2021 (11) TMI 910 - HC - Insolvency and Bankruptcy

Court upholds arbitral award challenge, debtor owes interest despite partial payment. Insolvency and Bankruptcy Code.

M/s. Ipex Infrastructure (P) Ltd. Versus Hindustan Construction Company

The court dismissed the judgment debtor's challenge to an arbitral award and subsequent appeal, leading to a petition under the Insolvency and Bankruptcy ... Validity of Arbitral Award - Seeking stay of proceedings before the NCLT - Section 36(1) of Arbitration and Conciliation Act, 1996 read with Order XXI Rule 11 CPC - HELD THAT:- It is noted that when judgment debtor approached Hon’ble Supreme Court seeking stay of proceedings before the NCLT, it undertook to pay within twelve weeks the amount of ₹ 8.81 crores i.e. the amount claimed by the decree holder in its petition before the NCLT i.e. the awarded amount of ₹ 8,35,33,837/- + interest @ 12% from the date of Award till the date of filing of the petition i.e. 27.05.2019 as ₹ 38,17,382 + ₹ 8,00,000/- towards awarded cost of arbitration proceeding, to the decree holder. However, judgment debtor failed to honour the aforesaid undertaking given before the Hon’ble Supreme Court, the decree holder filed the contempt petition, wherein the Hon’ble Supreme Court vide order dated 07.02.2020 gave last opportunity to the judgment debtor to make the payment of ₹ 8.81 crores within two weeks in compliance of order dated 13.09.2021. The aforesaid direction of Hon’ble Supreme Court relates to the root of the matter i.e. direction to the judgment debtor to pay the amount claimed by the decree holder before NCLT as on the said date i.e. 27.05.2019, as awarded by the Arbitral Tribunal. The spirit of the said direction is to honour the arbitral Award in its true essence. The arbitral Award is very clearly worded that “the awarded amount of ₹ 8,35,33,837/- has to be paid together with future interest at the rate of 12 percent per annum from 08.01.2019 i.e. the date of the award till date of payment on the awarded amount in favour of decree holder”. So, upon payment of ₹ 8,81,51,219/-crores to the decree holder, the judgment debtor cannot now claim that it has already honoured the arbitral award by complying the directions of Hon’ble Supreme Court vide order dated 07.02.2020. The judgment debtor is under the obligation to honour the arbitral Award in its true letter and spirit and cannot escape from paying the balance amount of interest due towards it. The judgment debtor is directed to pay the balance amount of interest, which is due and payable to decree holder from 27.05.2019 with interest @12% p.a. till the date of realization - petition disposed off. Issues:1. Interpretation of provisions of Arbitration and Conciliation Act, 1996 and Order XXI Rule 11 CPC regarding arbitral award and payment obligations.2. Compliance with directions of the Hon'ble Supreme Court in relation to payment of awarded amount and interest.3. Determination of liability for interest on the awarded amount till the date of payment.Analysis:1. The decree holder filed a petition under Section 36(1) of the Arbitration and Conciliation Act, 1996 read with Order XXI Rule 11 CPC concerning an arbitral award dated 08.01.2019. The judgment debtor challenged the award under Section 34 of the Act, which was dismissed by the court. Subsequently, the decree holder demanded payment under the Insolvency and Bankruptcy Code, 2016, leading to a petition before the NCLT. An appeal by the judgment debtor was also dismissed under Section 37 of the Act.2. The judgment debtor, after failing to comply with the agreed payment terms before the Hon'ble Supreme Court, faced a contempt petition. Following a court order, the judgment debtor made a partial payment to the decree holder. However, the decree holder contended that the payment did not include interest accrued till the date of payment, as per the arbitral award terms.3. The decree holder argued that the judgment debtor still owed a balance amount of interest from the date of the award till the actual payment date. The court noted that the direction from the Hon'ble Supreme Court was to pay the awarded amount and interest in full, and the judgment debtor's partial payment did not absolve it from the obligation to pay the remaining interest. Consequently, the judgment debtor was directed to pay the outstanding interest amount due to the decree holder from 27.05.2019 with interest at 12% per annum until realization.This detailed analysis of the judgment highlights the key legal issues, interpretations, compliance with court directions, and the determination of payment obligations, ensuring a comprehensive understanding of the case.