel for

respondent that the present Revision is not maintainable on the

ground that principle of constructive res judicata is applicable to

the facts on hand. According to the learned counsel, assailing the

order of civil Court in E.P.No.14 of 2014 awarding interest at 18%

per annum after expiry of three months from the date of award,

respondent filed C.R.P.No.4904 of 2015. This Court did not find

merit in the said contention and dismissed the revision. During

the course of hearing of the said revision, petitioner has not raised

plea as urged now and therefore it is deemed that this issue is

already considered by this Court in the earlier revision and

petitioner is restrained from raising that plea again. He would also

submit that no independent CRP is maintainable once the order in

the E.P.No.14 of 2014 has become final.

9.2. He would contend that the executing court has not

committed any error in denying interest on interest and prayed to

dismiss the Revision. Learned counsel placed reliance on the

decision of the Hon'ble Supreme Court in Municipal Council,

Thanesar and others v. Virender Kumar and others2.

(2020) 15 SCC 364 PNR,J & MGP,J CRP No.5636 of 2015

10. The point for consideration is whether the decree-holder is

entitled to interest at the rate of 18% per annum on the sum

awarded by the Arbitral Tribunal that includes interest ?

11. To appreciate the issue relevant provision is Section 31(7)3 of

Arbitration and Conciliation Act, 1996 (for short, 'the Act').

12. Clause (a) of Sub-Section (7) of Section 31 provides that

where an award is made for payment of money the arbitral tribunal

may include interest in the sum for which the award is made and

that the arbitral tribunal may award 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 cause of

action arose and the date on which the award is made. The sum

so determined including interest becomes the sum awarded and in

civil law, it is the decretal amount.

13. The contention urged by the learned counsel for the

petitioner flows out of provision in Section 31(7)(b) as was in force

at the relevant time and the decision of the Hon'ble Supreme Court

in Hyder Consulting (supra). Clause (b) of Section 31(7) envisages

"S.31. Form and contents of arbitral award:-

7(a). Unless otherwise agreed by the parties, where and insofar 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.

After amendment of Clause 7(b) of S.31:

7(b). A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment."

PNR,J & MGP,J CRP No.5636 of 2015

payment of 18% interest on the sum awarded by the Arbitrator. It

is no more res integra that sum awarded by the Arbitrator includes

the claim made by the claimant as accepted by the Arbitrator and

interest payable on that amount from the date of arising of cause of

action to passing of award by the Arbitrator. This aspect has been

made clear by the Hon'ble Supreme Court in Hyder Consulting.

14. In Hyder Consulting (supra) majority opinion held that

claimant is entitled to claim interest for post-award period on sum

awarded by the Arbitrator including interest for the pre-award

period. After elaborately discussing the relevant provisions, the

Hon'ble Justice S.A.Bobde, speaking for majority, as he then was,

held in paragraph-10 as under:

"10. In this view of the matter, it is clear that the interest, the sum directed to be paid by the arbitral award under clause (b) of sub- section (7) of Section 31 of the Act is inclusive of interest pendente lite.

14.1. In concurrent judgment, Hon'ble Justice Abhay Manohar

Sapre opined as under:

"26. Section 31(7)(a) of the Act deals with grant of pre-award interest while clause (b) of Section 31(7) of the Act deals with grant of post-award interest. Pre- award interest is to ensure that arbitral proceedings are concluded without unnecessary delay. Longer the proceedings, the longer would be the period attracting interest. Similarly, post-award interest is to ensure speedy payment in compliance with the award. Pre-award interest is at the discretion of the Arbitral Tribunal, while the post-award interest on the awarded sum is mandate of the statute - the only difference being that of rate of interest to be awarded by the Arbitral Tribunal. In other words, if the Arbitral Tribunal has awarded post- award interest payable from the date of award to the date of payment at a particular rate in its discretion then it will prevail else the party will be entitled to claim post-award interest on the awarded sum at the statutory rate specified in clause (b) of Section 31(7) of the Act, i.e., 18%. Thus, there is a clear distinction in time period and the intended purpose of grant of interest.

27. Section 31(7)(a) employs the words "... the Arbitral Tribunal may include in the sum for which the award is made interest ...". The words "include in the sum" are of utmost importance. This would mean that pre-award interest is not PNR,J & MGP,J CRP No.5636 of 2015

independent of the "sum" awarded. If in case, the Arbitral Tribunal decides to award interest at the time of making the award, the interest component will not be awarded separately but it shall become part and parcel of the award. An award is thus made in respect of a "sum" which includes within the "sum" component of interest, if awarded.

"28. Therefore, for the purposes of an award, there is no distinction between a 'sum' with interest, and a "sum" without interest. Once the interest is "included in the sum" for which the award is made, the original sum and the interest component cannot be segregated and be seen independent of each other. The interest component then loses its character of an "interest" and takes the colour of "sum" for which the award is made."

15. In Municipal Council (supra), Hon'ble Supreme Court

followed the decision in Hyder Consulting and upheld the decision

of the High Court in holding that the claimant was entitled to post

award interest in terms of Section 31 (7)(b) of the Act. Paragraph-8

of the order reads 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. The view taken by the High Court on this issue is absolutely correct."

16. The Arbitral Tribunal fixed time frame of three (03) months

period for payment of the sum due with interest at the rate of 9%

p.a., i.e., from 15.06.2013 to 14.09.2013. The sum directed to be

paid by the Arbitrator was not paid within the time stipulated by

the arbitrator. Since the Judgment-debtor did not make the

payment within the time granted by the Arbitrator, invariably

Clause (b) of Sub-Section (7) of Section 31 attracts and the

judgment-debtor cannot escape from the liability to pay interest at

the rate of 18% p.a. for the period subsequent to expiry of three

(03) months on the sum determined by the Arbitral Tribunal. It is PNR,J & MGP,J CRP No.5636 of 2015

pertinent to note that high interest rate prescribed for the post-

award period is to ensure speedy compliance of the Award.

17. In the present case, the Arbitrator has directed refund of

amount paid by claimant. This is the sum awarded by the

Arbitrator. The sum awarded by the Arbitrator includes principal

amount and interest. On this sum interest at the rate of 18% has

to be paid for the delayed period of payment. This does not amount

to award of interest on interest.

18. The Decree-holders claim that the sum payable under the

arbitral award is Rs.3,08,18,706/- that includes principal amount

of Rs.2,33,59,285/- and interest at the rate of 9% upto 13.09.2013

which comes to Rs.74,59,421/-. On 10.07.2015, Judgment-debtor

paid Rs.3,46,48,990/-. This does not include interest on interest

component of the award. In the said manner, by then, post-award

interest at the rate of 18% accumulated to Rs.1,01,06,847/-.

Thus, by 10.07.2015, the respondent was required to pay

Rs.62,76,563/- more. Later some more amounts are paid.

According to decree-holder on the balance amount remained

unpaid further interest accrues. A detailed calculation sheet is

filed by the petitioner as shown below. According to this calculation

sheet, after adding further interest, total amount due as on

18.03.2022 is shown as Rs.51,13,546/-. Calculation is as under:

PNR,J & MGP,J CRP No.5636 of 2015

Sl.No. Particulars Principal Interest Amount (Rs.) (Rs.) directed to be paid (Rs.) 1 Amount paid by DHRs to 2,33,59,585 2,33,59,285 JDR 2 Interest @ 9% per 74,59,421 74,59,421 annum based on dates of payment till 13.09.2013 3 Sum directed to be paid 3,08,18,706 3,08,18,706 to the DHRs (1+2) 4 Post Award interest as 1,01,06,847 per Sec.31(7)(b) from 14.9.2013 to 10.7.2015 @ 18% per annum 5 Total payable by JDR as 3,08,18,706 1,01,06,847 4,09,25,553 on 10.7.2015 6 Paid by JDR on 2,45,42,143 1,01,06,847 3,46,48,990 10.7.2015 7 Balance payable by JDR 62,76,563 62,76,563 as on 10.7.2015 8 Interest from 11.7.2015 3,25,005 to 23.10.2015 @ 18% on Rs.62,76,565/- for 105 days 9 Interest from 24.10.2015 39,207 to 16.11.2015 @ 9.5% on Rs.62,76,563/- for 24 days 10 Amount payable by JDR 62,76,563 3,64,212 66,40,775 as on 16.11.2015 11 Paid by JDR on 30,77,858 3,64,212 34,42,070 16.11.2015 12 Balance payable by JDR 31,98,705 31,98,705 as on 16.11.2015 13 Interest from 17.11.2015 19,14,841 to 18.3.2022 @ 9.5% p.a. for 2300 days on Rs.31,98,705/-

14 Amount payable as on 31,98,705 19,14,841 51,13,546 18.3.2022

19. In CRP No.4904 of 2015, respondent herein assailed the

order of the Civil Court in O.P.No.1940 of 2013 on the issue of PNR,J & MGP,J CRP No.5636 of 2015

computation of interest @ 18% after expiry of three months and

rejected the contention of the respondent herein that for the

remaining period also, only 9% interest should be awarded. The

issue for consideration was, whether direction issued by the

Execution Court to Judgment-Debtors to pay 18% interest for the

period subsequent to 14.09.2013 to 10.07.2015, on which date

payment was made, was valid. Following decision of the Hon'ble

Supreme Court in Hyder Consulting (supra), the decision of the

Execution Court was upheld.