LEELA HOTELS LTD. versus HOUSING & URBAN DEVELOPMENT CORPORATION LTD.

Citation: [2011] 13 S.C.R. 156 · Decided: 15-11-2011 · Supreme Court of India · Bench: ALTAMAS KABIR · Disposal: Appeal(s) allowed

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Judgment (excerpt)

[2011] 13 (ADDL.) S.C.R. 156 
A 
LEELA HOTELS LTD. 
v. 
HOUSING & URBAN DEVELOPMENT CORPORATION 
LTD. 
(Civil Appeal No. 9763 of 2011) 
B 
NOVEMBER 15, 2011 
[ALTAMAS KABIR, CYRIAC JOSEPH AND SURINDER 
SINGH NIJJAR, JJ.] 
C 
ARBITRATION: 
Award - Principal and interest payable under award -
Appropriation of by creditor - Debtor depositing Rs. 89. 78 
crores with the assertion that it represented the net principal 
amount due and payable to the credit9r -
According to the 
D calculation sheets of the creditor, the said sum deposited was 
appropriated towards the interest due under the award - Held: 
Admittedly, there was no agreement between the parties as 
to how the amounts to be paid in terms of the award were to 
be appropriated by the creditor - Accordingly, in terms of the 
E we// settled principle that in such cases it was for the creditor 
to appropriate such payment firstly against the interest 
payable, would be squarely attracted to the facts of the case 
- The deposit made by the debtor with the assertion that it 
was towards the principal amount, was accepted by the creditor 
F without prejudice to its rights and contentions in the 
proceedings - Accordingly, the creditor cannot be denied its 
dues on a unilateral stipulation that the amount of Rs. 89. 78 
crores was being deposited as against the principal sum due 
in terms of the award - Since the said amount was accepted 
G by the creditor on protest, it would be entitled to appropriate 
the same against the interest which was due and payable till 
that date on the principal amount, as has been asserted by it 
- Section 59 of the Contract Act was not attracted in the case 
- Contract Act, 1872 - ss. 59 and 60. 
H 
156 
LEELA HOTELS LTD. v. HOUSING & URBAN 
DEVELOPMENT CORP. LTD. 
Arbitration and Conciliation Act, 1996: 
157 
s. 36 - Award of arbitrator - Enforcement of - HELD: 
Such an award has to be enforced under the Code of Civil 
Procedure in the same manner as it were a decree of the 
court. 
Consequent upon cancellation of a lease agreement 
for construction of a Five-Star Hotel, the dispute between 
A 
B 
the parties was referred to the arbitrator, who allowed the 
claims of the appellant and rejected the counter-claim 
made by the respondent-HUDCO. The arbitrator held that C 
the appellant was entitled to recover and HUDCO was 
obliged to pay, inter alia, the amounts received by it from 
the appellant along with 20% interest thereon for the 
period the amount(s) remained with HUDCO till the date 
of the Award. HUDCO filed its objections uls 34 of the 
D 
Arbitration and Conciliation Act, 1996, which was 
dismissed by the Single Judge of the High Court on 20-
1-2003. Before the said petition was dismissed, HUDCO 
undertook to deposit the principal sum awarded by the 
arbitrator on or before 21.10.2002. Such deposit (Rs. 
E 
89,78,84,930/) was allowed to be made without prejudice 
to the rights and contentions of HUDCO in the 
proceedings before the High Court. Subsequently, by 
order dated 21.10.2002, the said position was reiterated 
and it was recorded that the deposit made by HUDCO 
F 
would be without prejudice to the rights and contentions 
of the parties in the pending proceedings. The first 
appeal from the order dated 20-1-2003, having been 
dismissed by the Single Judge of the High Court on 9-
11-2004, the respondent filed a special leave petition G 
before the Supreme Court, which was dismissed on 12-
2-2008, but the rate of interest was reduced from 20% to 
18%. Meanwhile HUDCO had also paid a sum of Rs.59.61 
crores to the appellant on 23-3-2006. It paid a further sum 
of Rs.48.09 crores on 16.4.2008. With these payments, 
H 
158 
SUPREME COURT REPORTS (2011] 13 (ADDL.) S.C.R. 
A according to HUDCO, the award was satisfied. 
In the execution petition, the case of the appellant .. 
was that the sum of Rs.89,78,84,930/- deposited by 
HUDCO was appropriated towards the interest due under 
B the award; whereas the stand of the respondent-HUDCO 
was that the said amount should be appropriated 
towards the principal sum payable to the appellant under 
the award. The Single Judge of the High Court directed 
the payment to the appellant as per its calculations. 
C However, the Division Bench of the High Court held that 
the said amount deposited by HUDCO would be 
appropriated towards the principal amount due and not 
towards the interest; and set aside the order of the Single 
Judge. 
D 
In the instant appeal, the question for consideratio

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