Deferment Charges On Liquidated Damages, No Liability To Pay When Liquidated Damages Itself Not Payable : Delhi High Court

The Single Bench of Justice Vibhu Bakhru has held that deferment charges cannot be treated as separate charges payable irrespective of whether the liquidated damages are payable or not.

The Court held that these would only be payable when the liquidated damages are held to be payable.

The petitioner (HVPNL) assailed the award on the ground that the arbitral tribunal erred in allowing the claim of the respondent (Cobra) for refund of deferment charges charged on the liquidated damages imposed by it.

HVPNL contended that Cobra had requested it to defer the imposition of liquidated damages and had agreed to pay the deferment charges for the same, therefore, deferment charges are independent of the liability to pay the liquidated damages.

The arbitral tribunal held that the deferment charges were in nature of interest on the liquidated damages and when the principal amount itself is held to be not payable, the question of interest on such an amount does not arise.

The Court upheld the award and held that deferment charges cannot be treated as separate charges payable irrespective of whether the liquidated damages.

The Court held that these would only be payable when the liquidated damages are held to be payable.

The Court rejected the contention of the petitioner that deferment charges could be recovered notwithstanding the fact that liquidated damages are not payable.

Accordingly, the Court dismissed the petition.

Case Title: Haryana Vidyut Prasaran Nigam Ltd. (HVPNL) v. Cobra Instalaciones Y Services Sa and Shyam Indus Power Solution Pvt. Ltd. JV

Citation: 2022 LiveLaw (Del) 454

Date: 06.05.2022

Counsel for the Petitioner: Mr Samir Malik, Ms Iti Agarwal and Mr Praful Shukla, Advocates.

Counsel for the Respondent: Mr Pankaj Kumar Singh, Advocate.

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