Full Judgment Text
$-19
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
Date of decision: 20 September, 2018
+ O.M.P. (COMM) 360/2018
MR. V. SARAVANAN ..... Petitioner
Through Mr.Desh Raj and Mr.Shikhar
Kumar,Advs.
versus
M/S. RISHIKESH HIRE PURCHASE AND LEASING
COMPANY PVT. LTD ..... Respondent
Through Mr.Siddharth Khattar, Adv.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
I.A. No.11111/2018 (Delay)
This is an application seeking condonation of delay in re-filing
of the petition.
For the reasons stated in the application, the delay is condoned
and application stands allowed.
O.M.P. (COMM) 360/2018 & I.A. No.11109/2018
1. This petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the ‘Act) has been
filed challenging the Arbitral Award dated 15.03.2018 passed by the
Sole Arbitrator adjudicating the disputes that have arisen between the
parties in relation to the Agreements dated 22.04.2015 and
OMP(COMM.) 360/2018 Page 1
03.06.2015 executed between the parties.
2. The respondent had granted a loan of Rs.3 crores to the
petitioner under the Loan Agreement dated 22.04.2015. In the terms
of the said agreement, the loan was to carry interest @ 24% p.a. and
was to be repaid on or before 22.06.2015. The Agreement further
provided that in case of a default, the interest is to be paid @ 36%
p.a.
3. On 03.06.2015, a further loan of Rs.1.50 crores was extended
by the respondent to the petitioner. This Agreement specifically
provided for the interest to be paid @ 36% p.a. The loan was to be
repaid on or before 22.06.2015.
4. The petitioner failed to repay the loan amount and infact, the
cheques given by the petitioner were returned back on account of
‘insufficient funds’. The respondent issued demand notices on the
petitioner dated 22.06.2015 and 23.07.2015 with respect to both the
loan amounts. In response thereto, the petitioner vide its reply dated
29.07.2015 admitted its liability.
5. The petitioner further vide its letter dated 10.08.2015 sent a
cheque for an amount of Rs.1.75 crores to the respondent towards
part payment of the loan amount, however, the same was also
returned back with remarks ‘funds insufficient’.
6. The respondent thereafter invoked the Arbitration Agreement
vide notice dated 16.02.2016 and subsequently on a petition under
Section 11 of the Act, being Arb.P.204/2016, this Court vide its order
dated 04.04.2016 appointed the Sole Arbitrator for adjudicating the
disputes that had arisen between the parties in relation to the
OMP(COMM.) 360/2018 Page 2
abovementioned Agreements.
7. The Arbitrator vide his Impugned Award has directed as
under:
“29. Award in the amount of Rs. 5,28,50,000/- is
passed in favour of the claimant and against the
respondent. The claimant shall further be entitled to
receive interest from the respondent @ 36% per
annum on the amount of Rs. 4.50 crore from the date
of filing of this petition, i.e., 20.4.2016, to the date of
this award. The claimant shall also receive future
interest at the rate of 18% p.a. on the amount of the
award, i.e., Rs. 5,28,50,000/- from the date of the
award to the date of full realization. The claimant
shall further be entitled to receive Rs. 1,00,000/-
from the respondent as cost of the present
proceedings.”
8. Learned counsel for the petitioner submits that the interest
awarded by the Arbitrator is highly exorbitant and cannot be
sustained. He submits that the said interest would be against the
public policy of India and therefore, Impugned Award is liable to be
set aside.
9. I find no merit in the contention raised by the learned counsel
for the petitioner. As noted above, the first Agreement dated
22.04.2015 clearly stipulates that in case of failure of the petitioner to
pay the loan amount in time, it shall be liable to pay interest @ 36%
p.a. The second Agreement dated 03.06.2015 also stipulates that the
loan shall carry interest @ 36% p.a., therefore, the petitioner has
agreed to pay the said rate of interest out of his own free will. This
being a commercial transaction where a short term loan facility was
OMP(COMM.) 360/2018 Page 3
granted by the respondent to the petitioner and there being no
allegation of coercion or undue influence exercised on the petitioner,
the decision of the Arbitrator to award interest in terms of the
Agreement cannot be faulted.
10. The Arbitrator in the Impugned Award has also recorded the
following reasons for awarding the interest in favour of the
respondent:
“21. Indeed, except making bald allegations and arguing
that the interest rates charged by the claimant were in
contravention of the Reserve Bank of India Guidelines to
the NBFC and the Government of India Guidelines, no
such rules, regulations, guidelines or instructions issued
by Reserve Bank of India or Government of India have
been produced by the respondent to support his
contention. Admittedly, Rs. 3 crore were advanced to the
respondent as unsecured loan by loan agreement dated
22.4.2015 for a short duration of 60 days. The loan was
repayable on 22.6.2015. The second loan of Rs. 1.50
crore was advanced on 3.6.2015 again for a very short
duration of 20 days and the same was repayable with
interest on 22.6.2015. It was also an unsecured loan. The
law does not bar charging of higher rate of interest on
unsecured loan of a short duration by NBFC which
involved great risk. The rate of interest charged would be
governed by the terms of the loan agreement. In this case,
the rate of interest has been mentioned in the loan
agreement with which the respondent is bound. It may be
pertinent to note here that during the pendency of this
case, the respondent had been offering to settle the claim
by making payment towards the principal amount and the
interest accrued but despite taking time and promising to
pay the settled amount he has failed to pay the same.
Emails of the respondent and the submissions made on
his behalf by his counsel are on the file of this case.
OMP(COMM.) 360/2018 Page 4
22. As per loan agreement dated 22.4.2015 the loan
amount of Rs. 3 crore was repayable on 22.6.2015 with
interest at the rate of 24% per annum and if there was
delay beyond 22.6.2015, the rate of interest chargeable
on the loan amount was 36% per annum. The loan
amount of Rs. 1.50 crore, as per the loan agreement
dated 3.6.2015, was repayable on 22.6.2015 and the rate
of interest agreed upon between the parties was 36% per
annum. The claimant is claiming interest@ 36% per
annum on the amount of Rs. 1.5 crore for the period of
loan and also for delay in payment beyond 22.6.2015.
23. The contention of the respondent is that the rate of
interest charged on first loan of Rs. 3 crore was 24% p.a.
which could not have risen to 36% p.a. when the second
loan of Rs. 1.5 crore was given to the respondent barely
40 days after the first amount was sent. But the fact
remains that both the loans were unsecured and further
unsecured loan of Rs.1.5 crore had further increased the
risk of the claimant. It is not the case of the respondent
that it had to succumb to the demand of the claimant for
increase in rate of interest as he was under pressure to
take loan for some pressing need. The second loan was
also taken for buying land for investment purposes and
not for his residence/ household. The letters sent by the
respondent by Email to the claimant show that the
claimant had no grievances at least against payment of
interest @ 24% p.a. He agreed to pay interest at
enhanced rate of 36% p.a. evidence as he wanted more
money. He consciously agreed to pay it on second loan
taken under the loan agreement dated 3.6 .2015. The rate
of interest 24% and/or 36% do not hit Section 23 and 74
of the Contract Act, 1872 as the rate of interest agreed
upon cannot be said to be unconscious in the facts and
circumstances of the case and the court do not interfere
in such cases generally.
xxxx
OMP(COMM.) 360/2018 Page 5
25. For the aforesaid reasons, I do not find that the claim
of interest made by the claimant in this case is exorbitant
or is not in accordance with law. According to the
claimant, the interest on the amount of Rs. 3 crore
calculated at the rate of 24% per annum from 23.4.2015
to 22.6.2015 was Rs. 12 lakh and at the rate of 36% per
annum from 23.6.2015 to 19.4.2015 was Rs. 89.10 lakh
aggregating to Rs. 1,01,10,000/-. The respondent has not
been able to show that there is some calculation mistake
in this amount. Furthermore, the claimant is also
claiming amount of Rs. 47,40,000/-as interest @ 36%
per annum on the loan amount of Rs. 1.50 crore for the
period from 3.6.2015 to 19.4.2016. No mistake in the
calculation of this amount, as well, has been pointed out
by the respondent. As a result, the claim of the claimant
towards interest for Rs.1,01,10,000/- on the loan amount
of Rs. 3 crore and the amount of interest amounting to
Rs.47,40,000/- on the loan amount of Rs.1.50 crore as
claimed by the claimant in clauses no. 3 and 4
respectively is allowed. Both the issues are decided in
affirmative in favour of the claimant.”
11. I am in full agreement with the above reasoning of the
Arbitrator.
12. As noted by the Arbitrator, the petitioner has been offering
settlement of the claim of the respondent, however, in spite of
opportunity being granted, the petitioner failed to even honour its
own offer. Even in the present proceedings, counsel for the petitioner
had taken time to explore the possibility of an amicable settlement,
however, has been unable to give any concrete offer of repayment of
the awarded amount to the respondent.
13. In Syndicate Bank v. West Bengal Cements Ltd. and others
AIR 1984 Del 107, this Court had held that the grant of interest at the
OMP(COMM.) 360/2018 Page 6
rate lesser than the contractual rate as a matter of rule, will amount to
giving premium to those who trade upon the money of others; the
defaulting borrowers cannot be given the benefit by reducing the rate
of interest. The Court also took into account the conduct of the
defendants therein to hold that there was no exceptional or special
circumstance justifying reduction of the rate of interest in that case.
14. Further in Deepak Bhatia v. Virender Singh,
MANU/DE/2749/2015, this Court had upheld charging of interest at
the rate of 20% per month, observing that where there is
extreme/urgent need of money and loan is taken for a short period, it
is not unknown in the mercantile world that higher rate of interest is
charged.
15. This Court in PEL Industries Ltd. & Ors. v. S.E. Investment
Ltd . 2018 SCC OnLine Del 8746, while relying upon the
abovementioned judgments has upheld the grant of pendente lite
interest @ 18% p.a. compounded monthly, awarded by the Arbitrator
relying upon the contractual terms, against the defaulter/borrower.
16. In view of the above, I find no merits in the present petition
and the same is accordingly dismissed alongwith pending
application, with no order as to cost.
NAVIN CHAWLA, J
SEPTEMBER 20, 2018/Arya
OMP(COMM.) 360/2018 Page 7
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
Date of decision: 20 September, 2018
+ O.M.P. (COMM) 360/2018
MR. V. SARAVANAN ..... Petitioner
Through Mr.Desh Raj and Mr.Shikhar
Kumar,Advs.
versus
M/S. RISHIKESH HIRE PURCHASE AND LEASING
COMPANY PVT. LTD ..... Respondent
Through Mr.Siddharth Khattar, Adv.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
I.A. No.11111/2018 (Delay)
This is an application seeking condonation of delay in re-filing
of the petition.
For the reasons stated in the application, the delay is condoned
and application stands allowed.
O.M.P. (COMM) 360/2018 & I.A. No.11109/2018
1. This petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the ‘Act) has been
filed challenging the Arbitral Award dated 15.03.2018 passed by the
Sole Arbitrator adjudicating the disputes that have arisen between the
parties in relation to the Agreements dated 22.04.2015 and
OMP(COMM.) 360/2018 Page 1
03.06.2015 executed between the parties.
2. The respondent had granted a loan of Rs.3 crores to the
petitioner under the Loan Agreement dated 22.04.2015. In the terms
of the said agreement, the loan was to carry interest @ 24% p.a. and
was to be repaid on or before 22.06.2015. The Agreement further
provided that in case of a default, the interest is to be paid @ 36%
p.a.
3. On 03.06.2015, a further loan of Rs.1.50 crores was extended
by the respondent to the petitioner. This Agreement specifically
provided for the interest to be paid @ 36% p.a. The loan was to be
repaid on or before 22.06.2015.
4. The petitioner failed to repay the loan amount and infact, the
cheques given by the petitioner were returned back on account of
‘insufficient funds’. The respondent issued demand notices on the
petitioner dated 22.06.2015 and 23.07.2015 with respect to both the
loan amounts. In response thereto, the petitioner vide its reply dated
29.07.2015 admitted its liability.
5. The petitioner further vide its letter dated 10.08.2015 sent a
cheque for an amount of Rs.1.75 crores to the respondent towards
part payment of the loan amount, however, the same was also
returned back with remarks ‘funds insufficient’.
6. The respondent thereafter invoked the Arbitration Agreement
vide notice dated 16.02.2016 and subsequently on a petition under
Section 11 of the Act, being Arb.P.204/2016, this Court vide its order
dated 04.04.2016 appointed the Sole Arbitrator for adjudicating the
disputes that had arisen between the parties in relation to the
OMP(COMM.) 360/2018 Page 2
abovementioned Agreements.
7. The Arbitrator vide his Impugned Award has directed as
under:
“29. Award in the amount of Rs. 5,28,50,000/- is
passed in favour of the claimant and against the
respondent. The claimant shall further be entitled to
receive interest from the respondent @ 36% per
annum on the amount of Rs. 4.50 crore from the date
of filing of this petition, i.e., 20.4.2016, to the date of
this award. The claimant shall also receive future
interest at the rate of 18% p.a. on the amount of the
award, i.e., Rs. 5,28,50,000/- from the date of the
award to the date of full realization. The claimant
shall further be entitled to receive Rs. 1,00,000/-
from the respondent as cost of the present
proceedings.”
8. Learned counsel for the petitioner submits that the interest
awarded by the Arbitrator is highly exorbitant and cannot be
sustained. He submits that the said interest would be against the
public policy of India and therefore, Impugned Award is liable to be
set aside.
9. I find no merit in the contention raised by the learned counsel
for the petitioner. As noted above, the first Agreement dated
22.04.2015 clearly stipulates that in case of failure of the petitioner to
pay the loan amount in time, it shall be liable to pay interest @ 36%
p.a. The second Agreement dated 03.06.2015 also stipulates that the
loan shall carry interest @ 36% p.a., therefore, the petitioner has
agreed to pay the said rate of interest out of his own free will. This
being a commercial transaction where a short term loan facility was
OMP(COMM.) 360/2018 Page 3
granted by the respondent to the petitioner and there being no
allegation of coercion or undue influence exercised on the petitioner,
the decision of the Arbitrator to award interest in terms of the
Agreement cannot be faulted.
10. The Arbitrator in the Impugned Award has also recorded the
following reasons for awarding the interest in favour of the
respondent:
“21. Indeed, except making bald allegations and arguing
that the interest rates charged by the claimant were in
contravention of the Reserve Bank of India Guidelines to
the NBFC and the Government of India Guidelines, no
such rules, regulations, guidelines or instructions issued
by Reserve Bank of India or Government of India have
been produced by the respondent to support his
contention. Admittedly, Rs. 3 crore were advanced to the
respondent as unsecured loan by loan agreement dated
22.4.2015 for a short duration of 60 days. The loan was
repayable on 22.6.2015. The second loan of Rs. 1.50
crore was advanced on 3.6.2015 again for a very short
duration of 20 days and the same was repayable with
interest on 22.6.2015. It was also an unsecured loan. The
law does not bar charging of higher rate of interest on
unsecured loan of a short duration by NBFC which
involved great risk. The rate of interest charged would be
governed by the terms of the loan agreement. In this case,
the rate of interest has been mentioned in the loan
agreement with which the respondent is bound. It may be
pertinent to note here that during the pendency of this
case, the respondent had been offering to settle the claim
by making payment towards the principal amount and the
interest accrued but despite taking time and promising to
pay the settled amount he has failed to pay the same.
Emails of the respondent and the submissions made on
his behalf by his counsel are on the file of this case.
OMP(COMM.) 360/2018 Page 4
22. As per loan agreement dated 22.4.2015 the loan
amount of Rs. 3 crore was repayable on 22.6.2015 with
interest at the rate of 24% per annum and if there was
delay beyond 22.6.2015, the rate of interest chargeable
on the loan amount was 36% per annum. The loan
amount of Rs. 1.50 crore, as per the loan agreement
dated 3.6.2015, was repayable on 22.6.2015 and the rate
of interest agreed upon between the parties was 36% per
annum. The claimant is claiming interest@ 36% per
annum on the amount of Rs. 1.5 crore for the period of
loan and also for delay in payment beyond 22.6.2015.
23. The contention of the respondent is that the rate of
interest charged on first loan of Rs. 3 crore was 24% p.a.
which could not have risen to 36% p.a. when the second
loan of Rs. 1.5 crore was given to the respondent barely
40 days after the first amount was sent. But the fact
remains that both the loans were unsecured and further
unsecured loan of Rs.1.5 crore had further increased the
risk of the claimant. It is not the case of the respondent
that it had to succumb to the demand of the claimant for
increase in rate of interest as he was under pressure to
take loan for some pressing need. The second loan was
also taken for buying land for investment purposes and
not for his residence/ household. The letters sent by the
respondent by Email to the claimant show that the
claimant had no grievances at least against payment of
interest @ 24% p.a. He agreed to pay interest at
enhanced rate of 36% p.a. evidence as he wanted more
money. He consciously agreed to pay it on second loan
taken under the loan agreement dated 3.6 .2015. The rate
of interest 24% and/or 36% do not hit Section 23 and 74
of the Contract Act, 1872 as the rate of interest agreed
upon cannot be said to be unconscious in the facts and
circumstances of the case and the court do not interfere
in such cases generally.
xxxx
OMP(COMM.) 360/2018 Page 5
25. For the aforesaid reasons, I do not find that the claim
of interest made by the claimant in this case is exorbitant
or is not in accordance with law. According to the
claimant, the interest on the amount of Rs. 3 crore
calculated at the rate of 24% per annum from 23.4.2015
to 22.6.2015 was Rs. 12 lakh and at the rate of 36% per
annum from 23.6.2015 to 19.4.2015 was Rs. 89.10 lakh
aggregating to Rs. 1,01,10,000/-. The respondent has not
been able to show that there is some calculation mistake
in this amount. Furthermore, the claimant is also
claiming amount of Rs. 47,40,000/-as interest @ 36%
per annum on the loan amount of Rs. 1.50 crore for the
period from 3.6.2015 to 19.4.2016. No mistake in the
calculation of this amount, as well, has been pointed out
by the respondent. As a result, the claim of the claimant
towards interest for Rs.1,01,10,000/- on the loan amount
of Rs. 3 crore and the amount of interest amounting to
Rs.47,40,000/- on the loan amount of Rs.1.50 crore as
claimed by the claimant in clauses no. 3 and 4
respectively is allowed. Both the issues are decided in
affirmative in favour of the claimant.”
11. I am in full agreement with the above reasoning of the
Arbitrator.
12. As noted by the Arbitrator, the petitioner has been offering
settlement of the claim of the respondent, however, in spite of
opportunity being granted, the petitioner failed to even honour its
own offer. Even in the present proceedings, counsel for the petitioner
had taken time to explore the possibility of an amicable settlement,
however, has been unable to give any concrete offer of repayment of
the awarded amount to the respondent.
13. In Syndicate Bank v. West Bengal Cements Ltd. and others
AIR 1984 Del 107, this Court had held that the grant of interest at the
OMP(COMM.) 360/2018 Page 6
rate lesser than the contractual rate as a matter of rule, will amount to
giving premium to those who trade upon the money of others; the
defaulting borrowers cannot be given the benefit by reducing the rate
of interest. The Court also took into account the conduct of the
defendants therein to hold that there was no exceptional or special
circumstance justifying reduction of the rate of interest in that case.
14. Further in Deepak Bhatia v. Virender Singh,
MANU/DE/2749/2015, this Court had upheld charging of interest at
the rate of 20% per month, observing that where there is
extreme/urgent need of money and loan is taken for a short period, it
is not unknown in the mercantile world that higher rate of interest is
charged.
15. This Court in PEL Industries Ltd. & Ors. v. S.E. Investment
Ltd . 2018 SCC OnLine Del 8746, while relying upon the
abovementioned judgments has upheld the grant of pendente lite
interest @ 18% p.a. compounded monthly, awarded by the Arbitrator
relying upon the contractual terms, against the defaulter/borrower.
16. In view of the above, I find no merits in the present petition
and the same is accordingly dismissed alongwith pending
application, with no order as to cost.
NAVIN CHAWLA, J
SEPTEMBER 20, 2018/Arya
OMP(COMM.) 360/2018 Page 7