Commissioner Transport Department v. Gaurav Enterprises
Delhi High Court·23 Feb 2023·2023:DHC:1357
Navin Chawla
OMP(COMM) 33/2023
2023:DHC:1357
civilpetition_dismissedSignificant
AI Summary
The Delhi High Court upheld an arbitral award granting 12% per annum interest as compensatory, dismissing the government department's challenge that the rate was penal and excessive.
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Neutral Citation Number: 2023/DHC/001357
OMP(COMM) 33/2023 HIGH COURT OF DELHI Date of Decision: 23rd February, 2023
1. The learned counsel for the respondent objects to the maintainability of the present petition on the ground of limitation. However, based on the view that I am taking on the merits of the present petition, I am not inclined to further delve on the objection that has been raised.
2. This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) challenging the Arbitral Award dated 29.10.2020 passed by the learned Sole Arbitrator, whereunder the learned Sole Arbitrator has passed the following Award:
“52. For the reasons given hereto above, the claimant is held entitled to an award of Rs.2,80, 70,843/- towards balance payment of the bills for the period June, 2013 to March, 2015 with interest @ 12% p.a. with effect from the date of invocation of Arbitration Clause mentioned as 10/27.04.2015 in SOC and taken as dated 27.04.2015 for the purpose of calculating the interest on the above amount; 53. The claimant is also held entitled to an award of Rs.9,50,000/- towards refund of security deposit, which was to be refunded on expiry of period of 60 days of ending of extended period on 31.03.2015, alongwith interest @ 12% p.a. till realisation. 54. The claimant is also held entitled to cost of arbitration proceedings to the extent of Tribunal fee incurred by the claimant.”
3. The limited challenge to the Arbitral Award is to the interest awarded at the rate of 12% p.a. in favour of the respondent with effect from the date of the invocation of the arbitration clause.
4. The learned counsel for the petitioner submits that the petitioner being the Department of the Government of NCT of Delhi, could not have been burdened with a such high rate of interest, which, in fact, has resulted in the amount of interest being almost equivalent to the amount of the principal sum awarded under the Arbitral Award.
5. Placing reliance on the judgment of the Supreme Court in Oriental Structural Engineers Pvt. Ltd. v. State of Kerala, (2021) 6 SCC 150, he submits that the underlying principle guiding the award of interest is that interest payment is essentially compensatory in nature and not penal. He submits that in the present case, the learned Arbitrator has, in fact, awarded a penal rate of interest.
6. I find no merit in the submissions made by the learned counsel for the petitioner.
7. For determining whether the rate of interest is compensatory or penal, it is not the status of the petitioner but the status of the respondent which needs to be considered.
8. In the present case, the learned Arbitrator, on merit, has found that the respondent was struggling to get his payment released from the petitioner, which were due for the security services provided for the period of 22 months, and on the other hand was defending huge liability of more than Rs. 3 Crore fastened on the respondent by the EPF Organization. The said liability was later set aside in appeal. However, in spite of the same, the security amount was not refunded to the respondent.
9. On the question of interest, the learned Sole Arbitrator has also observed as under:
“48. As per the tender/contract document, the respondent was under an obligation to clear the bills and also refund the security deposit which has not been done till date. It is a matter of record that the respondent has not received any demand from any statutory authorities after the order dated 05.09.2016 passed by the EPFAT whereby it was clearly held that the demand by EPF organization was against the settled principles of law. The amount deposited by the claimant was directed to be returned to it with interest @ 12% p.a. At least thereafter respondent had no valid reason to continue withholding the payment due
to the claimant from June, 2013 onwards. As the respondent has been withholding these payments unauthorizedly and without any justification, therefore, the claimant is held entitled to interest @ 12% p.a. from the date of invocation of arbitration clause on dated 10/27.04.2015 (Ex.CW1/10) till realisation. The bills for the extended period i.e. June, 2013 to March, 2015 were admittedly submitted by the claimant to the respondent. The respondent was under contractual obligation to clear the same after due verification as stipulated in clause 5. Admittedly the respondent has not paid the amount due and payable to the claimant till date. It is also not the case of the respondent that except the summons dated 09.09.2014 and the letter dated 27.10.2015 from the EPF authorities, the respondent has ever received any demand from EPF/ESI organisation highlighting default of the claimant in fulfilling its statutory obligations under the EPF/ESI Act and other Labour laws. When the claimant had already deposited 50% of the amount at the time of filing appeal before EPF AT, after the decision of EPFAT dated 05.09.2016 holding the said demand to be against the settled legal position, nothing stopped the respondent from releasing the payment at least at that stage. The claimant has been deprived of its legal dues for all these years and also had been pushed to litigate before various Forums/Courts. Even the notices invoking the arbitration clause were not responded to, thereby making the claimant to approach Hon'ble High Court again and again for appointment of an Arbitrator. The claimant had been constantly writing to the respondent to clear its dues as the claimant was paying the wages after raising loan on high rate of interest. Despite that only 10% of the bill amount was released which was only Rs.18,10,754/- and not sufficient to meet the financial requirements of the claimant. For depriving the claimant of its lawful dues by withholding the payments unauthorisedly, makes it a fit case to award interest to the claimant.
49. The claimant has claimed interest from the date of invoking arbitration clause i.e. 10/27.04.2015 @ 18% p.a. In the opinion of this Tribunal, the ends of justice shall be sub-served by awarding interest @ 12% p.a. on the amount of Rs.2,80,70,843/- from the date of invocation of arbitration clause 10/27.04.2015 (taken as dated 27.04.2015 for the purpose of calculating the interest on the above amount) till realisation.”
10. The award of interest under Section 31(7) of the Act is at the discretion of the Arbitrator. In the present case, I find no perversity in the exercise of discretion by the learned Arbitrator. The learned Sole Arbitrator has, in fact, given cogent reasons for the rate of interest and also for the period of its award.
11. In view of the above, I find no merit in the present petition. The petition along with the pending applications is dismissed.
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12. There shall be no order as to costs.
NAVIN CHAWLA, J FEBRUARY 23, 2023
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