Case Note & Summary
The case involves an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, filed by Container Corporation of India Ltd. (CONCOR) against an arbitral award in favor of M/s. Kandla Cargo Handlers (claimant). The parties entered into an agreement on 1 April 2002 for handling and transportation of containers and cargo at Nagpur Container Terminal, initially for three years, extended until 15 March 2006. Disputes arose, and the matter was referred to arbitration. The Sole Arbitrator upheld the claimant's claim and awarded Rs.9,73,91,115.46 with interest pendente lite at 18% per annum from 28 January 2007 (date of filing claim) to 19 April 2015 (date of award), totaling Rs.24,20,16,921.91. The award directed payment within 90 days, failing which interest at 15% per annum from 20 April 2015 till realization. The Principal District Judge maintained the award with slight modification. CONCOR appealed, primarily challenging the interest rate as excessive. The High Court considered the scope of interference under Section 37 and found that the interest rate of 18% was patently unreasonable given the commercial context and prevailing rates. The court reduced the pendente lite interest to 12% per annum but upheld the post-award interest at 15% per annum. The appeal was partly allowed, modifying the award accordingly.
Headnote
A) Arbitration - Appeal under Section 37 - Interest Rate - Modification - The appeal challenged the arbitral award granting 18% interest pendente lite and post-award interest at 15% - The High Court held that the interest rate of 18% was excessive and reduced it to 12% per annum for the pendente lite period, while maintaining the post-award interest at 15% - Held that the court can interfere with the rate of interest if it is patently unreasonable (Paras 5-8).
Issue of Consideration
Whether the interest rate of 18% per annum awarded by the Arbitrator and maintained by the District Judge is excessive and warrants interference under Section 37 of the Arbitration and Conciliation Act, 1996.
Final Decision
The appeal is partly allowed. The award is modified to the extent that the interest pendente lite (from 28 January 2007 to 19 April 2015) shall be at the rate of 12% per annum instead of 18% per annum. The rest of the award, including post-award interest at 15% per annum, is maintained.
Law Points
- Arbitration award
- Section 37 Arbitration and Conciliation Act
- 1996
- interest pendente lite
- interest rate modification
- scope of appeal under Section 37
- interference with arbitral award
Case Details
2019 LawText (BOM) (07) 203
ARBITRATION APPEAL NO. 22 OF 2018
Shri Anil Mardikar, Senior Advocate a/b. Shri R.M. Mardikar, Advocate and Shri Rishabh Khemuka, Advocate for Appellants; Shri M.G. Bhangde, Sr. Advocate a/b. Shri Shyam Dewani and Shri Sahil Dewani, Advocates for Respondent
Container Corporation of India Ltd.
M/s. Kandla Cargo Handlers
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Nature of Litigation
Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against an arbitral award and the order of the Principal District Judge maintaining the award with slight modification.
Remedy Sought
The appellants (CONCOR) sought to set aside or modify the arbitral award, particularly the rate of interest awarded.
Filing Reason
The appellants challenged the arbitral award on the ground that the interest rate of 18% per annum pendente lite and 15% post-award was excessive and unreasonable.
Previous Decisions
The Sole Arbitrator awarded Rs.9,73,91,115.46 with interest pendente lite at 18% per annum from 28 January 2007 to 19 April 2015, totaling Rs.24,20,16,921.91, and post-award interest at 15% per annum from 20 April 2015 till realization. The Principal District Judge maintained the award with slight modification.
Issues
Whether the interest rate of 18% per annum awarded by the Arbitrator is excessive and warrants interference under Section 37 of the Arbitration and Conciliation Act, 1996.
Submissions/Arguments
The appellants argued that the interest rate of 18% per annum was exorbitant and not in line with commercial rates.
The respondent supported the award, contending that the rate was justified given the delay and the nature of the claim.
Ratio Decidendi
The court can interfere with the rate of interest awarded by an arbitrator under Section 37 if the rate is patently unreasonable or excessive. In this case, 18% pendente lite interest was held to be excessive and reduced to 12% per annum, while post-award interest at 15% was considered reasonable.
Judgment Excerpts
The learned Arbitrator upheld the claim of the claimant and granted Rs.9,73,91,115.46ps. with interest pendente lite i.e. for the period from 28th January 2007 (date of filing of Statement of Claim by the claimant) till 19th April 2015 (date of award), at the rate of 18% per annum.
The learned Arbitrator held that, including interest pendente lite as awarded, the claimant was entitled for Rs.24,20,16,921.91ps.
The learned Arbitrator directed that on failure to pay the amount till 18th July 2015, the CONCOR will be liable to pay interest @ 15% per annum from 20th April 2015 till realization of the amount from the CONCOR.
Procedural History
The dispute arose from an agreement dated 1 April 2002 between CONCOR and the claimant for handling and transportation of containers. The agreement was extended until 15 March 2006. Disputes led to arbitration. The Sole Arbitrator passed an award on 19 April 2015. The Principal District Judge maintained the award with slight modification. CONCOR filed the present appeal under Section 37 of the Arbitration and Conciliation Act, 1996 on 22 of 2018. The High Court reserved judgment on 2 May 2019 and pronounced on 12 July 2019.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 37
