2024 (1) TMI 928 - HC - Indian Laws

Maintainability of petition - Aggregate value of claims and counter-claims in arbitration - Seeking return of the petition on ground of lack of pecuniary jurisdiction of this Court entertain this Petition - invocation of Order VII Rule 10 of the Code of Civil Procedure, 1908 - inclusion of pendente lite interest - HELD THAT - Section 12(2) of the CCA stipulates that the aggregate value of the claim and any counter-claim in a commercial dispute arbitration forms the basis for determining the pecuniary jurisdiction of the Court. In cases where the Statement of Claim includes a component of interest, such as in the present case, 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 Arbitration and Conciliation Act, 1996. 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. The calculation presented by the Petitioner conflicts with the proper interpretation of Section 12 of the CCA. It is not permissible to apply interest to the original value of both the claim and counter-claim up until the filing date of petition under Section 34 of the Act. Accepting such a method would imply that in any arbitration case, the Specified Value would continually get revised. Consequently, if the Specified Value is initially below the pecuniary jurisdiction of this Court, it would eventually fall within the jurisdiction of a High Court simply due to the accrual of interest over time. This outcome would contravene the legislative intent behind establishing a specific threshold for the pecuniary jurisdiction of the Courts. Reliance placed upon a Division Bench judgment of this Court in NATIONAL SEEDS CORPORTION LTD. ANR. VERSUS RAM AVTAR GUPTA 2021 (12) TMI 1479 - DELHI HIGH COURT , wherein the Court took into consideration only the portion of interest claimed till the date of invocation of arbitration for the purposes of calculating the pecuniary jurisdiction of this Court under Section 12(2) of the CCA. Section 21 of the Act stipulates that the arbitral proceedings commence when the notice invoking arbitration is received by the Respondent, and therefore, the interest is calculated up to such date. The interest component in the calculation supplied by the Petitioner would reduce substantially, for the following reasons (a) Interest on risk and cost amount is to be calculated from due date (19th January, 2019) to the date of notice invoking arbitration (04th October, 2019) 18% interest p.a. on INR 58,07,799.82 for a period of 258 days INR 7,38,891.5. (b) Moreover, the inclusion of pendente lite (interest accruing during litigation) and future interest on the counter-claim, as well as litigation costs, is impermissible to be inlcuded in the calculation of the Specified Value, as they commence accrual after date of notice invoking arbitration. Application disposed off.

Summary

Issues Involved:
1. Pecuniary Jurisdiction of the Court
2. Calculation of Specified Value
3. Inclusion of Interest and GST in Specified Value

Pecuniary Jurisdiction of the Court:
The Respondent invoked Order VII Rule 10 of the Code of Civil Procedure, 1908, seeking the return of the petition due to lack of pecuniary jurisdiction. The Delhi High Court Act, 1966, stipulates that the Court's jurisdiction applies to suits where the subject matter exceeds INR 2 crores. The Commercial Courts Act, 2015, requires the aggregate value of claims and counterclaims to determine the Specified Value. The JR determined the Specified Value as INR 1,79,08,623.63, which the Petitioner contested, asserting errors in the calculation.

Calculation of Specified Value:
The Petitioner initially declared the Specified Value as INR 2,22,83,947.3, later revising it to INR 2,00,75,422.8. The Respondent argued that the Petitioner's calculation of interest was incorrect and that GST was wrongly included, resulting in a lower Specified Value of INR 1,79,08,623.63. The JR rejected the Petitioner's calculations, stating that interest on litigation costs should be from each invoice date, and GST should not be included in the litigation costs.

Inclusion of Interest and GST in Specified Value:
The Petitioner argued that interest should be calculated from the date of notice invoking arbitration and that GST was claimed in the statement of claim. The JR and the Court found inaccuracies in the Petitioner's calculations, particularly regarding the interest component. The Court clarified that interest should be considered only up to the date of invocation of arbitration, not the filing date of the petition. The inclusion of pendente lite and future interest on counterclaims and litigation costs was deemed impermissible.

Analysis and Directions:
The Court held that the Petitioner's method of calculating interest until the filing date of the petition was flawed. The correct approach, as per Section 12(2) of the CCA, is to consider interest only until the arbitration is invoked. This interpretation aligns with the legislative intent of establishing a specific threshold for pecuniary jurisdiction. The Court referenced the Division Bench judgment in National Seeds Corporation v. Ram Avtar Gupta, which supported this interpretation. Consequently, the interest component in the Petitioner's calculation would reduce substantially, bringing the Specified Value below INR 2 crores.

Conclusion:
The application was allowed, and the petition was returned due to the Specified Value being less than the pecuniary jurisdiction stipulated under Section 5(2) of the DHC Act and Section 12(2) of the CCA. The Petitioner was granted liberty to present the petition before the Court of competent jurisdiction as per the revised Specified Value.