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SHENZHEN SHANDONG NUCLEAR POWER CONSTRUCTION COMPANY LIMITED  Vs VEDANTA LIMITED -Judgment by Delhi High Court

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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: April 04, 2022
Pronounced on: April 27, 2022

+ EFA(OS) (COMM) 5/2020 & CM APPLs. 17808-09/2020
SHENZHEN SHANDONG NUCLEAR POWER CONSTRUCTION COMPANY LIMITED ….. Appellant
Through: Mr. Gourab Banerji, Senior Advocate with Mr. Ranjit Prakash, Mr.Anshuman Pande, Mr. Abhinav Raghuvanshi, Ms. Vishalakshi Singh & Mr. Ishan Das, Advocates

Versus

VEDANTA LIMITED ….. Respondent
Through: Mr. Dhruv Mehta, Senior Advocate with Ms. Ranjana Roy Gawai, Ms.Vasudha Sen, Mr. Vineet Wadhwa & Mr.Keith Varghese, Advocates

CORAM:

HON’BLE MR. JUSTICE SURESH KUMAR KAIT
HON’BLE MR. JUSTICE SUDHIR KUMAR JAIN

JUDGMENT
SURESH KUMAR KAIT, J
1. The present execution appeal under the provisions of Section 13 of the Commercial Courts Act, 2015 read with Order XXI Rule 58 CPC has been filed by the appellant seeking setting aside of the order dated 06.01.2020 in OMP (ENF.) (COMM) 225/2018 on the ground that the learned Single Judge has purported to modify the arbitral award dated 09.11.2017 as well as judgment dated 11.10.2018 passed by the Hon�ble Supreme Court in Civil Appeal No. 10394/2018.
2. The factual background of the present appeal is that appellant and respondent had entered into EPC Contracts on 22.05.2008, however, certain disputes with regard to pending payments and suspension of contracts at the hands of respondent arose and, therefore, on 18.04.2012 appellant invoked arbitration. An arbitral tribunal comprising of Mr. Justice Dr. Mukundakam Sharma & Mr. Justice B.N. Srikrishna, Former Judges of Hon�ble Supreme Court and Mr. Justice Mukul Mudgal, Former Chief Justice of High Court of Punjab and Haryana, was constituted; parties filed their claims and counter claims and the arbitral award dated 09.11.2007 was passed. The said arbitral award was challenged by the respondent in petition [OMP (COMM) 70/2018] under Section 34 of the Arbitration and Conciliation Act, 1996, which was dismissed vide order dated 12.02.2018 passed by the learned Single Judge of this Court. Against the aforesaid dismissal order dated 12.02.2018, respondent preferred an appeal [FAO (OS) (COMM) 35/2018] under the provisions of Section 37 of the Act and vide order dated 05.03.2018 passed therein, respondent/ judgment debtor was directed to deposit the amount in terms of arbitral award dated 09.11.2017 with interest @9% p.a. Further, respondent filed an application seeking modification of the order dated 05.03.2018 to secure the amount of Rs.332.22. crores by depositing amount of Rs.522.22 crores as per order dated 05.02.2018 and continue the bank guarantee of Rs.187 crores furnished by the respondent in favour of appellant. This Court vide order dated 23.03.2018 directed the respondent to deposit Rs.152,22,00,000/- with the Registry of this Court, however, the said appeal [FAO (OS) (COMM) 35/2018] was dismissed holding that the interest decided by the arbitral tribunal is not perverse and does not warrant any interference.
3. Thereafter, appellant preferred an execution petition [OMP (ENF) (COMM) 225/2018] seeking enforcement of the arbitral award dated 09.11.2017, wherein this Court vide order dated 24.09.2018 directed the Registry to release amount of Rs. 60 crores deposited by the respondent [in FAO (OS) (COMM) 35/2018] in favour of the appellant. The respondent preferred Special Leave Petition [SLP (C) No. 25819/2018] wherein the Hon�ble Supreme Court vide order dated 11.10.2018 modified the arbitral award to the extent that interest on the EURO element will be based upon London Interbank Offered Rate as on the date of the arbitral award i.e. 09.11.2017 and set aside the future rate of interest @15% applicable after 120 days of the award. Consequently, directed flat rate of interest @9% p.a. applicable from the date of award till realization upon the rupee value of the award.
4. In pursuance of Hon�ble Supreme Court decision dated 11.10.2018, the learned Single Judge of this Court in execution proceedings after taking into account respective calculations and written submission of the parties, passed the final decision dated 06.01.2020 and directed the Registry to release Rs.34,69,20,245/- in favour of the appellant.
5. Aggrieved against the judgment dated 06.01.2020 in OMP (ENF) (COMM) 225/2018, the appellant has preferred the present appeal on the ground that the learned Single Bench has purportedly modified the judgment of the Hon�ble Supreme Court in Civil Appeal No. 10394/2018.
6. During the course of hearing, learned senior counsel for appellant submitted that vide order and judgment dated 11.01.2018, the Hon�ble Supreme Court has modified the impugned arbitral award only to the limited extent that the interest on the EURO component will be based upon London Interbank Offered Rate as on the date of the award and also deleted the future interest of 15% applicable after 120 days of the award and directed flat rate of interest @9% p.a. applicable from the date of the award till the date of eventual realization upon the rupee value of the award. It was submitted that the review petition preferred by the appellant against the aforesaid order and judgment dated 11.01.2018 was dismissed by the Hon�ble Supreme Court and thereafter, appellant filed updated calculations before this Court in pursuance thereof, which was objected to by the respondent. Respondent also filed application along with calculation sheet seeking refund of excess amount deposited before the Registrar General of this Court. Thereafter, the impugned judgment dated 06.01.2020 was passed. Learned senior counsel appearing on behalf of appellant submitted that the arbitral award provides for payment of awarded amount in two components i.e. EURO and INR, which has been upheld by the Hon�ble Supreme Court and this Court in the execution proceedings, cannot modify the arbitral award by directing that the EURO component be converted into INR.
7. Learned senior counsel for appellant emphasized that the Hon�ble Supreme Court has recorded a categorical finding that the arbitral amount is payable both in EURO and INR. Further submitted that in Para-12 of the judgment and order dated 11.10.2018, the Hon�ble Supreme Court has observed that to coordinate the choice of currency with the interest rate, a uniform rate of interest for INR and EURO would not be justified� and this observation was made in view of the fact that part payment of the arbitral award has to be made in EURO. Therefore, the learned Single Bench has failed to appreciate that the respondent before the Hon�ble Supreme Court had pleaded that the interest on the EURO component be reduced and thereby, accepted that there were two components of the Award i.e. EURO and INR and so, the Hon�ble Supreme Court reduced the rate of interest from 15% to a flat 9% on INR and LIBOR+ 3 percentage points, which effectively comes to 2.5% on EURO. It was submitted that by change of rate of interest from 15% to 9%, the respondent has already got benefit in excess of 12 millions of EUROS and the judgment dated 06.01.2020 interprets as if the arbitral award is lump sum, payable in Indian rupees, the EURO component already been converted into INR and has even refrained from indicating any date of conversion. It was submitted that the impugned judgment dated 06.01.2020 is in clear contradiction of the impugned arbitral award.
8. Lastly, learned senior counsel for appellant submitted that the appellant cannot accept INR denomination instead of EURO, as it would cause huge tax implications and financial complications.
9. To the contrary, learned senior counsel appearing on behalf of respondent submitted that the contention of the appellant that the judgment and order dated 06.01.2020 passed in execution proceedings modifies the impugned Award or the order dated 11.10.2018 of the Hon�ble Supreme Court, is misconceived and unsubstantiated. It was submitted that the observations of the Hon�ble Supreme Court in Paras-2.10 or 2.12 do not in any way state that the directions in Para-91 of the impugned award are not to be adhered to. Further submitted that the appellant had raised its claim before the arbitral tribunal in three currencies, out of which USD was rejected and other two currencies i.e. EURO and INR was upheld (as indicated in Para-134 of the Award). However, Para-91 of the award clearly stipulate that the amount awarded in EURO currency is to be paid in INR at an exchange rate as prevalent at the time of filing of the claim petition. It was submitted that the Hon�ble Supreme Court has modified the rate of interest, however, did not change the rate of conversion as indicated in Para-91 of the Award i.e. amounts calculated in EURO are to be paid in INR as per exchange rate prevalent at the time of filing of the claim petition. It is submitted that the observations made in Para-91 of the impugned award were never challenged by the appellant and thereby, the award has attained finality.
10. Learned senior counsel for respondent also submitted that the appellant has been changing its stand before the Hon�ble Supreme Court as well as before the Executing Court, as appellant before the Hon�ble Supreme Court had conceded that EURO component of the Award is payable upon conversion of the INR as per the exchange rate prevalent on the date of filing of claims i.e. 17.10.2012 and in enforcement proceedings, stated that the EURO component has to be paid in EURO only. Learned senior counsel next submitted that the impugned order and judgment dated 06.01.2020 notes that the appellant had pleaded before the said Court that if the EURO component of the Award is converted into INR, then the interest payable on the INR has to be paid on the said amount, whereas in the present appeal, appellant is seeking payment of awarded amount in two components i.e. EURO and INR both.
11. Learned senior counsel further submitted that the respondent has already deposited fixed deposit receipt of Rs.152,22,48,637/- and bank guarantee of Rs.187 crores and along with interest accrued thereupon, appellant has secured awarded amount prior to the order dated 10.11.2018 passed by the Hon�ble Supreme Court reducing the rate of interest. Learned senior counsel submitted that the order dated 06.01.2020 does not in any manner modifies the arbitral award or contradicts the order of the Hon�ble Supreme Court. Also submitted that the order of the Hon�ble Supreme Court does not record that the awarded amount has to be paid both in EURO and INR.
12. We have considered the submissions advanced by learned senior counsel representing both the sides and have also perused the material placed on record.
13. For the sake of convenience, this Court finds it fit to advert to the different observations made in the arbitral award dated 09.11.2017; order dated 06.01.2020 passed by Single Bench of this Court and order dated 11.10.2018 passed by the Hon�ble Supreme Court.
14. The relevant Para-91 of the impugned Award dated 09.11.2017 reads as under:-
�Considering the aforesaid, in the opinion of the Tribunal, as the termination is due to the suspension, the claimant is entitled to additional 5% as the compensation towards the aforesaid invoices raised by the claimant. Accordingly, the Claimant is additionally entitled to an amount of Rs.2,22,44,854/- and Euro 1,129,401. Thus, the final amount payable to the claimant under the said claim is Rs.46,71,41,942/- and Euro 23,717,437 (that is adding the principal amount of Rs.444,897,088 and Euro 22,588,029 and Rs.2,22,44,854/- and Euro 1,129,401 as 5% compensation). Be it mentioned that the amount payable as Euro 23,717,437 in terms of the award would be of the value of exchange rate as prevalent on the date of filing of the claim petition. Interest payable on the same would however protect the interest of the complainant.�

15. The Hon�ble Supreme Court, while taking detailed glance of the arbitral award, order passed by the Single Judge as well as Division Bench of this Court, vide order dated 11.10.2018 noted that the appellant has restricted the challenge to the rate of interest awarded by the arbitral tribunal and observed and held as under:-
�13. In the light of the above mentioned discussion, the interest awarded by the arbitral tribunal is modified only to the extent mentioned hereinbelow:-

(i) The Interest rate of 15% post 120 days granted on the entire sum awarded stands deleted.
A uniform rate of interest @9% will be applicable for the INR component in entirety till the date of realization.
(ii) The interest payable on EURO component of the Award will be as per LIBOR + 3 percentage points on the date of the Award, till the date of realization.�

16. The review petition filed by the appellant herein against the order dated 11.10.2018 was dismissed by the Hon�ble Supreme Court on 24.07.2019.
17. Pursuant to the aforesaid orders of the Hon�ble Supreme Court, the learned Single Bench of this Court vide order dated 06.01.2020 held as under:-
�28. The decree holder is entitled to the principal amount of Rs.60.53 crore along with interest therein from the judgment debtor. Vide order dated 24th September, 2018, this Court directed Rs.60 crore to be released to the decree holder. According to the decree holder, the amount of Rs.60 crore received by the decree holder has to be first appropriated towards the interest and thereafter towards the principal under Order XXI Rule 1 of Code of Civil Procedure whereas according to the judgment debtor, the amount of Rs.60 crores released to the decree holder was towards principal amount.
29. XXXXX
30. Following the principles laid down in the aforesaid judgments, the decree holder�s contention is accepted that Rs.60 crores released to the decree holder shall be appropriated first towards the interest and thereafter, towards the principal.
31. The decree holder is claiming exchange rate of EURO 23,717,737 on the date of the payment whereas according to the judgment debtor, the exchange rate has to be on the date of filing of the claim petition in terms of Para 91 of the award.
32. The arbitral tribunal has given a clear finding that the amount of EURO 23,717,437 would be of the value of exchange rate as prevalent on the date of filing of the claim petition. This finding was not interfered by the Supreme Court and has attained finality. This Court cannot go behind the award.
33. There is merit in the contentions urged by learned senior counsel for the judgment debtor. There is a clear unequivocal finding of the Arbitral Tribunal that the amount of EURO 23,717,437 would be of the value of the exchange rate as prevalent on the date of filing of the claim petition.
34. There is no merit in the claim of decree holder that the date of conversion should be taken as the date of payment since the rate of interest awarded by the Arbitral Tribunal has been reduced by the Supreme Court and the EURO amount was payable to the decree holder in EURO. All contentions of decree holder in this regard are rejected.�

18. Pertinently, according to Para-91 of the arbitral award, appellant/claimant is entitled to payment of claim amount in INR as well as EURO. The arbitral award also notes that the amount payable as EURO in terms of the award would be of the value of exchange rate as prevalent on the date of filing of the claim petition and interest payable thereon shall protect the interest of the claimant. It is not disputed that the appellant herein had not challenged the findings returned in Para-91 of the arbitral award and thereby, the same has attained finality. Thereby contention of appellant herein that the amount payable in EURO cannot be converted into INR, deserves to be rejected.
19. Further, the Hon�ble Supreme Court in the order dated 11.10.2018 has categorically noted that the appellant has restricted the challenge only to the rate of interest awarded by the arbitral tribunal. On this aspect, the pertinent observations of the Hon�ble Supreme Court are as under:-
�12. The Award has granted uniform rate of 9% S.I. on both the INR and EUR component. However, when the parties do not operate in the same currency, it is necessary to take into account the complications caused by differential interest rates. Interest rates differ depending upon the currency. It is necessary for the arbitral tribunal to co-ordinate the choice of currency with the interest rate. A uniform rate of interest for INR and EUR would therefore not be justified. The rate of 9% interest on the INR component awarded by the tribunal will remain undisturbed. However, with respect to the EUR component, the award debtor will be liable to pay interest at the LIBOR rate +3 percentage points, prevailing on the date of the Award.�

20. In our considered opinion, the Single Bench of this Court has rightly not interfered in finding returned by the arbitral tribunal that the amount of EURO would be of the value of exchange rate as prevalent on the date of filing of the claim petition and thereby, rejected the claim of the appellant/ decree holder that the date of conversion should be taken as the date of payment.
21. On interest aspect, the Hon�ble Supreme Court has elaboratively spelt out as to why rate of interest payable in EURO has been reduced and that the Single Bench has rightly taken note of it.
22. In view of above, we hereby make it clear that the awarded amount payable by the respondent in EURO would be of the value of exchange rate as prevalent on the date of filing of the claim petition with interest at LIBOR rate +3 percentage points prevailing on the date of the Award, whereas the amount payable in INR shall carry flat rate of interest @9% p.a. Needless to say the amount with interest shall be due and payable from the date of the filing of arbitration proceedings.
23. With aforesaid directions, the present appeal and pending applications are accordingly disposed of.

(SURESH KUMAR KAIT)
JUDGE

(SUDHIR KUMAR JAIN)
JUDGE

APRIL 27, 2022
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