The discretion with regard to grant of interest is available to the Arbitral Tribunal only when there is no agreement to the contrary between the parties: Supreme Court of India
(DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED VERSUS DELHI METRO RAIL CORPORATION, CIVIL APPEAL NO. 3657 OF 2022)
The facts of the case in this present Appeal were as under:
Appellant namely, Delhi Airport Metro Express Private Limited, and Respondent namely, Delhi Metro Rail Corporation entered into a Concession Agreement dated 25th August 2008. As per the Concession Agreement, the Respondent was to carry out the civil works (excluding civil works at the Depot) and the balance works (including the Depot civil works and the Project systems works) were to be executed by the Appellant. As per Article 29 of the Concession Agreement, in the event of termination, it was the Respondent, which was liable to make payment for termination. During the course of operations of the project, a dispute arose between the Appellant and the Respondent. The Appellant terminated the Concession Agreement by Termination Notice dated 8th October 2012.
Thereafter, the Respondent 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. The Appellant thereafter 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 were also passed by the Hon’ble Single-Judge bench of the Delhi High Court in the said proceedings from time to time. In the said proceedings, a contention was raised on behalf of the Appellant that the sum, as specified under clause (a) of subsection (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 rejected by the learned Hon’ble Judge of the Delhi High Court by the impugned order. The appellant on being aggrieved from the order of the Delhi High Court filed the present appeal by way of special leave.
The question that arose before the Court in the present Appeal was whether sum” awarded under clause (a) of sub-section (7) of Section 31 of the Arbitration and Conciliation Act, 1996 would also include interest pendente lite or not?
The Hon’ble Supreme Court after hearing the contention of both the parties held that:
……“It could thus be seen that the part which deals with the power of the Arbitral Tribunal to award interest, would operate if it is not otherwise agreed by the parties. If there is an agreement between the parties to the contrary, the Arbitral Tribunal would lose its discretion to award interest and will have to be guided by the agreement between the parties. The provision is clear that the Arbitral Tribunal is not bound to award interest. It has a discretion to award the interest or notto award. It further has a discretion to award interest at such rate as it deems reasonable. It further has a discretion to award interest on the whole or any part of the money. It is also not necessary for the Arbitral Tribunal to award interest for the entire period between the date on which the cause of action arose and the date on which the award is made. It can grant interest for the entire period or any part thereof or no interest at all. We find that in the present case, the words “unless otherwise agreed by the parties” would assume significance. If clause (a) of subsection (7) of Section 31 of the 1996 Act is given a plain and literal meaning, the legislative intent would be clear that the discretion with regard to grant of interest would be available to the Arbitral Tribunal only whenthere is no agreement to the contrary between the parties. The phrase “unless otherwise agreed by the parties” clearly emphasizes that when the parties have agreed with regard to any of the aspects covered under clause (a) of subsection (7) of Section 31 of the 1996 Act, the Arbitral Tribunal would cease to have any discretion with regard to the aspects mentioned in the said provision. Only in the absence of such an agreement, the Arbitral Tribunal would have a discretion to exercise its powers under clause (a) of subsection (7) of Section 31 of the 1996 Act. The discretion is wide enough. It may grant or may not grant interest. It may grant interest for the entire period or any part thereof. It may also grant interest on the whole or any part of the money.It could thus be seen that each and every word and each and every phrase mentioned in the provision will have to be given effect to. Statutes have to be construed so that every word has a place and everything is in its place. It could thus clearly be seenthat 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 further held that “We are therefore of the considered view that 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.”