The computation of the “Specified Value” in commercial suits has often been a point of consideration and deliberation before commercial courts. In common practice, a litigant approaching a court for recovery of his dues, includes (along with the recoverable principal) interest upon the principal at a rate and amount that he deems (if not predefined) is applicable and justified. Often, the day from which the interest should be calculated also differs in the eyes of the claimant and that of the respondent, which also makes for a key factor of consideration and deliberation for the court. All in all, a challenge to the factor of interest may even have a cascading effect upon the Specified Value, which may render the suit to be dismissed on jurisdictional grounds (more specifically the pecuniary jurisdiction).

A similar case came for consideration before the Delhi High Court (“Court”), in “Simentech India Pvt. Ltd. v. Bharat Heavy Electricals Ltd. (2024 SCC Online Del 227), where the respondent therein (claimant to the arbitration proceeding) filed an application under Order VII Rule 10 of the Code of Civil Procedure, 1908 (“CPC”) for return of the petition filed by the petitioner (respondent to the arbitration proceeding), on the ground of lack of pecuniary jurisdiction, as the Joint Registrar of the Court ascertained the Specified Value (of the Petition) to be lesser than INR 2 Crores, which rendered the said petition to be outside the jurisdiction of the High Court.

Countering the said application, the petitioner asserted that the determination by the Joint Registrar was erroneous as it failed to consider several crucial components, which, if accounted for, would have significantly impacted the calculation of the Specified Value. The crux of the issue was that the petitioner declared the Specified Value to be over INR 2 Crores, and the respondent contended that the same was under INR 2 Crores, as the calculation of the Specified Value by the petitioner, more specifically upon the component(s) of interest, was misplaced. In addition to challenging the components of interest, the factor of calculating the interest from the date of invocation of arbitration was also impugned.

The Court, at the outset, referred to Section 12(2) of the Commercial Courts Act, 2015 (“CCA”), (as applicable to arbitration proceedings), which stipulated that the aggregate value of both the claims and counterclaims, as detailed in the respective statements, shall be the basis of determination of the Specified Value. The Court noted that the said provision shows that the assessment should focus on the core claim and counterclaim values on the date of presentation rather than the additional interest calculation till the date of filing of the petition. It was noted that in cases where the statement of claim in an arbitration proceeding includes a component of interest, 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 Court further concluded that the said 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 (“A&C Act”). It was held that the intent of the statute is to consider interest only until the arbitration is invoked, thereby establishing a definitive cut-off for calculating the aggregate value for jurisdictional purposes. It was further held that it is not permissible to apply interest to the original value of both the claim and counterclaim up until the filing of a petition under Section 34 of the A&C Act insofar as the acceptance of such a method would imply that in any arbitration case the Specified Value would continue to only get revised, and, therefore, even if the Specified Value would initially be below the pecuniary jurisdiction of the Court, it would eventually fall within the jurisdiction of a High Court, simply due to the accrual of interest over time. The said outcome would contravene the very legislative intent behind establishing a specific threshold for the pecuniary jurisdiction of the courts.

Therefore, the interest component in the calculation supplied by the petitioner in the said case was required to be reduced substantially, as the inclusion of pendente lite and future interest, on the counterclaim, as well as on the litigation costs, that were factored in in the Specified Value, was, in view of Section 12(2) of CCA, impermissible.

By - Vaibhav Mehra and Nitish Bansal