2002 JTR(SC) 189
2002 AIR(SC) 952 ; 2002 AIR(SCW) 650 ; 2002 2 ALD(SC) 53 ; 2003 1 AllCJ 468 ; 2002 47 AllLR 682 ; 2002 2 ALT(SC) 45 ; 2002 1 ArbLR 348 ; 2002 5 AWC 4263 ; 2002 3 ICC 287 ; 2002 1 JLJR(SC) 134 ; 2002 2 JLJR(SC) 14 ; 2002 2 JLJR(SC) 36 ; 2002 2 JT 5 ; 2002 2 MLJ 113 ; 2002 2 PLJR(SC) 14 ; 2002 3 PLR(SC) 226 ; 2002 1 RAJ 340 ; 2002 2 RCR(Civ) 130 ; 2002 2 Scale 32 ; 2002 2 SCC 573 ; 2002 1 UJ 727 ; 2002 1 WLC 237 ; 2002 KHC 1807 ; 2002 1 Supreme 549
2002(1) Supreme 549
SUPREME COURT OF INDIA
(From Kerala High Court)
S. Rajendra Babu & Mrs. Ruma Pal, JJ.
Greater Cochin Development Authority -Appellant
versus
Leelamma Valson & Ors. -Respondents
Civil Appeal No. 1006 of 2002
(Arising out of SLP (C) No. 11035 of 2001)
Decided on 6-2-2002
Counsel for the Parties :
For the Appellant : T.L. Viswanatha Iyer, Sr. Advocate and T.G. Narayanan Nair, Advocate.
For the Respondents : C.A. Sundaram, Sr. Advocate, Ms. B. Vijaya Lakshmi Menon and Rajiv George, Advocates.
IMPORTANT POINT
Where arbitrators awarded interest until payment future interest can be claimed on a decree in terms of the award. But where award was giving interest upto date of decree (as in present case), execution for future interest cannot be granted.
Act
Referred
:ARBITRATION ACT : S.17, S.29
CIVIL PROCEDURE CODE : S.11, S.114
(A) The Arbitration Act, 1940 (Sections 17, 29) and the Code of Civil Procedure (Sections 11, 114) govern the enforcement and interpretation of arbitral awards. Section 17 of the Arbitration Act outlines the scope for interest awards, while Section 29 empowers courts to pass decrees and address future interest. Sections 11 and 114 of the CPC provide mechanisms to challenge and review orders, ensuring procedural finality and the doctrine of res judicata. These provisions apply directly as the dispute originated from an arbitration agreement containing an arbitration clause, with the award being challenged and reviewed under these statutory frameworks.
(B) Key legal principles include that an arbitral award's interest provisions bind the court when forming a decree, and a decree passed in terms of an award inherits its terms. Courts are bound by prior interpretations of decrees unless set aside, and parties are barred from reopening issues under res judicata if they accept an interpretation or fail to challenge it.
Facts of the case:
An agreement for construction contained an arbitration clause. After disputes, an arbitral award directed payment with specific interest rates. The respondent sought enforcement including future interest at 18%, which was dismissed. Later, a review petition under Section 114 CPC was dismissed, interpreting the decree as refusing future interest. An appeal from that dismissal was allowed by the High Court, allowing future interest. The respondent subsequently challenged the execution, and the High Court held the respondents entitled to interest.
Findings of Court:
The High Court correctly held that the arbitrators awarded interest until payment, and the decree inherited this. However, the order dated 29th October 1990 explicitly refused future interest, and the respondents accepted this by not appealing the decree or challenging the interpretation.
Issues:
Whether the respondents could challenge the interpretation of the decree regarding future interest after accepting it, and whether the doctrine of res judicata bars reopening the issue decided in the earlier dismissal of the review petition.
Ratio Decidendi:
When parties accept a specific interpretation of a decree and refrain from appealing it, that interpretation becomes final inter partes. Res judicata prevents reopening an issue already decided, even if a prior application was dismissed on merits.
Result:
The appeal is allowed, and the High Court decision is set aside. No costs are awarded.
(A) The Arbitration Act, 1940 (Sections 17, 29) and the Code of Civil Procedure (Sections 11, 114) govern the enforcement and interpretation of arbitral awards. Section 17 of the Arbitration Act outlines the scope for interest awards, while Section 29 empowers courts to pass decrees and address future interest. Sections 11 and 114 of the CPC provide mechanisms to challenge and review orders, ensuring procedural finality and the doctrine of res judicata. These provisions apply directly as the dispute originated from an arbitration agreement containing an arbitration clause, with the award being challenged and reviewed under these statutory frameworks.
(B) Key legal principles include that an arbitral award's interest provisions bind the court when forming a decree, and a decree passed in terms of an award inherits its terms. Courts are bound by prior interpretations of decrees unless set aside, and parties are barred from reopening issues under res judicata if they accept an interpretation or fail to challenge it.
Facts of the case:
An agreement for construction contained an arbitration clause. After disputes, an arbitral award directed payment with specific interest rates. The respondent sought enforcement including future interest at 18%, which was dismissed. Later, a review petition under Section 114 CPC was dismissed, interpreting the decree as refusing future interest. An appeal from that dismissal was allowed by the High Court, allowing future interest. The respondent subsequently challenged the execution, and the High Court held the respondents entitled to interest.
Findings of Court:
The High Court correctly held that the arbitrators awarded interest until payment, and the decree inherited this. However, the order dated 29th October 1990 explicitly refused future interest, and the respondents accepted this by not appealing the decree or challenging the interpretation.
Issues:
Whether the respondents could challenge the interpretation of the decree regarding future interest after accepting it, and whether the doctrine of res judicata bars reopening the issue decided in the earlier dismissal of the review petition.
Ratio Decidendi:
When parties accept a specific interpretation of a decree and refrain from appealing it, that interpretation becomes final inter partes. Res judicata prevents reopening an issue already decided, even if a prior application was dismissed on merits.
Result:
The appeal is allowed, and the High Court decision is set aside. No costs are awarded.
JUDGMENT
Ruma Pal, J.-Leave granted.
2. An agreement was entered into between the appellant and the respondent by which the respondents undertook the construction of residential flats. The agreement contained an arbitration clause. After the completion of the work, disputes arose between the parties. The disputes were referred to a panel of three arbitrators under the provisions of the Arbitration Act, 1940 (referred to as the Act). By an award made on 31st December 1987 the arbitrators directed the appellant to pay the respondents various amounts towards the several heads of claim put forward by the respondents. The arbitrators also awarded interest in respect of certain of the respondents claims. As the dispute in this appeal centers around the right of the respondent to claim interest, the relevant portion of the award in this context is extracted (wherein the appellant herein is referred to as the respondent and the respondent herein as the claimant ) :
"Respondent to pay claimant interest @ 9% from 29.5.80.
Respondent to pay claimant interest at 10% from 1.2.1985 on claims III to IX and on Claim XII only".
3. The award was filed in the local Court which issued notice under Section 14(1) of the Act, to the appellant. The appellant filed an application challenging the award on several grounds, one of the grounds being that the award of interest pendente lite was illegal. The respondents also filed an application in which the first prayer was to pass a decree in terms of the award. The second prayer was to :
"Grant interest at 18% per annum on the amounts due under the decree to be so passed from the date of decree till date of payment or realization, in accordance with Section 29 of the Arbitration Act."
4. Both the applications were heard and disposed of by a common judgment on 26th March 1990 by which the appellant s application was dismissed and the respondents application was allowed and a decree in terms of the award was granted.
5. Soon after this an application was made under Section 114 of the Code of Civil Procedure by the respondents before the court praying for review of the order dated 26th March 1990. According to the respondents application, by an "accidental slip, omission or oversight" the Court while allowing the respondents application "had not dealt with and passed any order on Prayer No. 2 therein for the grant of future interest at 18% per annum on the amounts due under the decree from the date of decree till date of payment or realisation". It was further stated that unless the Court reviewed the order dated 26th March, 1990 and allowed the prayer for future interest to the respondents on the amounts due under the decree from the date of decree till the date of payment or realisation, serious prejudice and hardship would be caused to the respondents.
6. The application was dismissed by the Court on 29th October 1990. It was held on a construction of the order dated 26th March 1990 that it was not a case of any "omission or slip" but that the Court had chosen not to grant any interest to the respondents on the decretal amount. The respondents did not challenge this order nor did they prefer any appeal from the decree or order dated 26th March 1990.
7. However, on 10th December 1990, the appellant preferred an appeal from the order dated 26th March 1990 before the High Court. The appeal was allowed to the future interest at 18% per annum on the amounts due under the decree from the date of decree till date of payment or realisation". It was further stated that unless the Court reviewed the order dated 26th March, 1990 and allowed the prayer for future interest to the respondents on the amounts due under the decree from the date of decree till the date of payment or realisation, serious prejudice and hardship would be caused to the respondents.
8. In execution of the decree, the respondents claimed interest on the decretal amount. The Executing Court held that that the question whether the respondents were entitled to interest on the decree had been resolved finally by the order dated 29th October 1990 which had made it clear that no future interest was payable on the decree. According to the Executing Court, the decretal debt had been fully satisfied by the appellant. The execution petition was consequently dismissed.
9. The respondents challenged the order of the Executing Court in revision. The High Court construed the decree and came to the conclusion that the respondents were entitled to claim interest on the decretal amount. The reasoning was that arbitrators had awarded interest until payment and that the decree had been passed in terms of the award and therefore the appellants were entitled to claim interest on the decree.
10. The reasoning of the High Court is faultless as a pure proposition of law and in keeping with the decision of this Court in State of Orissa v. B.N. Agarwalla 1997(2) SCC 469 where it was held that :
"When the court does not modify the award with regard to grant of interest from the date of the award up to the date of payment, the effect would be as if the court itself has granted interest from the date of the decree till the payment at the rate which was determined by the arbitrator. The future interest would be regarded as having been ordered to be paid under Section 29 of the Arbitration Act when the court does not modify the award in this respect."
11. But in the facts of this case, the decision was erroneous.
12. In the case before us the parties, and certainly the respondents, had understood and proceeded on the basis that the arbitrators had awarded interest only upto the date of the decree. The respondents application under Section 114 of the Code of Civil Procedure makes that abundantly clear. The submission of the learned counsel for the respondents that the application was in substance not under Section 114 but under Section 152 of the Code for correcting a clerical error is unacceptable. The language in the body of the application and the prayer made by the respondents was to consider the grant of future interest on the ground that the prayer had been overlooked while passing the decree in terms of the award.
13. The learned counsel for respondents then contended that the application filed by the respondents whether under Section 114 or 152 CPC had not been accepted but on the other hand dismissed on the basis that none of the grounds urged fell within the range of either of the said provisions. He elaborated that an order dismissing an application as not maintainable with not have any effect upon the decree as originally passed in terms of the award.
14. The argument may have had some substance had the scope of the decree not been put in issue between parties by the respondents themselves. The Court before which the application was made could have said that the grant of interest was implicit in the order dated 26th March 1990 and that by affirming the award, future interest had been granted. It did not say so. It said categorically that the prayer for future interest or interest on the decree had been considered and had been refused by the Court. When the High Court affirmed the decree in 1991, the decree had already been interpreted - an interpretation which was not questioned. In the light of B.N. Agarwalla s case (supra) the correctness of the decision may be doubtful. But the respondents accepted this interpretation of the decree. They could have challenged the interpretation but they did not. They also chose not to prefer an appeal from the decree itself. Not having adopted either course, the interpretation of the decree by the order dated 29th March 1990 was final inter partes.
15. Paradip Port Trust and Ors. v. Unique Builders 2001(2) SCC 680 relied on by the respondents has no application. In that case this Court was disposing of an appeal from an order passing a decree in terms of the award and itself granted future interest from the date of the decree till payment. Here the impugned order was passed in execution proceedings after the scope and import of the decree stood concluded.
16. The High Court erred in ignoring the order dated 29th October 1990 and its effect on the rights of the parties. The issue of future interest had been raised and decided once and the respondents were barred by res judicata from reopening it.
17. For the above mentioned reasons, the appeal is allowed and the decision of the High Court is set aside. There will however be no order as to costs.
(N.K.R.) Appeal allowed.
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