Author: Riya Verma, 1st year student at Hidayatullah National Law University.
Citation: 2021 SCC OnLine Del 2634
Date of Decision: 12 April 2021
Bench: Vipin Sanghi and Rekha Palli
Original copy: N/A
Statute Involved: Arbitration & Conciliation Act, 1996
An earlier decision which has not proceeded on interpretation or analysis of the issue does not have a binding effect: High Court of New Delhi.
The submission of learned counsel for the appellant has no merit because none of the earlier decisions relied upon by the appellant have actually undertaken the process of analysis and interpretation of the contractual clauses, namely Clause 16(2) of the GCC (GENERAL CONDITIONS OF CONTRACT) and the similar clause contained in Clause 13(3) of the contract considered in Union of India v Bright Power Projects (India) Private Limited. We do not believe that learned counsel for the appellant’s argument that the decision in M/s Pradeep Vinod Construction Co. was made in ignorance of the Supreme Court’s prior binding decisions has any validity.
Background Of The Case:
The appellant has filed an appeal against the judgement of the learned Single Judge dismissing the objections raised under Section 34 of the Arbitration & Conciliation Act, 1996 to the award made on-claim to pre-suit, pendente lite, and future interest granted on the amount due payment from the due date.
Except for the sum of security deposit and earnest money, the Arbitral Tribunal (AT) had granted pre-referral and pendente lite interest at 12% per year on the awarded amount.
The appellant’s counsel argued that the Single Judge relies on the M/s Pradeep Vinod Construction Co. and that the decision was per incuriam, as it did not take into account previously major decision-making by the Supreme Court, citing the example of Union of India Vs. Bright Power Projects (india) Private Limited.
The court found in the light of the law and the facts of the case that the applicant did not provide a binding precedent for interpreting Clause 13(3) or 16(2) of the GCC in the cases relied upon.
The Division Bench of Delhi High Court of the Union of India v. Manraj Enterprises decided that the arbitrator would not prohibit the granting of interest on timely payment by a provision excluding interest on earnest money, security or other money owed to the contractor.
Clause 16 (2) of GCC: No interest is to be paid on any income or security deposit or sum owed to the contractor in accordance with the contract, but Government Securities placed under sub clause (1) of that clause are to be refunded on interest accrued.
The Court found that the Supreme Court, in placing its trust in Union of India v. M/s Pradeep Vinod Construction Co, held that, while interpreting a similar clause, that the prohibition of granting interest under Clause 16 is limited exclusively to the component of an employer’s safety deposit and earnings, and not otherwise.
The aforementioned provision does not concern a non-payment of interest between the parties in connection with other contractual duties. The appeal was thus rejected.
The court referred to the judgement of the Apex Court in, M/s Pradeep Vinod Construction Co. for the purposes of discussing the interpretation of Clause 16(2), where it was held that, “Having considered our contractual obligations under Clause 16 of the parties, first we have no cause to doubt whether the clause related to the merits only of the parties. The above clause did not deal with the other contractual responsibilities of the parties…It is therefore clear that the failure to pay interest, envisaged between parties according to Clause 16 is confined entirely to the element of earnest money and the deposit of security which the appellant has retained and to nothing else.”
The court made reference to the Supreme Court judgement in State of U.P. and Others v Synthetics and Chemicals Ltd. and Others, where the following observations were made, in order to underline the issue of what renders a judgement binding precedent:
- Per incuriam appears to mean per ignoratium in practise. In order to loosen the norm of stare decisis, English courts created this concept. If it is rendered in the absence of a statute or other binding authority, the phrase “quotable in law” is avoided and omitted (Young v. Bristol Aeroplane Co. Ltd). While interpreting Article 141 of the Constitution, which embodies the idea of precedents as a matter of law, this Court recognised, approved, and adopted the same.
- While pointing out the procedure to be followed when conflicting decisions are placed before a bench in Jaisri Sahu v. Rajdewan Dubey, this Court extracted a passage from Halsbury’s Laws of England incorporating one of the exceptions when an appellate court’s decision is not binding.
 (2015) 9 SCC 695.
 Union of India v. Pradeep Vinod Construction Co., (2020) 2 SCC 464.
 Depending on the outcome of litigation.
 Supra note 2.
 Through lack of due regard to the law or the facts.
 (2015) 9 SCC 695.
 2021 SCC OnLine Del 2634.
 Supra note 2.
 Supra note 2.
 (1980) 2 SCC 441.
 (1944) 1 KB 718.
 (1962) 2 SCR 558.