2022 (5) TMI 977 - SC - Indian Laws

Supreme Court upholds arbitral award granting interest at SBI PLR plus 2% per contractual agreement under Section 31(7)(a)

DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED Versus DELHI METRO RAIL CORPORATION

SC dismissed appeal in arbitration matter involving termination payment dispute. Arbitral Tribunal correctly awarded interest at SBI PLR plus 2% as per ... Interpretation of statute - whether the 'sum' awarded under Clause (a) of Sub-section (7) of Section 31 of the Arbitration and Conciliation Act, 1996 would include the interest pendente lite or not? - HELD THAT:- As per Article 29.8 of the Concession Agreement, the Termination Payment would become due and payable to the Concessionaire by DMRC within thirty days of a demand being made by the Concessionaire. It further provides that if the DMRC fails to disburse the full Termination Payment within 30 days, the amount remaining unpaid shall be disbursed along with interest at an annualized rate of SBI PLR plus two per cent for the period of delay on such amount. It can thus clearly be seen that Article 29.8 of the Concession Agreement deals with payment of interest on Termination Payment amount. It is thus clear that the Arbitral Tribunal has directed that the Termination payment would be as per the provisions of the Concession Agreement and the interest on the Termination payment would accrue from 7th August, 2013 (i.e., the date 30 days after the demand of Termination payment by DAMEPL on 8th July, 2013). It is pertinent to note that though the Arbitral Tribunal has found that the rates of interest on loans taken by the Appellant-DAMEPL are lower than SBI PLR + 2%, it has observed that it was beyond the competence of the Arbitral Tribunal to change or alter or modify the provisions of the Concession Agreement. The Arbitral Tribunal, therefore, has granted interest at an annualized rate of SBI PLR + 2%, though it had found that the rate of interest on which the loan was taken by the Appellant-DAMEPL was on the lower side. The Arbitral Tribunal, therefore, has rightly given effect to the specific agreement between the parties with regard to the rate of interest. We find that the arbitral award has been passed in consonance with the provisions as contained in Clause (a) of Sub-section (7) of Section 31 of the 1996 Act and specifically, in consonance with the phrase 'unless otherwise agreed by the parties'. In view of the specific agreement between the parties, the interest prior to the date of award so also after the date of award will be governed by Article 29.8 of the Concession Agreement, as has been directed by the Arbitral Tribunal - Appeal dismissed. Issues Involved:1. Whether the 'sum' awarded under Clause (a) of Sub-section (7) of Section 31 of the Arbitration and Conciliation Act, 1996 includes interest pendente lite.Issue-wise Detailed Analysis:1. Interpretation of 'sum' under Clause (a) of Sub-section (7) of Section 31 of the Arbitration and Conciliation Act, 1996:The primary issue in this case is whether the 'sum' awarded under Clause (a) of Sub-section (7) of Section 31 of the Arbitration and Conciliation Act, 1996 includes interest pendente lite. The appellant argued that the sum should include the principal amount plus interest from the date the cause of action arose to the date of the award. This interpretation is based on the majority judgment in Hyder Consulting (UK) Limited v. Governor, State of Orissa, which held that the sum for which an award is made may include interest for the pre-award period, and that for the post-award period, interest up to 18% per annum may be awarded on such sum directed to be paid by the Arbitral Tribunal.2. Agreement between the parties on interest:The respondent contended that Clause (a) starts with 'unless otherwise agreed by the parties,' indicating that if there is a specific agreement on interest, it should prevail. The Concession Agreement between the parties had a specific clause (Article 29.8) regarding interest, which stipulated that if the Termination Payment is not made within 30 days, the unpaid amount shall accrue interest at an annualized rate of SBI PLR plus 2%.3. Judicial Interpretation and Precedents:The court emphasized the importance of the phrase 'unless otherwise agreed by the parties' and referred to various precedents, including N.S. Nayak & Sons v. State of Goa and Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), which clarified that the Arbitral Tribunal's discretion to award interest is subject to any agreement between the parties. The court also reiterated that every word and phrase in a statute must be given effect, avoiding any interpretation that renders them redundant.4. Application of Hyder Consulting (UK) Limited Case:The court noted that in Hyder Consulting (UK) Limited, there was no agreement between the parties regarding interest, which is not the case here. The court highlighted that the judgment must be read in the context of the specific facts of the case. Since there was an agreement on interest in the present case, the principle from Hyder Consulting (UK) Limited regarding the inclusion of interest in the 'sum' did not apply.5. Final Decision:The court concluded that the Arbitral Tribunal correctly followed the Concession Agreement, which specified the interest rate. The tribunal's award, including interest as per the agreement, was upheld. The court found no error in the Delhi High Court's judgment and dismissed the appeal, affirming that the interest prior to and after the award date would be governed by the Concession Agreement.Conclusion:The court dismissed the appeal, holding that the 'sum' awarded under Clause (a) of Sub-section (7) of Section 31 of the Arbitration and Conciliation Act, 1996, includes interest only if there is no contrary agreement between the parties. Since the Concession Agreement specified the interest rate, the Arbitral Tribunal's award, including interest as per the agreement, was upheld.