The High Court · 2025

Judgment

1. 2 ...AppellanURespondent No.1 t J:: ^t"t3,f,fi: 1)no S;'f,%ib%bSi I n d ia Ltd 5 th F I oo r, M o s u rs c o u rt, ,*,[$lix,1lfl 3s'#]i"iffi*[t%rl,g!,'*llii,,%1*3;"?sh".i; ... RespondenURespondent ...RespondenURespondent

Counsel for the Appellant :Sri S Ravi Counsel for the ResponUent tto.t : MS. M Vidyavathi The Court delivered the following: Common Judgment I THE HON'BLE SRIJUSTICE P. SAM KOSHY AND THE HON'BLE SRIJUSTICE N. TUKARAMJI ctvlL MlsCELLANEOU S APPEAL NOs.412 0F 2006 &1586 oF 2008 COMMON JUDGMENT: (Per Hon'bte Sri Justice N. Tukaramii) These Civil Miscellaneous Appeals are filed under Sections 37 and 39 of the Arbitration and Conciliation Act''1996' C.M.A.No.412 of 2006 is filed by the appellanUState Trading Corporation of lndia Limited, Hyderabad (STC), C M'A No 1586 of 2008 is filed by the appellanUM/s.shreeji Trading Company' Mumbai, challenging the decree and judgment dated 28 10'2005 in O.P.No.2151 of 2003 on the file of the XIV Additional Chief Judge' City Civil Court, HYderabad (FTC)'

2. We have heard Ms. M.Vidyavathi, learned counsel for the appellanUstate Trading Corporation of lndia Limited' Hyderabad in C.M.A.No.412 of 2006 and respondent No'1 in C'MANo'1586 of 2008; and Mr. S.Ravi, learned Senior Counsel for appellanU M/s' Shreeji Trading Company, Mumbai in C'M A No 1586 of 2008 and respondent No.1 in C.M.A.No. 412 of 2006' ( CMAS 412_2006&1586 2OOg - -

3. Since both the appeals are filed assailing the selfsame decree and judgment, they were heard together and are being decided by this common judgment.

4. The appellanVstate Trading Corporation of lndia Limited, Hyderabad in C.M.A.No. 412 of 2006 and the appellanUM/s. Shreeji Trading Company, Mumbai in C.M.A.No. 1586 of 200g are hereinafter referred to as ,claimant and respondent, as per the Arbitration Award dated 12.06.2003. 5 (i) Briefly stated, the facts are thus: The respondent issued a tender notification on 02.og.2ooo inviting offers for the purchase of rice stocks. The claimdnt,s offer was accepted on 15.0g.2000, and they were asked to remit Rs.1,.l 1,7O,OOOI- by 20.09.2000. The contract was entered into by the parties on 25.O9.2OOO for the sale of 10Oo/o broken rice, 25yo broken rice, and parboiled rice, with a default penalty clause at Rs. j,000/_ per Metric Tonne (for short, 'MT'). On 04.10.2000, the claimant sought part payment of Rs.S lakhs out of the required deposit, stating that the materiar avairabre for lifting was ress than notified, but asserted that a demand draft for Rs. 9 lakhs is ready and would be presented upon delivery. . \r 3 PsK,' & NTR,J cMAs 412 2006&1586 2008 s(ii) Thereafter, on 13.10.2000, a delivery order for 690 MT of 100o/o broken white rice was issued by the respondent, and the claimant paid Rs. 7 lakhs for that quantity. As per the surveyo/s report, 269.780 MT out of 690 MT was delivered to the claimant up to 03.11.2000, and no stock of 100% broken rice was available in the godown. S(iii) On O7.11.2OOO,a delivery order for 635 MT ol 29o/obroken raw rice was issued, and the surveyor's report stated that 320.300 MT out of 635 MT was delivered until 20.11.2000, with no stock available. 5(iv) Two delivery orders for 520 MT of 2oo/o broken parboiled rice and a delivery order for 95,000 Polypropylene (PP) Bags were issued on 27.11.2000. However, on the same day, the claimant addressed a letter to the respondent stating that against a deposit of Rs. 24,79,506/-, goods worth only Rs. 12,42,508/- had been supplied and requested to carry forward the balance for subsequent orders. Meanwhile, on 27.10.2000, the respondent asked the claimant to lift the stock by 31.10.2000, failing which they would be liable to pay godown rent. However, on 01 .12.2000, the respondent claimed that only part of the PP bags were received delivery and 4 PSK,J & NIR,J CMAS 412 2006&1586 2008 \ requested for clearance of the stock, otherwise godown rent would be charged. 5(v) The claimant contested that the stocks were of unacceptable standard and refused to receive and pay the godown rent. The respondent replied that as the tender and sale were on an 'as is and where is basis'and limited to the quantity available in the godown, they denied liability and reiterated that rent would be payable until lifting of stocks. 5(vi) The claimant issued a registered notice for breach of contract and compensation. Thereafter, the goods were referred to ICRISAT and IGSMRI to ascertain fitness of the stock. Based on the report of lGSMRl, the respondent requested the claimant to lift 7Oo/o of the fit stock on 03.09.2001. S(vii) Whereafter, the claimant contended that by 02.12.2000, only

145.150 MT had been delivered, and the rest was unfit, as such, they were not liable to pay godown rent. The claimant offered to lift 7Oo/o of the parboiled rice stock if segregated and certified to be fit for animal feed, and also to take industrial-grade goods at Rs. 100/- per MT. However, this proposal was rejected by the respondent. P5K,J & NTR,j CMAs 412 2006&1586-2008 Nonetheless,on25.09.2001'adeliveryorderforT0%ofthe parboiled rice stock was issued and also effected' S(viii) ln this backdrop, the claimant demanded a refund of Rs.9,33,8341, the value of the short-delivered goods' along with godown rent and the earnest deposit, totaling Rs'15'63'6601' The respondent paid Rs. 1,81,950/- as the balance due via demand draft. Further, a debit note was issued towards sales tax and godown rent. ln reply, the claimant issued a legal notice for damages of Rs. 43,50,600/-.'Whereupon, the arbitration clause was invoked and the Arbitral ;l-ribunal was constituted'

6. The Tribunal had considered the issues as to the commitment of the respondent to deliver the notified quantities and the quantum of compensation, the obligation of the respondent to refund the amounts withheld, and to determine the liability to pay interest and costs.

7. The Tribunal held that the respondent is accountable to deliver the quantity promised in each delivery order and that there was a breach in delivering the promised quantity' Nonetheless' the claim for reimbursement of the amount settled for breach of contract was dismissed . /- I 6 PSK,J & NTR,J CMAS_412_200G&1586 2008 8(i) Basing its decision on the penarties stipurated in the contract for the shortage in supply of lOOo/o broken rice, 20% broken rice, and parboiled rice, and by assuming a profit rate of 10% for the shortages, the Tribunal awarded Rs.4,2O,22Ot_, Rs 3,.14,740l_, and Rs. 2,01 ,640t-, respectively. For the rice at 201 .64 MT, compensation of Rs. 2,01,640/- was awarded, and for the pp Bags, counting the profit al 1Oo/o of the market price, i.e., Rs. 0.9g per bag, Rs. 26,2641 - was awarded, totating Rs. 9, 62, 8641. 8(ii) As to godown rent, thb Tribunal held that the respondent had retained Rs. 8,10,000/_,at Rs. 90,000/_ per month from January to September 2OO1 . ln addition, the claimant deposited Rs.1,g0,000/_ for two months to ensure prompt deliveries. Considering the correspondence and the allowance of five days for taking delivery, claimant was Rs.1,43,310.g0 ps. from the deposited amount. Further, as there was no delay on the part of the claimant, the respondent,s invocation of clause 7 towards godown rent from January to september 2001 was herd unjust and directed to return the withherd amount of Rs.9,10,000/_, making the entiflement of claimant to Rs. 9,43,310t- entifled 7 P5K,J & NTR,J CMAs_412_2005&1585-2008 8(iii) Further, regarding the debit of Rs.1,18,845.80 towards sales tax, on the ground that the purchase and sale of the commodity in the domestic market resulted in the respondent losing exemption, and the acceptance letter specified the applicability of sales tax, the claimant was argued to be liable to reimburse the sales tax paid by the respondent. However, observing that the acceptance letter did not cover this specific situation and applied only to the transaction between the respondent and the claimant, and that there was no condition for reimbursement in the contract, the Tribunal held that the debited sales tax of Rs.1,18,845.80 had to be refunded to the claimant. 8(iv) ln addition, considering the amounts withheld by the respondent towards godown rent and sales tax, the Tribunal observed that interest was payable ftom 12.10.2001 at 18o/o pet annum for 18 months, which amounted to Rs.2,86'682/-. Accordingly, a sum of Rs. 23,1't ,701/- was awarded to the claimant, with further direction that if this amount was not paid by 31.08.2003' it would carry further interest al 18o/o per annum compounded at quarterly intervals from 01.06.2003 until realization.

9. Discontented by the Award, the respondent preferred a petition under Section 34 of the Arbitration and Conciliation Str^ ) \ 1996 (for short, 'the Act') before the XIV Additionat Chief Judge, City Civil Court, Hyderabad. ln the impugned order, the Court considered whether the respondenusTC had committed any breach of contract, was liable to pay damages, was liable to refund the rent paid by the claimant, and was liable to refund the sales tax recovered from the claimant. while considering these issues, the court observed that the Arbitrator was not justified in rejecting the contentions raised by the respondent and overlooking the sentence in the acceptance letter' wherein it has been specified that the quantities were approximate and deriveries wourd be made on an actuar accounting basis, and the fact that th'e craimant requested canceilation of delivery order No. 7 without any initial contention as to shortage of materials or even supply of the delivery order. Further, in the subsequent correspondence, neither the shortage nor the claim for damage was put forward, all these aspects evidencing that the claimant himself had cancelled the agreement. Further, relying on the authority of M/s. Rajindra Kumar v. Smt. Vijaya Rani (AtR 1981 SC 2010), the Court observed that the claim for damage could not be entertained. Additionally observed that, the claimant had inspected the stock, participated in the tender, pointed out a shortfalr in quantity, availed payment in installments, and the claim for 9 PSK,J & NIR,J cMAs 412 2006&1586-2008 damages was made at a later stage' That apart' the Arbitrator erred in awarding Rs. 1,000/- per MT against the consistent judgments of the Hon,ble Supreme Court, which Suggest awarding 10 to 15% of the value of the goods Furthermore' noted that the Arbitrator had failed to see the documents' Regarding the payment of rent' the Court below held that the claimant voluntarily paid the rent for November and December 2OOO' evidencing acceptance of liability' However, as there was a dispute regarding the quality of the supplied rice, the claimant was not liable to pay rent from January 200l.Hence,theorderforreturningRs'8'10'000/-wasaccepted' and the reasons given, by the Arbitrator for the refund of Rs' 1,18,845.85 ps' towards sales tax were upheld That apart' the Court observed that awarding future interest with quarterly rests was unjustified and converted the direction to pay compound interest with quarterly rests to simple interest' 10. Dissatisfied by this order' the claimant preferred C.MA.No.1586 of 2008' and the respondent preferred C'M'A No 412 of 2006. 11 . Learned counsel for the claimant contended that the Court below erred in denying the damages and compound interest where therespondentfailedtopaytheamountsbythegivendate.ltwas 7, I 1 l -tU P>K,J t,. N IR,] CM As.-472 _20O6&1586 2OO8 .-x pleaded that the Court below erred in considering the proceedings under Section 34 of the Act as an appeal to interfere with the reasoned findings of the Arbitrator based on the materials on record. Further, the damages were properry ascertained by the Arbitrator based on the market price, and in the absence of contrary materials, recasting the damages granted in the awarcl was improper. Furthermore, contended that in regard to awarding damages the authority relied upon by the Court below was in a different context, whereas the damages were considered in the Award in tune with Section 73 of the Contract Act. The claimant also argued that the sentence in the correspondence referred to by the Court below had not been properly appreciated and that the acceptance was for the price, not the quantity. Therefore, each derivery order constituted a contract and the respondent was obliged to deliver the quantity mentioned therein. The Court below had erroneously taken irrelevant correspondence to reverse the.findings of the Arbitrator. Thus, the claimant prayed for setting aside the impugned order and restoring the award.

12. On this aspect, the claimant cited the following authorities: (a) Patel Engineeing Ltd. v. Notth Eastern Electric power Corporation Ltd. - (2020) I SCC 167, (b) Dethi Airpoft Metro Express pivate ; I i I I I I :l 11 PSK,J & NTR,J CMAS 412 2006&1586-2008 Limited v. Dethi Metro Rail Corporation Limited - (2022) 1 SCC 131 ' and (c) the iudgment dated 26 08'2022 in Commercial Courl Appeal Nos- 33 of 2019 and batch of this Court' and pleaded that for intervention under Sections 34 and 37 of the Act' there must be a patent illegality on the face of the Award' and reappreciation of evidence is not permitted even on the ground of patent illegality' Further, the court can either allow the application or remit it back for fresh consideration but cannot alter or modify the award passed by the Arbitrator

13. Per contra, the learned counsel for the respondent contested that the Court below should have appreciated the observation of the Arbitrator that each delivery order constitutes a contract and obliges the respondent to deliver the quantity given in the delivery order' As such, the finding that the respondent obligation to deliver the quality and quantity was flawed and contrary to the facts of the matter' The Court below should have held that as the rents for November and December 2000 were accepted and voluntarily paid by the claimant' this also amounted to acceptance of liability until september 2001' and the delay in taking delivery by raising objections as to the quality of the stock available meant that the claimant should have been held liable for the payment of rent during that period. Thus, the t2 PSK,J & NIR,] CMAs-412_2006&1586_2008 order of refund of rent by the Arbitrator and its confirmation by the Court below were improper and liable to be set aside. Further, the court should have observed that the respondent is a pubric sector undertaking and, as such, not the first purchaser, and the goods sold to the respondent in the local .market would make the respondent the first purchaser; therefore, the direction for the refund of sales tax is unsustainable. Thus, the respondent prayed for intervention by setting aside the relevant findings in the impugned order and setting aside the Award. 14- we have carefurr! considered the submissions of the rearned counsel and gone through the materials on record. '1 5. The facts as to the tender notification, acceptance of the claimant's offer, entering into the agreement, issuance of delivery orders by the respondents, payments made by the claimant, the quantum of stock made available by the respondent, and the variance in the quantity shown in the derivery order and the actuar stock made available for lifting are not in dispute. Likewise, the claimant making payments to the extent of the stock made avairabre and forwarding the sampres for rcRrSAT and TGSMRT to assess the quality, and the correspondence between the respondent and the .claimant based on the report are also in agreement. 13 PSK,I & NIR,I CMA5 412 2006&1s86 2OO8

16. ln this position, it is pertinent to note that the question considered by the Arbitrator and the Court below was whether there was a breach of contract by the respondent regarding the non- supply of the stock stated in the delivery order, and the consequent prayer for a refund of amounts and the payment of interest and costs. 17(a) As noted earlier, the Arbitrator held that the respondent No. 1 was obliged to provide the quantity as per the delivery order and could not evade this obligation by referring to the 'as is and where is basis' clause. The request for payments in installments could not be read as a waiver by the,claimant regarding the receipt of the goods. The deficit in the delivery order amounted to a breach of contract, and therefore, the claimant was entitled to damages as per the penalty clause in the contract. Thus, the Arbitrator awarded damages of Rs.9,62,864/-. 17(b) However, the Court below, by interpreting the condition that the right to vary the quantity offered for sale in the tender and the offer for sale was limited to the actual quantity available at the godowns, held that the Arbitrator erred in holding the respondent obligation to deliver the quantity mentioned in the delivery order. The Court further observed that the correspondence evidencefrtG L4 PsK,J & NTR,] CMAS_412_2006&158G 2008 '1 .J claimant's knowredge about the resser stock than offered in the delivery order, and the claimant had the advantage of payment in installments and even asked for the cancellation of Delivery Order No. 7. These aspects demonstrated a repudiation of the agreement by the claimant himself. Further, as the claimant had not pleaded for damages anywhere in the correspondence, the Court reversed the findings of the Arbitrator 18(a) Regarding the rent for the godown, the Arbitrator, having considered the deposit of 'the claimed rent for the months of November and DecemUer, the respondent,s statement in rejoinder, and the allowance of five days granted for delivery, allowed the refund of Rs.1,43,310.80 ps. 18(b) The Court opined that the claimant had accepted liability by making the deposit and concruded that the amount ought not to have been refunded, thus accepting the portion of the Award concerning the amounts of rent. 19(a) fhe other factor in dispute is the awarded interest. The Tribunal had awarded 1g% interest on the amount withheld for 1 8 months, i.e., up to May 2003. rf the respondent faired to crear the 15 PSK,J & NTR,I CMAs-412-2006&1 586-2008 dues by 31.08'2003' the Tribunal directed compounding of the interest at quarterly intervals from 01'06'2003 until payment' 19(b) The Court below interfered with the imposition of compound interest on the amounts if unpaid by 31'08'2003' 20. Regarding the refunding of sales tax' the Court below accepted the reasoning and finding oi the Arbitrator' 21. A careful reading of the intervention of the Court below with the Award reveals that it was tased on a consideration of the materials,leadingtocertainconclusionsbyassigningitsown reasonlng. 22 lnthiscontext,thescopeofinterventionbytheCourtunder Section 34 of the Act needs alteration' For better appreciation' Section 34 of the Act is extracted 23 hereunder: "section 34 in The Atbifiation And Concitiation Act' 1996 34. Application for setting aside arbitral award' (1)Recourse to a Court against an arbitral award may be made 5-ntv Oy an application t- ' aside such award in I"Jora-jn"" *it sub-section (2) and sub-section (3)' (!)An arbitral award may be set aside by the Court only if ""tt'S "';ffff: f*,;**nli,:t ii Hi}",i,[li?'H"j'l,??"r I II ) <: 16 PSK,J & NTR,J CMAs_ 412_2006& 1586 200.c ,x (i)a party was under some incapacity; or (ii)the arbitration agreement is not valid under the law to which the parties have subiected it under the dl;; # i;:=J";[,.; indication thereon, t;l[: €nv "r"". oi.-.-. ","---. li'#"+Hffi xi'"li",T;,l::11",""::;,;:,"'l;:,1ru:5""j"1?ff : or was otherwise unable to present his (iv)the arbitral award deals w h, a dispute not contemplated by or not falling within the terms oithe submission to arbiiration, or rt ::l3il: decisions on matrers b"yo;; -;; lJ"rl,"# ,n" suomtssion to arbitration: Provided that, if the decisions can be separate; ;;t,;; the arbit;r a;;;i ffi;":""ffiH." ::HffiS :X submitted to arbitration may be set aside; or on matters submitted to arbitration rJ:i::iiil "T , Iy)-Jhe composition of the , '-' , ,arbitral tribunal or the arbitral procedure. was not in accordance with the agreement of the trft * iiT!!;i ?rJ",:fr?I m1.."*U:[1[i ffi : :t agreement. was not in accordance with tni" i"rt'oi' (E)the Court finds that- (Qthe subject-matter of the dispute is not capable of setflement by arbitration under the taw for ihe tir" o"i"girii"rJ, il,,' (!)the arbitral award is in conflict with the public policy of lnctia_ 'ii,ii!iji;,,:,,i#:,J,J,i",1"3,",i,iiffi #ifl jii?l an award is in conflict with thr (i)the makins or the award #::j:::j::j,l',1#,1,,. corruption or was in violation (ii) it is in contravention *,,,o' taw; or Oi)it is in conflict with the r nost basic notions of morality or lusttce. Explanation 2. - For the aysilsnss of doubt, the test as to whether there is a contravention witn.tne iurJamlrij'pi,i", , tndlan law shall not entail a re ."".,on 75 or sectjon 8i: or ", I the fundamental policy of lndian *1*r*rfiu*tfuq+ffi ,--:._ L7 PsK,J & NTR,J CMAs 412-2006&1586-2008 erroneous application of the law or by reappreciatiol of evidence.l [nsieded by Act No. 3 of 2016 dated 31 12 2015 ] (!)An application for setting aside may not be made after three rnontns nave elapsed from the date on which the party making that application had received the arbitral award or' if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within ihe said period of three months it may entertain the application within a further period of thirty days, but not thereafter. !!)On receipt of an application under sub-section (1), the Court rnay, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. (!)[ An application under this section shall be filed by a party only attei issuing a prior notice to the other party and such apflication shall be acbompanied by an affidavit by the applicant endorsing compliance with the said requirement. (9)An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice refened to in sub-section (5) is served upon the other pady-l [lnserted by Act No' 3 of 2016 dated 31 .12.2015.1"

24. Section 34 of the Act provides for an.application by a party to the proceedings for setting aside an arbitral award on the grounds that the party was under some incapacity, or the arbitration agreement is not valid under the law, or the party making the application was not given proper notice of the appointment of an arbitrator, or the arbitral award deals with a dispute not contemplated within the terms of the submission to arbitration or beyond its scope. f I I I i : 16 PSK,J & NTR,J CMAS 412_2006&1586 2OO8

25. Nonetheless, the proviso clarifies that if the decisions on the matters submifted to arbitration can be separated from those not so submitted; only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside. Alternatively, the award can be set aside if the composition of the Arbitrar rribunar or the arbitrar procedure was not in accordance with the agreement of the parties, or if the Court finds that the subject matter was not capable of set,ement under the law, or if the arbitral award is in conflict with the public policy of lndia. lt has been clarified under sub-section 2(a) that an arbitral award other than one arising from internationar commerciar arbitration can be set aside if the Court finds that the award is vitiated by patent illegality appearing on the face of the award. However, it is also clear that the award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciating the evidence. 26. Thus, the provision explicates that intervention by the Court for setting aside the award occurs in three facets: (a) firstly, by the party establishing incapacity or invalid agreement under law or not giving proper notice on appointment of Arbitrator or the arbitral proceedings or the arbitral award transgresses the dispute or not falling within the 19 PSK,J & NTR,J CMAs-41 2-2006&1586-2008 terms of the submission or beyond the scoPe of the submission to arbitration; (b) secondly, if the Court finds that the dispute is not capable of settlement by arbitration under the law or the award is conflict with the Public PolicY of lndia; (c) thirdly, affected by fraud or corruption or was in violation of Section 75 or Section 81 or the fundamental policy of lndia; and if the award is in conflict with the most notions of morality or justice. 27 . lt has been specified that testing for contravention of fundamental policy shall not entail a review on the merits of the dispute, and it has been cautioned that the award shall not be set aside merely on the ground of an erroneous application of law or by reappreciation of evidence Therefore' within the afore-noted limited scope, the Court can interfere with the award under Section 34 of the Act

28. Significantly, before the Court below' the respondent did not plead any incapacity, invalidity of the arbitration agreement' or lack of service of notice or appointment of arbitrator' or that the award dealt with a dispute not contemplated through arbitration' That \ 20 PSK,J & NII{,J CMAs_412_2006&1586 2008 .-\5 apart, in the impugned order, the Court has not held that the dispute was not capabre of setflement by arbitration under raw or that the arbitral award is in conflict with the public policy of lndia.

29. ln this position, the aspect for consideration by the Court below would be whether the Award is vitiated by patent illegality appearing on the face ofthe record

30. Regarding the consideration of the challenge of patent illegality in a domestic award, the Hon'ble supreme courl in Derhi Airpoi Metro Express pivate Limited (supra) held as follows in para Nos. 29 to 31: "29. A perusal of the aforesaid claims shows that calcutation for interest for the delayed payment of Termination payment has been done in accordance with Article 29.g of the Concession Agreement i.e. SBI prime Lending Rate + 2o/o and not generic Prime Lending Rate + 2o/o as alleged and the rates of SBI pLR have been taken for the period Ol.0g.2013 to 10.09.2021. The plea of judgment debtor that interest has to be calculated keeping in mind the various notifications issued by RBI changing the basis from pLR to BLR and then to MCLR cannot be permitted to be raised in execution proceedings. Moreover, the Hon:ble Supreme Court in its judgment OateO Og.Og.ZOZt has categorically held that the interest component ts not required to be interfered with.

30. Further, the plea whether the decree holder has a right to claim interest over interest till the date of the payment in lerms of arbikal award in question or not, the impugned arbitral award holds that the decree holder shall be entifled to the interest from the date requisite stamp duty is paid by it. ln the present case, the requisite stamp duty is said to have been made good . by the decree holder on 12.05.2017 . Meaning thereby, the 2L PSK,J & NTR,J CMAs 412 2006&1586-2008 interest on the awarded amount shall commence from 12.O5.2017 till the date of realization There is no observation in the award that interest, if not paid, shall be added in the principal amount for future interest. Therefore, the claim of decree holder that the outstanding interest has to be added in the principal amount cannot be accepted- During pendency of these proceedings' the judgment debtor had also made payment of Rs 678 crores and Rs'1,000 crores i-e. Rs-1678.42 crores. Even on the day orders in the present petition were reserved, learned senior counsel for judgment debtor had undertaken that the amount of Rs 600crores shall be deposited in the ESCROW account- The ludgment debtor has raised the contention that the payments made by the judgment debtor should have been adjusted from the due amount on the date of payment can not be accepted The Constitution Bench of Hon"ble Supreme Court in Gurpreet Singh Vs. Union of lndia, (2006) 8 SCC 45 has held that the payments made by the judgment debtor to decree holder has to be appropriated first towards the interest and costs and then towards the principal bmount. Also, the Hon"ble Supreme Court in Bharat Heavy Electricals Ltd. Vs. R.S Avtar Singh (2013) 1 SCC 243 has held that if the payment made by the judgment- debtor falls short of the decreetal amount, the decree-holder will be entitled to apply the general rule of appropriation by appropriating the amount deposited towards the interest, then towards costs and finally towards the principal amount due under the decree and observed as under.- "31. From what has been stated inthe said decision' the following princiPles emerge: 31.1. The general rule of appropriation towards a decretal amount was that such an amount was to be adjusted strictly in accordance with the directions contained in the decree and in the absence of such directions adjustments be made firstly towards payment of interest and costs and thereafter towards payment of the principal amount subject, of course' to any agreement between the parties 31.2.fhe legislative intent in enacting sub-rules (4) and (5) is a clear pointer that interest should cease to run on the deposit made by the judgment-debtor and notice given or on the amount being tendered outside the court in the manner provided in Order 2'l Rule 1 (1Xb)' P5K,J & NTR,J CMAs_412_200G&1586 2008

31.3. lf the payment made by the judgment_debtor falls short of the decreed amount, the decree_holder will be entifled to apply the general rule of appropriation by appropnating the amount deposited towards the interest, then towards cosis and finally towards the principal amount due under the decree.

31.4. Thereafter, no further interest would run on the sum appropriated towards the principal. ln other words if a part of the principal amount has been paid along with ,nterest due thereon as on the date of issuance of notice of deposit interest on that part ofthe principal sum will cease to run thereafter.

31.5. ln cases where there is a shortfall in deposit of the principal amount, the decree_holder would be entifled to adjust interest and costs first and the balance towards the principal and beyond that the decree_holder cannot seek to reopen the entire transaction and proceed to recalculate the interest on the whole of the principal amolnl and seek for reappropriation.,,

31. ln light of the above principles, if the facts and the impugned order are carefully considered as to whether there was a situation for exercising the jurisdiction under section 34 of the Act, we are of the considered view that the Court below has reappreciated the evidence and interfered with the award without there being a conclusion as to patent illegality apparent'on the face of the record. It has to be noted here that the patent illegality must be of such a nature that it goes to the root of the matter and cannot be a mere error of fact or law while reaching the conclusion by the Arbitrator.

32. ln this factual and legal position and in the absence of any contention that the Award was passed upon an erroneous legal in deciding the contractual dispute or in the absence of any .position 23 PSK,J & NIR,J CMAs,412-2006&1585-2008 factor on record evidencing that the Arbitrator had proceeded illegally, it shall be held that the Court below has transgressed the jurisdiction vested under Section 34 of the Act and determined the issues as if in appeal or revision. Therefore, the impugned order is unsustainable and liable to be set aside' ln effect' the Arbitral Award dated 12.06.2003 of the Arbitrator shall be restored Ordered accordinglY.

33. ln the result, C.M.A.No' 412 of 2006 is dismissed and C.M.A.No.1586 of 2008 is allowed' No order as to costs' As a sequel, pending miscellaneous petitions' if any' stand closed. P,PADMANABHA REDDY E UTY REGISTRAR //TRUE COPY/' SECTION OFFICER

1. The XrV Additionar chief Judge, city civir court, Hyderabad(with records' if , il! cc to Ms M Vid.vavathi' Advogate^[oPUC] ;. il 6c io s,l s Ravi' Advocate [oPUC] 4. Two CD CoPies # ADK/PSL ? \ To, HIGH COURT DATED:1 610412025 /., ". ::., :_ -. '\ 10 sEP mfr -.1 COMMON JUDGMENT CMA.Nos.412 ot 2006 and 15g6 of 2008 DISMISSING THE CMA.No.412 ot 2006 AND ALLOWING THE CMA.No.1586 of 2008 WITHOUT COSTS (L \b P\,i-