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

J U D G M E N T

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  Engineer1,  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.