DAMEPL v DMRC: Supreme Court upholds Delhi High Court verdict on payment of interest on arbitral award amount

The Supreme Court on Thursday upheld the judgment of the Delhi High Court on the aspect of interest to be paid by Delhi Metro Rail Corporation (DMRC) on the amount awarded by an arbitral tribunal in favour of Anil Ambani-owned Delhi Airport Metro Express Private Limited (DAMEPL). [Delhi Airport Metro Express Pvt Ltd v. Delhi Metro Rail Corporation].A Bench of Justices L Nageswara Rao and BR Gavai held that the legislative intent behind Section 31(7)(a) of the Arbitration and Conciliation Act, 1966 is that the discretion with regard to grant of interest would be available to the arbitral tribunal only when there is no agreement to the contrary between the parties. "The phrase “unless otherwise agreed by the parties” clearly emphasizes that when the parties have agreed with regard to any of the aspects covered under clause (a) of subsection (7) of Section 31 of the 1996 Act, the Arbitral Tribunal would cease to have any discretion with regard to the aspects mentioned in the said provision. Only in the absence of such an agreement, the Arbitral Tribunal would have a discretion to exercise its powers under clause (a) of subsection (7) of Section 31 of the 1996 Act. The discretion is wide enough. It may grant or may not grant interest. It may grant interest for the entire period or any part thereof. It may also grant interest on the whole or any part of the money," the top court said in its judgment..Since there existed a concession agreement between DMRC and DAMEPL, the Supreme Court upheld the observations of the High Court that the latter's claim that the outstanding interest has to be added in the principal amount cannot be accepted."We are therefore of the considered view that in view of the specific agreement between the parties, the interest prior to the date of award so also after the date of award will be governed by Article 29.8 of the Concession Agreement, as has been directed by the Arbitral Tribunal," the judgment stated..The judgment of the Delhi High Court was passed in an execution petition filed by DAMEPL seeking enforcement of an arbitral award which, it is claimed, amounts to ₹8,000 crore.The award arises out of an agreement signed between the DMRC and DAMEPL in 2008 to develop and operate the orange line of the Delhi Metro that connects Indira Gandhi International Airport's Terminal-3 to Dwarka Sector-21.In March 2022, a single-judge of the Delhi High Court issued certain directions with regard to the payment to be made by the DMRC towards the satisfaction of the award. In the proceedings before the High Court, a contention was raised on behalf of DAMEPL that the sum, as specified under clause (a) of subsection (7) of Section 31 of the 1996 Act, would include interest for a period from the date on which the cause of action arose to the date on which the award was made. The said contention was rejected by the High Court, prompting the instant appeal by DAMEPL..Before the apex court, counsel appearing for DMRC and DAMEPL relied on the judgment in Hyder Consulting (UK) Limited v. Governor, State of Orissa through Chief Engineer regarding the interpretation of Section 31(7)(a) of the Arbitration and Conciliation Act. .Senior Advocate Harish Salve, appearing for DAMEPL, said that the top court in Hyder Consulting had held that it is clear from the said Section that in the sum for which an award is made, interest may be included for the pre-award period, and that for the post-award period, interest up to the rate of 18% per annum may be awarded on such sum directed to be paid by the arbitral tribunal. He submitted that the amount under Section 31(7)(a) would include the termination payment of ₹2,782.33 crore plus the amount of interest granted by the arbitral tribunal from the date of cause of action till the date of the award, which would amount to ₹4,662.59 crore..On the other hand, Senior Advocate Parag Tripathi, appearing for the DMRC, submitted that since there is an agreement between the parties as to how the interest would be awarded and that since the same has been awarded by the arbitral tribunal in accordance with the agreement, the majority judgment in Hyder Consulting would not be of any assistance to the case of DAMEPL..Going by a plain interpretation of the language employed by the legislature, the Court said that the position that would emerge, on an analysis of Section 31(7)(a) is as under:It begins with the words “Unless otherwise agreed by the parties”;where and insofar as an arbitral award is for the payment of money, the Arbitral Tribunal may include interest component in the sum for which the award is made;the interest may be at such rate as the Arbitral Tribunal deems reasonable;the interest may be on the whole or any part of the money;the interest may be 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.The Court stated that the part of said Section which deals with the power of the arbitral tribunal to award interest would operate only if it is not otherwise agreed by the parties. Such a situation was not under consideration in Hyder Consulting, the Court noted.Since the arbitral tribunal directed that the termination payment would be as per the provisions of the concession agreement, the Court saw no reason to interfere, and dismissed the appeal. .[Read Judgment]