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Do-It Computer JV A Joint Venture Company v/s The Municipal Corporation of Greater Mumbai

    Commercial Appeal (L) No. 129 of 2018 in Chamber Summons No. 324 of 2017 in Execution Application No. 37 of 2017 & Notice of Motion (L) No. 243 of 2018
    Decided On, 11 June 2018
    At, High Court of Judicature at Bombay
    For the Appellants: Aspi Chinoy, Sr. Advocate a/w. Farahan Khan a/w. Suraj Iyer, Debashree Mandpe i/b. Ganesh & Co., Advocates. For the Respondents: U.J. Makhija a/w. R.Y. Sirsikar, Advocates.

Judgment Text
Naresh H. Patil, J.


1. Admit. Heard finally by consent of the parties.

2. The appellants are aggrieved by an order dated 7th February, 2018 passed by the learned Single Judge in Chamber Summons No.324/2017. The appellant is a joint venture company of M/s. DoIT Associates and M/s. Computer Engineers. They were registered contractor of the respondents for various projects which were introduced and implemented from time to time. The respondent is a municipal Corporation of Greater Mumbai. On or about 14th February, 2006 the respondent invited civil tenders for work of design, supply, installation, commissioning, operation and maintenance of 'Mechanized Refuse Transfer Station' at the Mahalaxmi site on 'Built Own and Operate' basis ('BOO' basis). The appellant participated in the bidding process and was declared as a successful bidder on 9th November, 2006. Work Order was issued on the same day on 'BOO' basis. Some disputes arose between the appellant and the respondents in respect of the contracted work. The Writ Petition bearing No. 3396 of 2013 came to be filed in the Bombay High Court by the appellant. The matter was referred to Arbitral Tribunal by an order dated 26th June, 2014 which was passed during the course of proceedings by consent of the parties. An Award came to be passed by the Sole Arbitrator on 14th May, 2015. Clause (d) of the Award reads as under:

'(d) Declared that the Claimant is entitled for Rs.286/per MT (Metric Ton) with linear escalation of 5% every year on the amount of Rs.260/per MT on the actual transferred municipal solid waste or for a minimum of 600 MT per day, whichever is higher, and that the Respondent is liable to pay to the Claimant the said sum for the period commencing from 18.06.2009 till expiration of the contractual period, that is, 08.05.2017.'

3. The Award was put for execution by the appellant. A Chamber Summons No.324/2017 came to be filed by the applicant-original respondent with following prayers:

'(a) That the Bank Guarantee dated 17.04.2017 for Rs.47,76,92,708/submitted by the Applicant pursuant to the Order dated 4th April 2017 passed by the Hon'ble Chief Justice and Justice G.S. Kulkarni in Notice of Motion (st) No.746/2017 in Appeal (stamp) No.116 of 2017, be permitted to be substituted by a Bank Guarantee for Rs.35,78,38,434.93 being the amount calculated as per the Award dated 14th May, 2015;'

4. The learned Senior Counsel appearing for the appellant submitted that the Award has to be read as a whole. In view of the observations and conclusions drawn by the Arbitrator in the body of the Award, more precisely in paragraphs 41 and 42, it is imperative to grant interest in respect of amount determined and directed to be paid by the arbitrator as per clause (d) of the Award.

5. The learned Counsel placed reliance on the provisions of Section 31(7)(b) of the Arbitration and Conciliation Act, 1996. It is submitted that even if the Arbitrator fails to specifically mention awarding of interest under the provisions of Section 37(1)(b), the law mandates that such a interest has to be calculated and paid to the successful party.

6. In view of the provisions of law and the observations made in Paragraphs 41 and 42 of the Award, the learned Counsel urged that a reasonable interpretation would be to grant interest and not to deny it on the premise that clause (d) of the operative portion of the award does not refer to awarding of interest.

7. The learned Single Judge rejected the contentions of the appellant.

8. The learned Senior Counsel Mr.Chinoy by referring to Paragraph-42 of the Award submitted that in fact the sole arbitrator had granted interest on the amount found due and payable, therefore, it shall be considered and held that during execution of the award interest has to be calculated under all the heads which are specified in clauses (a) to (d). The learned Counsel further submitted that in view of the provisions of Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 it is mandatory to calculate the interest and pay the same to the successful party.

9. Per contra, the learned Counsel appearing for respondent submitted that Award is a decree. During execution proceedings Court is not entitled to go behind the decree. The sole arbitrator had clearly indicated and granted interest under clauses (a) to (c) of the Award but did not grant interest while awarding claim of the appellant as per clause (d). The Executing Court is not supposed to go behind the decree, interpret different clauses of the judgment, to modify the decree or executable portion of the award. The Award was challenged but the same failed in Courts of law upto Apex Court. It is submitted that the appellants failed to pray for correction of award within stipulated time. The amount under the Award has been deposited in the Executing Court. In view of the fact that Arbitrator did not grant interest in clause (d) of the Award, it shall not be now permissible for the parties to interpret and claim interest during execution proceedings.

10. We have perused the record placed before us. We may reproduce Paragraph42 of the Award which reads as under:

'Though there is no specific contractual term for payment of interest on amount remaining due and payable by the Respondent to the Claimant, it being commercial transaction and the Claimant having been deprived of the user of the amount justly due and payable by the Respondent to the Claimant, the Claimant is required to be compensated for the same nomenclature apart. The Claimant having established that the Claimant has in fact made payment and is in fact making payment of interest at 14% per annum to banks/financial institutions for the amounts borrowed for capital investments in execution of the contractual work, the Claimant is entitled to payment of interest by the Respondent at the reasonable prevailing market rate of interest which, in the facts and circumstances, is determined at 15% per annum and accordingly, the Claimant is entitled to interest on the amount found due and payable in any event as from the date of commencement of the present arbitral proceedings, that is, 14.07.2014 when letter dated 04.07.2014 was addressed by this Arbitral Tribunal in response to letter dated 03.07.2014 addressed by the Respondent, till date of payment or realization, whichever is earlier.

11. Though in the said paragraph the arbitrator recorded that the Complainant is entitled to interest amount due and payable but at the sametime while concluding in paragraph45 the arbitrator recorded 'I make the following Award' and thereafter recorded the operative portion of the Award in clauses (a) to (d). In Clauses (a) to (c) the Arbitrator had directed payment of interest on the amount which were directed to be paid to the appellant-claimant by the respondent but the arbitrator did not grant interest for the amount determined in clause (d) of the award.

12. We are convinced with the submissions advanced by the learned Counsel appearing for respondents that it would not be permissible to go behind the decree and add and modify the award by accepting oral submissions of the parties. We find substance in the submissions of the Counsel. The provisions of Section 33 of the Arbitration and Conciliation Act, 1996 refers to correction and interpretation of award/additional award which could have been resorted to by the appellant within 30 days from the receipt of arbitral award. Admittedly, such a step was not taken by the appellant, also there was no challenge to this portion of the award by invoking Section 34 of the Act. The award has accordingly become final which was subject matter of challenge before the Apex Court, according to the Counsel.

13. The provisions of Section 31(7)(b) reads as under:

'31(7)(b): A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent, higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.'

14. Based on provisions of Section 31 the learned Senior Counel Mr. Chinoy submitted that in view of provisions of Section 31(7)(b) even if the arbitrator did not award interest then interest shall be calculated at the rate of 18% per annum from the date of award till the date of payment. This is the mandate of law. The arbitrator did not otherwise direct not to pay interest on the sum payable under clause (d) of the Award, according to learned Counsel.

15. We have perused the relevant part of the award, particularly, paragraph42 and the provisions of Section 31(7)(b). It is true that there is no other finding otherwise denying interest to the appellant on the subject claim in clause (d), however, considering the nature and contents of clause (d) it appears to us that the arbitrator has consciously not granted interest against the payment determined as per clause (d) of the Award. Under clause (d), the Arbitrator declared that the claimant was entitled for an amount with escalation of 5% on the actual transferred municipal solid waste. The amount involved under this head would be required to be cal

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culated based on the actual transferred municipal solid waste for the period between 18.06.2009 till expiry of the contractual period i.e. 08.05.2017. Therefore, it seems that Arbitrator was clear in his mind not to grant interest on the amount in clause (d) of the Award. 16. In the facts, therefore, the provisions of Section 31(7)(b) are not applicable. Even reading of the observations made by the Arbitrator in paragraph42 of the judgment would not come to the help of the appellant to claim interest at the belated stage namely in the execution proceedings. The learned Single Judge adopted a view which according to us is sound and reasonable. A balanced approach has been adopted keeping in view the material placed on record. We do not find any error or perversity in the view adopted by the learned Single Judge. We do not find merit in the appeal. It is accordingly dismissed. 17. In view of dismissal of appeal, nothing survives for consideration in the Notice of Motion. The same is disposed of accordingly.