Mahavir Prasad Gupta v. Union of India

Delhi High Court · 01 Mar 2023 · 2023:DHC:1549

Prateek Jalan

CS (OS) 354/2017

2023:DHC:1549

civil appeal_allowed Significant

AI Summary

The Delhi High Court set aside the arbitrator's denial of pendente lite interest under Clause 16(2) of the GCC, awarded interest from invocation to payment, and dismissed Northern Railways' objections as barred by limitation.

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NEUTRAL CITATION NUMBER:- 2023/DHC/001549

CS (OS) 354/2017
HIGH COURT OF DELHI
Date of Decision: 01st March, 2023

CS(OS) 354/2017
MAHAVIR PRASAD GUPTA ..... Plaintiff
Through: Mr. Vivekanand, Mr. Abhishek Semwal, Advocates.

VERSUS

UNION OF INDIA THROUGH THE GENERAL MANAGER & ANR. ..... Defendants
Through: Mr. Siddhartha Sinha, Mr. Prashant Rawat, Mr. Niring Chamwibo Zeliang, Ms. Anu Priya Nisha Minz, Advocates.

CORAM:

HON’BLE MR. JUSTICE PRATEEK JALAN
PRATEEK JALAN, J. (ORAL)

I.A. 2302/2020 (for condonation of delay) & I.A. 16979/2019
(objections on behalf of respondents)

JUDGMENT

1. CS (OS) 354/2017 has been filed under Section 14 of the Arbitration Act, 1940 [hereinafter, “the Act”], for making an arbitral award dated 15.07.2017 a Rule of the Court.

2. The plaintiff- Mr. Mahavir Prasad Gupta [hereinafter, “MPG”] has filed I.A. 366/2018 under Section 15, 16, 30 and 33 of the Act, challenging an award dated 15.07.2017, to the extent that the learned sole Arbitrator has denied pendente lite and future interest. The defendant- Northern Railways has, during the course of these proceedings, filed I.A. No. 16979/2019, to place its objections to the award in respect of the claims granted to MPG, and I.A. NO. 2302/2020 for condonation of delay in filing these objections.

3. I have heard Mr. Siddharth Sinha, learned counsel for Northern Railways and Mr. Vivekananda, learned counsel for the plaintiff.

4. The first question to be determined is whether Northern Railways is entitled to condonation of delay in filing its objections to the award.

5. By virtue of Article 119(b) of the Limitation Act, 1963, an application for setting aside an award under the Act is required to be made within 30 days from the date of service of notice of filing of the award. I.A. No. 16979/2019 was filed by Northern Railways on 03.09.2019, and I.A. 2302/2020 was filed on 28.01.2020.

6. The averment in I.A. No. 16979/2019 with regard to the delay is as follows: - “That no notice under old Arbitration Act 1940 of filing of award has been received by the Respondents. Only notice of filing objection filed by the petitioner to award was received by the respondents at Jodhpur. The objections are being filed as an abundant precaution, without even receiving any requisite notice, from this Hon'ble in the facts and circumstances of the case. The objections are therefore with in time.”

7. In I.A. 2302/2020 also, the contention of Northern Railways is that “no summons of filing of the award appears to have been received in the office of the defendants herein”, and that the objections are, therefore, within time. The specific contention of Northern Railways is that summons to it were served only in respect of the objections filed by MPG, and no notice of filing of the award was served upon it.

8. Having regard to this contention, the Court, vide order dated 01.12.2022, directed the Registry to produce the physical file of the suit before the Court. It is apparent thereupon that, by an order dated 11.01.2018, the Court directed that notice of filing of the arbitral awards be issued upon Northern Railways, and notice in I.A. 366/2018 was also issued to the Northern Railways. The record further demonstrates that notice of filing of the award was duly served upon Northern Railways on 12.01.2018, and a rubber stamp was affixed, acknowledging receipt thereof at the Headquarters of Northern Railways, Baroda House at New Delhi on 24.01.2018. A separate notice was issued in I.A. 366/2018, which was also received in the Headquarters of Northern Railways on 24.01.2018.

9. Both notices were also served upon the General Manager, NWR-JP, through the Deputy Chief Engineer, Jodhpur. Service was effected on 24.01.2018, through the District Judge, Jodhpur. The record also contains proof of service by Registered Post at the Jodhpur address, which was received on 22.02.2018.

10. In these circumstances, the contention of Northern Railways that it was not served with the notice of filing of the award, in terms of the Act, is contrary to the record.

11. In any event, it is evident from the record that Northern Railways entered appearance in the present suit on 16.03.2018. It thus had knowledge of the filing of the award in this Court. Mr. Vivekanand relies upon the judgment of the Supreme Court in Bharat Coking Coal Ltd vs. C.K. Ahuja and Another[1] to submit that the knowledge of a party as to filing of the award in court is sufficient for commencement for the period of limitation for filing of its objections, and subsequent issuance of notice of filing of the award would not give rise to a fresh period of limitation. In the said case, the Supreme Court considered that the party was aware of filing of the award as its counsel had inspected the Court’s record in this regard. Mr. Vivekanand also relies upon the judgment of the Supreme Court in Food Corporation of India & Ors. vs. E. Kuttappan[2], which was relied upon in Bharat Coking Coal Ltd[3], wherein the Court emphasised that knowledge of filing of the award may be conveyed to the party not just by formal service of filing of award, but by other modes also.

12. Thus, in this case, formal service of notice of filing of the award is demonstrated to have been served upon Northern Railways, first on 24.01.2018. In any event, Northern Railways having entered appearance on 16.03.2018, had knowledge of filing of award at the very latest on 16.03.2018. The contention to the contrary, taken in the captioned applications, is, therefore, rejected.

13. No other ground for condonation of delay has been raised in the application, or argued before me.

14. For the aforesaid reasons, I.A. 2302/2022 is dismissed, and consequently, I.A. 16979/2019 is rejected on the ground of limitation. 1995 Supp (1) SCC 744 (refer paragraphs 4 & 6).

1. MPG assails the award of the learned Arbitrator dated 15.07.2017, to the extent that the learned Arbitrator has declined his request for pendente lite and future interest upon the awarded amount.

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2. Learned counsel for the parties are ad idem that Clause 16(2) of the General Conditions of Contract [hereinafter, “GCC”], relied upon by the learned Arbitrator, reads as follows: “(2) Interest on amounts.—No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract, but government securities deposited in terms of sub-clause (1) of this clause will be repayable with interest accrued thereon.”

3. The learned Arbitrator has dealt with this issue in paragraphs 105 to 109 of the award, which are reproduced below:

“105. Heading No. 11, petitioner has claimed interest @ 24% p.a. on claimed amount from the date the same fell due on 1.12.95 till the date of payment. In support of his submission he has relied upon decision of our own Hon'ble High Court in UOI vs. N.K.Garg 224(2015) DLT 668. 106. Petitioner has placed reliance on UOI vs. Ambika Construction AIR 2016 SC 1441 which is answer of reference made by Two Judge Bench, by Three Judge Bench of Hon'ble Supreme Court. What I have been able to understand from the same is that when there is clause in agreement prohibiting Arbitrator from granting interest, the Arbitrator cannot grant interest. No such prohibition is to be implied unless expressly barred. In the case in hand there is express prohibition, so the same does not help petitioner. 107. On the other hand, counsel for respondent submitted that clause 16(2) of GCC do not permit grant of interest. On the face of the same, arbitrator has no jurisdiction to allow interest. In support of his submission, he has relied upon Full bench decision of our own Hon'ble High Court in UOI vs. M/s Conbess India P.

Ltd. 20 12(III)AD, Delhi 301. The said decision is based upon earlier Supreme Court decision in UOI vs. Crafting Engineer and Leasing P. Ltd. (2011) 7 SCC 279 and Sayeed Ahmad & Co. vs; State of UP 2009(3) Arbitration Law Reporter 29. It has been held that where the agreement is silent for grant of interest, arbitrator has a discretion to grant interest but where there is a prohibition in the agreement to grant interest, arbitrator has no discretion to grant interest. Decision of Magnani Construction Corporation P. Ltd. 2009(4) Arbitration Law Reporter 457 was not followed as having been interpreted differently in subsequent decisions.

108. It is true that the decision relied upon by the counsel for petitioner in UOI vs. N.K.Garg Supra helps the petitioner and the same takes note of Full bench decision but our own Hon'ble High Court in UOI vs. Conbess India P. Ltd. Supra. But with respect to Hon'ble Judge deciding the case of N.K.Garg, I am unable to follow the same on the face of decision of Full bench in M/s Conbess India P. Ltd., Hence the claim for interest till now is disallowed.

109. Counsel for petitioner urged that to award principal amount only after more than 20 years will cause hardship to petitioner as amount of interest itself @ 10% p.a. would come to 200% meaning thereby that amount would become three times. I have all sympathy with petitioner but law does not permit me to allow interest. Interest pendente lite and for future may be considered by Hon'ble High Court as per S. 34 CPC.”

4. Mr. Vivekanand submits that Clause 16(2) of the GCC has been interpreted in favour of the plaintiff by the Supreme Court in the judgment of Ambica Construction vs. Union of India[4]. Paragraphs 5 to 7 of the said judgment read as follows:

“5. The impugned order passed by the High Court dated 17-6- 2005, limited to the determination with reference to pendente lite interest, has been assailed by the appellant, through the instant civil appeal. During the court of hearing, it was not disputed, that the contractual obligation between the parties expressly provided, that interest could not be claimed, either on earnest money or on the security deposit, and even on amounts payable to the claimant. The relevant clause affirming the above position is extracted hereinbelow: “(2) Interest on amounts.—No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract, but government securities deposited in terms of sub-clause (1) of this clause will be repayable with interest accrued thereon.” The aforesaid clause has been relied upon by the learned counsel representing the Union of India to contend, that when interest was not payable even on the principal amount, there was no question of the same being payable during the period the matter remained pending for adjudication. It is therefore apparent, that the learned counsel for the respondent, relied upon the contractual obligation contained in the clause, extracted hereinabove, to counter the claim of pendente lite interest and to support the impugned order passed by the High Court.

6. The only contention advanced at the hands of the learned counsel the appellant, was based on the judgment of this Court in Union of India vs. Ambica Construction, wherein, having examined the legal position declared by this Court by a Constitution Bench in Irrigation Deptt., State of Orissa v. G.C. Roy, it was held as under: (Ambica Construction case, SCC. 59, para 34) “34. Thus, our answer to the reference is that if the contract express bars the award of interest pendente lite, the same cannot be awarded by the arbitrator. We also make it clear that the bar to award interest on delayed payment by itself will not be readily inferred as express bar to award interest pendente lite by the Arbitral Tribunal, as ouster of power of the arbitrator has to be considered on various relevant aspects referred to in the decisions of this Court, it would be for the Division Bench to consider the case on merits.” A perusal of the conclusions drawn by this Court in the above judgment, rendered by a three-Judge Division Bench, leaves no room for any doubt, that the bar to award interest on the amounts payable under the contract, would not be sufficient to deny payment of pendente lite interest. In the above view of the matter, we are satisfied, that the clause relied upon by the learned counsel for the Union of India, to substantiate his contention, that pendente lite interest could not be awarded to the appellant, was not a valid consideration, for the proposition being canvassed. We are therefore satisfied, that the arbitrator, while passing his award dated 28-6-1999, was fully justified in granting interest pendente lite to the appellant.

7. Accordingly, while affirming the award passed by the arbitrator on the issue of pendente lite interest, as also, the determination rendered by the learned Single Judge in his order dated 3-8-2001, we set aside the impugned order passed by the Division Bench of the High Court, on 17-6 -2005, on the question of pendente lite interest. The pendente lite interest determined by the arbitrator, shall be paid to the appellant, within two months from today.”5

5. It is clear therefrom that the Supreme Court found that the said clause does not constitute an express bar upon the award of pendente lite interest by the learned Arbitrator, as required by the judgment of the Constitution Bench of the Supreme Court in Secretary, Irrigation Department, Government of Orissa and Others vs. G.C. Roy and Another[6], read with the judgment of a three Judges Bench of the Supreme Court in Union of India vs. Ambica Construction[7] to this extent. To the extent that the learned Arbitrator relies upon the judgement of the three-judge Bench of the Supreme Court in Ambica[8], and finds that, in the case at hand, there is an express prohibition upon the award of pendente lite interest, the finding is directly contrary to the interpretation of the very same provision [Clause 16(2) of the GCC] by the Supreme Court.

6. Having regard to the aforesaid position, the application is disposed of with the following directions:

A. The impugned award dated 15.07.2017, passed by the learned

Arbitrator, is set aside to the extent that the learned Arbitrator has declined the petitioner’s claim for pendente lite interest.

B. In exercise of the power under Section 15 of the Act, pendente lite interest is awarded at the rate of 6% per annum for the period from the date of invocation of the arbitration clause i.e., 01.12.1995, until the date of award i.e., 15.07.2017. CS(OS) 354/2017

1. The objections of both the parties having been disposed of hereinabove, the arbitral award dated 15.07.2017 is made Rule of the Court, subject to the directions passed in I.A. 366/2018.

2. It is clear from the judgment of the Supreme Court in Gujarat Water Supply and Sewerage Board vs. Unique Erectors (Gujarat) (P) Ltd. vs. Another[9] that this Court also has the jurisdiction under the Act, to award interest from the date of the award until the date of payment. The aforesaid judgment of the Supreme Court has been followed by this Court in Babu Lal Barwa vs. Delhi Development Authority10. This Court held, relying upon the judgments of the Supreme Court in Unique Erectors11 and Renusagar Power Co. Ltd. vs. General Electric Company12, that the court can grant interest till the date of the decree, and from the date of decree till realisation.

3. It is, therefore, directed that award will carry interest at the rate of 6% per annum from the date of the award until the date of the decree, and further from the date of decree until payment of the award.

4. The Registry is directed to prepare the decree sheet in terms of the award, read with the abovementioned directions.

5. The suit stands disposed of in these terms.

PRATEEK JALAN, J MARCH 01, 2023 ‘Bhupi’/

Mahavir Prasad Gupta v. Union of India

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