Interest Accrued Up To Date Of Invocation Of Arbitration Can Be Considered For Calculating ‘Aggregate Value’ U/S 12(2) Commercial Courts Act: Delhi HC

The Delhi High Court held that where a Statement of Claim involves interest, the portion of interest accrued up to the date of invocation of arbitration can be considered for calculating the ‘aggregate value’ under Section 12(2) of the Commercial Courts Act, 2015 (CCA).

The Court noted that this provision should not be construed to necessitate the computation of interest up to the commencement of proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Court allowed a Petition in an arbitration case seeking the return of the Plaint, claiming that the Court lacked pecuniary jurisdiction.

The Bench of Justice Sanjeev Narula observed, “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 (“Act”). 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”. 

Advocate Sanchita Ain appeared for the Petitioner and Advocate Aditya Narayan Mahajan appeared for the Respondent. 

The Respondent in an arbitration case requested the return of the Petition, claiming that the Court lacked pecuniary jurisdiction. The Court, with the assistance of the Joint Registrar, determined the Specified Value as INR 1,79,08,623.63. The Petitioner contested this valuation, leading to conflicting views on the Specified Value and the court's jurisdiction.

The Court's jurisdiction, outlined by Section 5(2) of the Delhi High Court Act, 1966 (DHC Act), mandates that the value of the subject matter must exceed INR 2 crores. As the case stems from an Arbitral Award, Section 12(2) of the CCA determined the Specified Value based on aggregate claims and counterclaims. The Petitioner initially declared the Specified Value at INR 2,22,83,947.3, later revising it to INR 2,00,75,422.8. The respondent challenged the calculations, emphasizing specific dates for interest calculations and excluding unclaimed GST, resulting in a Specified Value below INR 2 crores, questioning the court's jurisdiction.

The Court scrutinized the submissions from both parties and the Joint Registrar's analysis, identifying inaccuracies, particularly concerning the interest component within the Specified Value. The Petitioner's calculation, assuming the filing date of the petition as the 'date of realization' for interest, was considered flawed.

The Bench observed that Section 12(2) of the CCA dictates that pecuniary jurisdiction should be based on the aggregate values in the statements of claim and counterclaim, focusing on core values as of the presentation date.

“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”, the Bench observed.

The Bench observed that the petitioner's calculation, including interest on the original value of the claim and counter-claim until the filing date of the petition under Section 34 of the Act, conflicted with Section 12 of the CCA. The Court noted that the interest component in the petitioner's calculation would substantially reduce when considering interest on risk and cost amounts from the due date to the date of arbitration invocation. The inclusion of pendente lite and future interest on the counter-claim, along with litigation costs, was impermissible in determining the Specified Value. After revision, the Specified Value fell below INR 2 crores.

Therefore, the Court determined that due to the Specified Value of the petition being below the pecuniary jurisdiction defined in Section 5(2) of the Delhi High Court Act, 1966 (DHC Act) and Section 12(2) of the CCA, the petitioner was allowed to submit the petition before the appropriate court per the revised Specified Value.

Accordingly, the court allowed and disposed of the application accordingly.

Cause Title: Simentech India Private Limited v Bharat Heavy Electricals Limited (2024:DHC:254)

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