Municipal Council Thanesar vs Virender Kumar

CIVIL APPEAL NOS. 1751-1763 OF 2019 (@ SLP(C) NOS.15937-15949/2017) MUNICIPAL COUNCIL THANESAR & ORS VS. VIRENDER KUMAR AND ORS.

1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 1751-1763 OF 2019 (Arising out of Special Leave Petition (Civil)Nos.15937-15949 of 2017)

MUNICIPAL COUNCIL THANESAR AND ORS. …Appellants

VERSUS

VIRENDER KUMAR AND ORS. …Respondents

JUDGMENT

Uday Umesh Lalit, J.

1. Leave granted.

2. These appeals challenge the final judgment and order dated

03.03.2017 passed by the High Court of Punjab and Haryana at Chandigarh in

C.R.Nos. 6765 of 2015 (O&M), 5198 of 2015(O&M), 5199 of 2015(O&M),

5200 of 2015(O&M), 5201 of 2015(O&M), 5202 of 2015(O&M), 5203 of

2015(O&M), 5204 of 2015(O&M), 5205 of 2015(O&M), 5510 of

2015(O&M), 5511 of 2015(O&M), 5512 of 2015(O&M) and 4253 of

2015(O&M).

CIVIL APPEAL NOS. 1751-1763 OF 2019 (@ SLP(C) NOS.15937-15949/2017) MUNICIPAL COUNCIL THANESAR & ORS VS. VIRENDER KUMAR AND ORS.

2

3. Pursuant to public notice for auction of shops/showrooms, the auction

was conducted by the appellant on 18.10.2016 in which the respondents

participated and were declared successful bidders. Thereafter, disputes arose

between the parties whether the auctioned premises were ready to be

delivered on the relevant dates; whether the construction was incomplete; and

whether the civic amenities were made available or not? The matters reached

the High Court in various Writ Petitions namely CWP Nos.13548 of 2008,

1015, 1016, 1017, 1018, 1020, 1062, 14793 and 19228 of 2009 and by a

common order dated 14.07.2010 the disputes were referred to a sole

Arbitrator. After considering the matters, the Arbitrator passed a common

Award on 14.10.2010. Para 21 of the Award was as under:-

“21. In view of the above findings, award is passed in favour of the petitioners against the respondents with costs of Rs.10,000/- (Rupees Ten Thousand only) and Municipal Council, Thanesar, is directed to complete the work in all the respects of the Shopping Complex, situated in Kacha Gher, Thanesar, within one month; if already completed, a notice be issued to the petitioners to take possession of the respective shops and also to execute the agreement within a week. Municipal Council, is further directed to give interest on the advance rent as well as non-refundable security, at the rate of interest offered by Nationalised Bank, i.e. 7% per annum, till physical/possession is handed over to the petitioners/allottees. Petitioners are further awarded damages by way of 12% interest on non-refundable security till delivery of possession as they have suffered CIVIL APPEAL NOS. 1751-1763 OF 2019 (@ SLP(C) NOS.15937-15949/2017) MUNICIPAL COUNCIL THANESAR & ORS VS. VIRENDER KUMAR AND ORS.

3 mentally as well as loss of business due to delay in completion of work of the shops and handing over their possession. Requisite stamp papers be filed within week.”

4. The appellants preferred objections under Section 34 of the

Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’)

which were dismissed by the Additional District Judge on 15.09.2012. The

appellants, being aggrieved, preferred First Appeals which were dismissed by

the High Court of Punjab and Haryana on 17.01.2014. The order of the High

Court was also affirmed by this Court by dismissing Special Leave Petition

(Civil) No.15550 of 2014 on 04.08.2014. The directions issued in the Award

thus became final.

5. In Execution Proceedings taken out by the respondents, the Executing

Court in its order dated 23.03.2015 dealt with the matter as under:-

“5. As per the award dated 14.10.2010 the arbitrator had directed the judgment debtor i.e. Municipal Council, Thanesar to give interest on the advance rent as well as non-refundable security, at the rate of interest offered by nationalized bank i.e. 7% per annum till physical possession is handed over to the petitioners/allottees. Petitioners were further awarded damages by way of 12% interest on non-refundable security till delivery of possession. It is a settled legal position that an executing court cannot go beyond decree. A plain reading of award dated 14.10.2010 shows that interest @ 7% per annum has been given to CIVIL APPEAL NOS. 1751-1763 OF 2019 (@ SLP(C) NOS.15937-15949/2017) MUNICIPAL COUNCIL THANESAR & ORS VS. VIRENDER KUMAR AND ORS.

4 the decree holder on the advance rent as well as non- refundable security. “At the rate of interest offered by nationalized bank” mentioned in the award has to be read in continuation and cannot be isolated to give it a separate meaning. The award clearly stipulates that the rate of interest being awarded by the arbitrator is at the rate which is offered by nationalized bank. The award is silent about the manner of calculation of interest. The award cannot be interpreted to mean that the manner of calculation of the interest has to be in accordance with the norms of a nationalized bank. Interpreting the award as calculation of interest of 7% per annum on advance rent and non-refundable security with quarterly rests would mean that compound interest has to be calculated. The same does not appear to be the intention of the learned arbitrator as it is not specifically stated that interest at the rate of 7% per annum was awarded with quarterly rests.

6. Even as per the Reserve Bank of India guidelines liberty has been given to the nationalized banks to pay interest on domestic savings deposit accounts either at quarterly intervals or by giving longer rests.

Admittedly different nationalized banks have their own rate of interest and are free to determine the manner of calculation by giving shorter or longer period of rests. In the absence of any specific direction given by the learned arbitrator in the award dated 14.10.2010, no further interpretation in the award is feasible and the rate of interest has to be read as 7% per annum which has to be calculated with yearly rests. As per award dated 14.10.2010, the interest has to be calculated only till the delivery of possession. The possession of the respective shops has already been handed over to the decree holders.” CIVIL APPEAL NOS. 1751-1763 OF 2019 (@ SLP(C) NOS.15937-15949/2017) MUNICIPAL COUNCIL THANESAR & ORS VS. VIRENDER KUMAR AND ORS.

5

5. The appellants being aggrieved, filed aforementioned Civil Revisions

in the High Court which were disposed of on 03.03.2017. The questions that

arose for consideration were formulated by the High Court as:

“Twin questions that fall for consideration of this Court are; (i) whether the decree-holders are entitled to the statutory benefits under Section 31(7)(a) and (b) of the Act; and (ii) whether the decree-holders-petitioners are also entitled to calculate the amount of interest on advance rent and nonrefundable security, at the rate of interest offered by nationalized bank, i.e. 7% per annum, with quarterly rests.”

Relying on the majority view in Hyder Consulting (UK) Ltd. vs.

Governor, State of Orissa through Chief Engineer 1, the High Court

answered the first issue in favour of the respondents and concluded that they

were entitled to post award interest in terms of Section 31(7)(b) of the Act.

As regards second issue, it was held that the respondents were also entitled

to interest @ 7% per annum with quarterly rests. The view so taken by the

High Court is presently under challenge.

6. We have heard Mr. Ajay Majithia, learned counsel for the appellants

and Mr. A. Tewari, Mr. Anupam Raina, Mr. Raktim Gogoi and Mr. Chritarth

Palli, learned advocates for the respondents.

7. The first issue was rightly answered in favour of the respondents. The

question is no longer res integra and stands answered in clear terms in Para 1 (2015) 2 SCC 189 CIVIL APPEAL NOS. 1751-1763 OF 2019 (@ SLP(C) NOS.15937-15949/2017) MUNICIPAL COUNCIL THANESAR & ORS VS. VIRENDER KUMAR AND ORS.

6 10 of the Judgment of Bobde, J. and paras 27-28 of the Judgment of Sapre, J.

in Hyder Consulting (supra). The view taken by the High Court on this issue

is absolutely correct.

8. As regards the second issue, the Executing Court correctly

appreciated that the Award did not specifically state that the interest @ 7%

per annum was to be awarded with quarterly rests. In fact, the Award did not

specify anything; whether it be quarterly rests or yearly rests. It simply

awarded interest @ 7% per annum. Since the Award was completely silent on

that aspect, at the stage of execution, no addition or alteration could be made

in the operative directions issued in the Award. The Award had seen the

challenges at three levels and at none of those stages, there was any

modification in the operative directions of the Award.

9. The Executing Court found that it was doubtful whether the award of

interest was @ 7% with quarterly rests or yearly rests. In fact, the situation

was more fundamental, whether there was award of any compound interest at

all. The Executing Court put it with yearly rests which the High Court in

Revisions preferred by the appellants modified to quarterly rests. In our view,

both the Executing Court and the High Court completely erred and awarded

compound interest in favour of the respondents when the award had CIVIL APPEAL NOS. 1751-1763 OF 2019 (@ SLP(C) NOS.15937-15949/2017) MUNICIPAL COUNCIL THANESAR & ORS VS. VIRENDER KUMAR AND ORS.

7 stipulated it to be 7% per annum simplicitor. The Award did not even

remotely suggest that such award of interest would be with a direction that

interest be capitalized on yearly or quarterly basis. It was pure and simple

award of interest @ 7% and could not be taken to be a direction to award

compound interest.

10. We, therefore, accept the submission made by the learned counsel for

the appellants as regards second issue and direct that the direction issued in

the para 21 of the Award shall be construed as simple interest @ 7% per

annum.

11. Consequently, the pre-award interest on the amounts in question shall

be calculated @ 7% per annum simple interest. The respondents shall be

entitled to the benefit under Section 31(7)(b) of the Act and post award

interest shall also be @ 7% per annum – simple interest.

12. With the aforesaid modification the appeals are partly allowed. No

order as to costs.

……….………..…..……..……J. (Uday Umesh Lalit)

………...………….……………J. CIVIL APPEAL NOS. 1751-1763 OF 2019 (@ SLP(C) NOS.15937-15949/2017) MUNICIPAL COUNCIL THANESAR & ORS VS. VIRENDER KUMAR AND ORS.

8

(Dr. Dhananjaya Y. Chandrachud) New Delhi, February 19, 2019.