Arbitrator Rightly Denied Interest to Respondent-Co. As Petitioner-Bank Had Promptly Passed on Recovered Funds | HC

Case Details: Axis Bank Ltd. v. UV Assets Reconstruction Co. - [2024] 160 taxmann.com 3 (HC-Delhi)

Judiciary and Counsel Details

• • Dinesh Kumar Sharma, J.
  • Ritin Rai, Arjun Garg, Aakash Nandolia, Ms Sagun Srivastava & Dayal Singla, Advs. for the Petitioner. & Others.
  • Dhruv Dewan & Y. Sharma, Advs. for the Respondent. & Others.

Facts of the Case

In the instant case, the petitioner assigned the account of its borrower to the respondent (i.e. Asset Reconstruction Company) by way of an assignment agreement, wherein, all its rights, title, and interest in financing documents related to the borrower were assigned.

The petitioner received a sum from company ‘E’/guarantor of the borrower towards a claim. The respondent discovered that the said sum was received by the petitioner. Subsequently, the Respondent sought payment of the said amount from the petitioner under the assignment agreement. However, the same was refused by the petitioner leading to the commencement of arbitration proceedings between the parties.

The Arbitrator vide the impugned order, awarded the respondent an amount along with an interest from the date of award till the date of payment/realization. Thereafter, the petitioner filed an instant petition challenging the impugned arbitral award. The petitioner argued that since the question regarding the sum received from ‘E’ was raised before the NCLT, therefore, arbitration proceedings would not be continued.

Then, the Respondent filed another petition assailing the conclusion of the arbitrator in the said award, that they were not entitled to any interest prior to the date of award.

It was observed that the arbitrator had rightly recorded that, since the petitioner agreed to pass on all economic benefits pertaining to the loan, including all recoveries to the respondent after a specific date, there was no delay caused by the petitioner in passing on the said monies to the respondent for which the petitioner was to be made liable for interest.

High Court Held

The High Court held that since the arbitrator had adjudicated on basic premises that arbitration is a creature of agreement between the parties and not based on equity and an award cannot be annulled just due to a misapplication of the law, the findings of the arbitrator were totally based on merits of the case and in accordance with settled principles of law. Thus, both the petitions were to be dismissed.