Skip to main content

Award-Debtor Cannot Be Subjected To A Penal Rate Of Interest

In Vedanta Ltd. vs Shenzen Shandong Nuclear Power Construction Co. Ltd., the arbitral tribunal adopted a dual rate of Interest. If the amounts awarded were paid within 120 days’ from the passing of the Award, the awarded sum would carry a 9% rate of Interest on both the components of the Award i.e. the amounts payable in INR and EUR. However, if the awarded amounts were not paid within 120 days’, the arbitral tribunal imposed a higher rate of further Interest @ 15% the date of realization of the amount.

The appeal against the order of the tribunal was rejected by the Single Judge of the Delhi High Court and the divisional bench as well.

On appeal the Supreme Court decided that the discretion of the arbitrator to award interest must be exercised reasonably. An arbitral tribunal while making an award for Interest must take into consideration a host of factors, such as: 
(i) the ‘loss of use’ of the principal sum; 
(ii) the types of sums to which the Interest must apply; 
(iii) the time period over which interest should be awarded; 
(iv) the internationally prevailing rates of interest; 
(v) whether simple or compound rate of interest is to be applied;
(vi) whether the rate of interest awarded is commercially prudent from an economic stand­point;
(vii) the rates of inflation, 
(viii) proportionality of the count awarded as Interest to the principal sums awarded.

On the one hand, the rate of Interest must be compensatory as it is a form of reparation granted to
the award­ holder; while on the other it must not be punitive, unconscionable or usurious in nature.

The dual rate of Interest awarded seems to be unjustified. The imposition of a high rate of interest @ 15% post-120 days is exorbitant, from an economic standpoint, and has no co­rrelation with the prevailing contemporary international rates of Interest. The Award­ debtor cannot be subjected to a penal rate of interest, either during the period when he is entitled to exercise the statutory right to challenge the Award, before a Court of law, or later. Furthermore, the arbitral tribunal has not given any reason for imposing a 15% rate of Interest post 120­days.

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Property can be sold on power of attorney - Delhi High Court

As reported in the Hindusthan Times on 5th May:-  http://www.hindustantimes.com/India-news/NewDelhi/Property-can-be-sold-on-power-of-attorney/Article1-1054964.aspx In a judgment that will benefit lakhs of Delhi residents living in co-operative housing societies and DDA flats, the Delhi High Court has quashed a Delhi government circular banning property sale in the Capital through general power of attorney (GPA). The court found that the directions in the circular, issued by the revenue department on April 27 last year, were contrary to the Supreme Court judgment dated October 11, 2011. The HC order will increase the number of saleable properties in Delhi and could bring down the value of freehold properties. According to realty watchers, on an average, around 20% of properties are registered through GPA transfers — a common way of selling leasehold properties and those that don’t have a clear title. The judgment came on a petition filed by a company, Pace Developers and ...
5 comments
Read more

Vanishing promoters and languishing shareholders

Over Rs 60,000 crore of shareholders’ wealth is stuck in 1,450 companies suspended by the stock exchanges. More importantly, near 100 per cent pledging of promoter holding appears to be common in many of these companies. This, almost rules out any chance of the companies bouncing back. The suspension is for non-compliance of the listing norms. Vanishing Companies - Definition As per the definition stipulated by SEBI, any listed company, which raised moneythrough initial public offer and, thereafter, stopped operations, did not file returnseither with the RoC or SEBI and did not exist on the registered premises wastermed as vanishing.There are provisions under Companies Act under which companies are termedvanishing companies on satisfying certain conditions. it is provided a companywould be deemed to be a vanishing company, if it satisfies all the conditions given below : a) Failed to file returns with Registrar of Companies (ROC) for a period of two years; b) Failed to fil...
3 comments
Read more