IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CHAMBER SUMMONS NO.335 OF 2005 ALONG WITH CHAMBER ORDER (LODGING) NO.235 OF 2005 IN EXECUTION APPLICATION NO.77 OF 2002 IN AWARD DATED 3RD NOVEMBER 2001 ALONG WITH COMMISSIONER’S REPORT DATED 12TH APRIL 2005 Camoron Finance & Investments, a partnership firm registered under the Indian Partnership Act, 1932, having their office at 3, Homelands, 55, Hill Road, Bandra (W), Mumbai - 400 050. ...Applicants Versus 1.M/s.Viral Enterprise, a partnership firm having their office at 401, Kshamalaya, 37 New Marine Lines, Mumbai - 400 020 and also at Bahar Theatre, Sahar Road, Vile Parle (E), Mumbai 400 057. 2.M/s.Sandip Enterprise, a partnership firm, having its place of business at 216, Dr.Annie Besant Road, Worli, Mumbai 400 018. 3.Manish Estates Pvt.Ltd., the partner of Respondent No.1 abovenamed through its Director Mr.C.D.Shah having his office at 401, Kshamalaya, 37 New Marine Lines, Mumbai - 400 020. 4.M/s.Saral Enterprises, a partnership firm having its office at 401, Kshamalaya, : 2 : 37 New Marine Lines, Mumbai 400 020 (Chakala Property) 5.M/s.Saral Enterprise, a partnership firm having its office at 401, Kshamalaya, 37 New Marine Lines, Mumbai 400 020 (Ghatkopar Property) And 6.Recovery Officer, Debt Recovery Tribunal (I), having his office at 5th Floor, Sindia House, Ballard Estate, Mumbai. 7.The Commissioner of Taking Accounts, High Court, Bombay. ...Respondents ...... Mr.Gaurav Joshi with Mr.Ashwin Ankhad for Applicants. Mr.U.J.Makhija with Mr.Uday Bobde i/b Mr.Denzil D’Mello for Respondents 1, 4 & 5. Mr.Kishore Jain for Commissioner for Taking Accounts. Mr.G.T.Mestha, Commissioner for Taking Accounts is present. ...... CORAM: A.M.KHANWILKAR, J. CORAM: A.M.KHANWILKAR, J. CORAM: A.M.KHANWILKAR, J. JUNE 29, 2005. JUNE 29, 2005. JUNE 29, 2005. : 3 : ORAL JUDGMENT : ORAL JUDGMENT : ORAL JUDGMENT : 1. This Order will dispose of the questions raised in the above numbered proceedings. Essentially, two questions will arise for my consideration: Firstly, whether the Judgment Creditor is entitled to claim statutory interest in terms of Section 31(7) of the Arbitration and Conciliation Act, 1996? Secondly, whether the Judgment Creditor is entitled to claim reimbursement on the cost, expenses and outgoings in respect of the disputed properties, as determined by the Commissioner in his report dated 12th April 2005? 2. For the limited controversy that is required to be considered in the present order, it is unnecessary to burden this Judgment with all the events that have led to the filing of the present proceedings. Suffice it to observe that : 4 : arbitration proceedings were resorted to by the parties before the Arbitral Tribunal, which culminated with the Consent Award passed on 26th September 2001. That Award has been passed on the agreement reached between the parties that in full and final settlement of all claims and dispute between the parties, the Judgment Creditor would accept a sum of Rs.15,00,00,000/- (Rupees Fifteen Crores) only. I shall refer to the relevant clauses of the Award as passed by the Arbitral Tribunal when required. 3. The Judgment Creditor has taken out execution proceedings for the enforcement of the said Award. In the original Execution Application as filed, Judgment Creditor has not claimed amount under the head ‘statutory interest’ in terms of Section 31(7) of the Act. For that reason, Judgment Creditor has taken out Chamber Order No.235 of 2005 so as to permit the Judgment Creditor to amend the Execution Application and include his claim of statutory interest under Section 31(7) of the Act as well as reimbursement of cost and outgoings in respect of the disputed : 5 : properties. In addition, the Judgment Creditor has taken out Chamber Summons No.335 of 2005 for recovery of the balance amount, which, according to the Judgment Creditor is around Rs.7,40,20,201/- (Rupees Seven Crores Forty Lakhs Twenty Thousand Two Hundred & One), which includes interest component of Rs.5,03,04,580/- (Rupees Five Crores Three Lakhs Four Thousand Five Hundred & Eighty) as on filing of the Application with further interest at the rate of 18% per annum from 31st March 2005 till the payment and/or realisation. The Judgment Creditor has also claimed reimbursement of the cost quantified at Rs.83,86,204/- (Rupees Eighty-three Lakhs Eighty-six Thousand Two Hundred & Four) in the Chamber Summons, but during course of argument, has confined to sum of Rs.72,85,826/- (Rupees Seventy-two Lakhs Eighty-five Thousand Eight Hundred & Twenty-six) as has been accepted in the report of the Commissioner dated 12th April 2005. 4. I shall first consider the question as to whether the Judgment Creditor is entitled to claim interest in terms of Section 31(7) of the Act. According to the Judgment Creditor, the Award as : 6 : passed by the Arbitral Tribunal is silent in respect of the future interest to be paid after the date of award. If it is so, by virtue of Section 31(7) of the Act, the Judgment Creditor is entitled to claim interest which is statutory interest. It is also contended that the issue regarding interest has been kept open by this Court, at least, on more than one occasion in order dated 7th April 2003 and subsequently on 20th July 2004 in derivative proceedings between the parties. Counsel for the Judgment Creditor has placed reliance on the decision of the Division Bench of our High Court in the case of Vijaya Bank vs. Maker Development Vijaya Bank vs. Maker Development Vijaya Bank vs. Maker Development Services Pvt.Ltd. reported in 2001 (3) Bom.C.R. Services Pvt.Ltd. reported in 2001 (3) Bom.C.R. Services Pvt.Ltd. reported in 2001 (3) Bom.C.R. 652 652 652, in particular, para 43 thereof. On the above submission, contends Counsel for the Judgment Creditor, the Judgment Creditor cannot be precluded from claiming statutory interest in terms of Section 31(7) of the Act. 5. On the other hand, Counsel for the Respondents 1 to 5 would contend that on fair reading of the award passed by the Tribunal, it would appear that parties had agreed for full and : 7 : final settlement of all claims and disputes, which presupposes that the said Respondents were not liable to pay future interest. It is argued on behalf of the said Respondents that the Award as passed by the Tribunal, will have to be construed to mean that the Tribunal has not provided any future interest, to be paid to the Judgment Creditor and if so held, the Judgment Creditor will not be entitled for claim of future interest. Counsel for the said Respondents further contends that essentially because of this understanding between the parties, the Judgment Creditor had filed Execution Application without claiming any amount towards future interest. According to him, if the prayer of the Judgment Creditor was to be accepted by this Court, that would result in modifying the consent award as passed and which will be impermissible. To buttress this legal submission, reliance is placed on the decision of our High Court reported in 2001 (4) Bom.C.R. 395 2001 (4) Bom.C.R. 395 2001 (4) Bom.C.R. 395 in the case of State of Goa, through the Executive in the case of State of Goa, through the Executive in the case of State of Goa, through the Executive Engineer vs. Placido Braganza & Ors. Engineer vs. Placido Braganza & Ors. Engineer vs. Placido Braganza & Ors. Counsel for the said Respondents has also relied on the proceedings already taken out by the Judgment : 8 : Creditor before this Court in the form of Execution Application and subsequent Application for Judge’s Order wherein no claim for future interest has been specifically prayed by the Judgment Creditor. Relying on this circumstance, it is contended that the claim set up by the Judgment Creditor with regard to future interest by way of present Chamber Summons and Chamber Order is after thought. 6. To examine the rival submissions on this issue, it is appropriate to advert to clauses of the Consent Award passed, on which emphasis was pressed by the Counsel appearing for the parties. . Clause 2 of the Award reads thus : "It is agreed that in full and final settlement all claims and disputes between the aforesaid parties, Camoron Finance and Investments, the claimants have agreed to accept a sum of Rs.15 crores." . Reliance was then placed on Clause 5 of the Award which reads thus : "Save as herein provided it is agreed and awarded that the Shah group has no claim against Camoron Finance and Investment of : 9 : any kind in respect of the disputes referred to us or otherwise". . Reliance was also placed on clause 7 of the Award which reads thus : "Agreed and awarded that the Shah group and each person consisting of Shah group as mentioned in clause 3 hereinabove to jointly and severally pay the said sum of Rs.15 crores to Camoron Finance & Investment on or before 30th January 2002". . Reliance was then placed on Clause 10 of the Award, which reads thus : "Agreed and awarded that in the event of Shah group committing default in payment of the sum of Rs.15 crores by 30th January 2002 - (i) Shah group shall forthwith hand over to the Claimants Camoron Finance and Investments physical possession of Bahar property described in Annexure 2 and Chakala property described in Annexure 3 for the purpose of sale to realise the amount remaining under these terms; (ii) The Claimants, viz. Camoron Finance & Investments will be entitled to remain in possession of the said two properties described in Annexures 2 and 3 hereto till the sales take place; (iii) The Claimants, viz. Camoron Finance & Investments shall be at liberty to execute the award for the amount remaining unpaid under the award by selling the Bahar property described in Annexure 2 by public auction in the first instance; : 10 : (iv) In the event of the Claimants viz. Camoron Finance and Investments not realising their dues under the award from the net sale proceeds of Bahar property described in Annexure 2 hereto, the Chakala property described in Annexure 3 shall be sold by public auction by the Claimants viz., Camoron Finance & Investments; (v) In the event of the claim under the award still remaining unsatisfied even after receiving the net sale proceeds of Chakala property, the Worli property which is described in Annexure 5 shall be sold by public auction by the Claimants viz. Camoron Finance & Investments. (vi) The Shah group shall give full cooperation for such sale or sales". 7. Indeed, the argument canvassed on behalf of said Respondents seems to be attractive at the first blush - that parties agreed for full and final settlement of all claims and disputes with no further liability of the Respondents to pay any other amount to the Judgment Creditors, except, sum of Rs.15,00,00,000/- (Rupees Fifteen crores). That interpretation is essentially founded on the language of Clause 2 of the Award, which is reproduced earlier. However, it is not possible to accept this submission. The expression "in full and final settlement of all claims and disputes" : 11 : would not encompass the claim regarding statutory interest, which is available to the Judgment Creditor in law, unless the Award was to specify in express terms to the contrary. It is not possible nor open for this Court to interpret the Award so as to read or infer that any contrary intent is expressed in the Award. For, there has to be an express provision in the Award so as to absolve the Judgment Debtor from the statutory obligation flowing from Section 31(7)(b) of the Act. 8. Section 30 of the Act provides for settlement of the dispute during the pendency of arbitration proceedings. Sub-section (2) of Section 30 provides that if during arbitral proceedings, the parties settle the dispute, the Arbitral Tribunal shall terminate the proceedings and if requested by the parties and not objected to by the Arbitral Tribunal, record the settlement in the form of an arbitral award on agreed terms. Even in the given case, the Award as passed is in conformity with Section 30(2). The status or effect of such Award is spelt out by Section (4) of : 12 : Section 30 of the Act, which provides for the arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute. 9. Thus understood, the subject award is in conformity with the requirements of Act of 1996. Section 31 provides for form and contents of arbitral award. Sub-section (7) deals with the requirement towards provision for interest payable in terms of the award. Section 7(a) deals with the interest to be paid at such rate on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. Whereas, clause (b) of sub-section (7) deals with future interest. This provision is relevant for our purpose, which is reproduced thus: "31.(7) (a) ......... (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment". : 13 : 10. From the plain language of this provision, it is obvious that "as of rule", interest at the rate of 18% per annum from the date of the Award to the date of payment has to be provided for in law. This provision is, however, an enabling provision which enables the Arbitral Tribunal to do away this requirement, which, however, can be done by directing to that effect in the Award. For, the expression used in this provision is "unless the award otherwise directs". There is no scope for the Court to interpret the Award so as to infer such intention. A priori, the Award should expressly make provision contrary to the obligation flowing from Section 31(7)(b) of the Act. If that is lacking, no amount of argument would be of any avail because of the mandate of Section 31(7)(b) of the Act. 11. In the present case, even on fair reading of the entire Award, it is not possible to take the view that the Award expressly provides that the Respondents are not liable to pay future interest after the date of the Award or for that matter, the : 14 : judgment Creditors are not entitled to claim interest in terms of Section 31(7)(b) of the Act. It is for that reason, strenuous efforts were made by the Counsel for the Respondents to persuade this Court to take the view that the agreement arrived at between the parties as articulated in the form of Consent Award is for full and final settlement of all claims and disputes without any further liability of the Respondents to pay any amount, except sum of Rs.15,00,00,000/- (Rupees Fifteen Crores). 12. Reliance has been rightly placed on the exposition of the Division Bench of our High Court by the Counsel for the Judgment Creditor in the case of Vijaya Bank (supra). Vijaya Bank (supra). Vijaya Bank (supra). It will be apposite to reproduce Para 43 of this decision, which reads thus : "The learned Counsel for the respondent pointed out that the Award in terms does not provide for payment of any interest from the date of the award till the date of payment. He drew our attention to sub-section (7) of section 31 and desired us to make a clarification that sub-section (7) of section 31 applies if the award is upheld and interest would be payable thereunder. According to the : 15 : learned Counsel, this clarification was being sought only for avoiding another round of litigation on the issue of interest which the respondent apprehends. Promptly came a very vehement objection from the appellant through Counsel that the Court cannot and ought not to make any such clarification. Perhaps, the apprehension of the respondents Counsel is justified. In any event, we see that sub-section (7) of section 31 provides that any sum directed to be paid by the arbitrator shall, unless there is a contrary direction in the award, carry interest at the rate of eighteen per cent per annum from the date of the award to the date of payment. We think that this is a salutary provision in the statute which is intended to deter parties from raising frivolous disputes by putting them on notice that interest calculated at the rate of 18 per cent per annum on the amount directed to be paid is payable. beyond making this observation, we do not feel called upon to make out any clarificatory exercise for we think that the salutary provision operates per proprio vigore". 13. The principle stated therein applies with full force to the case on hand, for which reason, I have no hesitation in accepting the stand of the Judgment Creditor that the Judgment Creditor is entitled to claim interest at the rate of 18% per annum from the date of award to the date of payment in terms of Section 31(7)(b) of the Act. : 16 : 14. The authority pressed into service on behalf of the Respondents in the case of State of State of State of Goa (supra) Goa (supra) Goa (supra) can be distinguished on two basis. Firstly, the Respondents have assumed that the issue if decided by this Court, would result in modification of the Award. That assumption is incorrect. This Court is not called upon to modify the award, but only to enforce the statutory right available to the Judgment Creditor in terms of Section 31(7)(b) of the Act. Secondly, in the said reported case, to which I was party, the provision such as Section 31(7) was not invoked, but it was simplicitor a case of consent decree between the parties, which was required to be modified if the stand of the Government of Goa was to be accepted as it is. 15. The next question is, whether the non-mentioning or non-claiming of interest under Section 31(7)(b) of the Act in the Execution Application or the Judges Order taken out by the Judgment Creditor before this Court is one on account of the understanding between the parties in : 17 : that behalf and, in any case, would preclude the Judgment Creditor from claiming the same at a later stage as having waived the same due to failure to claim it at the earliest opportunity. Even this contention need not detain us to answer the claim of the Judgment Creditor in that behalf. In the first place, neither from the Execution Application nor the Judges Order taken out by the Judgment Creditor, it is possible to cull out such intention of the Judgment Creditor. There is no document or any legal evidence on record to ascribe such intention to the Judgment Creditor. The case of waiver of such claim has to be not only pleaded but also established by positive evidence. It is not open in law to assume such factual position. As is rightly contended on behalf of the Judgment Creditor, there can be no estoppel against the Law. Besides, as found earlier, the Award should expressly provide to the contrary, which is the sine qua non to absolve the Judgment Debtor of the liability flowing from Section 31(7)(b) of the Act. : 18 : No more and no less. 16. For the aforesaid reasons, the first issue regarding entitlement of the Judgment Creditor to claim interest at the rate of 18% per annum from the date of the award to the date of payment will have to be answered in favour of the Judgement Creditor. 17. That takes me to the second issue which arises for my consideration as to whether the Judgment Creditor is entitled for reimbursement of the outgoings in respect of the disputed properties as accepted by the Commissioner. The statement of outstanding recoverable dues in respect of the two properties, as claimed by the Judgment Creditor is : 19 : as follows : STATEMENT OF OUTSTANDING RECOVERABLE DUES STATEMENT OF OUTSTANDING RECOVERABLE DUES STATEMENT OF OUTSTANDING RECOVERABLE DUES --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- Sr. Details Claim Approved by Sr. Details Claim Approved by Sr. Details Claim Approved by No. the Commissioner No. the Commissioner No. the Commissioner --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- Bahar Property Bahar Property Bahar Property 1 Liability accepted 14,48,000 14,48,000 by the Respondents. 2 Water charges 2,47,415 63,106 3 Property Tax 59,34,602 50,18,533 --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- (a) Total 76,30,017 65,29,639 (a) Total 76,30,017 65,29,639 (a) Total 76,30,017 65,29,639 --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- Chakala Property Chakala Property Chakala Property 4 Amount paid to the 69,000 69,000 Collector. 5 Security Expenses 5,22,154 5,22,154 6 Advertisement Exp. 1,65,033 1,65,033 --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- (b) Total 7,56,187 7,56,187 (b) Total 7,56,187 7,56,187 (b) Total 7,56,187 7,56,187 --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- Grand Total (a) + (b) 83,86,204 72,85,826 Grand Total (a) + (b) 83,86,204 72,85,826 Grand Total (a) + (b) 83,86,204 72,85,826 --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- : 20 : 18. As mentioned earlier, although the Judgment Creditor has claimed sum of Rs.83,86,204/- (Rupees Eighty-three Lakhs Eighty-six Thousand Two Hundred & Four) under the said heads in the Chamber Summons as filed; however, during the course of argument, the Counsel for the Judgment Creditor has confined his claim on the above terms and pressed relief in terms of prayer clause (d) only to the extent of sum of Rs.72,85,826/- (Rupees Seventy-two Lakhs Eighty-five Thousand Eight Hundred Twenty-six). 19. According to the Judgment Creditor, going by the language of the Award as passed, as also the conditions on which, the said properties at Bahar and Chakala were put to sale, it necessarily follows that the Judgment Creditor is entitled to claim reimbursement in respect of all the six heads referred to in the aforesaid statement. However, this position is contested by the Respondents 1 to 5. According to the said Respondents, however, in terms of clause 5 and other clauses of the terms and conditions of sale, the Judgment Creditor is not entitled for amount spent towards water : 21 : charges, property tax, amount paid to the Collector and security expenses. 20. Insofar as the amount specified by the Commissioner towards liability accepted by the Respondents being Rs.14,48,000/- (Rupees Fourteen Lakhs Forty-eight Thousand), Counsel for the said Respondents fairly contends that in view of the concession made before the Commissioner in respect of that head, it is not open for him to argue to the contrary. However, it is his submission that, the said concession was given due to inadvertence by the Counsel appearing for the said Respondents before the Commissioner. In other words, Counsel for the said Respondents appearing before this Court, is not in a position to dispute the liability of the said Respondents for disbursal of the amount of Rs.14,48,000/- (Rupees Fourteen Lakhs Forty-eight Thousand) as specified by the Commissioner in his subject report. 21. Similarly, with regard to the expenses incurred for disposal of the disputed properties : 22 : towards advertisement expenses in the sum of Rs.1,65,033/- (Rupees One Lakh Sixty-five Thousand Thirty-three) is not challenged. In that sense, disbursal of amount of Rs.1,65,033/- (Rupees One Lakh Sixty-five Thousand & Thirty-three) in favour of the Judgment Creditor under this head is fairly accepted by the said Respondents. 22. That leaves me to consider whether the Judgement Creditor is entitled for disbursal of amounts under heads 2 to 5 towards water charges and property tax in respect of Bahar Property and amount paid to the Collector and security expenses in respect of Chakala Property. The controversy will have to be resolved with reference to the Clause 11 of the Award and clauses 5, 5A and 12 of the terms and conditions of sale. . Clause 11 of the Award provides as follows: "11. Agreed and awarded that the net sale proceeds after deducting the costs, charges and expenses but excluding lawyers fees and charges from the aforesaid sales of properties shall be