Soma Enterprise Limited vs Dedicated Freight Corridor ... on 10 April, 2023

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Delhi High Court - Orders

Soma Enterprise Limited vs Dedicated Freight Corridor ... on 10 April, 2023

1. The decree holder seeks enforcement of an award dated 18.10.2018 by which a three-member Arbitral Tribunal ["the Tribunal"] has adjudicated disputes between the parties under a contract dated 17.03.2009, for "Design and construction of 54 major and important bridges for Western Freight Corridor".

2. Mr. Sushant Kumar, learned counsel for the decree holder, states that the decretal dues have largely been satisfied except the decree holder's claim for further interest upon claim No. 2.

3. Claim No. 2, raised by the decree holder before the Tribunal, related to recovery of excess interest levied by the judgment debtor upon advances for plant and machinery and mobilisation, which it had given to the decree holder. The judgment debtor had recovered interest from the decree holder on the advance amounts from its running bills at 2% above the Prime Lending Rate of the State Bank of India [SBI PLR + 2%]. According to the decree holder, the contract only permitted the judgment Signature Not Verified Digitally Signed By:SHITU NAGPAL OMP (ENF.) (COMM.) 99/2019 Page 1 of 6 Signing Date:13.04.2023 11:12:03 debtor to levy simple interest @ 5% per annum. The Tribunal found that the judgment debtor was obliged to recover interest only @ 5% per annum during the extended period of the contract.

4. After quantifying the excess recovery made towards interest at ₹32,25,88,066/-, the Tribunal accepted the decree holder's computation adjusting the amount of excess recovery towards the outstanding principal advanced amount. This is reflected in paragraph 3.4.11 and 3.4.12 of the award under enforcement, which reads as follows:

"3.4.11 Qualification of Claim The Claimant has given detailed calculations of the interest amount as actually recovered vis a vis what should have been recovered @ 5% simple interest up to 15/06/2015 at page 103 of CD-1 as summarized herein below:

a) Total amount recovered towards interest up to 15/06/2015 Rs 52,13,20,871/-

b) Total amount recovered towards interest charges up to 14/08/2011 at 5% p.a in IPC 13 and IPC 14 Rs 7,07,75,202/-

c) Therefore, amount recovered towards interest charges for the period beyond 14/08/2011 at SBI PLR +2% (a)- (b) Rs. 45,05,45,668/-

d) Interest charges recoverable at interest rate of 5% p.a. up to 15/06/2015 Rs 19,87,32,805/-

e) Excess recovery made towards interest @SBI PLR +2% (a)- (d) Rs 32,25,88,026/-

f) Outstanding amount of advance as on 15/06/2015 after adjusting excess recovery Rs 43,72,02,006/-

He has arrived at Rs 43,72,02,006/- as the correct outstanding amount on this date. (Refer para 15.28 of CD1). The Respondent in response at page 55 of RD1 has stated that he could recover only ₹ 7,99,87,182/- towards principal amount up to June 2015, thus leaving an outstanding amount of Rs 75,97,90,072/-. The Respondent has however, not given the basis of his calculations. If in the calculations of claimant above, the excess recovery of interest amounting to Rs 32,25,88,066/- is. added to the outstanding amount of advance of Rs. 43,72,02,006/- as calculated by Claimant, the figure totals up to 75,97,90,072/- and tallies with the figure as pointed out by Respondent above. Therefore, the calculations of claimant stand validated with those of Respondent. The Respondent has also calculated the outstanding amount along with interest as Rs 108,11,86,117/- as on 31/07/2017. but since the cut off date for claims. as considered by AT is 15/06/2015, we are not considering any details beyond 15/06/2015.

We, therefore conclude, that the Respondent has recovered excess interest amount of Rs 32,25,88,066/- up to 15/06/2015 which should be adjusted as return of principal amount treating the balance outstanding amount as Rs 43,72,006/-. Thereafter, the interest charges and principal amount should be reworked out by Signature Not Verified Digitally Signed By:SHITU NAGPAL OMP (ENF.) (COMM.) 99/2019 Page 2 of 6 Signing Date:13.04.2023 11:12:03 Respondent for the period beyond 15/06/2015.

3.4.12 Accepting the prayer of the Claimant as reproduced in para 3:2.6 above, the AT passes the following order on claim no 2

(i) Charging of interest @SBI PLR +2% on the outstanding advances during the extended periods of contract is not as per Contract Agreement. The same has to be @5% simple interest as in the original period of completion.

(ii) The outstanding advances after reworking the interest charges @5% p.a from 15/08/2011 to 15/06/2015 amount to ₹ 43,72,02,006/- as on 15/06/2015 instead of Rs 75.98 crores as considered by Respondent.

(iii) The Respondent shall continue to deduct interest on outstanding advance @ 5% p.a simple interest, beyond 15/06/2015 during further extensions of the contract if the same are granted under clause 8.3."

[Emphasis supplied.]

5. In the summary of the award in paragraph 8, as far as claim No. 2 is concerned, these conclusions have been reproduced :-

"Summary of Award Claim Claim Award Remarks Number xxxx xxxx xxxx 2 Excess interest 1. Charging interest @ SBI recovered by the PLR +2% is not as per CA.

                                             Respondent on the             The same has to be @ 5%
                                             mobilization        and       p.a. simple interest.

machinery advances 2. The outstanding advance, @ SBI PLR +2% after reworking the interest instead of 5% simple charges @ 5% p.a. from interest for the period 15.08.2011 to 15.06.2015, 15.08.2011 to amounts to Rs.43,72,02,006/- 15.06.2015 as on 15.06.2015, instead of Rs.75.98 crores as calculated by the Respondent.

3. Interest is payable on outstanding advances @ 5% simple interest beyond 15.06.2015 also, during further extensions of the Contract, if the same is granted under Clause 8.3 of CA"

Signature Not Verified Digitally Signed By:SHITU NAGPAL OMP (ENF.) (COMM.) 99/2019 Page 3 of 6 Signing Date:13.04.2023 11:12:03

6. Paragraph Nos. 10 and 11 of the award thereafter read as follows: -

"The total amount as payable by the Respondent to the Claimant as on date of the Award, after adjustment of excess interest recovered towards claim no. 2, works out to Rs 1,88,04,931/- as per details below:

• Claim no. 1 = Rs. 1 ,37,19,931/-

• Claim no. 4 = Rs. 19,35,000/-

• Adjustment· towards fees paid to the Arbitrators by the Claimant on behalf of the Respondent= Rs. 31,50,000/-

11. Award The AT awards an amount of Rs.1,88,04,931/- (Rupees One crore eighty eight lakhs four thousand and nine hundred thirty one only) on this day, the 08th October, 2018 in favour of the Claimant on a non-

judicial stamp paper of Rs. 100/- with the direction that the party concerned may make good the appropriate stamp duty as per the Stamp Act of Delhi.

In case, the payment of Awarded amount is not made within 60 days of the publication of Award, simple interest@ 12% p.a. shall be payable to the Claimant, from the date of publication of Award."

[Emphasis supplied.]

7. Mr. Kumar submits that, upon a proper reading of the award, the excess amount recovered under claim No. 2 must also be read to carry interest @ 12% per annum. He submits that the aforesaid excess amount has, in fact, been paid by the judgment debtor to the decree holder on 10.03.2023.

8. Ms. Sandhya Kohli, learned counsel for the judgment debtor, on the other hand, submits that the conclusions of the Tribunal on claim No. 2 do not carry any future interest. Ms. Kohli, relying upon paragraph Nos. 10 and 11 of the award, further submits that the award for future interest was granted by the Tribunal only on the amount of ₹1,88,04,931/-, and Signature Not Verified Digitally Signed By:SHITU NAGPAL OMP (ENF.) (COMM.) 99/2019 Page 4 of 6 Signing Date:13.04.2023 11:12:03 not upon the excess recovery computed against the claim No. 2.

9. Having heard learned counsel for the parties, I am of the view that the interpretation of the judgment debtor on this account is correct. As far as claim No. 2 is concerned, the Tribunal found in favour of the decree holder that the judgment debtor had recovered excessive interest on the advance amount for the extending period of the contract. However, the Tribunal did not award the recovery of the excess amount in terms of a monetary award against the judgment debtor, but directed that the excess recovery would be adjusted against the principal which remained due from the decree holder on this account. The decree holder has, thus, benefited from the adjustment of the principal amount, but was not to be compensated by refund of the excess amount recovered. The terms in which paragraph Nos. 10 and 11 of the award have been framed also lend support to this view. As far as the monetary award is concerned, the Tribunal has limited it to claim Nos. 1 and 4, and also awarded further interest thereupon @ 12 % per annum.

10. It may also be mentioned that Section 31(7) of the Arbitration and Conciliation Act, 1996, which provides for interest to be awarded upon an arbitral award from the date of the award until payment would not apply to the present case for the same reason. The operative relief in claim No. 2 granted by the Tribunal was by way of adjustment as aforesaid, and not by way of a payment to be made by the judgment debtor to the decree holder.

11. It appears that, after passing of the impugned award, the contract was terminated in February, 2019, and further arbitral proceedings have been held between the parties in respect of which an arbitral award dated Signature Not Verified Digitally Signed By:SHITU NAGPAL OMP (ENF.) (COMM.) 99/2019 Page 5 of 6 Signing Date:13.04.2023 11:12:03 06.01.2023 has been made. According to the decree holder, after termination of the contract, the judgment debtor, in fact, made a monetary payment of the award on claim No. 2 in the award under enforcement. Ms. Kohli, however, submits that the payment has been made pursuant to the award dated 06.01.2023. She has also pointed out that the judgment debtor's challenge to the award dated 08.10.2018 [O.M.P.(COMM) 110/2019] remains pending before this Court.

12. It is made clear that the aforesaid findings are only rendered in the context of these enforcement proceedings, which arise out of the award dated 08.10.2018. If the decree holder has any further claims arising out of the award dated 06.01.2023, it will be open to the decree holder to execute the same in accordance with law. Similarly, if any further orders are required in view of the final adjudication of O.M.P.(COMM) 110/2019, the parties will be at liberty to seek appropriate orders at that stage.

13. As the decree holder contends that its claim for future interest on claim No. 2 was the only outstanding claim against the award under execution, no further orders are required to be passed in these enforcement proceedings, which accordingly stand disposed of.

PRATEEK JALAN, J APRIL 10, 2023 'Bhupi'/ Signature Not Verified Digitally Signed By:SHITU NAGPAL OMP (ENF.) (COMM.) 99/2019 Page 6 of 6 Signing Date:13.04.2023 11:12:03

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Delhi High Court - Orders