Delhi District Court
M/S. Splendor Landbase Ltd vs Arysta Life Science India Ltd on 24 May, 2024
IN THE COURT OF MS. NEELAM SINGH
DISTRICT JUDGE (COMMERCIAL)-02, SOUTH EAST
SAKET COURTS, NEW DELHI
OMP (COMM) No.- 42/2021
In the matter of
SPLENDOR LANDBASE LTD
Through its authorized representative:
Mr. Manish Prakash
Having its registered office at
501-511, 5th Floor, Splendor Forum,
03, Jasola District Centre, New Delhi ....Petitioner
Vs.
ARYSTA LIFE SCIENCES INDIA LTD.
Its registered office at:
703-704, Ocean, Nr. Central Square
Sarabhai Compound, Wadi Vadi,
Vadodra, State of Gujarat ....Respondent
Date of Institution : 30.10.2021
Date of Final Arguments : 16.05.2024
Date of Judgment : 24.05.2024
Final Decision : Dismissed
Section 34 Arbitration and Conciliation Act, 1996
1. The present petition has been filed under Section 34 of the
Arbitration and Conciliation Act, 1996 ("the Act"), seeks to set
aside the arbitral award dated 09.06.2021 read with order dated
10.07.2021 passed by the Learned Sole Arbitrator Justice Sh. V.K.
Shali (Retired) in DAC/1841/11-17 titled ' M/s Arysta Lifescience
India Ltd. Vs. M/s Splendor Landbase Ltd.'.
OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 1 of 17
Arysta Life Science India Ltd.
FACTUAL BACKGROUND
2. Petitioner has challenged the award to the limited extent of granting of interest at the rate of 9% from 01.02.2018 to the respondent. Petitioner is willing to refund the interest free refundable security deposit (IFRSD) amounting to Rs. 60,63,388/- to the respondent.
3. The facts germane to the present petition is that petitioner is a company registered under The Companies Act, 1956 having its registered office at Jasola District Centre, New Delhi. Petitioner is engaged in the business of development of real estate projects in NCR, Haryana and Punjab regions and is enjoying a good market reputation. Petitioner is the developer and owner of office space ad-measuring 9538 square feet of super area bearing units number 512-521 on fifth floor of Commercial Complex, Splendor Forum situated at Plot no. 3, Jasola District Centre (hereinafter referred to as 'said units').
4. The respondent desirous of obtaining office space in the said complex approached the representatives of the petitioner and expressed their desire to obtain the said units on lease for the purpose of running their office and undertaking commercial activities. The respondent specifically represented that they require the said unit for a period of 9 years and assured the OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 2 of 17 Arysta Life Science India Ltd.
petitioner that they had full intention of retaining the said units for the entire lease term. Accordingly, applicant incurred a huge expenditure of Rs. 78,00,628/- towards carrying out the fit outs and fixtures in the said unit as per the requirement and specification of the respondent.
5. Thereafter parties entered into two documents namely letter of intent dated 14.08.2012 and lease deed dated 17.09.2012. The respondent had paid an interest free refundable security deposit (IFRSD) of Rs. 85,62,972/- in order to secure due and faithful performance by the respondent. Thereafter, another amount of Rs. 12,79,046/- was paid towards IFRSD by the respondent bringing the total IFRSD to Rs. 98,06,018/-. The petitioner provided the requisite fit outs and fixtures with complete satisfaction to the respondent.
6. As per clause 17.1 of the said lease deed, respondent was entitled to vacate the said units upon serving three months notice or pay lease rent of three months in lieu of notice period. It is the case of the petitioner that he received a termination notice dated 01.02.2016 from the respondent wherein respondent had terminated the said deed by only giving one month notice which is in complete contradiction and violation of the said deed.
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7. Respondent instead of fulfilling its obligations illegally demanded a sum of Rs.1,10,59,311/- towards refund of IFRSD and maintenance charges. Petition had offered to refund the IFRSD subject to deduction of two months lease rental and corresponding service tax that was admittedly payable by the respondent to the petitioner. Thereafter, respondent through its council issued a legal notice dated 30.06.2016 to the petitioner. Respondent again issued a second legal notice dated 15.09.2016 to the petitioner at an incorrect address to malign the image of the petitioner.
8. The petitioner through its DGM legal issued a reply dated 29.09.2016 to the legal notice of the respondent wherein it was reiterated and clarified that it was agreed and accepted by the parties that the petitioner will refund the IFRSD on or before 31.12.2016. The petitioner in spite of suffering huge losses was ready and willing to resolve the dispute which had solely arisen due to the omission and commission on the part of the respondent. Petitioner issued copy of 5 cheques amounting to Rs. 73,16,681/- towards refund of IFRSD under the said deal amounting to Rs. 60,63,388/- and refund of maintenance agreement of Rs. 12,53,293/-. Vide the aforesaid reply, respondent was requested to send their legal representatives to collect the cheques as mentioned in para 9 of this petition. Petitioner was more than willing to refund the entire IFRSD in a span of three months and this offer of refund of IFRSD goes to the very root of the matter OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 4 of 17 Arysta Life Science India Ltd.
which evidently was not considered by the Ld. Tribunal.
9. It is submitted that petitioner as a goodwill gesture and in order to not purposelessly drag on litigation had offered repeatedly the refund of IFRSD after deduction of two months rental payable by the respondent. However, respondent refused to accept the same and instead embroiled the petitioner in litigation to extort money from him. The witness of the respondent CW-1 has also admitted in his cross-examination before the Ld. Arbitrator that the petitioner had offered to refund an amount of Rs. 73,00,000/- but the same was not accepted by the respondent as the petitioner had deducted lease rent for two months. The award has been challenged by the petitioner on the ground that Ld. Arbitrator had ordered in paragraph 54 and 55 of the award that respondent is entitled to claim the amount of Rs. 77,39,311/- alongwith interest at the rate 9% w.e.f 01.03.2016 till the realization of amount.
10. The award has been challenged by the petitioner on the ground that the Ld. Arbitrator could not understand the fact that it was the petitioner who was ready to give the entire security amount to the respondent the moment he has received notice of termination from the respondent after deducting two months notice period from the security amount and thus the award is contrary to the public policy and is bad in law.
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11. Reply has been filed on behalf of respondent to this petition by submitting that the present dispute is governed by the lease deed dated 17.09.2012 between the parties and as per the lease deed there was a lock-in period of three years to safeguard the financial interest of both parties which was the actual understanding between the parties from the letter of intent. It is submitted that the matter of furnished office with fit outs was well discussed between the parties and after the understanding the lease deed was formalized and a big amount of rent was fixed at the rate of Rs.14,21,162/- per month alongwith agreed security deposit and with increment of 18% per annum. Respondent has paid total rent of Rs. 6,09,67,850/-, the rent paid by the respondent includes six months rent after the lock in period and in that way the post of furnishing in fit out as alleged by the petitioner i.e. Rs. 78,00,628/- has already been recovered. It is submitted that as regards the issue of notice period of three months on the part of respondent is concerned, petitioner has admitted that he is showing the premises to many prospective clients and vide e-mail dated 24.09.2015, the petitioner had informed the respondent that the petitioner has already finalized the other tenant for the subject premises.
12. It is submitted that it was the petitioner who asked the respondent to vacate the premises in the first week of December, 2015 and the respondent informed the petitioner that respondent would not be able to vacate the premises and has given the date in the month of May, 2016 to vacate the premises to the petitioner.
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Upon the arrangement suggested by the petitioner, respondent sent a termination notice of 30 days vide letter dated 01.02.2016. The petitioner never objected the said termination of 30 days and allowed the respondent to vacate the premises. The petitioner on its own deducted the amount of Rs. 32,68,672/- for two months rent from the security deposit towards the rent and also deducted an amount of Rs. 12,53,293/- and sent an amount of Rs. 73,16,681/- that too in five parts payment and same was rejected by the respondent as the petitioner is supposed to refund the amount in one go.
Points of Consideration before the Court
13. I have heard arguments advanced on behalf of both the parties and have perused the case file as well as original arbitral record.
14. The petition has been challenged under Section 34 of the Arbitration and Conciliation Act, 1996 which is reproduced as under:
"Section 34. Application for setting aside arbitral awards.
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if--
(a) the party making the application 1[establishes on the basis of OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 7 of 17 Arysta Life Science India Ltd.
the record of the arbitral tribunal that]--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted 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; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
1[Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2A) An arbitral award arising out of arbitrations other than OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 8 of 17 Arysta Life Science India Ltd.
international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.] (3) An application for setting aside may not be made after three months have 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 the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, 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.
[(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) 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 referred to in sub-section (5) is served upon the other party.]"
15. It has been held in catena of judgments by Hon'ble Apex Court as well as by our own Hon'ble Delhi High Cort that while adjudicating upon a petition u/s 34 of the Act, the Court has limited ground as enshrined in Section 34 of the Act.
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16. It has been held by our own Hon'ble High Court of Delhi that while dealing with the award passed by the Ld. Arbitrator the Court cannot dig deep on the point of appreciation of evidence and the discretionary power of Ld. Arbitrator to award cost and interest if the same is not prima-facie against the public policy or there is no error prima-facie on the face of the award.
17. I have gone through the award in detail. Ld. Arbitrator has dealt with the issue of both the parties in detail and has awarded the amount of Rs.77,39,311/- to the respondent alongwith an interest @ 9% per annum w.e.f. 01.03.2016 till the realization of the amount with a sound reasoning. Para 53, 54 and 55 are reproduced as under:
"53. I have gone through both these judgments. In my opinion, both of these judgments are not applicable to the facts of the present case as the facts of the present case do not involve any concept of breach of agreement or repudiator contract. This is simple and straight case of lease, where the question is whether notice of 3 months was given in terms of Clause 17.1 of the lease deed before terminating the tenancy or the Claimant has to pay the rent in lieu of the same. This question has already been adjudicated here in above.
54. The Respondent is thus entitled o recover two months rent of Rs.32,68,672/- (Rupees Thirty Two OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 10 of 17 Arysta Life Science India Ltd.
Lakhs Sixty Eight Thousand Six Hundred and Seventy Two Only) apart from service tax of Rs 4,73,958/- (Rupees Four Lakhs Seventy Three Thousand Nine Hundred and Fifty Eight Only) from the IFRSD of Rs.98,06,018/- (Rupees Ninety Eight Lacs Six Thousand Eighteen) and thereafter refund the remaining security deposit amount which comes out to be Rs.60,63,388/- (Rupees Sixty Lakh Sixty Three Thousand Three Hundred and Eighteen)
55. Since the security deposit refund was to made in one transaction and the same was not being done by the Respondents, therefore the Respondent is liable to pay interest on the security deposit refund. However, the rate of interest cannot be @ 18% as the parties had agreed at the time of signing the lease deed. In my opinion, rate of interest @ 18% is an exorbitant interest and thus the same is reduced to 9% with effect from 1.3.2016 till the realization of the amount. This reduction of rate of interest is being done by the undersigned in terms of Section 31(7) of the Arbitration and Conciliation Act, 1996. Further, it will also balance the period for which the Claimant is not entitled to interest because of its refusal to accept the security amount."OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 11 of 17
Arysta Life Science India Ltd.
18. I could lay my hand on a judgment of Hon'ble Delhi High Court in KAL Airway Pvt. Limited Vs. Spicejet Ltd. & Anr. OMP (COMM) 450/2018 dated 31.07.2023. The relevant paragraphs are reproduced hereunder:
"76. The petitioners also raised an objection with regard to the issue of interest. The Tribunal awarded interest in favour of the respondents herein as under:
"(3) Since the amount covered by conclusion (1) was with the Respondents since November 2015, they would have become liable to pay interest on the same. Though, interest at the rate of 18% per annum has been claimed, we are of the view that since Respondent No.1 Company took over a huge liability and also paid interest on the tax amount payable by the Claimants, interest at the rate of 12% on Rs.308,21,89,461/- would be appropriate. The amount has to be accordingly calculated for about 30 months. Additionally, in view of the finding relating to the CRPS claim and the proved position that the Respondents have paid interest / servicing charges of around Rs.29 Crores, the counter claim to that extent is allowed.
(5) In case the payments, as directed, to be made by the Respondents are not so made within two months from the relevant date, the Claimants shall be entitled to interest @ 18% from the last date of the due date in terms of this Award.
77. There is no dispute to the fact that an Arbitral Tribunal has the jurisdiction and power to make an award pertaining to interest. The Hon'ble Supreme Court has time and again reiterated that an Arbitrator has sufficient powers to pass an Award on the question of interest. In Delhi Airport Metro Express (P) Ltd. (Supra), the Hon'ble Supreme Court held as under:
"13. Shri Harish N. Salve, learned Senior Counsel is justified in relying on the majority judgment of this Court in Hyder Consulting (UK) [Hyder Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC 189 : (2015) 2 SCC (Civ) 38] . S.A. Bobde, J. in his judgment in the said case observed thus : (SCC pp. 200-202, paras 2-14) "2. It is not possible to agree with the conclusion in S.L. Arora case [State of Haryana v. S.L. Arora & Co., (2010) 3 SCC 690 : (2010) 1 SCC (Civ) 823] that Section 31(7) of the Act does not require that interest which accrues till the date of the award be included in the "sum" from the date of award for calculating the post-award interest.
In my humble view, this conclusion does not seem to be in consonance OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 12 of 17 Arysta Life Science India Ltd.
with the clear language of Section 31(7) of the Act. 3. Sub-section (7) of Section 31 of the Act, which deals with the power of the Arbitral Tribunal to award interest, reads as follows:
'31. (7)(a) Unless otherwise agreed by the parties, where and insofar as an arbitral award is for the payment of money, the Arbitral Tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment.'
4. Clause (a) of sub-section (7) provides that where an award is made for the payment of money, the Arbitral Tribunal may include interest in the sum for which the award is made. In plain terms, this provision confers a power upon the Arbitral Tribunal while making an award for payment of money, to include interest in the sum for which the award is made on either the whole or any part of the money and for the whole or any part of the period for the entire pre-award period between the date on which the cause of action arose and the date on which the award is made. To put it differently, sub-section (7)(a) contemplates that an award, inclusive of interest for the pre-award period on the entire amount directed to be paid or part thereof, may be passed. The "sum" awarded may be the principal amount and such interest as the Arbitral Tribunal deems fit. If no interest is awarded, the "sum" comprises only the principal. The significant words occurring in clause (a) of sub-section (7) of Section 31 of the Act are "the sum for which the award is made". On a plain reading, this expression refers to the total amount or sum for the payment for which the award is made. Parliament has not added a qualification like "principal" to the word "sum", and therefore, the word "sum" here simply means "a particular amount of money". In Section 31(7), this particular amount of money may include interest from the date of cause of action to the date of the award.
5. Oxford Dictionary gives the following meaning to the word "sum":
Sum, "if noun".--A particular amount of money. Sum, "if verb".--The total amount resulting from the addition of two or more numbers, amounts, or items.
6. In Black's Law Dictionary, the word "sum" is given the following meaning:
'Sum.--In English law--A summary or abstract; a compendium; a collection. Several of the old law treatises are called "sum". Lord Hale applies the term to summaries of statute law. Burrill. The sense in which the term is most commonly used is "money"; a quantity of money or currency; any amount indefinitely, a sum of money, a small sum, or a large sum. United States v. Van Auken [United States v. Van Auken, 24 L Ed 852 : 96 US 366 (1877)] and Donovan v. Jenkins [Donovan v. Jenkins, 52 Mont 124 : 155 P 972 (1916)] , P at p. 973.'
7. Thus, when used as a noun, as it seems to have been used in this provision, the word "sum" simply means "an amount of money";
whatever it may include -- "principal" and "interest" or one of the two.
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Once the meaning of the word "sum" is clear, the same meaning must be ascribed to the word in clause (b) of sub- section (7) of Section 31 of the Act, where it provides that a sum directed to be paid by an arbitral award 'shall ... carry interest ...' from the date of the award to the date of the payment i.e. post-award. In other words, what clause (b) of sub-section (7) of Section 31 of the Act directs is that the "sum", which is directed to be paid by the award, whether inclusive or exclusive of interest, shall carry interest at the rate of eighteen per cent per annum for the post-award period, unless otherwise ordered.
8. Thus, sub-section (7) of Section 31 of the Act provides, firstly, vide clause (a) that the Arbitral Tribunal may include interest while making an award for payment of money in the sum for which the award is made and further, vide clause (b) that the sum so directed to be made by the award shall carry interest at a certain rate for the post-award period.
9. The purpose of enacting this provision is clear, namely, to encourage early payment of the awarded sum and to discourage the usual delay, which accompanies the execution of the award in the same manner as if it were a decree of the court vide Section 36 of the Act.
10. In this view of the matter, it is clear that the interest, the sum directed to be paid by the arbitral award under clause (b) of sub-section (7) of Section 31 of the Act is inclusive of interest pendente lite.
11. At this juncture, it may be useful to refer to Section 34CPC, also enacted by Parliament and conferring the same power upon a court to award interest on an award i.e. post-award interest. While enacting Section 34CPC Parliament conferred power on a court to order interest "on the principal sum adjudged" and not on merely the "sum" as provided in the Arbitration Act. The departure from the language of Section 34CPC in Section 31(7) of the 1996 Act is significant and shows the intention of Parliament.
12. It is settled law that where different language is used by Parliament, it is intended to have a different effect. In the Arbitration Act, the word "sum" has deliberately not been qualified by using the word "principal" before it. If it had been so used, there would have been no scope for the contention that the word "sum" may include "interest". In Section 31(7) of the Act, Parliament has deliberately used the word "sum" to refer to the aggregate of the amounts that may be directed to be paid by the Arbitral Tribunal and not merely the "principal" sum without interest.
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 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 OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 14 of 17 Arysta Life Science India Ltd.
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."
15. It could thus be seen that the majority view of this Court in Hyder Consulting (UK) [Hyder Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC 189 : (2015) 2 SCC (Civ) 38] is that the sum awarded may include the principal amount and such interest as the Arbitral Tribunal deems fit. It is further held that, if no interest is awarded, the "sum" comprises only the principal amount. The majority judgment held that clause (a) of sub-section (7) of Section 31 of the 1996 Act refers to the total amount or sum for the payment for which the award is made. As such, the amount awarded under clause (a) of sub-section (7) of Section 31 of the 1996 Act would include the principal amount plus the interest amount pendente lite. It was held that the interest to be calculated as per clause (b) of sub-section (7) of Section 31 of the 1996 Act would be on the total sum arrived as aforesaid under clause (a) of sub-section (7) of Section 31 of the 1996 Act. S.A. Bobde, J. in his judgment, has referred to various authorities of this Court as well as Maxwell on the Interpretation of Statutes. He emphasised that the Court must give effect to the plain, clear and unambiguous words of the legislature and it is not for the courts to add or subtract the words, even though the construction may lead to strange or surprising, unreasonable or unjust or oppressive results.
16. Sub-section (7) of Section 31 of the 1996 Act is already reproduced in the judgment of S.A. Bobde, J. in Hyder Consulting (UK) [Hyder Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC 189 : (2015) 2 SCC (Civ) 38]. Applying the principle of plain interpretation of the language employed by the legislature, the position that would emerge, on an analysis of clause (a) of sub-section (7) of Section 31 of the 1996 Act, is as under:
(i) It begins with the words "Unless otherwise agreed by the parties".
(ii) Where and insofar as an arbitral award is for the payment of money, the Arbitral Tribunal may include interest component in the sum for which the award is made.
(iii) The interest may be at such rate as the Arbitral Tribunal deems reasonable.
(iv) The interest may be on the whole or any part of the money.
(v) The interest may be for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
17. It could thus be seen that the part which deals with the power of the Arbitral Tribunal to award interest, would operate if it is not otherwise agreed by the parties. If there is an agreement between the parties to the contrary, the Arbitral Tribunal would lose its discretion to award interest and will have to be guided by the agreement between the parties. The provision is clear that the Arbitral Tribunal is not bound to award interest. It has a discretion to award the interest or not to award. It further has a discretion to award interest at such rate as it deems reasonable. It further has a discretion to award interest on the whole or any part of the money. It is also not necessary for the Arbitral Tribunal to award interest for the entire period between the date on which the cause of action arose and the date on which the award is made. It can grant interest for the entire period or any part thereof or no interest at all.
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20. If clause (a) of sub-section (7) of Section 31 of the 1996 Act is given a plain and literal meaning, the legislative intent would be clear that the discretion with regard to grant of interest would be available to the Arbitral Tribunal only when there is no agreement to the contrary between the parties. The phrase "unless otherwise agreed by the parties" clearly emphasises that when the parties have agreed with regard to any of the aspects covered under clause (a) of sub- section (7) of Section 31 of the 1996 Act, the Arbitral Tribunal would cease to have any discretion with regard to the aspects mentioned in the said provision. Only in the absence of such an agreement, the Arbitral Tribunal would have a discretion to exercise its powers under clause (a) of sub-section (7) of Section 31 of the 1996 Act. The discretion is wide enough. It may grant or may not grant interest. It may grant interest for the entire period or any part thereof. It may also grant interest on the whole or any part of the money.
78. Therefore, it is apparent that the Arbitral Tribunal had the jurisdiction and the power to grant and award an interest while passing the Award, since there existed no prior agreement between the parties pertaining to such interest. Along with such power and jurisdiction, there is a vast degree of discretion which is vested with the Arbitral Tribunal. The Hon'ble Supreme Court explicitly stated in the aforesaid judgment that "It has a discretion to award the interest or not to award". Hence, there is not dispute to this effect that since there were no explicit terms pertaining to the issue of interest decided and agreed between the parties before this Court, the Arbitral Tribunal was free to exercise its discretion and grant or not grant an award of interest to the best of its judgment, upon looking into the entirety of the material before it, while also ensuring that such an award does not render the Award patently illegal.
79. In the instant case, the discretionary power of awarding interest was exercised by the Arbitral Tribunal and the award of interest was made while keeping in view that there was a default on the part of the parties. It was also observed that the interest on the amount would have been accruable in the month of November in the year 2015, and hence, it was found just to allow an award of interest @12% per annum, as opposed to the original claim of 18% raised on behalf of the petitioners/claimants.
80. Such an interest was granted by the Arbitral Tribunal, in its wisdom being the master of evidence, after appreciation of the objections, claims and material adduced by the parties. Since, there was no stipulation regarding interest in the Agreement between the parties, the Arbitral Tribunal duly exercised its powers as well as the discretion bestowed upon it and only then the Award regarding interest was made.
81. This observation of the Tribunal also does not invite the vigours of the principles set out above that warrant an intervention under Section 34 of the Arbitration Act. While passing the Award, OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 16 of 17 Arysta Life Science India Ltd.
on merits as well as on the issue of interest, Arbitral Tribunal has taken a judicial approach while passing the Award and has given sufficient reasoning, backed by the facts and material. There is also nothing to show that the principles of natural justice were not observed by the Tribunal since the parties were given sufficient opportunity to put forth their case and further the Arbitral Tribunal has also considered and appreciated the entirety of the matter while passing the impugned Award, which is backed by reasons."
Conclusion
19. Based on the above discussion and the precedents cited, it is evident that the arbitral tribunal has diligently examined the facts of the case and provided a well-reasoned award. The court's jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 is limited, and it cannot delve deeply into matters of evidence or exercise discretion beyond the scope defined by the Act. In this case, the arbitral tribunal has addressed the issues raised by both parties and awarded compensation along with interest based on the merits of the case and the evidence presented. The tribunal's decision to award interest falls within its discretionary power, as established by legal precedents and the provisions of the Act. Therefore, considering the thoroughness of the tribunal's reasoning and its adherence to legal principles, there are no grounds to set aside the arbitral award under Section 34 of the Act. Hence, the petition is dismissed. File be consigned to record room after due compliance.
Announced & dictated
in the open Court on
24th day of May, 2024 (NEELAM SINGH)
District Judge
(Commercial Court-02)
South-East, Saket Courts, ND
OMP (COMM) 42/21 M/s Splendor Landbase Ltd. Vs. Page 17 of 17
Arysta Life Science India Ltd.