The court upheld the hire purchase agreement and the claim for hire charges, but modified the interest awarded by the arbitrator on the delayed payment charges and reduced the rate of interest awarded from 24% to 12% per annum.

1. By this petition filed under section 34 of the Arbitration and Conciliation Act 1996 (for short 'the said Arbitration Act') the petitioners have impugned the arbitral award dated 7th July, 2011 made by the learned arbitrator directing the petitioners to pay a sum of Rs.56,44,422/- with delayed payment charges at the rate of 36% per annum from 30th November, 2001 to 3rd June 2002 and at the rate of 24% per annum from 4th June 2002 till payment and/or realisation thereof. Some of the relevant facts for the purpose of deciding this petition are as under:-

2. The petitioners are the original respondents whereas the respondents are the original claimants in the arbitration proceedings. It was the case of the respondents that pursuant to the proposal of the petitioner no.1 herein to have two numbers of L & T Make Hydraulic Excavator Model 72 CK and one no. Tata Hitachi EX 200 and two nos. Krupp HM 720 CS Rock breaker on hire purchase basis which proposal was accepted by the respondents. The respondents provided those machineries to the petitioner no.1 on hire purchase basis under an agreement for hire purchase 11th October 2000 on the terms and conditions mentioned therein. It was the case of the respondents that as requested by the petitioner no.1, the said machineries had been acquired from the petitioner no.1 on payment of Rs.67 lacs and the same were given to the petitioner no.1 on hire purchase basis.

3. Under the said hire purchase agreement the petitioners agreed to pay the hire charges totalling to Rs.88,42,392/- in monthly installment of Rs.2,45,622/- as stipulated in the repayment schedule attached to the said agreement within the period of 36 months commencing from 11th November 2000 and ending on 11th October 2003. Under clause 12 of the said agreement, it was agreed that the petitioners would pay 3% per month on unpaid and delayed hire charges. Under the said agreement the petitioners were put in possession of the said machineries. The petitioner no.2 guaranteed the due observance and full performance by the petitioner no.1 of all the terms and conditions of the said agreement. Clause 12 of the said agreement provided for payment of 36% per annum as and by way of additional finance charges by the petitioner no.1 to the respondents in case of the default, from the date of default till payment of such installment. The respondent no.1 was also entitled to take possession of the said machineries from the petitioner no.1 in case of default.

4. It was the case of the respondents that under the said hire purchase agreement, the petitioner no.1 made a payment of Rs.2,45,622/- on 26th November 2000 towards the hire installment of the said machineries and failed to pay the other installments. The cheques issued by the petitioners towards the payment of other installments were dishonoured.

5. According to the respondents the petitioners were liable to pay a sum of Rs.89,92,062/- as on 29th November 2001 and compensation at the rate of 36% per annum from 30th November 2001 on Rs.46,66,818/- till payment or realisation of the said amount.

6. On 18th December 2001 the respondents issued a notice of demand upon the petitioners and called upon the petitioners to pay the overdue hire installment alongwith additional finance charges aggregating to Rs.33,42,756/- as on 29th November 2001 making it clear that in case of failure, the agreement shall automatically stand terminated and the respondents would be entitled to repossession of the machineries. It was also made clear that in case of failure, the dispute shall stand referred to the arbitration as provided under clause 21 of the said hire purchase agreement. The petitioners neither gave any reply to the said notice nor made any payment.

7. The respondents therefore appointed a sole arbitrator under the provisions of the said hire purchase agreement. In the month of June 2002 the respondents filed a statement of claim before the learned arbitrator inter alia praying for an order