Leela Hotels Ltd vs Housing & Urban Dev.Corp.Ltd

3. Being aggrieved by the steps taken by the Respondent Corporation, the Appellant filed a Petition before the Chief Justice of the Delhi High Court to appoint an Arbitrator in terms of the arbitration clause, which was registered as Arbitration Application No.193 of 1999. On 23rd June, 1999, an Arbitrator was appointed by the Delhi High Court before whom the Appellant herein claimed a sum of Rs.142,16,08,896/- from the Respondent Corporation along with interest at the rate of 20% per annum along with a further sum of Rs.19,24,45,800/- comprising the ground rent paid along with interest thereon at the rate of 25% per annum along with a sum of Rs.5,98,22,058/- towards refund of property tax. A sum of Rs.5,62,27,715/-

4. The learned Arbitrator allowed the claims of Leela Hotels and rejected the counter-claim made by HUDCO. In his Award, the learned Arbitrator held that Leela Hotels was entitled to recover and HUDCO was obliged to pay damages computed with regard to the amounts paid as the first and second instalments of the premium, together with interest paid with the second instalment, less the amount refunded by HUDCO to Leela Hotels under letter dated 8th July, 1999, and as further reduced by the amount of property tax paid by HUDCO on behalf of Leela Hotels to the Municipal Corporation of Delhi.

5. The Appellant filed its objections under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the "1996 Act", before the High Court. The same was dismissed by the High Court by its order dated 21st January, 2003. Before the said petition was dismissed, the Respondent herein undertook to deposit the principal sum awarded by the Arbitrator on or before 21st October, 2002. The said sum of Rs.89,78,84,930/-, was allowed to be deposited without prejudice to the rights and contentions of the Respondent herein. When the cheque for the aforesaid amount was brought to Court on 21st October, 2002, the said Respondent got it recorded 7 that it represented the net principal amount due and payable to the Appellant herein under the Award and that the said deposit was without liability on its part to pay future interest thereupon.

6. The first appeal from the said order dated 20th January, 2003, having been dismissed by the High Court on 9th November, 2004, the Respondent filed a Special Leave Petition before this Court, which was dismissed on 12th February, 2008. Although, the Special Leave Petition was dismissed, the rate of interest for the pre-Award period was reduced from 20% to 18% per annum. Furthermore, since this Court had directed the Appellant to pay or deposit 50% of the balance decretal amount, the Respondent paid a sum of Rs.59.61 crores to the Appellant herein on 23rd March, 2006. The Respondent paid a further sum of Rs.48.09 crores to the Appellant herein on 16th April, 2008, which, according to the 8 Respondent, satisfied the decree. This, in fact, was the genesis of the dispute between the parties.

9. It may be indicated that on 11th October, 2002, the Respondent herein undertook to deposit the principal amount awarded by the Arbitrator on or before 21st October, 2002. Such deposit was allowed to be made without prejudice to the rights and contentions of HUDCO in the proceedings before the High Court. Subsequently, by order dated 21st October, 2002, the said position was reiterated and it was recorded that the deposit made by the Respondent would be without prejudice to the rights and contentions of the parties in the pending proceedings and without any liability on the part 12 of the Respondent to make payment of further interest on the above-mentioned amount. The Division Bench took the view that having regard to the submissions made on behalf of the Respondent herein that the said amount of Rs.89,78,84,930/-

was on account of the principal sum due and payable to the Appellant herein under the Award, and since no objection had been raised by the Appellant herein to such contention, it would have to be held that the said sum had, in fact, been adjusted towards the principal sum. After observing that before withdrawing the amount, the Appellant herein had neither sought permission of the Court to appropriate the sum towards interest nor given any intimation regarding withdrawal of the said amount, the Division Bench made it clear that the said amount would be appropriated towards the principal amount due and not towards interest. The Division Bench noted that the amount being withdrawn was 13 without prejudice to the Appellant's rights towards payment of interest. The Division Bench took the view that since the Respondent herein was keen to avoid the possibility of paying further interest on the principal sum, in the event of its objections being dismissed, it offered to deposit the principal sum payable under the Award. The Division Bench observed that it made good business sense on the part of the Appellant, at that time, to accept the aforesaid amount towards the principal sum payable to it under the Award and to utilize the said sum for its business, instead of waiting for the final outcome of the litigation between the parties. The Division Bench came to the conclusion that it was in such circumstances that the Respondent had agreed to deposit the said sum of Rs.89,78,84,930/- specifically, towards the principal amount under the Award.

11. On such reasoning, the Division Bench set aside the order passed by the learned Single Judge on 19th 15 November, 2008, and after noting that a sum of Rs.50.54 crores had been deposited by the Respondent No.1 herein during the pendency of the Appeal, directed him to decide in the light of the judgment rendered by the Division Bench as to whether any further amount was payable by the Respondent No.1 herein to the Appellant in terms of the judgment. Consequential directions were also given on the outcome of such findings.

Such a submission, though legal and correct, is not supported by the materials on record.

31. Hence, the submissions made by the learned ASG on behalf of HUDCO cannot be accepted and are, therefore, rejected. Consequently, the Appeal succeeds and the judgment and order of the Division Bench of the High Court is set aside and that of the learned Single Judge is restored.

32. Having regard to the nature of the issues involved in this case, the parties will bear their own costs.