M/s Damodar Ropeways and Infra Limited (DRIL) v. Central Coalfields Limited

: Mr. Indrajit Sinha, Advocate Mr. Ankit Vishal, Advocate For the Respondent-CCL: Mr. Anoop Kumar Mehta, Advocate Mr. Manish Kumar, Advocate ------- Order No. 06/Dated: 13 th January 2023 M/s Damodar Ropeways and Infra Limited (in short, DRIL) has challenged the order dated 10th May 2022 passed in Commercial Execution Case No. 09 of 2018.

By the aforesaid order dated 10th May 2022, the Commercial Court did not accept the proposition of the decree-holder that an amount of Rs. 1,51,37,479/- with interest @ 9% for pre-arbitration and pendente lite periods taken together shall constitute “sum awarded”, and has dismissed the application dated 02nd September 2021 claiming a sum of Rs. 2,92,65,950/- as the re-calculated award amount with interest @ 9% per annum in terms of the order passed by this Court in Commercial Appeal No. 01 of 2019.

Before the Commercial Court, “Hyder Consulting (UK) Limited v. Governor, State of Orissa” (2015) 2 SCC 189 was referred to on behalf of the decree-holder to lay support to its claim for Rs. 2,92,65,950/- with interest @ 9% from 5th October 2015.

In “Hyder Consulting (UK) Limited” the Hon'ble Supreme Court has held as under:

13. Thus, it is apparent that vide clause (a) of sub-section (7) of Section 31 of the Act, Parliament intended that an award for payment of money may be inclusive of interest, and the "sum" of the principal amount plus interest may be directed to be paid by the Arbitral 2 CMP No. 522 of 2022 Tribunal for the pre-award period. Thereupon, the Arbitral Tribunal may direct interest to be paid on such "sum" for the post-award period vide clause (b) of sub-section (7) of Section 31 of the Act, at which stage the amount would be the sum arrived at after the merging of interest with the principal; the two components having lost their separate identities. 14. In fact this is a case where the language of sub-section (7) clauses (a) and (b) is so plain and unambiguous that no question of construction of a statutory provision arises. The language itself provides that in the sum for which an award is made, interest may be included for the pre-award period and that for the post-award period interest up to the rate of eighteen per cent per annum may be awarded on such sum directed to be paid by the arbitral award.

In yet another case, in “Morgan Securities and Credits Pvt. Ltd v. Videocon Industries Ltd.” 2022 SCC OnLine SC 1127 the Hon'ble Supreme Court has held thus:

23. Section 31(7)(a) confers a wide discretion upon the arbitrator in regard to the grant of pre-award interest. The arbitrator has the discretion to determine the rate of reasonable interest, the sum on which the interest is to be paid, that is whether on the whole or any part of the principal amount, and the period for which payment of interest is to be made - whether it should be for the whole or any part of the period between the date on which the cause of action arose and the date of the award. When a discretion has been conferred on the arbitrator in regard to the grant of pre-award interest, it would be against the grain of statutory interpretation to presuppose that the legislative intent was to reduce the discretionary power of the arbitrator for the grant of post-award interest under clause (b). Clause (b) only contemplates a situation where the arbitration award is silent on post-award interest, in which event the award-holder is entitled to a post-award interest of eighteen percent.

Mr. Anoop Kumar Mehta, the learned counsel for the Central Coalfields Limited (in short, CCL) would however submit that as indicated in paragraph no. 57 of the award dated 5th October 2015 the principal sum awarded is Rs. 1,51,37,479/- over which pre-arbitration, pendente lite and future interest shall be payable @ 9% per annum.

The decree holder – DRIL in its execution petition filed in Commercial Execution Case No. 09 of 2018 has given the following calculation: “4. That the total amount is to be calculated with interest @9% on the Awarded amount upto 31.08.2021. Now since more than one and half year have passed the present fresh writ of attachment is being made for the Principal amount of Rs. 2,92,65,950.00 along with interest for the period 05.01.2015 upto 31.08.2021, that is 5 years 10 months as shall appear from the details of amount to be attached as under: Principal Amount Interest amount (from 05.10.2015 to 31.08.2021, 70 months) Cost of Execution … Rs. 2,92,65,950.00 … … Rs. 1,55,43,828.00 Rs. 25,000.00 Total ... Rs. 4,48,34,778.00 3 CMP No. 522 of 2022

The relevant paragraphs of the opposition raised by the CCL to the aforesaid calculation of DRIL are extracted below:

7. That the decree holder in their petition in paragraph 4 has given the principal amount Rs. 2,92,65,950/- as principal amount and Rs. 1,55,43,828/- as interest amount and cost of execution Rs. 25,000/-. The decree holder has given the calculation of interest as per order dated 26.02.2020 at the rate of 9% which is absolutely illegal, incorrect and misconceived. 8. That the judgement debtor hereby given their calculation calculating the interest at the rate of 9% wherein the total interest at the rate of 9% in respect of the awarded amount comes to Rs. 81,63,046/- and the awarded amount with interest calculated by the judgement debtor comes to Rs. 3,74,28,996/-. That so far the calculation of judgement debtor is concerned regarding payment to DRIL it is correct whereas the interest calculated by the decree holder is wrong and has been calculated under misconception of order passed by Hon'ble High Court.

The CCL has filed calculation sheet in Commercial Execution Case No. 09 of 2018 showing total amount to be paid to DRIL of Rs. 3,74,28,996/- which included the principal amount of Rs. 1,51,37,479/-, with interest @ 9% for pre-arbitration and pendente lite periods amounting to Rs. 1,41,28,471/-, and further interest @ 9% for post-arbitration period at Rs. 81,63,046/-.

The stand taken by the CCL has been accepted by the Commercial Court for the following reasons:

Firstly the case of HYDER CONSULTING (UK) LIMITED VERSUS GOVERNOR, STATE OF ORISSA [(2015) 2 Supreme Court Cases 189] cited by the learned counsel has different fact situation. The Hon'ble Apex Court was dealing with the powers of the Arbitral Tribunal as to whether it has power to award interest on the sum namely principal amount and the interest from the passing of the date of order or the tribunal can pass order of interest only on the principal amount. So this case has got no application to the instant case. When the order of learned Arbitral Tribunal was modified by the Hon'ble High in its order in on 26.02.2020 in Commercial Appeal No. 01/2019, the order of learned Arbitral Tribunal got merged with the order of Hon'ble High Court. Admittedly Hon'ble High Court has reduced the interest from the 15 % to 9 % as pre-arbitration, pendente lite and future interest. Further if the interest is calculated on the sum awarded by the learned tribunal, then it will tantamount to paying interest on the principal amount, and on the interest payable during the pre-arbitration period and pendente lite. Thus in a sense the future interest will become compound interest from the date of award till the date of payment as the judgement debtor will be paying the interest over the awarded interest. The interest is normally for the delayed and deferred payment. The way the learned counsel for the decree-holder has interpreted Par 57 of the award, in view of the modified order of the Hon'ble High Court, is not permissible. Thus, in view of the above discussions the interest will be payable on the principal amount of Rs. 1,51,37,479/- @9% for pre- 4 CMP No. 522 of 2022 arbitration period, pendent elite and future interest. Thus prayer of the Decree-holder through petition dated on 02.09.2021 is rejected. In this view of matter award seems to have satisfied. Although the award seems to have been satisfied but for any discrepancies or mistake in calculation the case is not being disposed of today.

The aforesaid consideration by the Commercial Court is apparently a misconstruction of the judgment in “Hyder Consulting (UK) Limited”. The law is by now well-settled that the “sum awarded” which now has statutory recognition under section 31(7) of the Arbitration and Conciliation Act, 1996 may include the principal sum claimed/awarded with pre-arbitration and pendente lite interest taken together. The award dated 5th October 2015 is very clear and unambiguous in terms. What is the sum awarded has been quantified in the following manner:

57. DRIL is, as such, entitled to an award aggregating a sum of Rs. 3,86,84,927/-. It will be entitled to further interest on such sum from the date of the award till the date of payment of the sums awarded by CCL. Although interest has been claimed by DRIL @ 18% per annum compounded quarterly, I do not find the same to be reasonable and accordingly proceeded to award simple interest @ 15% per annum.

The sum awarded was Rs. 3,86,84,927/- which was calculated by adding interest @ 15% per annum over the claim of Rs. 1,51,37,479/- for the pre-arbitration and pendente lite periods. The Arbitrator has further awarded interest @ 15% per annum over the sum of Rs. 3,86,84,927/- from the date of award. However, the rate of interest has been reduced to 9% per annum by this Court in the proceeding of Commercial Appeal No. 01 of 2019 in which validity of the award was challenged by the Central Coalfields Limited. The Commercial Court has therefore committed a serious error in law in ignoring the binding proposition in law on the subject, as held by the Hon'ble Supreme Court in “Hyder Consulting (UK) Limited”, in calculating interest @ 9% per annum only on the amount of Rs. 1,51,37,479/-.

CMP No. 522 of 2022 is allowed to the aforesaid extent. As it is recorded in the order dated 10th May 2022, a sum of Rs. 3,74,28,996/- which was the total amount payable to the petitioner as per calculation of the CCL has been paid to it. Accordingly, this Court has been 5 CMP No. 522 of 2022 informed in course of hearing that the Commercial Execution Case No. 09 of 2018 has now been terminated.

Having regard to the aforesaid subsequent development, the petitioner may avail of the remedy as available to it in law. Tanuj/- (Shree Chandrashekhar, J.)