'No Infirmity In The Decision To Direct Payment Of Interest On Interest', Delhi High Court Upholds Decision Of Central Administrative Tribunal

Background

On 12 July 2011, Surendra Singh (Respondent) approached the Central Administrative Tribunal seeking re-fixation of his pay and pension and consequent payment of the differential amount which would become payable to him on the re-fixed pay and pension with interest thereon. The Petitioners(CI Directorate of Training and Technical Education) agreed to grant the benefits to the Respondent, however, excluding interest and costs. The Tribunal thus directed the Petitioners to grant the relief without extending the benefit of granting interest and costs. The Tribunal noted that if the payments to the Respondent were not made within the stipulated time-period, he would be entitled to an interest at the rate of 10% from the said date. The application was disposed of with these directions.

The Order was passed on 12 July 2011 and the retiral benefits were to be paid within four weeks. The Petitioners made the payments to the respondent on 21 June 2013. However, no interest apart from making a payment of Rs.86 was paid to the Respondent for the delay from the expiry of four weeks as was directed by the Tribunal.

Aggrieved by the decision, the Respondent approached the Tribunal again. The Petitioners were directed to pay interest at the rate of 10% per annum to the Respondent on the retiral benefits for the period constituting the delay from the expiry date. This was merely the direction to implement the direction flowing from the initial Order dated 12 July 2011.

Moreover, the Tribunal directed that the payment of interest was to be made by the Petitioners on the amount payable as interest on the pension arrears paid on 21.06.2013. Holding that money has time value, the tribunal observed that the respondents could not get away by paying in present times what was payable on 21.06.2013 without interest. Accordingly, the Tribunal directed that the Respondent be paid interest on arrears payable to him from 10.08.2011 to 21.06.2013. However, an amount of Rs.86 was deducted from the amount directed to be paid. Furthermore, a direction to pay an interest on interest to be paid for the period from 22.06.2013 till the date of payment of such interest on interest at the rate of 10 percent was also issued to the Petitioners.

Dissatisfied with the order of the Tribunal, the Petitioners approached the High Court.

Findings of the Court:

The Court expressed disagreement with the submission of the Counsel for Petitioners that as per on Section 3 (3) (c) of the Interest Act, awarding interest on interest was prohibited. It observed that Section 3 (3) (c) of the Interest Act, which proscribes awarding interest on interest would be applicable only in cases where direction to pay interest was issued under Section 3 of the Interest Act. However, in the case of the Respondent, the Tribunal did not pass the direction to award the interest under Section 3 of the Interest Act and therefore, proscription on awarding interest on interest as per Section 3 (3) (c) of the Interest Act would not apply.

The Court further held that the Tribunal, by order dated 12 July 2011 had directed the Petitioners to pay the amount of which interest was an integrated and homogeneous part and the petitioner had paid only a part of the said amount to the respondent on 21 June 2023. Thus, directing the Petitioners to pay interest on the 'balance unpaid amount' till the date of payment could not be held erroneous, the Court held.

While the Counsel for the Petitioner referred to the judgment in National Projects Construction Corporation Ltd v Interstate Construction, the Court held that the decision could not be applied in the case being decided since the referred case was concerned with the power of an Arbitral Tribunal to award interest and examining the matter in the backdrop of Section 31(7) of the Arbitration and Conciliation Act, 1996, which stood irrelevant in terms of application in the present case.

The Court ratified the decision of the Tribunal noting that the direction to the Petitioners to pay interest from the expiry of four weeks from 12 July 2011 till the date when the retiral benefits were paid, was a firm decision.

The Court held that retiral benefits were to be paid to the Respondent on 21 June 2013 and the petitioners were required to not only pay the retiral benefits but also interest from 12 July 2011 till 21 June 2013 at the rate of 10% per annum.

Making these observations, the Court dismissed the Petition, upholding the decision of the Tribunal.

Case Title: GOVT OF NCT DELHI AND ORS. versus SURENDRA SINGH

Counsel for Petitioner: Mr. Nitesh Kumar Singh, Ms. Laavanya Kaushik, Ms. Aliza Alam for Mrs. Avnish Ahlawat, Standing Counsel for GNCTD. Mr. B.S. Rawat, Advocate for CI DTTE.

Counsel for Respondents: Mr. Ashok Agarwal, Mr. Kumar Utkarsh, Mr. Manoj Kumar, Ms. Ashna Khan, Advocates.

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