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Delhi Airport Metro Express Private Limited vs Delhi Metro Rail Corporation

Civil Appeal · 2022 INSC 522Decided 5 May 2022
Civil Appeal No. 3657 of 2022
L. Nageswara Rao · B.R. Gavai

Background

DAMEPL (the appellant) and DMRC (the respondent) had entered a Concession Agreement in 2008 to build and operate the Delhi Airport Metro Express line. After DAMEPL terminated the agreement in 2012 citing DMRC's defaults, an Arbitral Tribunal awarded DAMEPL a Termination Payment of Rs. 2782.33 crore plus interest as per the agreement: an award that, after years of litigation, was ultimately upheld and restored by the Supreme Court in September 2021. When DAMEPL sought to execute the award, a narrow but financially significant dispute arose over whether the "sum" on which post-award interest (at the rate fixed by the award) should be calculated must also include the pre-award interest that had accrued up to the date of the award: a question the Delhi High Court's execution court had answered against DAMEPL.

Decision Breakdown

The Supreme Court held that ordinarily, under Section 31(7) of the Arbitration Act (relying on its earlier ruling in Hyder Consulting v. State of Orissa), the "sum" for calculating post-award interest would indeed include pre-award interest, since the word "sum" is not qualified by "principal" and Parliament deliberately used broader language than in Section 34 CPC. However, Section 31(7)(a) itself begins with "unless otherwise agreed by the parties," and here the Concession Agreement's Article 29.8 specifically fixed the rate and manner of interest on the Termination Payment (SBI PLR plus 2%): an express agreement that displaced the Arbitral Tribunal's general discretion and rendered Hyder Consulting's default reasoning inapplicable to this case. Since the Arbitral Tribunal had already computed and awarded interest strictly per the parties' own contractual formula (and that finding had attained finality in the 2021 judgment), there was no room to further pad the interest calculation, and the Delhi High Court's execution-stage ruling rejecting DAMEPL's larger interest claim was upheld, with the appeal dismissed.

Lesson Learnt

Where parties have specifically agreed in their contract on how interest is to be calculated on a payment, that contractual agreement overrides the arbitration law's default rules on awarding interest: the phrase "unless otherwise agreed by the parties" in Section 31(7) of the Arbitration Act is not a dead letter, and courts will not read general precedent (decided on facts without such an agreement) to override a specific contractual bargain.

Official source (sci.gov.in)View Judgment (PDF)

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