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Nirmal Lifestyle Ltd. & Another v/s Tulip Hospitality Services Ltd. & Another

    Arbitration Petition Nos. 550 of 2013, 864 of 2013, 891 of 2013 & 663 of 2013
    Decided On, 27 November 2013
    At, High Court of Judicature at Bombay
    By, THE HONOURABLE MRS. JUSTICE ROSHAN DALVI
    For the Petitioners: Dinyar Madon, Sr. Advocate a/w. Simil Purohit, Ashok Paranjpe, Ms. Leena DesaiPadhye, Aparna Wagle, Heta Shah i/b MDP & Partners, Advocates. For the Respondents: Hiroo Advani, Sr. Advocate a/w. Rajeev Naik, Ms. Chaiti Desai, Asif Lampwalla, Peter Lobo i/b M/s. Advani & Co., Advocates.


Judgment Text
1. The parties entered into agreements for development of the property of the Tulip Hospitality Services Ltd. (Tulip) by Nirmal Lifestyle Ltd. (Nirmal). The payments under the agreements were to be made upon specified covenants contained in the agreements. Certain payments have been made. Certain covenants have been complied. Certain other covenants have not been complied. There were disputes between the parties. Arbitration was invoked. The parties appeared before the Arbitrator. An award has been passed which has been challenged by Nirmal with regard to two agreements executed by the parties which were referred to arbitration. The award is challenged by Tulip with regard to the grant of interest only. Nirmal has also applied for interim relief for protection and preservation of the disputed property pending the arbitral proceedings to be initiated in respect of the reference agreement and until the publishing of the award.

2. Parties have entered into agreements on 29.03.2003, 31.03.2003, 11.06.2003, 21.06.2003 and 17.10.2003. The parties have referred the last two agreements to arbitration as they have agreed to refer the dispute to arbitration in the last two of the aforesaid agreements. However since all the agreements relate to the same property being the hotel premises of Tulip known as Tulip Star Hotel, Juhu Beach, Juhu Tara Road, Vile Parle (West), Mumbai – 400 049 the parties have relied upon and shown the Court the initial agreement also. The main dispute between the parties is with regard to the covenant/obligation of Tulip to obtain the approval of the Consortium of Banks from whom Tulip had obtained a large loan of about 1.29 Crores for the proposed transaction of the parties. This was to be obtained within 60 days of the initial agreement dated 29.03.2003 and within 150 days of the agreements dated 21.06.2003 and 17.10.2003 which have been referred to arbitration. Tulip has not obtained the approval. Meanwhile Nirmal applied for specific performance of the agreement. Nirmal claimed that it was bound and liable to pay further sums in addition to the amount shown to be already paid under the agreement dated 21.06.2003 to Tulip only after the approval was obtained. Nevertheless it has admittedly made payments of further amounts to Tulip. Nirmal claims that despite such payments the approval was not obtained and Nirmal accordingly must obtain specific performance, it having performed its part of the contract and more and Tulip having breached its obligation under the contract. In the alternative Nirmal claimed damages.

3. Tulip counterclaimed and claimed certain further damages.

4. Nirmal's claim for specific performance has been rejected. The counter-claim of Tulip has been rejected. Nirmal has been granted an award of return of the amount of monies paid by Nirmal to Tulip under the reference agreement but not those paid by Tulip under the earlier agreements dated 29.03.2003 and 31.03.2003 as those agreements were not referred to arbitration and the Arbitrator held that he would have exceeded his jurisdiction if he passed an award for refund of those monies also.

5. It has been admitted in the pleadings between the parties and in the minutes of the meeting held by the parties that Rs.30.60 Crores has been paid by Nirmal to Tulip.

6. The main dispute between the parties in the arbitration as also the main contention of the parties in these petitions is with regard to the covenant/obligation of Tulip to obtain the approval of the Consortium of Banks. The relevant clauses of the agreement dated 21.06.2003 deserve to be reproduced to understand the contract between the parties which has been considered in arbitration.

(4) Nirmal shall pay to Tulip the amount of Rs.30,00,00,000/- (Rupees thirty crores) in the following manner:

a) ….......

b) The balance amount of Rs.26,00,00,000/- (Rupees twenty six crores only) payable by Nirmal to Tulip within 180 (one hundred and eighty) days from the date hereof, time being of the essence, provided however that

(i) Tulip has within 150 (one hundred and fifty) days from the date hereof obtained approval of the Consortium of Banks which have lent funds to Tulip for this Agreement between Tulip and Nirmal, and for giving Nirmal an interest in the Shopping Mall area and

(ii) …........

(7) Tulip has represented to Nirmal that it has availed of a Term Loan from a Consortium of Banks, including Bank of India, Union Bank of India, Vijaya Bank, Indian Bank, Punjab National Bank and Canara Bank ('the said Banks') to the tune of Rs.129 crores and to secure due repayment thereof, has inter alia, mortgaged the said property in favour of the said Banks. Under the terms and conditions on which the said loan has been disbursed, Tulip has undertaken not to alienate, sell, transfer, mortgage, charge or otherwise deal with the said property or any part thereof, without prior written consent being obtained from the said Banks. Tulip hereby agrees and undertakes to obtain within 150 days from the date hereof, the necessary No Objection Certificate (NOC) in writing from the said Banks, specifying inter-alia the following.............)

7. Tulip did not obtain the prior written Consent/NOC of the Consortium of Banks. Nirmal sought its enforcement.

8. Tulip did have two meetings dated 18.12.2003 and 18.11.2004 with the Consortium of Banks. They were attended also by Nirmal. The parties jointly put forward their proposal. The Banks required Tulip's audited balance-sheet, detailed project report of the assets available to the bankers and sought to put up their proposal to their higher authority. Tulip has not submitted the audited balance-sheet or the detailed project report as called upon. The banks have neither refused nor granted the NOC.

9. It was contended by Tulip in the arbitration and it has been contended by Tulip even in the above petitions that the Tulip did its best, but the banks refused to grant sanction and hence the contract stood frustrated. Tulip claims that it has been discharged of its obligations under the contract and that the contract is at an end. The learned Arbitrator held similarly and consequently called upon Tulip to return the amount. Tulip received Rs. 30.60 crores in all from Nirmal. Rs. 11 crores were initially received. Rs.19.60 crores were received upon and under and after the referred agreement dated 21.06.2003. Hence the learned Arbitrator directed to return of only Rs.19.60 crores as per the terms of reference with interest thereon.

10. Nirmal has contended that there has been no supervening impossibility by which the contract between the parties dated 21.06.2003 could have been frustrated. It is only Tulip which breached its obligation to obtain the NOC of the banks. The learned Arbitrator has ruled otherwise. The law relating to frustration of contract under Section 56 of the Indian Contract Act, 1872 would required to be seen to consider whether the learned Arbitrator has gone against the provisions of that law and accordingly misconducted himself. Section 56 runs thus:

56. Agreement to do impossible act.- An agreement to do an act impossible in itself is void.

11. The doctrine of frustration of contract has been clearly set out in Pollock and Mulla's Contract law 13th Edition Volume I at page 1124 thus:

'DOCTRINE OF FRUSTRATION

Frustration signifies a certain set of circumstances arising after the formation of the contract, the occurrence of which is due to no fault of either party and which renders performance of the contract by one or both parties physically and commercially impossible'.

Taking from P. S. Atiyah's 'An introduction to the law of contract',

fifth edition page 231 it is further enunciated in Mulla's law of contract thus:

'Where the entire performance of a contract becomes substantially impossible without any fault on either side, the contract is prima facie dissolved by the doctrine of frustration'.

12. Since 1881 this imperative mandate has governed the doctrine of frustration of contracts. In the case of Dahl V. Nelson (1881) 6 AC 38 Lord Sumner articulated it thus:

'frustration' as being a matter 'caused by something for which neither party was responsible'.

Hence a party cannot rely upon his own default to get himself excused from the liability under the contract. The conditions of frustration must prevail without the default of either party.

13. Thus in the case of Maritime National Fish Ltd. Vs. Ocean Trawlers Ltd. AIR 1935 Privy Council 128 it was held that the essence of 'frustration' is that it should not be due to the act or election of any party; it should be without the default of either party. In that case the trawler was employed under a charter party. The trawler was to be used only in the fishing industry. The Fisheries Act came to be amended in Canada. The regulations made thereunder were published by which any action of otter trawler fishing was held illegal if made without a licence. Parties had to apply for licence. The party to the contract had five trawlers. Licence was to be granted to three of them as chosen by that party. The party chose three other trawlers and not the one under the contract. Hence the trawler under the contract would not be used. The party claimed that the contract became impossible by performance because of the change in the law. The defence succeeded in the trial Court. The Supreme Court of en banco reversed the decree holding that the event upon which frustration is claimed cannot depend upon the volition or election of either party. Since upon the deliberate act of one of the parties to the contract in selecting the three trawlers the trawler under Charter Party could not be licenced it was held to be a deliberate act. The Privy Council confirmed the ruling that such an act could not frustrate the contract.

14. The case of KrellVs. Henry (1903) 2 K B 740 was relied upon. In that case the hire of a window to view the coronation procession of King Edward was held frustrated when the procession was postponed by reason of the unexpected illness of the King. It was held that the contract stood dissolved because the basis of the contract did not materialise.

15. In the case of HirjiMulji Vs. Cheong Yue Steamship (1926) A O 497 frustration of contract has been defined by Lord Sumner at page 510 thus:

'a device by which the rule as to absolute contracts are reconciled with a special exception which justice demands.'

16. What would be the conditions without the default of either party is explained in the case of BoothalingaAgencies Vs. V.T.C. Poriaswami Nadar AIR 1969 SC 110 (V 56 C 24). In that case certain imported goods were to be sold. After the import of goods the Import Control Order of 1955 came into force, under clause 5(4) of which certain conditions had to be complied with by the licencee without which the goods could not be sold. In view of that the contract became impossible or unlawful of performance and consequently void. It was held that it was the positive condition imposed by the licence not to sell the imported goods which were meant to be used only for consumption as raw material in a factory and hence not a 'Self induced frustration'. The contract either became impossible of performance and resulted in its discharge by supervening impossibility of performance. It was observed that there was no choice of election left to the appellant to supply the goods under the terms of the contract.

17. In the case of J Lauritzen A/S Vs. Wijsmuller B.V. 1990 WLR 754790 the conditions of applicability of doctrine of frustration of contract are set out thus:

'(i) The doctrine of frustration was evolved to mitigate the rigour of the common law's insistence on literal performance of absolute promises (Hirji Mulji Vs. Cheong Yue Steamship Co. Ltd.[1926] A.C. 497 at 510.

The object of the doctrine was to give effect to the demands of justice, to achieve a just and reasonable result, to do what is reasonable and fair, as an expedient to escape from injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances (Hirji Mulji, supra, at 510).

(ii) Since the effect of frustration is to kill the contract and discharge the parties from further liability under it, the doctrine is not to be lightly invoked, must be kept within narrow limits and ought not to be extended.

(iii) Frustration brings the contract to an end forthwith, without more and automatically (Hirji Mulji, supra, at 505, 509).

(iv) The essence of frustration is that it should not be due to the act or election of the party seeking to rely on it (Hirji Mulji, supra, at 510).

A frustrating event must be some outside event or extraneous change of situation (Paal Wilson & Co. A/S. V. Partenreederi Hannath Blumenthal (The Hannah Blumenthal) [1983] 1 A.C. 854 at 909).

(v) A frustrating event must take place without blame or fault on the side of the party seeking to rely on it (Bank Line Ltd. supra, at 452)'.

In fact the established law was summarized initially thus:

'The classical statement of the modern law is that of Lord Radcliffe in Davis Contractors Ltd. V. Fareham Urban District Council [1956] A.C. 696 at 729'.

'Frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed ….'

18. Further drawing from the case of Denmark Productions Ltd. Vs. Boscobel Productions Ltd. [1969] 1 Q.B. 699] it was observed:

'The essence of frustration is that it is caused by some unforeseen supervening event over which the parties to the contract have no control and for which they are therefore not responsible. To say that the supervening event occurs without the default or blame or responsibility of the parties is, in the context of the doctrine of frustration, but another way of saying it is a supervening event over which they had no control. The doctrine has no application and cannot be invoked by a contracting party when the frustrating event was at all times within his control; still less can it apply in a situation in which the parties owed a contractual duty to one another to prevent the frustrating event occurring'.

'When, in Bank Line Ltd. supra, at page 452 Lord Sumner made his famous observation that 'Reliance cannot be placed on a self-induced frustration' he was contrasting a self-induced frustration with one arising 'without blame or fault on either side'. As the judge observed (at page 156). '... in some respects the doctrine of frustration and the concept of 'self-inducement' are simply opposite sides of the same coin'.

Hence the test of determining whether a contract is frustrated was laid down thus:

'The test would, in my judgment, confine the law in a legalistic strait-jacket and distract attention from the real question, which is whether the frustrating event relied upon is truly an outside event or extraneous change of situation or whether it is an event which the party seeking to rely on it had the means and opportunity to prevent but nevertheless caused or permitted to come about. A fine test of legal duty is inappropriate; what is needed is a pragmatic judgment whether a party seeking to rely on an event as discharging him from a contractual promise was himself responsible for the occurrence of that event.'

19. Tulip has referred to the judgment in the case of SatyabrataGhose Vs. Mugneeram Bangur & Co. & Anr. 1954 SCR 310 : AIR 1954 SC 44 which deals with the distinction between English and Indian law of frustration of contract. The Doctrine of transaction in English Law is held not to have application in India because of the statutory provisions contained in Section 56 of the Indian Contract Act which is held to be a rule of positive law. It is observed that much as the English Law, it deals with an act which becomes inherently impossible or because of supervening impossibility or illegality of the act agreed to be done. It is observed that the word impossible is not used in the sence of physical or literal impossibility, though the act may become impracticable and useless or if an untowered event upsets the very foundation upon which the parties rested their bargain. The judgment refers to the observations of the English Court in the earliest case of TamplinSteam Ship Co. Ltd. Vs. Anglo-Mexican Petroleum Products Co. Ltd. (1916) 2 AC 397, 403 as the contract which has become impossible or impracticable by some cause 'for which neither was responsbile'. This analogy has been adopted in Section 56 also in the case of KesariChand Vs. Governor-General-in-Council ILR 1949 Nag 718 in which case it is held to become impossible only upon circumstances beyond the control of the parties. Hence even under Section 56 the condition for impossibility is not upon a party to the contract in control of the contract and responsible for discharging his obligation under the contract himself making it impossible. Hence, as in England, it is a rule of exception which justice demands and is held to be brought into play 'when an unexpected event or change of circumstances occurs the possibility of which the parties did not contemplate' as observed in para 12 of the judgment.

20. What is held in para 15 of the judgment that the word 'impossible' must be construed in its practical and not literal sense under Section 56 itself. Similarly the subsequent impossibility contemplated in para 16 of the judgment is of an unexpected event beyond what was contemplated by the parties. Hence when a fundamental change occurs striking at the root of the contract which destroys the basis of the contract it may cause its frustration.

21. Consequently that implies that such event cannot be because of the default of any party himself.

22. It would be an absurd interpretation of the law relating to frustration of contract if parties who are under an obligation to perform their part of the reciprocal promises or any other covenants in any contract throw their hands up and claim to be relieved of their obligations when they commit a breach thereof. The relief that the law grants must be, as shown above, not due to their fault, only due to an act of another beyond their control.

23. It is contended that the act of the banks was beyond the control of Tulip and that Tulip tried its best. It would have to be seen whether that best endevour was good enough because much will depend upon what Tulip has done or failed to do that would justify the act or the absence of any act of the bank in the presence of the act of Tulip. It would only then be seen that what the bank has done is not due to the fault of Tulip (it is not even contended that it is the fault of Nirmal) or that Tulip was not responsible for the NOC which was not obtained or, as per the contentions of Tulip, refused.

24. This would be seen from the minutes of the aforesaid two meetings of Tulip and Nirmal with the banks officials and a letter of Tulip which shall be considered presently.

25. In the meeting dated 18.12.2003 Nirmal showed how the property of Tulip, mortgaged to the bank was proposed to be developed by Nirmal. It also offered to have no charge on Tulip's property and confirmed that it has interest only to the extent of 50% share in the revenue. It confirmed that the approvals and clearance required for development will be obtained by it and that the Tulip would have to obtain the approval of the lender (lenders) bank for leasing out the property as contemplated by the parties. It showed the various income that would be generated from the developer. Tulip stated that the funds raised would be utilized to repay the bankers' overdue interest, repay the residual term loan, pay the workers under the VRS Scheme and meet the development costs. Tulip requested the banks/lenders to cede their paripasu charge on Tulip's property.

Union Bank of India questioned how the receivable could be scrutinized on the basis of only a blue print whilst Tulip was making various requests and seeking concessions. They stated that Tulip had not serviced of the interest payable on the loan and not paid the residual portion of the principal loan outstanding also so that it would be very difficult to exceed to Tulip's requests.

Bank of India stated that it had tried to make Tulip's operation viable by capitalizing interest and converting the facility granted into non funded guarantee but that the interest on the loan was not serviced by Tulip and hence 'the bankers' hands are tied' to create the paripasu charge in favour of another landlord. However it suggested that Tulip may explore the possibility of leveraging the additional FSI of 1.5 lac sq. ft. received by it.

The meeting concluded with the bankers agreeing to evaluate Tulip's requests upon the premise that any money received (from Nirmal or from the developer) would first go towards the payment of arrears of interest/guarantee, the outstanding of the principal term loan and VRS scheme payments.

26. It may be mentioned that the minutes of the meeting dated 18.12.2003 show the dismal performance of Tulip as the banks' debtor and as a complete defaulter. Hence notwithstanding the presentation by the Nirmal about the merits of the development project, the bankers were interested essentially only in the return of their loan. It is contended by Tulip that the expressions 'it would be very difficult to exceed to any of the company's requests' and 'the bankers' hands are tied to take up the company's requests' show refusal by the bankers and the refusal is by the third party which Tulip is not responsible for. The contention is incorrect for two reasons. Despite the banks having put their foot down upon the defaulter's further requests without payments, the meeting concluded 'with the bankers agreeing to evaluate the company's requests'. The evaluation could not be one sided. It could evaluate the request only upon further payments. Further payments were the responsibility of none other than Tulip. The refusal would, therefore, depend upon the steps that Tulip took. None are shown.

27. It is contended on behalf of the Nirmal that the banks' refusal is because of Tulip's defaults and non performance as also omissions of the acts required to be done. Tulip alone is responsible. The default is only due to its own fault. The bank has not refused but would consider only if Tulip would make the further payment.

28. It would be wondrous if Tulip ever thought that without making payment of the outlandish amount of the loan taken from the bankers, it would have obtained the banks' NOC and approval for the development project. Its obligation had to be made and could be made only by making further payments to the banks which was its sole responsibility. In fact, it has been shown that though Nirmal did not owe any further sum of money after 21.06.2003 to Tulip, it had made payment of the entire consideration of Rs.30 crores agreed between the parties and, in fact, had paid Rs.30.60 crores to Tulip out of which also Tulip did not repay any amounts to the bank.

29. The minutes of the other meeting held at the distance of about a year, on 18.11.2004, show much the same position. It showed various proposals of Tulip to the bankers essentially for creating the paripasu charge in favour of the new lenders.

Punjab National Bank stated that it would not be possible for the bankers to give the decision across the table and they would take up the matter to higher authorities.

Bank of India asked for access to the head office account of Tulip to monitor its cash flow. Tulip agreed to give access.

Canara Bank requested Nirmal to bail out Tulip. He was informed that Nirmal had already paid Tulip about Rs.31.50 crores.

Bank of India demanded the submission of audited balance-sheet of Tulip as also the detailed project report with the proposed asset cover. The banks were required to take a positive view.

It is not known and not shown whether Tulip submitted the audited balance-sheet or its detailed project report or its proposed asset cover to the banks. There is no refusal spelled out in the minutes of the meeting dated 18.11.2004 which has even been shown by Tulip except perhaps for the expression 'it may not be possible for the bankers attending the consortium to give their decision across the table'; they had to take up the matter with their higher authorities. Much depended upon the acts of Tulip and none other. Tulip had to obtain the NOC. Tulip was called upon to submit the aforesaid documents. The NOC could never have been expected without such submission. The submissions are not shown to be made. It is inconceivable how Tulip can contend that the banks refused the NOC. Mr. Madon on behalf of Nirmal strongly contended that the banks have not refused the NOC. The contention is seen to be correct from the aforesaid minutes. Even if the banks had refused the NOC, it cannot be seen how that would have been an act of occurrence 'due to no fault of' Tulip. The refusal would be well deserved. How Tulip will deserve the NOC is not shown. Nirmal's contention that Tulip failed and neglected to obtain the NOC would be justified.

30. In fact, a short letter of Tulip dated 05.03.2004, between the two aforesaid meetings shows the expected position. Tulip has written to Nirmal that the bankers have confirmed that the necessary permission for ceding the parapasu charge would be given after the dues have been paid to them. It would not require much effort for any adjudicating authority to see that a NOC cannot be obtained for free.

31. The case of Tulip in its reply to the statement of claim is that despite individual as well as collaborative effort of both parties to obtain the necessary permissions/approvals/NOC, the approval was ultimately never granted. Hence the non-fulfillment of the condition preceding the contract rendered the contract impossible of performance. The non grant is not non-refusal. The grant had to be obtained by Tulip as the condition precedent. Tulip has not shown the 'collaborative efforts' put by it to obtain the NOC. Tulip has not led evidence and hence could not be cross-examined.

32. Tulip has claimed that upon the banks not willing to give the NOC the development could not proceed and the agreements dated 21.06.2003 and 17.10.2003 became 'practically impossible'. It is contended on behalf of Tulip that it was for the banks to decide whether or not to grant the approval and that both the parties had tried their best but the NOC did not come through. It is contended that consequently the view taken by the learned Arbitrator was a possible view which cannot be interfered with by this Court. It has been contended by Tulip that it was impossible to clear the entire loan which the banks demanded. It is contended by the Nirmal that the entire loan did not have to be cleared up because if this was done the banks' NOC would not have even been required. As can be seen from the minutes specified disclosures of Tulip were called for by the banks.

33. The learned Arbitrator has observed that despite the best efforts of both the parties though making repeated appeals to the banks, the banks refused the NOC unless the entire amount due to all the banks was paid and that was a practical impossibility. No part of the documentary evidence shows the banks insistence upon the entire amount due. The minutes as aforesaid show that the banks were flexible in their approach but called upon the defaulter to submit documents which none other than the defaulter could have submitted and the non-submission was the fault of Tulip alone. It is contended that it is not even the case of Tulip before the Arbitrator that the banks would never give the NOC that the concept of 'practical impossibility' of the performance of the contract is not even a position in law. Indeed under Section 56 of the Contract Act, the impossibility of performance is the supervening impossibility. That is the impossibility created by another's act which the parties cannot help. The Arbitrator's conclusion that there was practical impossibility is not what the law envisages even in the judgment in the case of Satyabrata(supra) in this behalf relied upon by the Tulip.

34. Tulip claims that it did its best to obtain the NOC. What it did in the two banks meetings has been reflected above. What else it did pursuant to the two meetings has not been shown. Tulip failed to examine itself. It could not be cross-examined. Its efforts, if any, are not known.

35. Nirmal has examined more than one witness. The cross-examination has shown its consistent stand that the respondent was responsible to obtain the NOC and it breached that requirement. It also shows that despite it not being Nirmal's obligation, Nirmal lent its support to the presentation before the bankers.

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It is also sought to be suggested that the fact that the banks did not give the NOC was a refusal. However the witness of Nirmal has stood his ground that the contract had to go ahead upon the obligation of Tulip to be performed. 36. The view of the Arbitrator is, therefore, not a possible view. That view is of 'practical impossibility' and of the banks' insistence upon payment of Rs.200 crores for the grant of NOC. The view relating to practical impossibility is unknown to law and is hence outside the parameters applicable to frustration of contracts. The view about the payment remained of Rs.200 Crores is completely out of context and out of the evidence, oral and documentary. The view to grant a defaulter leeway to wriggle out of the contract is alegal. Hence it is contrary to the substantive provision of law as also against the terms of the contract and consequently patently illegal under clause 18(iv) set out in the judgment in the case of Steel Authority of India Ltd. Vs. Gupta Brother Steel Tubes Ltd. (2009) 10 SCC 63. 37. Consequently the award dated 08.02.2013 has to be and is set aside. 38. In view thereof the injunction prayed for by Nirmal against creation of third party rights of any nature in the disputed premises by negotiations, alienation, transfer, encumbrances or otherwise or by indirecting anyone into any part of the disputed premises being the basement, ground or first floor of Tulip Star Hotel, Mumbai admeasuring 2.5 lacs sq. ft. of built up area or changing the facade of hotel as prayed for must be and is granted. 39. Tulip has challenged the grant of interest @ 8% p.a. from 01.07.2005 till the date of award upon the return of part amount to Nirmal granted under the award. Interest is granted under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996. Tulip claims that it is wrongly granted. Such claim is made upon precedent law. Tulip has relied upon the decision of 7 Law Lords of the House of Lord in the case of FibrosaSpolka Akcyjna Vs. Fairbairn Lawson Combe Barbour Ltd. 1943 A. C. 32 which overruled the decision in the case of Chandler Vs. Webster (1904) 1 KB 493. That case was of frustration of contract upon the declaration of war between England, Germany and Poland. Return of the amount under the contract was claimed with interest as an alternative to specific performance of the contract which was stated to be breached. In view of the frustration of the contract, interest amount was not granted. Tulip also referred to Indian decisions in the case of Madura Municipality Vs. K. Alagirisami Naidu AIR 1939 Mad 957 and SheoKumar Vs. Gyan Nath Raina AIR 1955 All 408 para 24 to 27 in this regard which has been simplicitor cited in the award. All these decisions are prior to the Arbitration and Conciliation Act, 1996 having been enacted and would not be applicable in view of Section 31(7)(a) thereof after 1996. 40. However since the award itself is set aside, the interest granted on the award also does not survive. 41. Consequently Arbitration Petition Nos. 891 of 2013 and 550 of 2013 are granted as prayed. Arbitration Petition No. 864 of 2013 is partly granted as stated above. Arbitration Petition No. 633 of 2013 stands dismissed.
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