Konkan Railway Corporation Pvt. Ltd. v. M/s. B. T. Patil & Sons Belagum

2. The present Petition involves an issue about the calculation / computation of the amount payable to the Respondent – Decree holder under the award of the arbitrator.

3. The Petitioner is a Public Sector undertaking. The Petitioner had awarded a contract to the Respondent for construction of the BG Single Line Tunnel through shaft No.3 (Karbudhe) in Ratnagiri North Section vide an agreement dated 18 November 1993. As disputes and differences arose between the parties, the matter was referred to arbitration. The Arbitral Tribunal by an award dated 28 March 2007 allowed the claim of the Respondent with interest @12% per annum from the date of the award. A corrigendum was issued to the award on 17 April 2007, as to Claim No.9, with which we are not presently concerned.

4. According to the Petitioner, the calculation of the principal amount alongwith interest payable to the Respondent was made and after deducting taxes, the Petitioner under its advice dated 27 April 2007 informed the Respondent about the amount due and payable and issued a cheque in respect thereof which was accepted by the Respondent without any demur.

5. The Petitioner subsequently received a notice in Special Execution Proceeding No.503/2019 on the file of the learned Senior Civil Judge at Ratnagiri directing the Petitioner to pay an amount of Rs.67,11,263/- to the Respondent. It appears that the Petitioner filed an Application for review of the order dated 27 January 2021 claiming that the said amount was not payable to the Respondent under the said award. The learned Executing Court by an order dated 24 February 2021 rejected the Application for review. Principally, the order dated 27 January 2021 and the one refusing to grant the Application for review dated 24 February 2021 are subject matter of challenge in this Petition.

6. It appears that the Petitioner had filed an Application (Exh.18) for amendment of its reply and Application (Exh.20) to withdraw from the joint pursis (Exh.16) and the undertaking. The Executing Court rejected Application (Exh.20) by an order dated 27 January 2021 and the Application (Exh.20) was rejected by an order dated 7 September 2020. By virtue of an amendment to the Petition, the Petitioner has incorporated challenge to both these orders also.

7. I have heard Ms. Kiran Bhagalia, the learned counsel for the Petitioner and Mr. Nikhil Sakhardande, Senior Advocate, for the Respondent. With the assistance of the learned counsel for the parties, I have gone through the record.

8. It is submitted by the learned counsel for the Petitioner that the present Petition only pertains to Claim No.10 which is in respect of the interest on Claim Nos.[1] to 9 and 11. It is pointed out that as per Para No.4.10, the Arbitral Tribunal has held the Respondent to be entitled to simple interest @ 14% p.a. w.e.f. 7 December 1995 (the date when the final bill was passed) till 31 December 2000 and @ 12% p.a. w.e.f. 1 January 2001 till the date of the award. It is submitted that accordingly the calculation was made arriving at a total figure of Rs.2,48,03,572/-. The Petitioner had issued a cheque for Rs.2,12,99,602/- after deducting the taxes of Rs.35,03,970/which was accepted by the Respondent without any demur. It is submitted that in reply (Exh.12) filed to the Execution Proceedings, there was an inadvertent error on account of a misconception and calculation made by the concerned Deputy Engineer which is not binding on the Petitioner. It is submitted that the concerned officer of the Petitioner, on the basis of a misinterpretation of the decision of the Supreme Court in M/s. Hyder Consulting (UK) Ltd. Vs. Governor, State of Orissa 1 had arrived at an incorrect figure. It is submitted that only the interest pendente lite gets merged in the amount of the award on which future interest has to be calculated. It is submitted that therefore, the Executing Court could not have acted on the basis of the reply filed or the joint pursis / undertaking (Exh.16). It is submitted that the issue is only regarding calculation / computation of the amount in terms of the award and cannot govern itself on the basis of any admission as such by the parties.

9. The learned counsel for the first Respondent has supported the impugned order. It is submitted that the pre-award interest is not independent of the ‘sum’ awarded under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, as held by the Supreme Court in Hyder Consulting (supra). It is submitted that the Petitioner cannot extricate itself out of the admissions in the reply (Exh.12) and the undertaking (Exh.16) and in any event, the amount has rightly been held to be payable to the Respondent under the Arbitral award.

10. I have carefully considered the rival circumstances and the submissions made.

11. The issue only pertains to the manner in which the interest has to be calculated / computed. Claim No.10 was regarding interest and the Arbitral Tribunal has granted the said Claim in the following terms.

4.10 Claim No.10 – Interest on Claim No.1 to 9 and The Claimants have asked interest to be paid w.e.f. date of completion till the date of payment @ 24% for which they had already served notice on the Respondents. They have also submitted documents from their bankers as proof of prevailing Interest rates. The Respondents mentioned that the payment of Interest is not permitted under clause 15.[4] of GCC of KRCL and as such should not be paid on the sums due under the Contract. Further they pointed out that though they had taken action to constitute an arbitration tribunal vide their letter dated 16-05-03 after the disposal of SLP by the Hon. Supreme Court in Jan.’02, the Claimants refused to accept it and filed a writ petition in the High Court and continued to follow legal remedies. It was only in 2006 that they agreed to accept the appointment of Arbitrators. The Tribunal based on facts presented before it considers that the Respondents had taken recourse to contest the High Court’s appointment of an Arbitrator by filing a SLP in Supreme Court in 1996 and only after the disposal of SLP in 2002 that they decided to constitute an Arbitration Tribunal in 2003 and as such the major role for delay in the case is attributable to them. Tribunal thus considers the claim for Interest to be paid on the sum of the award to the Claimants. Tribunal is of the opinion that the Interest rates which had been at a high of 16-18% in around 1995-96 has come down after 2001 and as such a differential rate of Interest be paid for claims against which amount has been awarded to the Claimants at a simple interest of I) 14% p.a. w.e.f. 07/12/95 (the date when final bill had been passed) till 31/12/2000, and ii) at 12% w.e.f. 1/1/2001 to the date of award. (Emphasis supplied) It can thus clearly be seen that as the Arbitral Tribunal found that the Petitioner (the Respondent before the Arbitral Tribunal) was responsible and had major role in the delay in deciding the claim, the interest was granted for the pre-award period in two parts. For the period from 7 December 1995 (the date when final bill had passed) till 31 December 2000, it is granted at a higher rate of 14% p.a. and for the subsequent period from 1 January 2001 to the date of the award i.e. 28 March 2007, it has been granted @ 12% p.a.

12. It is undisputed that the Petitioner has paid an amount of Rs.2,12,99,602/- to the Respondent by cheque under a covering letter dated 27 April 2007.

13. The Respondent filed the Execution Case in which the calculation of the amount for Claim No.10 to arrive at ‘the sum of the award’ the Respondent has given the computation as under. Claim No. Date. of Refere nce Award Total Principal Int @ 14% (7.12.1995 to 31.12.2000) Total (3+4 = 5) Int. @ 12% (01.01.2001 to 28.03.2007) 1 2 3 4 5 6 7 1A 4708893.75 3344991.[7] 8053885.45 6031808.57 14085694.02 9 2258267 1604173.88 3862440.88 2892703.67 6755144.56 11 2131429.[5] 1514074.08 3645503.58 2730232.49 6375736.08 9098590.25 6463239.67 15561829.91 11654744.73 27216574.65