Delhi HC Upholds 12% Interest Award To Kiosk Bidder After DDA Retained Advance Without Handing Over Possession

The Delhi Development Authority (DDA) allotted three kiosks to Sanjay Tyagi following an e-auction.

Tyagi deposited security money and six months’ advance licence fee.

The possession letters made licence fee payable from the date of physical possession and requested that possession be handed over after basic facilities were completed.

DDA did not deliver possession, but later cancelled the allotment for non-payment of licence fee.

The arbitrator found that no licence fee had fallen due, held the cancellation illegal, rejected DDA’s counterclaim, and awarded Tyagi interest at 12% per annum on the deposited amount from 27 February 2017 until possession was handed over, together with arbitration costs.

DDA’s challenge under Section 34 of the Arbitration and Conciliation Act, 1996, confined to interest and costs, was dismissed.

DDA appealed under Section 37.

1. Whether the award of interest at 12% per annum on Tyagi’s deposit warranted interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.

2. Whether the award of arbitration costs warranted interference, including on the ground that the costs were unsupported by documentary proof.

Section 37 does not permit an appellate court to exceed the restrictions imposed by Section 34; it cannot independently reassess the merits of an arbitral award, and should be cautious about disturbing concurrent findings (MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163).

Under Section 31(7)(a) of the Arbitration Act, the arbitral tribunal may award interest at a rate it deems reasonable.

Section 31A gives the tribunal discretion to determine whether costs are payable and their amount.

An arbitral award is not liable to interference merely because the unsuccessful party is a public authority.

DDA’s public-authority status did not provide a ground for setting aside the award, as it had entered a commercial arrangement and was subject to the consequences of its breach like any other contracting party.

DDA required advance payment before possession, but its own possession letters made licence fee payable only upon physical possession.

Because Tyagi paid the deposit, never received possession, and DDA retained the money, the arbitrator could treat interest as compensation for deprivation of those funds.

The 12% rate was not shown to be unreasonable: DDA had stipulated a 15% rate for delayed licence-fee payments and had itself claimed interest at 12% in its counterclaim.

Although the District Judge referred imprecisely to Section 31A(2) in discussing interest, the award relied on Section 31(7), and the reference did not invalidate the judgment.

As to costs, the arbitrator had recorded reasons for awarding them, and DDA showed no basis for disturbing the tribunal’s discretion.

It rejected DDA’s challenge to the interest and costs awards and dismissed the appeal; the pending application was also disposed of.