1. Execution of an arbitral award — dispute over whether the sum for post-award interest includes pre-award interest under Section 31(7) of the Arbitration and Conciliation Act, 1996. (Para 2 , 4 , 5 , 6 )
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2022 Supreme(SC) 410
SUPREME COURT OF INDIA
L. Nageswara Rao, B.R. Gavai, JJ.
Delhi Airport Metro Express Private Limited – Appellant
Versus
Delhi Metro Rail Corporation – Respondent
Civil Appeal No. 3657 of 2022 [Arising Out of SLP(Civil) No. 4901 of 2022]
Decided on : 05-05-2022
Important Points
IMPORTANT POINTS
(1) Arbitral Tribunal is not bound to award interest – It has discretion to award interest or not to award.
(2) Discretion with regard to grant of interest would be available to Arbitral Tribunal only when there is no agreement to the contrary between parties.
(1) Arbitral Tribunal is not bound to award interest – It has discretion to award interest or not to award.
(2) Discretion with regard to grant of interest would be available to Arbitral Tribunal only when there is no agreement to the contrary between parties.
Subject
Arbitration Law - INTEREST ON AWARD
Act Referred
Headnote
(A) Arbitration and Conciliation Act, 1996 – Section 31(7)(a) – Interest pendente lite – Award of – Arbitral Tribunal is not bound to award interest – It has discretion to award interest or not to award – It further has discretion to award interest at such rate as it deems reasonable – It further has discretion to award interest on whole or any part of money – It is also not necessary for Arbitral Tribunal to award interest for entire period between date on which cause of action arose and date on which award is made – It can grant interest for entire period or any part thereof or no interest at all – Discretion with regard to grant of interest would be available to Arbitral Tribunal only when there is no agreement to the contrary between parties – When parties have agreed with regard to any of aspects covered under clause (a) of sub-section (7) of Section 31 of 1996 Act, Arbitral Tribunal would cease to have any discretion with regard to aspects mentioned in said provision – Only in absence of such agreement, Arbitral Tribunal would have discretion to exercise its powers under clause (a) of sub-section (7) of Section 31 of 1996 Act. (Paras 15 and 18)
(B) Interpretation of Judgment – Ratio decidendi – Every judgment must be read as applicable to particular facts proved, or assumed to be proved – Generality of expressions which are found in a judgment cannot be considered to be intended to be exposition of whole law – They will have to be governed and qualified by particular facts of the case in which such expressions are to be found – Ratio decidendi is rule deducible from application of law to facts and circumstances of a case which constitutes its ratio decidendi and not some conclusion based upon facts which may appear to be similar – One additional or different fact can make a world of difference between conclusions in two cases even when same principles are applied in each case to similar facts. (Paras 31 and 33)
Facts of the case:
Short question involved in the present appeal is, as to whether the “sum” awarded under clause (a) of sub-section (7) of Section 31 of the Arbitration and Conciliation Act, 1996 would include interest pendente lite or not?
Findings of Court:
No error in the observations of Single Judge of the Delhi High Court in paragraph 30 of impugned judgment and order dated 10th March, 2022, passed in Execution Petition being OMP (ENF.) (COMM) No. 145 of 2021.
Result : Appeal dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant :Harish N. Salve, J.J. Bhatt, Mahesh Agarwal, Megha Mehta, Niyati Kohli, Nishant Rao, Pranjit Bhattacharya, Manvi Agarwal, E. C. Agrawala, Advocates
For the Respondent:Tarun Johri, Advocate
For the Appellant :Harish N. Salve, J.J. Bhatt, Mahesh Agarwal, Megha Mehta, Niyati Kohli, Nishant Rao, Pranjit Bhattacharya, Manvi Agarwal, E. C. Agrawala, Advocates
For the Respondent:Tarun Johri, Advocate
Table of Contents
2. Whether the awarded sum includes interest pendente lite for post-award interest calculation — impact of the phrase unless otherwise agreed by the parties in the presence of a contract. (Para 8 , 9 )
3. The phrase unless otherwise agreed by the parties prioritizes party autonomy; specific contractual agreements on interest supersede the general statutory discretion of the Arbitral Tribunal. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 )
4. Contractual agreements on interest prevail over Section 31(7)(a) of the 1996 Act, as the statutory discretion applies only in the absence of such agreements. (Para 18 , 22 , 24 )
5. Appeal dismissed — the High Court's order regarding the calculation of the awarded sum and interest is upheld. (Para 35 , 36 , 37 )
6. Does the sum under Section 31(7)(a) of the 1996 Act generally include pre-award interest?
Yes, the sum for which an award is made typically refers to the total amount, which may include the principal and interest for the pre-award period, unless the parties have agreed otherwise. (Para 11 , 13 )
7. What is the legal effect of the phrase unless otherwise agreed by the parties in Section 31(7) of the 1996 Act?
This phrase ensures that if parties have a specific agreement regarding interest, the Arbitral Tribunal's discretion to award interest under Section 31(7)(a) is superseded, and the Tribunal must be guided by the contract. (Para 16 , 17 , 18 )
8. How does party autonomy influence the award of interest in arbitration proceedings?
The 1996 Act emphasizes party autonomy; therefore, any specific agreement between parties regarding interest aspects covered under Section 31(7)(a) removes the Tribunal's discretion and binds the award to the contractual terms. (Para 18 , 22 )
9. Can a general legal principle from a precedent be applied if the material facts of the current case differ?
No, every judgment must be read as applicable to the particular facts proved. A different material fact can significantly alter the conclusion even when the same legal principles are applied. (Para 30 , 31 , 32 , 33 , 34 )
JUDGMENT
B.R. Gavai, J.
Leave granted.
2. The short question involved in the present appeal is, as to whether the "sum" awarded under clause (a) of sub-section (7) of Section 31 of the Arbitration and Conciliation Act, 1996(hereinafter referred to as the "1996 Act") would include the interest pendente lite or not?
3. The undisputed facts in the present case are as under:
4. On being declared as the successful bidder, a Concession Agreement dated 25th August, 2008 (hereinafter referred to as "the Concession Agreement"), was entered into between the appellant-Delhi Airport Metro Express Private Limited (hereinafter referred to as "DAMEPL") and the respondent-Delhi Metro Rail Corporation (hereinafter referred to as "DMRC"). As per the Concession Agreement, the respondent-DMRC was to carry out the civil works (excluding at the Depot) and the balance works (including the Depot civil works and the Project systems works) were to be executed by the appellant-DAMEPL. As per Article 29 of the Concession Agreement, in the event of termination, it was the respondent-DMRC, which was liable to make Termination Payment (as defined in the Concession Agreement).
5. During the course of operations of the project, a dispute arose between the appellant-DAMEPL and the respondent-DMRC. The appellant-DAMEPL terminated the Concession Agreement by Termination Notice dated 8th October, 2012. The respondent-DMRC referred the dispute to Arbitration under Article 36.2 of the Concession Agreement on 23rd October, 2012. An Arbitral Award came to be passed on 11th May, 2017. On 12th May, 2017, the appellant-DAMEPL paid a stamp duty of Rs. 4,72,20,000/- on the Award. Certain interim orders were also passed in the interlocutory proceedings by the Delhi High Court. Since the respondent-DMRC was aggrieved by the Award, it filed a Petition under Section 34 of the 1996 Act in Delhi High Court, being OMP (COMM) No. 307 of 2017, challenging the Arbitral Award dated 11th May, 2017. Vide the judgment and order dated 6th March, 2018, the learned Single Judge of the Delhi High Court upheld the Arbitral Award and rejected the respondent-DMRC's petition under Section 34 of the 1996 Act. The said judgment and order dated 6th March, 2018 came to be challenged by the respondent-DMRC before the Division Bench of the Delhi High Court by way of appeal being FAO(OS)(COMM) No. 58 of 2018. The said appeal was partly allowed by the Division Bench of the Delhi High Court vide the judgment and order dated 15th January, 2019. Being aggrieved thereby, the appellant-DAMEPL preferred Civil Appeal No. 5627 of 2021 [arising out of Special Leave Petition (Civil) No. 4115 of 2019] before this Court. The said appeal came to be allowed by this Court by judgment and order dated 9th September, 2021, vide which the judgment and order dated 15th January, 2019, passed by the Division Bench of the Delhi High Court was set aside.
6. The appellant-DAMEPL thereafter immediately filed an Execution Petition being OMP (ENF.) (COMM) No. 145 of 2021 on 12th September, 2021, before the Delhi High Court for enforcement of the Arbitral Award dated 11th May, 2017 passed by the Arbitral Tribunal. Various orders came to be passed by the learned Single Judge of the Delhi High Court in the said proceedings from time to time. Vide the impugned judgment and order dated 10th March, 2022, the learned Single Judge of the Delhi High Court issued certain directions with regard to the payment to be made by the respondent-DMRC towards the satisfaction of the Award. Vide the impugned judgment and order, the application(s) for impleadment filed by the Canara Bank and the Union Bank of India came to be rejected. In the said proceedings, a contention was raised on behalf of the appellant-DAMEPL that the sum, as specified under clause (a) of sub-section (7) of Section 31 of the 1996 Act, would include interest for a period from the date on which the cause of action arose to the date on which the award was made. The said contention was
