The Board of Trustees of the Port of Bombay v. Mohinder Singh & Co.

Judgment

- (Per Smt. Ranjana Desai, J.)

1. Mohinder Singh & Company, the respondents in Appeal No.1215 of 1998 in Arbitration Petition No.30 of 1998 pray that they may be granted interest from the date of decree i.e. 10/6/2008 until payment i.e. 8/7/2010.

2. Gist of the facts is necessary to understand the respondents prayer and how the matter is placed before us. (a) The respondents tender in respect of construction of Warehouse at Sewree, Mumbai was accepted by the Board of Trustees of the Port of Bombay (for short, “the Port Trust”) vide their letter dated 1/9/1987. As disputes arose between the two, the respondents referred the matter for arbitration. The Arbitrator by his Award AJN 3 dated 1/1/1990 awarded increased rates for work done between 8/9/1989 to 31/3/1991. As regards further dispute, the matter was referred to arbitration, wherein under the Award dated 1/11/1990, the Arbitrator granted the respondents extension of time to complete the work upto 31/7/1991. The respondents were unable to complete the work within the stipulated time, hence the appellants sought to terminate the contract vide letter dated 23/8/1991. (b) Several disputes were raised subsequent to the declaration of both the earlier Awards and, therefore, third reference was made to the Arbitrator which was adjudicated and the Award came to be declared on 1/1/1993.

The said Award was challenged by the Port Trust in Arbitration Petition No.30 of 1995. The arbitration petition was disposed of by AJN 4 learned Single Judge on 10/6/1998. Learned Single Judge refused to interfere with the impugned Award. As there was no challenge in respect of claim No.1, learned Single Judge only passed a decree in terms of claim No.2 in the sum of Rs.30,00,000/-. Learned Single Judge awarded interest at the rate of 15% per annum from the date of the Award till the decree. (c) The Port Trust carried an appeal to the Division Bench being Appeal No.1215 of

1998. The Division Bench to which one of us (D.G. Karnik, J.) was a party, dismissed the appeal on 26/10/2007. The respondents filed a praecipe dated 19/12/2007 for speaking to the minutes of the judgment dated 26/10/2007 stating that the Division Bench has while dismissing the appeal omitted to provide interest from the date of AJN 5 the decree till payment and, hence, the same may be provided for. On 20/12/2007, the Division Bench dismissed the appellants' prayer by a non-speaking order. (d) The respondents filed Special Leave Petition (Civil) No.15126 of 2008 in the Supreme Court against the said order dated 20/12/2007. The Supreme Court set aside the said order on the ground that it was not a speaking order and was passed without application of mind. The Supreme Court requested this court to decide the respondents' prayer in accordance with law after giving hearing to the parties and pass a speaking and reasoned order. That is how the matter is placed before us.

3. We have heard Mr. Tulzapurkar, learned senior counsel appearing for the respondents. Mr. Tulzapurkar AJN 6 placed heavy reliance on the judgment of the Supreme Court in Jagdish Rai Brothers v. Union of India (1999) 3 SCC 257. He contended that grant of interest post decree is a matter of procedure and ought to be granted in all cases where there is a decree for money unless there are strong reasons against grant of interest. Counsel also relied on the judgment of the Supreme Court in Thazhethe Purayil Sarabi & Ors. v. Union of India & Anr. (2009) 7 SCC 372.

4. Counsel submitted that the respondents have succeeded through out. Counsel submitted that learned Single Judge passed the decree on 10/6/2008. Until the Port Trust deposited cheque in this court on 8/7/2010, the Port Trust enjoyed the interest on the principal sum of Rs. 30,00,000/-. After the cheque was deposited, the respondent wrote letter dated 25/6/2010 to the Port Trust asking the Port Trust to let the respondents know whether it has any objection to encashment of the said cheque by the respondents without prejudice to the respondents' AJN 7 claim for interest. As no objection was received, the respondents encashed the cheque on 8/7/2010. Counsel submitted that neither learned Single Judge nor the Division Bench has held that the respondents are not entitled to interest post-decree. The respondents are, therefore, entitled to interest on the sum of Rs. 30,00,000/- from the date of decree i.e. 10/6/2008 until 8/7/2010 i.e. the date on which the respondent encashed the cheque.

5. Learned counsel submitted that though the respondents had not challenged learned Single Judge's order, this court can still pass an order directing interest to be paid to them. In this connection, learned counsel drew our attention to Order 41 Rule 33 of the Code of Civil Procedure (for short, “the CPC”). Learned counsel submitted that, in the circumstances this court should direct that the respondents be paid interest as prayed by them.

6. Mr. Makhija, learned counsel for the Port Trust on the AJN 8 other hand submitted that the respondents never challenged the order passed by learned Single Judge. The respondents did not request the Division Bench to grant interest till the date of payment. The respondents merely filed a praecipe for the said relief. Counsel submitted that as directed by the Division Bench, the Port Trust deposited the decretal amount in the court. The respondents were permitted to withdraw that amount on furnishing security. The respondents did not do so. In fact, they obtained an order from this court permitting the Port Trust to withdraw the amount, pursuant to which the Port Trust withdrew the amount. The respondents cannot now claim interest. Counsel submitted that the respondents' prayer be rejected.

7. Chronology of dates is necessary to deal with the respondents prayer. The appeal filed by the Port Trust was admitted on 8/12/1998. On that day, the Port Trust was directed to deposit the sum of Rs.30,00,000/- in this court on or before 15/1/1999. On such deposit being AJN 9 made, the respondents were allowed to withdraw the same on furnishing security to the satisfaction of the Prothonotary & Senior Master of this court. The Port Trust accordingly deposited the amount on 13/1/1999. Instead of withdrawing that amount, the respondents vide their letter dated 11/3/1999 informed the Port Trust that they are not in a position to provide security and are therefore not desirous of withdrawing the said amount or any part thereof. The respondents requested the Port Trust to withdraw the said amount as there was no direction of investment of the said sum in any nationalized bank. On 6/5/1999, counsel for the respondents made a statement before this court that the Port Trust may be permitted to withdraw the amount. This court by its order of the same day permitted the Port Trust to withdraw the said amount. The Port Trust accordingly withdrew the said amount. The appeal filed by the Port Trust was dismissed on 26/10/2007. The respondents moved a praecipe on 19/12/2007 for modification of judgment dated 26/10/2007 by providing interest from the date of the AJN 10 decree till payment. The said prayer was rejected on 20/12/2007

8. The Port Trust forwarded cheque dated 9/1/2008 in the sum of Rs.48,31,179/- in favour of the respondents vide its letter dated 14/1/2008. The respondents by their letter dated 25/6/2010 intimated to the Port Trust that the encashment of cheque would be without prejudice to their pending appeals for interest and requesting them to communicate their no objection thereto, if any. According to the respondents, since no objection was received from the Port Trust, they encashed the cheque on 8/7/2010.

9. In Jagdish Rai & Brothers, the Supreme Court was concerned with Arbitration Act, 1940. The Subordinate Judge had passed a decree in terms of the Award. When the proceedings were pending before him, a claim for interest was not made. When the appeal was pending in the High Court, an application was made under Section 29 of the Arbitration Act read with Section 34 of the CPC AJN 11 for interest but it was rejected on the ground that the appellant was not entitled to award of interest when such a claim had not been made before the court of Subordinate Judge by challenging the award and, secondly, on the ground that when the interim relief was granted against the order making the award a rule of the court to make payment to an extent of 50% which could be withdrawn after furnishing security to the satisfaction of the court and having withdrawn the money, the appellant would not be entitled to claim interest. The Supreme Court observed that there are four stages of grant of interest. Firstly, from the stage of accrual of cause of action till filing of the arbitration proceedings; secondly, during pendency of the proceedings before the arbitrator; thirdly, future interest arising between the date of the award and the date of the decree and fourthly, interest arising from the date of the decree till realization of the award. The Supreme Court observed that the claim for interest not having been made before the Court in which proceedings for making the AJN 12 award the rule of the court were pending would certainly disentitle the appellant from making such a claim during the first three stages of pre-arbitration and post- arbitration that is between the award and filing of application inasmuch as several considerations will have to be examined before the award of interest. Therefore, when the award had not been challenged for not granting interest, the award could not be upset to that extent. The Supreme Court observed that the view taken by the High Court was right to that extent. However, the High Court ought to have further examined whether the appellant was entitled to any interest after the decree was made in terms of the Award. The Supreme Court observed that the courts have taken the view that the award of interest under Section 34 of the CPC is a matter of procedure and ought to be granted in all cases when there is a decree for money unless there are strong reasons to decline the same. The Supreme Court observed that the appellant had made a claim for interest before the arbitrator but the same had been denied and no reasons are forthcoming AJN 13 thereto. In any case, after the Subordinate Judge made an award the rule of the court, the decree ought to contain a provision for making payment of interest. If such payment has not been made, appropriate correction of the decree could be ordered to be made when an application had been made before the High Court. The Supreme Court observed that it was conscious of the fact that the appellant had not preferred any appeal against the order made by the Subordinate Judge, who made the award, the decree of the court but who did not grant any interest. The Supreme Court clarified that even then, the grant of interest being a matter of procedure and the appellant having made an application before the High Court in that regard, there was no impediment to grant the same by bringing the decree of the subordinate court in confirmity with law, namely, by awarding appropriate interest.

10. Undoubtedly, there are certain similarities between the case which the Supreme Court was considering in AJN 14 Jagdish Rai & Brothers and the present case. In this case also, when learned Single Judge passed a decree in terms of the Award, learned Single Judge did not grant interest till payment. The respondents did not challenge the said order. Even when the High Court dismissed the appeal of the Port Trust, the respondents did not request the Division Bench of this court to grant interest till payment. The respondents through a praecipe requested the Division Bench to grant interest which was declined by the Division Bench by passing a non-speaking order. Mr. Tulzapukar, learned senior counsel is right in submitting that as stated by the Supreme Court in Jagdish Rai & Brothers, this court must examine whether the appellant was entitled to any interest after the decree was made in terms of the award. Although the respondents had not requested learned Single Judge to grant interest till payment nor had the respondents challenged the order of learned Single Judge, the award of interest under Section 34 of the CPC is a matter of procedure and ought to be granted in all cases where there is a decree for money AJN 15 unless there is a strong reason to decline the same. This court can decline to grant interest if there are strong reasons persuading it to do so. Therefore, we must find out whether in this case there are any strong reasons to decline interest.

11. The view taken by the Supreme Court in Jagdish Rai & Brothers has been affirmed by it in Thazhathe Purayil Sarabi & Ors. v. Union of India & Anr. (2009) 7 SCC 372. In that case, the Supreme Court was considering the question whether the Kerala High Court was justified in not granting interest on the amount of award from the date of incident till actual payment of the awarded sum. The Supreme Court considered Section 34 of the CPC which pertains to interest. The Supreme Court observed that the courts are consistent in their view that normally when a money decree is passed, it is most essential that interest be granted for the period during which the money was due, but could not be utilized by the person in whose favour an order of recovery of money AJN 16 was passed. The Supreme Court observed that the interest is essentially a compensation payable on account of denial of the right to utilise the money due, which has been, in fact, utilized by the person withholding the same. Accordingly, payment of interest follows as a matter of course when a money decree is passed. The Supreme Court referred to Jagdish Rai & Brothers and observed that in that case, it was held that although the claim for interest had not been made before the court in which proceedings for making the award rule of the court were pending, the High Court ought to have further examined whether the appellant was entitled to further interest after the decree was made in terms of the award because grant of interest is a matter of procedure and ought to be granted in all cases when there is a decree of money unless there are strong reasons to decline the same. The Supreme Court allowed the appeal, modified the order of the Kerala High Court and observed that the awarded sum shall carry interest till the date of actual payment. AJN 17

12. We must examine the present case in the light of the above judgments. We have already given the chronology of dates. As directed by the Division Bench of this court, the Port Trust deposited a sum of Rs.30 lakhs in this court on 13/1/1999. The respondents were permitted to withdraw that amount on furnishing security to the satisfaction of the Prothonotary & Senior Master of this court. But, the respondents did not withdraw that amount. On the contrary, they wrote a letter dated 11/3/1999 to the Port Trust informing them that they are not in a position to provide security and, therefore, they are not desirous of withdrawing the said amount. The respondents requested the Port Trust to withdraw the amount. On behalf of the respondents, their counsel made a statement before the Division Bench of this court on 6/5/1999 that the Port Trust may be permitted to withdraw the amount. This court by its order dated 6/5/1999 permitted the Port Trust to withdraw the amount and the Port Trust withdrew the amount. Since the Port Trust deposited the amount as directed by this court on AJN 18 13/1/1999 which the respondents could have very well withdrawn, the Port Trust cannot be saddled with interest from 13/1/1999 onwards. The respondents would at the most be entitled to interest from the date of decree i.e. 10/6/1998 till 13/1/1999 when the Port Trust deposited the amount in the court. As we have already noted, subsequently, the Port Trust forwarded cheque in the sum of Rs.48,31,179/- to the respondents and the respondents have encashed the same on 8/7/2010. The respondents are now claiming that they may be awarded interest from the date of decree i.e. 10/6/1998 till the date on which they encashed the cheque of the Port Trust i.e. 8/7/2010. For the reasons stated aforesaid, it is not possible for us to grant interest for the said period. When the Port Trust deposited the amount in the court on 13/1/1999, its obligation to pay interest on the decretal amount came to an end. It was for the respondents to withdraw the amount. If the respondents failed to withdraw the amount, and went on to persuade this court to pass an order permitting the Port Trust to withdraw the amount, AJN 19 the respondents cannot claim interest for the period from 13/1/1999 till 8/7/2010 i.e. the date on which they encashed the cheque of the Port Trust. In our opinion, these are strong reasons to decline interest to the respondents from 13/1/1999 to 8/7/2010. In the view that we have taken, the Port Trust will have to be directed to pay interest on the sum of Rs.30,00,000/- to the respondents at the rate of 15% per annum from the date of decree i.e. 10/6/1998 till 13/1/1999. Order accordingly. [MRS. RANJANA DESAI, J.] [D.G. KARNIK, J.]