Delhi High Court: Pendente Lite and Future Interest Cannot Be Added To the Aggregate Value of Claim and Counterclaim Under Commercial Courts Act

Delhi High Court: Pendente Lite and Future Interest Cannot Be Added To the Aggregate Value of Claim and Counterclaim Under Commercial Courts Act

The petitioner had filed a petition under Section 34 of the Arbitration and Conciliation Act challenging an arbitral award

The Delhi High Court has held that in order to determine the pecuniary jurisdiction of the Court to deal with a challenge petition under Section 34 of the Arbitration and Conciliation (A&C) Act, the value of the pendente lite and future interest cannot be included in the aggregate value of the claims and counterclaims to determine the 'specified value' as provided under Section 12 of the Commercial Courts Act (CCA), 2015.

The Bench of Justice Sanjeev Narula held that Section 12(2) of the CCA stipulated that the 'aggregate value' of the claim and any counterclaim in a commercial dispute arbitration formed the basis for determining the pecuniary jurisdiction of the Court.

The Court explained that in cases where the Statement of Claim (SoC) included a component of interest, it was necessary to consider the portion of interest accrued up to the date of invocation of arbitration as part of the 'aggregate value' under Section 12(2).

However, the provision could not be interpreted as requiring the computation of interest up to the commencement of proceedings under Section 34 of CCA. The intent was to consider interest only until the arbitration was invoked. It established a definitive cut-off for calculating the 'aggregate value' for jurisdictional purposes.

It further stated that the interest component, considered a part of the arbitration claim, could only be till the date of the invocation of arbitration and not the interest that accrued afterward.

The petitioner had filed a petition before the High Court under Section 34 of the A&C Act challenging an arbitral award.

In the challenge petition, the respondent filed an I.A. under Order VII Rule r/w Section 151 of CPC seeking the return of the petition on grounds of lack of the Court’s pecuniary jurisdiction.

The matter was referred to the Joint Registrar (JR) for computation of the specified value of claims and counterclaims. The JR held that the specified value of the claim was less than Rs.2 crores. Therefore, the petition was liable to be returned. However, erroneously, he included the pendente lite and future interests till the petition’s filing date.

The petitioner made the following submissions in favor of the pecuniary jurisdiction of the Court:

• The JR did not have the jurisdiction under Order VII Rule 10 of CPC or the Delhi High Court Rules, 2018 to decide the application, particularly the legal issues.

• The respondent claimed legal costs for 'engaging legal counsel' for arbitral proceedings and 'connected proceedings', specifically claiming interest on the 'pre-reference period’. Thus, the interest component should start from the date of notice invoking arbitration, and not from the date of each invoice.

• Contrary to the observations passed by the JR, the respondent claimed GST in the statement of claim. Specifically, they have sought interest on 'unpaid amounts along with applicable GST.

• The counterclaim explicitly seeks interest at the rate of 18 percent per annum from the 'date of the counterclaim', and the submissions of the petitioner mention that the cause of action arose when the contract was illegally terminated. Therefore, the interest is applicable from the date of cause of action.

Justice Narula held that not just the two parties, but also the JR, erred in calculating the specified value by including the pendente lite and future interest in the aggregate value.

The Bench stated that to determine the Court’s pecuniary jurisdiction to deal with a challenge petition under Section 34 of the A&C Act, the value of the pendente lite and future interest could not be included in the aggregate value of the claims and counterclaims to determine the 'specified value' as provided under Section 12 of the CCA.

The Court held that Section 12(2) stipulated that the 'aggregate value' of the claim and any counterclaim in a commercial dispute arbitration formed the basis for determining the Court’s pecuniary jurisdiction.

Thus, the judge allowed the application of the respondent and ordered the petition to be returned to be presented before the Court of competent jurisdiction.