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Hi there,

Once money is paid, interest as compensation for deprivation of use of money will not arise

FACTS:

By decision dated 14.04.2000, the appellant, M/s Nepa Limited, was ordered to pay the respondent, Manoj Kumar Agrawal, Rs. 14,49,300/-. The money was used to reimburse Manoj Kumar Agrawal for the balance of his security deposit, which he paid in accordance with the agreement of October 25, 1996. The award stated that Rs. 14,49,300/- would be subject to 18% annual interest from the date of the award till payment.

It is indisputable that this payment would be adjusted/set-off against the interest, rather than the award’s principle sum of Rs.14,49,300/-. On February 28, 2001, the appellant’s objections under Section 34 of the Arbitration and Conciliation Act, 19961 were dismissed.

The appellant then filed an appeal with the Division Bench of the High Court under Section 37 of the Act. The Division Bench issued an order requiring the appellant to deposit 50% of the awarded money before the executing court within ten days of the date of the order. Within three months of the final disposition of the appeal, the respondent was entitled to withdraw the deposited sum after providing a personal commitment for restoration of the amount if so directed. The direction/order attaching the appellant’s properties was to be continued.

On August 1, 2012, the respondent filed an application for the recovery of Rs. 3,97,382/- plus interest. On 18.08.2012, the respondent submitted a new application, indicating and claiming that he was entitled to interest on Rs.14,06,259/-, i.e., the original amount awarded plus 18% interest till the decision of the appeal under Section 37 of the Act, which was made on 02.02.2012. the executing court held that the respondent was entitled to the amount.

Aggrieved, the respondent filed a civil revision before the High Court of Madhya Pradesh in Jabalpur, which was allowed by the impugned order dated 19.06.2017, inter alia holding that under Order XXI, Rule 1, sub-rules (4) and (5) of the Code of Civil Procedure, 19085, the respondent would be entitled to interest at the rate of 18% per annum, even on the sum of Rs. 7,78,280/- Even on the sum of Rs. 7,78,280/-, which he had withdrawn, the respondent would be entitled to interest at the rate of 18% per annum until the conclusion of the appeal under Section 37 of the Act on 02.02.2012.

ISSUE:

 The dispute before the hon’ble court was whether the respondent is entitled to interest at the rate of 18% as per the award on the principal amount of Rs. 14,49,300/- till the decision of the appeal under Section 37 of the Act on 02.02.2012, or whether interest at the rate of 18% is payable on the net principal amount after the adjustment of interest due on 08.11.2001 from Rs.7,78,280/- which was withdrawn by the respondent on 08.11.2001.

HELD:

The impugned order, whereby the appellant was ordered to pay interest at the rate of 18% per annum on Rs.14,49,300/- from the date of the award until the date of the decision under Section 37 of the Act on February 2, 2012, by the high court was set aside and the present appeal was allowed.

ABSTRACT:

Case: Nepa Limited Through its senior manager (legal) vs. Manoj Kumar Agrawal

Date: 08.12.2022

Bench: Justice Sanjiv Khanna and Justice Sudhanshu Dhulia

Written by Amruthavarshini, a Student at Jindal Global Law School

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