Citation Code: 2023 SCC OnLine Del 7524
Date of Judgement: 30 November 2023
Court: High Court of Delhi
Coram: Justice Yashwant Varma & Justice Ravinder Dudeja
Factual Background
The case arose due to a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter “A&C Act”), which was partially allowed by the Single Judge. Upon granting the Petition the Ld. Judge reduced the rate of interest from 18% to 12% by the order dated 12 December 2018. No appeal was preferred by the Respondent against this order, however, later the Respondent sought for the modification of the order. This resulted in a subsequent order dated 08 August 2019, that modified the award by denying the claim of interest. This prompted the Appellant to file the present appeal under Section 37 of the A&C Act.
Issues
Whether it is appropriate to accept a modification application after the disposal of setting aside application under Section 34 of the A&C Act.
Whether it is permissible to modify the interest rate granted under an arbitral award in Section 34 of the A&C Act.
Appellant’s Position
The Appellant submitted that the Ld. Single judge assumed that the Appellant misled the Arbitral Tribunal into granting interest at 18%. The Appellant highlighted that the Appellant claimed 24% interest based on the tendered document. The Appellant submitted that the arbitral tribunal granted 18% in light of various grounds that were never challenged by the Respondent. Hence, there was no justification for the Ld. Single Judge to interfere in the award.
Reliance was placed on the decision of NHAI vs. M. Hakeem & Anr which held that no power of modification of an award in Section 34 of the A&C Act, 1996 exists [¶46]. Additionally, the Appellant cited the Larsen Airconditioning and Refrigeration Company v. Union of India & Ors. where a reduction of the rate of interest was held to be an impermissible modification of the award.
At last, the Appellant submitted that the entertainment of an application for modification seven weeks after the disposal of the Section 34 petition was impermissible.
Respondent’s Position
The Respondent submitted that the appellant committed fraud and obtained the award along with interest @ 18%. Furthermore, the Respondent submitted that apart from Section 34 of the A&C Act, 1996, the Court can invoke its inherent powers and make such orders in the interest of justice or to prevent abuse of process. Additionally, the Respondent submitted that the NHAI v. M. Hakeem came to be pronounced only on 20 July 2021 and would thus have no application to matters which stood concluded prior thereto.
The Respondent stated that the interest of 18% was unjustified and exorbitant and has been rightly set aside by the Ld. Single Judge.
Decision and Reasoning
On Issue 1
The Court held that once petition under Section 34 of the A&C Act, 1996 has been decided, the only recourse available to the Respondent was to file petition for review. The order dated 08 August 2019 resulted from de novo hearing instead of review proceedings. The court reasoned that once a matter has been decided, it cannot be re-opened except under the procedure provided in the law. Thus, the order dated 08 August 2019 was set aside on this ground.
On Issue 2
Addressing the issue related to power of the court to modify the terms of the arbitral award, the Court held that the power of setting aside under Section 34 of the A&C Act, 1996 as held by the Supreme Court in NHAI vs. M. Hakeem & Anr does not include within its ambit the power to modify the award. Additionally, the court highlighted that the case of Larsen Airconditioning and Refrigeration Company v. Union of India & Ors. reiterated the impermissibility of modifying the interest rate awarded by the Arbitral Tribunal.
Addressing the Respondent’s submission that the decision of M. Hakeem is not applicable to the awards and decisions rendered prior to it. The court highlighted the declaratory nature of the judgement and held that M. Hakeem does not indicate the Supreme Court having adopted the precept of prospective overruling.
Thus, the court set aside the order passed by the Ld. Judge dated 12 December 2018. The Section 34 petition was reinstated and placed on the board of the Ld. judge for consideration afresh.
Author(s)
Ishita Pandey
Graduate from Llyod Law College