Pendente Lite And Future Interest Can't Be Included In The 'Aggregate Value Of Claim And Counterclaims' U/S 12 Of Commercial Courts Act: Delhi High Court

The bench of Justice Sanjeev Narula held that Section 12(2) of the CCA stipulates that the 'aggregate value' of the claim and any counterclaim in a commercial dispute arbitration forms the basis for determining the pecuniary jurisdiction of the Court.

The Court held that in cases where the SoC includes a component of interest, it is necessary to consider the portion of interest accrued up to the date of invocation of arbitration as part of the 'aggregate value', in accordance with Section 12(2) of CCA. However, this provision cannot be interpreted as requiring the computation of interest up to the commencement of proceedings under Section 34 of the Act. The intent is to consider interest only until the arbitration is invoked, thereby establishing a definitive cut-off for calculating the 'aggregate value' for jurisdictional purposes.

Th Court held that the interest component which is to be considered a part of the claim of arbitration can only be till the date of the invocation of arbitration and not the interest that accrues afterwards i.e., pendente lite and future interest.

Facts

The petitioner filed a petition under Section 34 of the A&C Act challenging an arbitral award before the High Court of Delhi. In the challenge petition, the respondent filed an I.A. under Order VII Rule r/w Section 151 of CPC seeking return of the petition on ground of lack of pecuniary jurisdiction of the Court.

Accordingly, the Court referred the matter to the Joint Registrar (JR) for the computation of the specified value of claims and counterclaims. The JR held that the specified value of the claim was less than 2 crores, therefore, the petition was liable to be returned. However, the JR had also erroneously included the pendente lite and future interests till the date of the filing of the petition.

Submissions of the Parties

The petitioner made the following submissions in favour of the pecuniary jurisdiction of the Court:

• JR did not have the jurisdiction under Order VII Rule 10 of CPC or the Delhi High Court Rules, 2018 to decide the application, and particularly, the legal issues raised.
• Respondent had claimed legal costs for 'engaging legal counsel' for arbitral proceedings as well as 'connected proceedings', specifically claiming interest on the 'pre-reference period' as well. Thus, the interest component should start from the date of notice invoking arbitration, and not from date of each invoice.
• Contrary to the observations passed by the JR, the Respondent has indeed claimed GST in the statement of claim. Specifically, they have sought interest on 'unpaid amounts along with applicable GST'
• The counterclaim explicitly seeks interest @ 18% per annum from the 'date of counter-claim', and the submissions of the Petitioner mention that the cause of action for counter-claim arose when the contract was illegally terminated. Therefore, the interest is applicable from the date of cause of action.

Analysis by the Court

The Court held that not just both the parties but also the JR erred in calculating the specified value by including the pendente lite as well as the future interest in the aggregate value.

The Court held that to determine the pecuniary jurisdiction of the Court to deal with a challenge petition under Section 34 of the A&C Act, the value of the pendente lite and future interest cannot be included in the aggregate value of the claims and counterclaims to determine the 'Specified Value' as provided under Section 12 of the Commercial Courts Act, 2015 (CCA).

The Court that Section 12(2) of the CCA stipulates that the 'aggregate value' of the claim and any counterclaim in a commercial dispute arbitration forms the basis for determining the pecuniary jurisdiction of the Court.

The Court held that in cases where the SoC includes a component of interest, it is necessary to consider the portion of interest accrued up to the date of invocation of arbitration as part of the 'aggregate value', in accordance with Section 12(2) of CCA. However, this provision cannot be interpreted as requiring the computation of interest up to the commencement of proceedings under Section 34 of the Act. The intent is to consider interest only until the arbitration is invoked, thereby establishing a definitive cut-off for calculating the 'aggregate value' for jurisdictional purposes.

Th Court held that the interest component which is to be considered a part of the claim of arbitration can only be till the date of the invocation of arbitration and not the interest that accrues afterwards i.e., pendente lite and future interest.

Accordingly, the Court allowed the respondent's application and ordered the petition to be returned to be presented before the Court of competent jurisdiction.

Case Title: Simentech India Pvt Ltd v. BHEL, OMP(COMM) 348 of 2022

Citation: 2024 LiveLaw (Del) 63

Date: 12.01.2024

Counsel for the Petitioner: Ms. Sanchita Ain, Mr. Habib Muzaffar and Ms. Swati Khanna, Advocates.

Counsel for the Respondent/Applicant: Mr. Aditya Narayan Mahajan and Mr. Karan Aggarwal, Advocates.

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