Madhya Pradesh High Court
Sambhav Industries ( A Unit Of M/S. ... vs National Insurance Co. Ltd. Thr. on 15 January, 2018
THE HIGH COURT OF MADHYA PRADESH
1
MP.121.2018
Sambhav Industries
(A Unit of M/s Suruchi Electronics Pvt. Ltd.)
Through its Director Mr. Vishal Chand Bothra
Vs.
National Insurance Co. Ltd through its Divisional Manager
Gwalior, Dated : 15.01.2018
Shri K.N. Gupta, learned Senior Counsel with
Ms. Sweta Bothra, learned counsel for the
petitioner.
Shri Alok Kumar Sharma, learned counsel for
the respondent.
With the consent of learned counsel for the parties, the matter is finally heard.
Besides challenging the orders dated 21.12.2017 and 25/10/2017 passed by the Trial Court in Arbitration Application No.15/2017, the petitioner in the alternative seeks direction to respondent to deposit the awarded amount of Rs.11,70,18,676/- along with interest in the Trial Court in lieu of the stay thereof.
The Trial Court in seisin with the application under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity "1996 Act") directed against the Award dated 22.02.2017 whereby sole Arbitrator has awarded the total sum of Rs.3,44,89,217/- plus Rs.70,28,077/- towards interest on delayed payment @ 16% per annum from 06/02/2007 to 16/02/2016 [in respect of item No. h(i) and (ii) the interest from 11.07.2008 to 23.10.2009] and interest pendente lite from THE HIGH COURT OF MADHYA PRADESH 2 MP.121.2018 Sambhav Industries (A Unit of M/s Suruchi Electronics Pvt. Ltd.) Through its Director Mr. Vishal Chand Bothra Vs. National Insurance Co. Ltd through its Divisional Manager 16.02.2016 till actual payment on the awarded amount @ 14% per annum plus cost of litigation Rs.25 lacs, Arbitrator's Fee Rs.7,36,300/- and counsel fee Rs.3 lacs, by order dated 25.10.2017, on an application under Section 36 of 1996 Act stayed the operation of award subject to the objector depositing Bank Guarantee in the sum of Rs.3,44,89,217/- with court towards security.
Aggrieved, the present petitioner filed an application seeking review of the order dated 25/10/2017 contending inter alia that being a money decree incumbent it was on the trial court to have directed for deposit of equal sum as awarded including the interest and the costs. The Trial Court by order dated 21.12.2017 declined the relief on two counts; firstly, that the amount of award which finds mention in the comparative statement of claim of the Sambhav Industries at various stages; and secondly, the objector being a National Insurance Company the said Bank Guarantee was ordered.
Aggrieved, the petitioner has filed this petition seeking quashment of the impugned order and direction to the respondent/objector to deposit the entire amount of award, which includes the interest and the costs.
THE HIGH COURT OF MADHYA PRADESH 3 MP.121.2018 Sambhav Industries (A Unit of M/s Suruchi Electronics Pvt. Ltd.) Through its Director Mr. Vishal Chand Bothra Vs. National Insurance Co. Ltd through its Divisional Manager It is urged that the learned Trial Court glossed over the fact that the award included the interest and cost and that being a money decree equal sum thereof ought to have been directed to be deposited to meet out the equity. Further, relying on the decision on "Atma Ram Properties (P) Ltd. Vs. Federal Motors (P) Ltd. [(2005) 1 SCC 705; Malwa Strips Private Limited Vs. Jyoti Limited (2009) 2 SCC 426 and Bhupendra Kant Bhardwaj and others Vs. Rameshchandra Goyal 2014 (2) MPLJ 286", it is urged that the trial court has overlooked the principle of law laid down in these cases that the stay against money decree has to be conditional, satisfying the ratio of equity.
The respondent, on his turn, submits that under Section 36 of 1996 Act, learned Trial Court was well within its jurisdiction in directing for depositing Bank Guarantee equivalent to the sum of Rs.3,44,89,217/- which was awarded in favour of the present petitioner.
Considered the rival submissions. Sub-section (3) of Section 36 of 1996 Act envisages:
"36. Enforcement.--
(1) xx xx xx THE HIGH COURT OF MADHYA PRADESH 4 MP.121.2018 Sambhav Industries (A Unit of M/s Suruchi Electronics Pvt. Ltd.) Through its Director Mr. Vishal Chand Bothra Vs. National Insurance Co. Ltd through its Divisional Manager (2) xx xx xx (3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:
Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908)."
Furthermore, sub-section (7) of Section 31 of 1996 Act mandates:
"31. Form and contents of arbitral award.--
(1) xx xx xx
(2) xx xx xx
(3) xx xx xx
(4) xx xx xx
(5) xx xx xx
(6) xx xx xx
(7) (a) Unless otherwise agreed by the parties, where and in so far 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 THE HIGH COURT OF MADHYA PRADESH 5 MP.121.2018 Sambhav Industries (A Unit of M/s Suruchi Electronics Pvt. Ltd.) Through its Director Mr. Vishal Chand Bothra Vs. National Insurance Co. Ltd through its Divisional Manager 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 two percent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.
Explanation.--The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978)."
In "Hyder Consulting (UK) Limited Vs. Governor, State of Orissa through Chief Engineer [(2015) 2 SCC 189]", it is held:
"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 THE HIGH COURT OF MADHYA PRADESH 6 MP.121.2018 Sambhav Industries (A Unit of M/s Suruchi Electronics Pvt. Ltd.) Through its Director Mr. Vishal Chand Bothra Vs. National Insurance Co. Ltd through its Divisional Manager 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 pendent lite.
11. At this juncture, it may be useful to refer to Section 34 of the CPC, 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 34, CPC 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 34 CPC in Section 31 (7) of the Act, 1996 is significant and shows the intention of Parliament.
21. In the result, I am of the view that S.L. Arora case is wrongly decided in that it holds that a sum directed to be paid by an Arbitral Tribunal and the reference to the Award on the substantive claim does not refer to interest pendente lite awarded on the "sum directed to be paid upon Award"
and that in the absence of any provision of interest upon interest in the contract, the Arbitral Tribunal does not have the power to award interest upon interest, or THE HIGH COURT OF MADHYA PRADESH 7 MP.121.2018 Sambhav Industries (A Unit of M/s Suruchi Electronics Pvt. Ltd.) Through its Director Mr. Vishal Chand Bothra Vs. National Insurance Co. Ltd through its Divisional Manager compound interest either for the pre- award period or for the post-award period. Parliament has the undoubted power to legislate on the subject and provide that the Arbitral Tribunal may award interest on the sum directed to be paid by the Award, meaning a sum inclusive of principal sum adjudged and the interest, and this has been done by Parliament in plain language.
In view whereof, in our considered opinion, the award would include the principal sum adjudged and the interest thereon.
In the case at hand the Trial Court misconstrued the provisions contained under Section 31 of 1996 Act by only taking into consideration the principal sum adjudged while dwelling upon the application under Section 36(3) of 1996 Act.
That sub-section (3) of Section 36 of 1996 Act, in clear terms, stipulates that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.
The Trial Court though adhered to the principle of law stipulated in the proviso to sub- section (3) of Section 36 of 1996 Act, however THE HIGH COURT OF MADHYA PRADESH 8 MP.121.2018 Sambhav Industries (A Unit of M/s Suruchi Electronics Pvt. Ltd.) Through its Director Mr. Vishal Chand Bothra Vs. National Insurance Co. Ltd through its Divisional Manager erred in construing the Award by not including the interest on the principal sum adjudged.
In view whereof the impugned order is modified to the extent that the respondent/objector shall deposit the Bank Guarantee covering the amount of Rs.11,70,18,676/- with the Court. As the Bank Guarantee for the amount of Rs.3,44,89,217/- has already been deposited, the respondent shall deposit the Bank Guarantee covering the remaining amount of Rs.11,70,18,676-3,44,89,217 = 8,25,29,459/- within 15 days from the date of communication of this order. Subject to same the operation of Award is stayed.
The petition is disposed of finally in above terms. No costs.
(Sanjay Yadav) Judge pd PAWAN DHARKAR 2018.01.18 09:52:22 -08'00'