Introduction:

In the case of PCL STICCO (JV) v. National Highways Authority of India (EFA(OS)(COMM) 5/2024), the Delhi High Court addressed a significant question in arbitration enforcement: Does interest continue to accrue on amounts deposited by the judgment debtor into the court registry when the award holder is aware of such deposit?

Arguments:

Award Holder’s Position:

PCL STICCO (JV), the award holder, contended that interest should continue to accrue on the entire awarded amount, including the sum deposited in the court registry, until the funds are released to them. They argued that mere deposit without release does not equate to payment, and thus, interest should be calculated on the full amount until actual receipt.

Judgment Debtor’s Position:

The National Highways Authority of India (NHAI), the judgment debtor, argued that once the awarded amount is deposited into the court registry and the award holder is notified, interest should cease to accrue on the deposited sum. They relied on Order XXI Rule 1 of the Civil Procedure Code (CPC), which stipulates that interest stops accruing once payment is made into court and notice is given to the decree holder.

Court’s Judgment:

The Delhi High Court, comprising Justices Vibhu Bakhru and Tejas Karia, held that once the judgment debtor deposits the awarded amount into the court registry and the award holder is notified, interest ceases to accrue on the deposited sum. The court emphasized that the award holder’s awareness of the deposit is sufficient to halt interest accrual, even if formal notice under Order XXI Rule 1(2) CPC is not served.

The court further clarified that the deposited amount should first be appropriated towards the outstanding interest as per the arbitral award, with any remaining balance applied to the principal. Interest would continue to accrue only on the portion of the principal that remains unpaid after such appropriation.

This judgment aligns with precedents set by the Supreme Court, including BHEL v. R.S. Avtar Singh and Ors. (2013), which held that interest ceases on deposited amounts once the decree holder is notified. The court also referred to H.P. Housing & Urban Development Authority v. Ranjit Singh Rana (2012), reinforcing that depositing the award amount into court satisfies the decree holder’s claim to that extent.

Conclusion:

The Delhi High Court’s decision provides clarity on the accrual of interest in arbitration enforcement proceedings. It underscores the importance of timely deposit and notification to the award holder, ensuring that judgment debtors are not unfairly penalised with accruing interest once they have fulfilled their obligation by depositing the awarded amount into court.