Daelim Industrial Co. Ltd. vs Numaligarh Refinery Ltd.

S. Muralidhar, J.—There is a difference in the calculation in the exact decretal amount due to the Decree Holder (DH.). In order to appreciate the controversy it is necessary to advert to the fact that an Award dated 23rd September 2000 was made in the dispute between the DH and the Judgment Debtor (JD.). The Arbitrators by a majority of 2:1 awarded the following sums to the DH:

In view of the above decisions, this Tribunal (by majority) awards that the Defendant (NRL) shall make the following payments to the claimant (DIC) within a period of two months (60 days) from the date of receipt of the award:

(1) The sum of Rs. 29.76 Crores.

(2) Interest pendente lite on the amount of Rs. 29.76 Crores with effect from August 7, 1997 to the date of this award at the rate of 12 per cent per annum.

(3) The amount of US $ 170 000. In the event of failure on the part of the Defendant (NRL) to pay the above awarded amounts under (1), (2) and (3) within the stipulated period indicated above, the Defendant (NRL) shall make further payment of interest at the rate of 18 per cent per annum for the post award period on the above awarded amounts i.e. Rs. 29.76 Crores plus the amounts of Interest of pendente lite period and plus Rupee Value of US $ 170, 000 as prevalent on the date of Award.

The Arbitrators thus were clear that in the event of the failure on the part of the Defendant i.e. the JD to pay the awarded amount and 18% interest was to be paid for the post award period "on the above awarded amount i.e. Rs. 29.76 Crores plus the amount of interest of pendente lite interest plus the rupee value of US $ 170 000 as prevalent on the date of the award."

The challenge by the JD to the said Award in the Court of the learned District Judge, Golaghat succeeded resulting in the DH appealing to the Calcutta High Court. The DH itemised its claim as under:

A. Transfer of US $ 6 million : Rs.9.6 crores B. Turbotecnica.s Contract price : Included in Item C C. Countervailing Duty : Rs.13.0 crores D. Excess Customs Duty due to Fluctuation of exchange rate : Included in Item C E. Liquidated damages for delay In approval of Design and Engineering : Rs.8.9 crores F. Excess expenses due to lack of infrastructure : Rs.4.6 crores G. Additional expenses cost by Schedule delay : Rs.12.0 crores H. Interest for borrowed funds, Delayed opening of LC for Design : Rs.0.5 crore I. Escalation : Rs.4.1 crores J. Change Order : No dispute K. Extra tax burden as per AGSI With effect from 1st May 1997 : Rs. 3.1 crores L. Indian statutory taxes included In Item No.C. : (Total Claim of DEC) [Rs.55.8 crores]

By a judgment dated 24th August 2006, the High Court allowed the appeal in relation to issues A, B, D, E and H. Aggrieved by the said judgment of the High Court the JD appealed to the Supreme Court. In its judgment dated 6th September 2007 the Supreme Court upheld the judgment of the High Court substantially and ordered as under:

Hence, as a result of our above discussion, we are of opinion that the claimant-DIC is entitled to Rs. 2 crores for substituted material, Rs. 8.9 crores for liquidated damages, Rs. 0.2 crore as interest paid on the delayed funds i.e. Rs. 11.1 crore (Rs. 2 crore + Rs. 8.9 core + R..02 crore) and finally interest at the rate of 12 per cent pendent lite from the date of the claim petition till realization. The payment should be made within a period of six months from today failing which it will carry interest at the rate of 15 per cent per annum. The appeal arising out of S.L.P.(c) No. 20989 of 2006 is partly allowed. The order passed by the High Court is modified as indicated above. The claim of the DIC is decreed to the extent indicated above. However, the appeal arising out of S.L.P.(c) No. 4409 of 2007 filed by the DIC is dismissed. No order as to costs.

As regards interest, in para 14 it was held as under:

The next claim is with regard to interest. The majority of the arbitrators have granted interest on the amount at the rate of 12 per cent pendente lite and post pendente lite at rate of 18 per cent but the minority arbitrator, Justice M.M. Dutt has granted 10 per cent interest uniformly. The grant of interest is discretionary and the majority of the arbitrators has rightly granted interest at the rate of 12 per cent pendente lite and at the rate of 18 per cent post pendente lite. Therefore, no exception can be taken to grant of such interest. Consequently, we affirm this finding of the majority of the Arbitrators and of the High Court.

On an application filed by the DH, the Supreme Court on 4th January 2008 clarified that the bracketed portion written in bold at the foot of para 14 should read as under:

Interest at the rate of 12% pendent lite and at the rate of 18% post pendent lite

It is thus seen that the judgment of the Supreme Court affirmed in toto the finding of the majority of the Arbitrators on what should be the interest amount to be awarded both pendente lite and post pendente lite.

It was contended by the Judgment Debtor (JD.) that in light of the judgment of the Supreme Court dated 6th September 2007, as further clarified by its order dated 4th January 2008, the amounts paid by it as to the DH thus far is consistent with the decree. It may be mentioned that by its letter dated 29th February 2008 the JD informed the DH that it had filed a review petition seeking review of the judgment dated 6th September 2007 of the Supreme Court. It stated nevertheless that it was agreeable to paying Rs. 2 crores (Issue A.) and Rs. 0.2 crores (Issue. H.) and interest at 12% per annum from 7th August 1997 to 29th February 2008. Accordingly it enclosed a demand draft in the sum of Rs. 4,98,97,205. By a subsequent letter dated 13th May 2009 addressed to the DH, the JD adverted to the fact that the review petition filed by it followed by a curative petition in the Supreme Court, had been dismissed. Thereafter it gave the following break-up for the sum of Rs. 21,92,86,805 it enclosed with the said letter "in full satisfaction of the decretal amount as payable under Supreme Court order dated 6th July 2007:

A. Claim of Liquidated damage = Rs. 8,90,00,000/-

B. Rupee Equivalent of the Cost (US $ 1,70,000) awarded in your favour = Rs. 78,79,500/- _____________________ = Rs. 9,68,79,500/-

C. Interest on Rs.9,68,79,500/- at the rate of 15% from August 7, 1997 to 13th May 2009

Total (a) + (b) = Rs. 17,10,78,580/- _____________________ = Rs. 26,79,58,080/-

Income Tax of Rs. 4,11, 86,695 on Rs.8,90,00,000 plus Rs.17,10,78,580.00 and TDS of Rs.74,84,580.00 (which was not deducted on the earlier amount paid to you on 29/02/08) has been adjusted from the amount of Rs. 26,79,58,080.00

However the DH disputes the above calculation. In para 12 of the execution petition the DH has shown the calculation of the amount due to it thus:

The Judgment Debtor in terms of the Judgment of the Hon.ble Supreme Court dated 6.9.2007 and order dated 4.1.2008 owes the Decree Holder the amount shown below as on 2nd July 2008.

(A)

(a) Principal amount = 11,10,00,000.00

(b) Interest @ 12%

(from 7.8.1997 to 23.9.2000) = 4,16,99,000.00 (3 Years 1 Month 17 Days)

Total (a) + (b) = 15,26,99,000.00

Interest @ 18% on (a) + (b) (from 24.9.2000 to 29.2.2008) (7 Years 5 Months 6 days) = 20,43,11,262.50

Total (A) = 35,70,10,262.50

(B)

ICC Fee- (NRL.s share) USD 1,70,000/- converted @ 46.35 Indian Rupee/per USD = 78,79,500.00

Interest @ 18% = 1,05,42,771.00 (from 24.9.2000 to 29.2.2008) (7 Years 5 Months 6 days)

Total (B) = 1,84,22,271.00

Total (A) + (B) = 37,54,32,533.50

Part Payment received on 29.2.2008 =(-)4,98,97,205.00 Amount Due (AD)

(as on 29.2.2008) = 32,55,35,328.50 Interest @ 18% on amount due (AD) = 8,13,838.32

(from 1.3.2008 to 5.3.2008) (5 days) Interest @ 15% on amount due (AD) = 1,58,69,847.24

(from 6.3.2008 to 2.7.2008) (3 months 27 days) Grand Total = 34,22,19,014.06

Rupees Thirty Four Crores Twenty Two Lakhs Nineteen Thousand and Forteen And Paise Six. It must be noted that the above calculation is as on 2nd July 2008 which was the date of filing of the execution petition. The claim of the DH would obviously be higher as of date.

The submissions of learned Counsel have been considered. On a collective reading of paras 14 and 15 of the judgment of the Supreme Court dated 6th September 2007 as further clarified by it on 4th January 2008, it appears to this Court that what is payable by the JD to the DH is interest @ 12 % pendente lite on the sum of Rs. 11.1 crore and interest @ 18 % per annum on the sum of Rs. 11.1 crores plus the pendente lite interest and the rupee value of US $ 170 000 as prevalent on the date of the award. 18% interest was payable for the period of six months from the date of the order of the Supreme Court i.e. ending on 5th March 2008. For any delay beyond 5th March 2008 in making payment of the above amount, it was to carry interest @ 15% per annum.

The calculation arrived at by the JD as reflected in its letter dated 13th May 2009 is obviously not consistent with the above position. The JD appears to have calculated and paid 15% interest for the entire period without appreciating the break-up of the two periods i.e. interest @ 18% for six months from the date of the judgment of the Supreme Court and for the period beyond that @ 15 % per annum. They also do not seem to have included the pendente lite interest in the sum on which the post lite interest had to be paid.

Accordingly it is now directed that the JD will make payment of the entire sum as claimed in para 12 of the execution petition as reproduced above together with the further interest up to date of payment. In other words, the interest @ 18% per annum on the amount due up to 5th May 2008 and @ 15% per annum from 6th March 2008 till the date of payment. 12. The case be listed for further consideration on 3rd August 2009 by which date the JD should make the payment calculated on the above basis to the DH or bring the amount to the Court for being handed over to the DH.