Jaiprakash Associates Limited v. NHPC Limited

16. Third, he submitted that after the Decree was passed by making the Arbitral Award a rule of court, JAL had made an offer for amicably settling the disputes. Therefore, NHPC could not be held liable to pay interest for the period after 08.04.2019. He drew the attention of this Court to a letter dated 24.06.2019, whereby JAL had requested NHPC to extend an invitation for an amicable settlement of two cases including the claims as awarded under the Arbitral Award. He submitted that NHPC had responded by a letter dated 27.07.2019 informing the petitioner that its request for an amicable settlement would be considered if the same was supported by a realistic proposal.

17. Mr Sawhney, learned counsel appearing for JAL, countered the aforesaid submissions. He submitted that the claim of set off was untenable as the disputes arising out of the contract between the parties relating to the Dulhasti Hydroelectric Project were referred to a separate Arbitral Tribunal comprising of three arbitrators including a former Judge of the Supreme Court of India. The said Arbitral Tribunal had considered the disputes between the parties and rendered an Arbitral Award dated 07.10.2019 awarding a sum of ₹60 crores in favour of JAL in respect of its claims relating to the Dulhasti Power Project. The Arbitral Tribunal had also allowed NHPC‟s counter claims to the extent of ₹14,05,03,428/-. It had, thus, awarded a net amount of ₹45,94,96,572/- in favour of JAL along with interest. Therefore, the question of NHPC setting off any amount of its claims arising out of contract relating to the Dulhasti Power Project was untenable and, could not be accepted. Reasons and Conclusion

18. The principal question to be addressed is whether NHPC is absolved from making any further payment against the Decree (the Arbitral Award dated 19.02.2018) on account of adjusting the amount decreed in favour of JAL against an amount allegedly due from JAL in respect of another contract (the Dulhasti Power Project).

19. The said question is required to be answered in the negative for various reasons. First of all, there is no material on record to establish that any amount is due and payable by JAL to NHPC in respect of Dulhasti Hydroelectric Power Project, against which the decretal amount could be adjusted. Admittedly, NHPC had raised certain claims in respect of the said project (Dulhasti Hydroelectric Power Project). These were subject matter of the counter claims filed before the Arbitral Tribunal constituted to adjudicate the disputes between the parties arising from the contract relating to that project. The statement of counter-claims did not refer any adjustments of amounts due to JAL in respect of the Chamera projet.

20. JAL had invoked the agreement to refer the disputes relating to Dulhasti Power Project to arbitration by a notice dated 16.11.2010. It had, after the Arbitral Tribunal was constituted, filed its Statement of Claims. NHPC had disputed the claims made by JAL and, on 30.11.2014, also filed its Statement of Counter-claims. The Arbitral Tribunal had rendered an Arbitral Award dated 07.10.2019. The operative part of the said award reads as under: “FINAL AWARD In accordance with the majority opinion of Justice B.P.Jeevan Reddy, Presiding Arbitrator and Sri K.K.Madan, Co-Arbitrator, the following is the final award.

1) (a) The Claimant‟s claim for additional costs on account of overstay at the site of the project is estimated/ascertained at Rs.60.00 Crores (Rupees sixty crores only) as set out in the body of this Award. (b) The Counter Claims preferred by the Respondent have been allowed in the manner set out herein above in the body of the Award. The total amount allowed by way of Counter Claims to the Respondent against the Claimant is ascertained/determined at Rs.14,05,03,428/- (Rupees fourteen crores five lakhs three thousand four hundred and twenty eight only).

(c) The amount allowed by way of counter Claims in favour of the Respondent and against the Claimant is set off/deducted from the sum of Rupees Sixty Crores awarded to the Claimant against the Respondent towards additional costs for overstay at the site of the project, which means that the Claimant will be entitled to a sum of Rs. 45,94,96,572/- (Rupees fourty five crores ninety four lakhs ninety six thousand five hundred and seventy two only). (2) As mentioned in Cl.(1) of this final award, the Claimant is, awarded a sum of Rs.45,94,96,572/- ((Rupees fourty five crores ninety four lakhs ninety six thousand five hundred and seventy two only) against the Respondent. The Respondent shall pay the said amount of Rs.45,94,96,572/- (Rupees fourty five crores ninety four lakhs ninety six thousand five hundred and seventy two only) within three months from the date of this Award. In case, the Respondent does not so pay the aforesaid amount of Rs.45,94,96,572/- (Rupees fourty five crores ninety four lakhs ninety six thousand five hundred and seventy two only), the said amount of Rs.45,94,96,572/- (Rupees fourty five crores ninety four lakhs ninety six thousand five hundred and seventy two only) shall carry simple interest @9 (nine) per cent p.a. from the date of expiry of the said three months upto the date of realization. (3) In the circumstances of this case, the parties are directed to bear their respective costs in these proceedings.”

21. There were certain clerical errors in the said award, which were subsequently corrected by an order dated 18.12.2019 and the amount of ₹14,05,03,428/- awarded in favour of NHPC was rectified to read as ₹13,24,03,428/-. Consequently, the net amount awarded in favour of JAL was also rectified to ₹46,75,96,572/-.

22. NHPC claimed that it had set off the amount awarded in favour of JAL and communicated the same by a letter dated 16.12.2018. However, it is conceded that the counter-claims made by NHPC in respect of Dulhasti Power Project, which were pending consideration by the Arbitral Tribunal at the material time, were not amended to reflect any such adjustment. NHPC had, thus, pressed its counter claims in respect of the entire amount as claimed by it. The amount awarded to NHPC against its counter-claims in respect of the contract relating to the Dulhasti Power Project was adjusted against the amounts awarded by the Arbitral Tribunal against the claims preferred by JAL. Thus, there is no question of NHPC now claiming a set off against any amount allegedly due by JAL.

23. Second, NHPC has not produced any material on record that would establish that JAL owed any debt to NHPC against which it could adjust any amount owed to JAL in terms of the Decree (the Arbitral Award). It was also NHPC‟s stand before this Court in CS(COMM.) 907/2018 that no amount was due by JAL to NHPC. This was recorded by this Court in its order dated 04.04.2019 passed in the said matter.

24. However, while disposing of the said objections under Sections 30 and 33 of the Arbitration Act, 1940 [CS (Comm) no.907/2018], this Court had noticed the letter dated 06.12.2018 (which is also referred to by NHPC in its letter dated 27.07.2019 annexed as Annexure O/2 to the objections filed by NHPC). This Court did not accept that the said letter would affect the Arbitral Award in any manner. The relevant extract of the order dated 08.04.2019 is set out below: “10. Though, Mr. Nath had indicated during the course of hearing that no sum was due and payable to NHPC, I find on record a letter dated 06.12.2018 (i.e. document No. 2) addressed by NHPC to JAL/nonapplicant/ plaintiff. In this communication, NHPC has indicated JAL/nonapplicant/ plaintiff that it has adjusted the principal awarded amount of Rs.5,90,40,294/- against the purported dues payable to it in respect of another project i.e. Dulhasti Power Station. As indicated during the course of my narration, the Award pertains to Chamera Power Station. It appears that JAL/nonapplicant/plaintiff, vide letter dated 18.12.2018, had protested against the said adjustment and, accordingly, sought payment of a sum of Rs.26,65,86,920/- as due on 30.11.2018, which obviously factors in the awarded interest. 10.[1] What is clear, though, upon reading the aforementioned letter is that no details qua the amount which was purportedly due to NHPC against Dulhasti Power Station is indicated in the letter dated 06.12.2018. Furthermore, there is nothing on record to show that as to when lien was marked on the amounts due and payable under the subject contract towards the purported payments due to NHPC under Dulhasti Power Station. As a matter of fact, a perusal of the Award qua the aspect of interest would show that this argument was not pressed before the learned Arbitrator. The relevant portion of the Award dealing with interest is extracted hereafter to demonstrate this aspect of the matter. "Issue No. 5 Is Claimant entitled to interest? Answer is yes. Respondent in order to contest this claim relied on clause 49.[5] of the GCC which bars grant of interest. The reliance by respondent on clause 49.[5] is misplaced. Reading of clause 49.[5] makes it clear that claimant would not have been entitled to interest if his amount had been retained or withheld by the respondent. It is only in these two eventuality that interest is barred but that is not the case in hand. Hence claimant is entitled to interest @ 14% p.a. which interest respondent charged from the claimant for the advance provided to claimant. Interest is payable from the date of reference till realization." 10.[2] Lastly, and most importantly, this letter was issued well after the subject Award was passed and rectified, which is, perhaps the reason Mr. Nath had indicated both at the hearing held on 04.04.2019 and 08.04.2019 that nothing was payable to NHPC against any other contract obtaining between the parties. 10.[3] Therefore, clearly, the prohibition against payment of interest or damages under Clause 49.[5] will not apply. The second part can be triggered only if the first part of Clause 49.[5] of the GCC were to be applicable. 10.[4] Since, Mr. Nath tried to press ahead his argument based on the second part of Clause 49.[5] on account of not so happy wording used therein where the expression “his claim arising out of the same contract” is found, I must deal with the same as well. Mr. Nath tried to connect this expression with the expression "determined by the Arbitrator" to take forward his argument that if claims were made, as in this case, by the contractor (i.e. JAL/nonapplicant/plaintiff) for payment of moneys, which were withheld or retained by NHPC till its determination by the Arbitrator, no interest was payable. 10.[5] To my mind, such a construction placed on Clause 49.[5] of the GCC ignores the first part of Clause 49.[5] to which I have made a reference above. In short, no amounts could have been withheld or retained by way of lien by NHPC unless there were moneys due to it under another contract subsisting between itself and JAL/non-applicant/plaintiff. 10.[6] The second part, in my view, only provides for point of termination of the lien. Thus, if the contractor's (i.e. JAL‟s/non-applicant‟s/plaintiff‟s) claim arising under the subject contract is either settled or determined by the Arbitrator, then, obviously, the principal amount could not have been withheld by NHPC, notwithstanding the fact that the amounts were due to NHPC against another contract. Besides this, Mr. Nath‟s argument loses focus of the fact that, firstly, plain terms of the contract do not require interpretation they require to be simply applied and, if they do apply, then, clearly, application of the term of the contract is completely within the domain of the Arbitrator. Secondly, if it is a case of interpretation of the terms of the Contract, then, whether the interpretation is right or wrong cannot be a ground for interference by the Court, even where the challenge made is under the provisions of the 1940 Act. The position of law insofar as this aspect is concerned, to my mind, is the same whether the Award which is put to scrutiny is passed under the 1940 Act or the Arbitration and Conciliation Act, 1996. 10.[7] Thus, the principal objection being without merit, the same is, accordingly, rejected.”

25. NHPC‟s contention that it had marked a lien on the amount due to JAL in terms of Clause 49.[5] of the General Conditions of the Contract (GCC) was also rejected by this Court.

26. Third, there is no material to even remotely establish that any debt was owed by JAL to NHPC. Thus, the question of NHPC setting off of the amount due to JAL under the Decree, does not arise. At any rate, it is conceded that JAL had not admitted that any amount was due to NHPC and it was, thus, impermissible for NHPC to claim a set off against its unadjudicated claims. A party can set off any amount due to another party against a debt owed by the other party. However, an unadjudicated claim cannot be construed as a debt owed against which a set off can be claimed. (See: Union of India v. Raman Iron Foundry: 1974 (2) SCC 231).

27. Fourth, that an adjustment against an unadjudicated claim is not one of the modes for satisfying a decree under Rule 1 and 2 of Order XXI of the Code of Civil Procedure, 1908.

28. In terms of Rule 1 of Order XXI of the CPC, an amount payable under a decree is required to be paid either by depositing the same in court; or making payment to the decree holder by any mode where the payment is evidenced in writing; or otherwise as the court passing the decree, directs. In terms of Rule 2 of Order XXI of the CPC, where any money payable under a decree is paid out of court or is otherwise adjusted in whole and in part to the satisfaction of the decree holder, the decree holder is required to certify the same to the court executing the decree. The judgment debtor may also inform the court about such payment or adjustment and apply to the court to certify the same. In terms of Sub-rule (2A) of Rule 2 of Order XXI of the CPC, no payment or adjustment would be recorded at the instance of the judgment debtor unless the payment is made in the manner as provided under Rule 1 of Order XXI of the CPC; or the payment or adjustment is proved by documentary evidence; or the payment or adjustment is admitted by or on behalf of the decree holder in reply to the notice under Rule 1(2) of Order XXI of the CPC. In terms of Subrule (3) of Rule 2 of Order XXI of the CPC, a payment or an adjustment, which is not certified or recorded as aforesaid, cannot be recognised by any court executing a decree.

29. In the present case, NHPC has neither applied for nor secured a certificate of any adjustment of the decretal amount.

30. In Punjab State Civil Supplies Corpn. Ltd. v. Atwal Rice & General Mills, (2017) 8 SCC 116, the Supreme Court considered a case where the decree holder had secured an arbitral award, which had attained finality. It, had then, instituted proceedings under Section 36 of the A&C Act for enforcing the award as a decree of the court. In the proceedings before the executing court (Additional District Judge, Jalandhar), the judgment debtor filed an application under Section 47 of the CPC raising various objections. The executing court did not decide any of the objections but confined its inquiry to a statement of account filed by the judgment debtor, which indicated that it had paid a sum of ₹3,37,885/- to the decree holder‟s account and held that whatever amount was due to be paid by the judgment debtor to the decree holder (the appellant before the Supreme Court) had been paid and therefore, the decree was satisfied. In an appeal filed by the decree holder, the High Court upheld the order of the executing court. The decree holder appealed to the Supreme Court.

31. The Supreme Court referred to the provisions of Rule 1 and 2 of Order XXI of the CPC and held as under: “36. Keeping in view the mandatory requirements of Order 21 Rules 1 and 2 relating to payment of decretal dues made by the judgment debtor and applying the said provisions to the undisputed facts of this case, we have no hesitation in holding that the sum of Rs.3,37,885/which the respondents claimed to have paid to the appellant towards the decretal sum and which found acceptance to the two Courts below could never have been regarded as the payment made by the respondents to the appellant in conformity with the requirements of either Rule 1 or Rule 2 of Order 21. It is not in dispute that such payment was never certified by the Court as contemplated under Rule 2 of Order 21 at the instance of respondents or at the instance of the appellant. Indeed, there was neither any evidence to prove the factum of payment except one copy of the statement which also remained unproved nor any evidence was led to prove the certification done by the Court as required under Order 21 Rule 2 so as to recognize making of such payment by the respondents to the appellant.”

32. In view of the above, NHPC‟s objection that the Decree not be enforced on account of any adjustment, is unmerited and is, accordingly, rejected.

33. It was also contended on behalf of NHPC that it was not liable to pay interest on account of approximately two months delay in uploading of the judgment dated 08.04.2019 on the website of this Court. In addition, it was also contended that JAL had offered to settle the disputes amicably and therefore, NHPC is absolved of its liability to pay interest.

34. Both the aforesaid contentions are insubstantial.

35. The delay in uploading of the judgment on the website of this Court, if any, does not absolve NHPC from satisfying the decretal amount.

36. Undisputedly, JAL had requested NHPC to amicably resolve the disputes. The letters issued by JAL indicate that it had offered to reduce the interest payable on the amounts due from 14/18% to 12% per annum. This concession had also been extended by JAL before this Court and this Court had after considering the circumstances, modified the Arbitral Award by reducing the rate of interest awarded in favour of JAL from 14% to 12% per annum. Clearly, the willingness of JAL to resolve the disputes amicably cannot possibly be held out as absolving NHPC from satisfying the Decree especially when it is conceded that the parties were not able to arrive at an amicable settlement. As noted above, it was NHPC‟s stand that no realistic offer had been made by JAL.

37. In view of the above, the objections raised by NHPC against enforcement of the Decree, are unmerited and rejected. EX.APPL.(OS) 407/2021 is, accordingly, dismissed.

38. NHPC is directed to deposit the decretal amount, that is, a sum of ₹5,90,40,294/- along with interest at the rate of 12% per annum from 03.11.1993 till the date of deposit, with the Registry of this Court, within a period of three weeks from today.

39. List on 25.10.2021.

VIBHU BAKHRU, J SEPTEMBER 22, 2021 RK