The Delhi High Court held that the deposit of money or bank guarantee doesn’t barred accrual of interest until the award holder has full access to the deposited amount in accordance with Order XXI Rule 1(4) of the CPC. The Court held that in the present case, the “interest clock” stopped running on August 8, 2019, and not on March 23, 2018, or November 2022, as contended by the parties.
The enforcement proceedings arose from an arbitral award dated November 9, 2017, passed in favour of Shenzhen Shandong Nuclear Power Construction Company Limited against Vedanta Limited. The award directed payment of substantial amounts in INR and Euros, with interest at 9% per annum. Vedanta challenged the award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, but both challenges were dismissed. During the pendency of proceedings, Vedanta deposited ₹152.22 crore with the Delhi High Court and had earlier furnished a bank guarantee of ₹187 crore pursuant to orders passed by the Bombay High Court.
A core dispute arose on the cut-off date for the calculation of interest. The decree holder claimed interest till November 23, 2022, contending that it did not have unhindered access to the awarded amount. Vedanta argued that interest stopped on March 23, 2018, when the deposit was made, or at the latest on August 30, 2018, when its Section 37 appeal was dismissed. The Court was thus called upon to decide whether the deposits and bank guarantee amounted to “payment” under Order XXI Rule 1 CPC.
Justice Amit Bansal observed that a bank guarantee cannot be taken to be a deposit in terms of Order XXI Rule 1 of the CPC, and that a deposit only serves the purpose of stay, and doesn’t barred from interest until the decree holder is allowed for the encashment. Therefore, the deposit on March 23, 2018, accrues interest.
The Court further noted that by order dated August 8, 2019, the judgment debtor agreed for the cash encashment of Rs. 187/- and additional funds. However, the Decree holder chose to continue litigation. Accordingly, the High Court held that interest on the arbitral award ceased on August 8, 2019, directed Vedanta to file revised calculations, ordered payment of the amount due from the sums lying with the Registry, and directed refund of the excess deposit to Vedanta with accrued interest. The enforcement petition was disposed of with consequential directions.
Appearances:
For the Decree Holder – Senior Advocate Gourab Banerji, with Advocates Anshuman Pande and Abhishek Bhushan Singh.
For the Judgment Debtor – Senior Advocate Dhruv Mehta, with Advocates Ranjana Roy Gawai, Vasudha Sen, Vineet Wadhwa, Keith Varghese, and Shreyas Mittal.
