BEFORE THE HON'BLE DISTRICT JUDGE, COMMERCIAL COURTS, CENTRAL DISTRICT, TIS HAZARI COURTS AT NEW DELHI
O.M.P. COMM O.M.P. COMM case number OF 2024
IN THE MATTER OF
M/S Appellant's name… APPELLANT
VERSUS
M/S Respondent's name… RESPONDENT
INDEX
| 2 | APPEAL UNDER THE PROVISIONS OF SECTION 19 OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT, 2006) READ WITH THE PROVISIONS OF SECTION 34(2) OF THE ARBITRATION AND CONCILIATION ACT, 1996 AND SECTION 151 OF THE CODE OF CIVIL PROCEDURE, 1908, AS PREFERRED BY THE APPELLANT AGAINST THE ORDER PASSED BY THE LEARNED SOLE ARBITRATOR WHILE ADJUDICATING THE ARBITRAL PROCEEDINGS INITIATED UNDER THE PROVISIONS OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT, 2006), VIDE ORDER DATED Date of impugned order, ALONG WITH SUPPORTING AFFIDAVIT | |
| 4 | ANNEXURE A-1 – COPY OF ORDER DATED Date of impugned order | |
| 5 | ANNEXURE A-2 – AUTHORITY LETTER | |
| 6 | ANNEXURE A-3 – SCREENSHOT OF THE COMPANY AFFIRMATION QUA THE RESPONDENT'S DETAILS | |
| 7 | ANNEXURE A-4 – COPY OF STATEMENT OF CLAIM | |
| 8 | ANNEXURE A-5 – COPY OF STATEMENT OF DEFENCE ALONG WITH DOCUMENTS ACCOMPANIED BY THE COUNTER-CLAIM AS RAISED BY THE RESPONDENT | |
| 9 | ANNEXURE A-6 (COLLY.) – COPY OF DOCUMENTS AND REJOINDER | |
| 10 | ANNEXURE A-7 – COPY OF AFFIDAVIT OF ADMISSION AND DENIAL OF DOCUMENTS, REJOINDER TO THE COUNTER-CLAIM AND EVIDENCE | |
| 11 | ANNEXURE A-8 (COLLY.) – COPY OF EVIDENCE BY WAY OF AFFIDAVIT | |
| 12 | ANNEXURE A-9 (COLLY.) – COPIES OF APPLICATIONS, REPLIES AND DOCUMENTS AS WELL AS THE ORDER | |
| 13 | INTERIM APPLICATION ON BEHALF OF THE APPLICANT/APPELLANT UNDER THE PROVISIONS OF SECTION 5 READ WITH SECTION 14 OF THE LIMITATION ACT, 1963, FOR CONDONATION OF THE DELAY OF 183 DAYS IN FILING THE PRESENT APPEAL BEFORE THIS HON'BLE COURT, ALONG WITH AFFIDAVIT | |
APPELLANT
Through
Counsel's name
ADVOCATES FOR
Advocate firm's name
Counsel's address line
Counsel's address line
Counsel's address line
New Delhi
Date of signing
BEFORE THE HON'BLE DISTRICT JUDGE, COMMERCIAL COURTS, CENTRAL DISTRICT, TIS HAZARI COURTS AT NEW DELHI
O.M.P. COMM O.M.P. COMM case number OF 2024
IN THE MATTER OF
M/S Appellant's name… APPELLANT
VERSUS
M/S Respondent's name… RESPONDENT
MEMO OF PARTIES
M/s Appellant's name
Through its Partner, namely, Mr. Appellant's partner's name
Having its address at
Appellant's address
New Delhi… APPELLANT
VERSUS
M/s Respondent's name
Through its Director, namely, Mr. Respondent's director's name
Having its Registered Office at
Respondent's registered office address
New Delhi… RESPONDENT
APPELLANT
Through
Counsel's name
ADVOCATES FOR
Advocate firm's name
Counsel's address line
NEW DELHI
New Delhi
Date of signing
BEFORE THE HON'BLE DISTRICT JUDGE, COMMERCIAL COURTS, CENTRAL DISTRICT, TIS HAZARI COURTS AT NEW DELHI
O.M.P. COMM O.M.P. COMM case number OF 2024
IN THE MATTER OF
M/s Appellant's name
Through its Partner, namely, Mr. Appellant's partner's name
Having its address at
Appellant's address
New Delhi… APPELLANT
VERSUS
M/s Respondent's name
Through its Director, namely, Mr. Respondent's director's name
Having its Registered Office at
Respondent's registered office address
New Delhi… RESPONDENT
APPEAL UNDER THE PROVISIONS OF SECTION 19 OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT, 2006) READ WITH THE PROVISIONS OF SECTION 34(2) OF THE ARBITRATION AND CONCILIATION ACT, 1996 AND SECTION 151 OF THE CODE OF CIVIL PROCEDURE, 1908, AS PREFERRED BY THE APPELLANT AGAINST THE ORDER PASSED BY THE LEARNED SOLE ARBITRATOR WHILE ADJUDICATING THE ARBITRAL PROCEEDINGS INITIATED UNDER THE PROVISIONS OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT, 2006), VIDE ORDER DATED Date of impugned order
MOST RESPECTFULLY SHOWETH
A.PURPOSE OF THE PRESENT APPEAL
1.The Appellant is preferring the present appeal before this Hon'ble Court under the provisions of Section 19 of the MSMED Act, 2006 read with Section 34(2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Arbitration Act"), and Section 151 of the Code of Civil Procedure, 1908 (hereinafter referred to as the "Civil Code"), whereby the Appellant is challenging the order dated Date of impugned order (hereinafter referred to as the "Impugned Order") on a limited aspect, namely, that the Respondent was directed to pay a sum of ₹ Amount awarded (₹)/-, inclusive of interest, along with litigation costs, against a claim of ₹ Amount claimed (₹)/- (inclusive of interest), as filed by the Appellant before the Learned Arbitrator in the Statement of Claim. A copy of the Impugned Order dated Date of impugned order is annexed and appended as Annexure A-1 alongside the present appeal.
B.BRIEF INTRODUCTION
2.That the Appellant is a firm registered under the provisions of the Indian Partnership Act, 1932. The Appellant firm is an emerging firm engaged in the manufacture of bearings, machines and driving elements, and the Respondent company is engaged in the production and manufacture of aluminium castings for LED street lights, fixtures, etc. At present, the Respondent company is operating from the address mentioned in the Memo of Parties. The present claim petition under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 was filed by Sh. Authorised signatory's name, whose Authority Letter is appended alongside the present petition as Annexure A-2.
3.That the Respondent is a company registered under the ambit of the Companies Act, 1956, as amended from time to time. At present, the Respondent company is operating from the address mentioned in the Memo of Parties, which is Respondent's address, New Delhi. That the Respondent company bears Corporate Identification Number Respondent's CIN, and its books of account and papers are maintained at its office at RIICO industrial area plot/location, RIICO Industrial Area, Place in Rajasthan, Rajasthan. The affairs of the Respondent company are managed, through its Director, namely Sh. Director 1's name, bearing DIN No. Director 1's DIN, Sh. Director 2's name, bearing DIN No. Director 2's DIN, and Smt. Director 3's name, bearing DIN No. Director 3's DIN, who manage the affairs of the Respondent company. A screenshot of the company affirmation qua the Respondent's details is appended as Annexure A-3 alongside the present petition.
C.BACKGROUND OF THE PRESENT CASE
4.That, in and around the beginning of the year 2017, the Respondent, through its Directors, approached the Appellant firm and represented themselves as Directors of the Respondent company, who were also managing the day-to-day affairs and management of the Respondent company. Sh. Director 2's name, Director's name and Smt. Director 3's name represented that they were carrying out all the management responsibilities of the Respondent company, coupled with the fact that the said Directors were also entrusted with substantial powers of management.
5.The afore-mentioned Directors of the Respondent company gave personal guarantees to the Appellant firm, and assured the Appellant firm that the Respondent company, through the said Directors, shall make payment immediately upon receipt of the goods/material from the Appellant firm.
6.That, starting from the year 2017, the Respondent, through the said Directors, started placing numerous orders upon the Appellant firm, and it was mutually agreed between the parties, and also as per the tax/retail invoices, that payment of the amount due against the goods supplied by the Appellant firm to the Respondent company shall be paid/remitted by the Directors of the Respondent within the stipulated period of days as prescribed under law.
8.That commencing from the year 2017, the Respondent, through its Directors, personally visited the office of the Appellant Firm and thereafter placed numerous orders with it. All such orders of Respondent No. 1 were duly fulfilled by the Appellant Firm. The Appellant Firm, as and when requested by the Respondent Company through its Directors, supplied goods to the Respondents in the manner and in accordance with the specifications sought by the Respondent Company through its Directors.
9.That against the orders placed by the Respondent Company upon the Appellant Firm at its Delhi office, goods were supplied by the Appellant, and the Respondent accepted the said goods without any protest or demur whatsoever.
10.That it is pertinent to mention that as and when an order was placed by the Respondent, the Appellant Firm duly delivered the said goods, which were of the highest quality and in accordance with the specifications ordered by the Respondent, and the goods were supplied by the Appellant Firm to the Respondent on or before the time period requested by the Respondent.
11.That in respect of the aforementioned invoice(s) issued by the Appellant Firm to the Respondent, the Respondent made payments to the Appellant at its Delhi office on a running account basis.
12.That the Respondent Company, through its Directors, placed orders in light of the mutually accepted terms and conditions between the parties, and against such orders, the Appellant Firm supplied the goods to the Respondent in accordance with the specifications and to the satisfaction of the Respondent. It is pertinent to mention that the Respondent accepted the goods supplied by the Appellant Firm without any protest or demur.
13.That it is pertinent to mention that the goods were supplied by the Appellant Firm through a transport carrier, to whom the Appellant Firm delivered the goods for transmission to the Respondent against the invoices issued by the Appellant Firm to the Respondent. Payments were made on a running account basis, and the Respondent made payments to the Appellant at its Delhi office on a running account basis. The invoices are annexed herewith.
14.That the Appellant Firm most fairly states before this Hon'ble Court that on the Day of account confirmation of January Year of account confirmation, the Respondent admitted and confirmed the accounts, and the balance payment, i.e., the principal amount, was outstanding to the extent of INR Principal amount outstanding (₹)/-, payable by the Respondent to the Appellant Firm. That on Day of demand notice of January Year of demand notice, the Appellant Firm, by invoking the provisions of the Insolvency Act, issued a Demand Notice calling upon the Respondent to pay an unpaid debt to the extent of INR Total demand notice amount (₹)/-, of which INR Principal in demand notice (₹)/- was pending towards principal and INR Interest in demand notice (₹)/- was pending towards interest. The said Demand Notice specifically stated that payments were to be made in accordance with the provisions of the MSMED Act, as the Appellant Firm is registered under the provisions of the MSMED Act, and the Respondents were in continuous default of the said outstanding amount, which is also established by their own admission of liability for the said amount.
15.That the Appellant Firm fairly states before this Hon'ble Tribunal that, upon receipt of the Demand Notice, the Respondents, through their Director, approached the Partner of the Appellant Firm and requested a settlement of the disputes. The Directors of the Respondent Company assured that the principal amount stated in the Demand Notice would be paid by the Respondent to the Appellant Firm. Consequently, a Settlement Agreement was executed, wherein it was explicitly provided that the outstanding amount would be paid in four instalments vide Cheque No. Settlement cheque number(s), and the Respondent, through its Directors, confirmed that in the event of any breach of the payment plan/schedule, the Respondents, through their Directors, would be liable to pay the entire amount together with interest as claimed in the Demand Notice dated Date of demand notice.
16.That the Appellant Firm fairly states before this Hon'ble Tribunal that two instalments, vide Cheque No. Cheque number(s) paid, were duly paid, as is verifiable from the Statement of Account of both the Appellant Firm and the Respondent. Subsequent to the clearance of the aforementioned cheques, the Director of the Respondent Company once again requested the resumption of business between the parties. Relying upon the personal assurances and representations made by the Respondent, the Appellant Firm resumed business trade inter se the parties, and, upon request, Cheque No. Returned cheque number 1 and Cheque No. Returned cheque number 2 were returned, as the Respondent assured that the said payments would be made in the course of the running account, since the financial position of the Respondent Company was not sound and payments would be released only once the Respondent's business was restored to its original state.
17.That, owing to the cordial business relationship inter se the parties, the Appellant Firm once again commenced supply of goods as per the specifications laid down by the Respondent, and, being satisfied with the quality of the goods, the Respondent once again commenced making payments on a running account basis. That although payments commenced from Day payments resumed September Year payments resumed, the Respondent failed to make payment of the amounts due up to the last invoice dated Day of last invoice October Year of last invoice, as required under the provisions of Section 15 of the MSMED Act.
18.That as on Date of outstanding computation June 2022, the total principal amount outstanding inter se the parties was to the extent of INR Total principal outstanding (₹)/-, besides interest on delayed payments leviable under the provisions of the MSMED Act.
19.That the Appellant had no other option but to file a claim under the provisions of Section MSMED Act section number of the MSMED Act before the Facilitation Council, as the Respondent failed to make payment under the provisions of Section 15 of the MSMED Act, and upon its failure to pay interest under the purview of Sections 15 and 16, an application under the provisions of Section 18(1) was filed before the Office of the Sub-Divisional Magistrate, which was registered vide File No. Facilitation council file number. Notice was issued to the Respondent, which appeared and filed a reply before the Office of the Sub-Divisional Magistrate, raising objections primarily on the pretext of the rate of interest coupled with the settlement — which, in fact, was never complied with by the Respondent. All the other contents of the claim were not denied, and hence the same amounted to an admission on the part of the Respondent that the goods were delivered, and that too without any protest, and that the principal amount stood admitted, the only objection raised being with regard to the calculation of the interest amount.
20.That despite the indulgence of the learned Council under the provisions of Section 18(2) of the Act, for the purpose of conducting conciliation in the matter or providing alternate dispute resolution services for conducting conciliation, and despite the best possible assistance rendered by the learned Council and the Appellant, the Respondent miserably failed to respect the proceedings. Upon the failure of the Respondent, despite the services having been rendered by the Appellant and the Respondent not discharging its payment obligations, the Council deemed it appropriate to refer the matter to the present Arbitration Centre.
21.That all the directors of the Respondent Company, as stated aforesaid, are jointly and severally liable to the Claimant Firm. On account of the personal guarantees and assurances rendered by the Respondent, coupled with the fraud played by the Respondent, the corporate veil is required to be lifted in the present matter in order to clear the legitimate dues of the Appellant Company. Under the provisions of Sections 15 and 16 of the MSME Act, the Respondent is required to make payment to the Appellant Company within a specified number of days of submission of the invoice. Section 15 of the Act uses the word "shall", thereby making it mandatory for the Respondent to clear the dues within the specified period of days from submission of the Appellant's invoice. In any event, it is statutorily incumbent in law that a buyer cannot exceed the period of 45 days from the date of acceptance of service for discharging the payments.
22.Compound interest is mandated by the MSMED law, and the said provision also uses the word "shall" and is therefore mandatory in nature. The law mandates that compound interest has to be paid by the buyer at three times of the bank rate as notified by the Reserve Bank of India, making the said provision applicable to all pending dues and belated payments that stand due from the Respondent. In the matter at hand, the calculation of compound interest commences from the Day interest period commences to Time period for invoice receipt of receipt of the Claimant's invoice by the Respondent, which remained uncleared by the Respondent within the given time frame.
23.Consequent to the above, the Respondent is duty-bound and obligated in law to clear the principal amount and interest of the Appellant as enshrined in Section 17 of the Act. The Respondent has miserably failed to comply with the provisions of law and has deliberately violated the same despite several reminders, and no action was taken by the Respondent towards payment of the dues to the Appellant.
24.That, as such, it is clear from the above-mentioned facts that the Respondent has failed to make payments as per the aforementioned sections of the MSMED Act, and as such the Appellant approached the Ld. Tribunal as enshrined under the relevant provisions of law.
25.The Appellant submitted its claim before the Learned Tribunal by virtue of the statement of claim, as per the provisions of the MSMED Act, on Date of statement of claim, alongside the documents, which is filed and annexed as Annexure A-4 (Colly.).
26.The Respondent thereafter, on Date of statement of defence, filed its Statement of Defence, inter alia, praying for dismissal of the Statement of Claim. At the same time, the Respondent also filed a Counter Claim inter se, raising a claim of INR Counter claim amount for loss of sale (₹)/- on account of damage on account of loss of sale, and INR Counter claim damages amount (₹)/- as a claim for damages on account of loss of reputation and mental distress, plus costs and interest. The copy of the Statement of Defence, alongside the documents coupled with the Counter Claim as raised by the Respondent, is annexed and appended alongside the present petition as Annexure A-5 (Colly.).
27.The Petitioner then, on Date of rejoinder, filed the Rejoinder to the Statement of Defence as filed by the Respondent to the Claim Petition, alongside the Statement of Defence to the Counter Claim as filed by the Respondent. In addition thereto, the Petitioner filed an affidavit of admission and denial and evidence by way of an affidavit before the Ld. Tribunal over e-mail. The copy of the documents as filed is annexed and appended alongside as Annexure A-6 (Colly.). The Respondent, on Date of affidavit of admission and denial, had filed the affidavit of admission and denial of documents, and the same is annexed and appended as Annexure A-7.
28.In addition to the above, the Petitioner, on Date of claimant's evidence affidavit, filed the evidence by way of an affidavit, and the Respondent, on Date of respondent's evidence, filed the evidence by way of an affidavit dated Date on respondent's evidence affidavit, and the same is exhibited as Annexure A-8 (Colly.), whereas, in the Counter Claim, the evidence was filed by the Counter Claimant on Date of counter claim evidence, and the evidence of the Petitioner in the Counter Claim case was also filed, and the same is annexed and appended. It is stated that the directors of the Respondent Company were impleaded in the said arbitration; however, an interim application seeking deletion of the directors was filed, which was subsequently dismissed. In addition thereto, the Appellant also filed an interim application seeking permission to cross-examine the AR of the Respondent, and the same was also dismissed by the Ld. Arbitrator for the reasons best known to the learned arbitrator. The copies of the documents as well as the orders are annexed and appended as Annexure A-9 (Colly.).
D.ISSUES AS FRAMED BY THE LEARNED TRIBUNAL
29.The Learned Arbitrator, after perusal of the pleadings of the case, inclusive of the arbitration as well as the Counter Claim, framed the following questions for adjudication of the present matter, as is evident from Para 9A of the impugned judgment, which are as follows:—
i.Whether the parties come under the purview of the MSMED Act, 2006 or not; and whether the Claimant is not entitled to get any relief through this MSME Arbitral Tribunal, being registered with the MSEFC subsequent to the date of entering into the contract as well as subsequent to the rendering of its said services to the Respondent, as contended by the Ld. Counsel for the Respondent?
ii.Whether the Claimant is not entitled to seek remedy from this platform, i.e., the MSME Arbitral Tribunal, being an unregistered partnership firm, as barred under Section 69 of the Partnership Act, 1932?
iii.Whether the bills/invoices raised by the Claimant upon the Respondent, and basing upon which the instant claim is raised, are bogus and not genuine?
iv.Whether the claim raised herein by the Claimant is time-barred, as contended by the Respondent?
v.Whether, under the effect of novation of contract, as provided under Section 62 of the Indian Contract Act, 1872, on resumption of business with it by the Claimant after having terminated the settlement agreement, the Respondent was not bound to perform the original (said settlement) agreement?
vi.Whether the clause of force majeure applies to the present matter or not?
vii.Whether the defence of the Respondent that the goods received by it from the Claimant were of inferior quality / low grade is plausible and sustainable in view of the documentary evidence available on record?
viii.Whether the Respondent is liable to pay the entire claim amount with interest of INR Interest amount claimed (₹)/-; if not, then how much?
E.FINDINGS BY THE LD. ARBITRATOR
30.Pursuant to the questions as framed in the arbitral proceedings, the Ld. Arbitrator dealt with the questions upon perusal of the agreements and on the basis of the documents on record. With respect to Serial No. (i), the Ld. Arbitrator held as under:—
As argued by the learned counsel for the Claimant, the Claimant is a legitimate enterprise, as it is a Company registered with the Ministry of MSME, India, under its Udyog Aadhaar No. Udyog Aadhaar number dated Month of Udyog Aadhaar registration Year of Udyog Aadhaar registration (subsequently replaced by Udyam Registration No. Udyam registration number). The Company, structured as a partnership firm, specialises in the manufacturing and supply of bearings, machines, driving elements, and aluminium castings for LED street lights and fixtures, operating from its base in Industrial area of appellant's base Industrial Area, City of appellant's base.
Given this information, it is clear that the Claimant is a valid supplier under the MSMED Act, 2006, even during the ongoing business relationship with the Respondent. This business relationship commenced in Year of commencement of business relationship and continued until Month of last invoice Year of last invoice, the date of the last invoice raised. While the learned counsel for the Respondent has challenged the maintainability of the instant claim petition under the provisions of the MSMED Act, 2006, arguing non-compliance with Section 8 of the MSMED Act, 2006, due to the absence of the required memorandum filed by the Claimant, this contention is misplaced. The Claimant is not obligated to file such a memorandum as mandated in Section 8 of the MSMED Act, 2006, since it is optional for Micro & Small Enterprises to file it.
Furthermore, this issue stands settled by the Hon'ble High Court of Delhi in its recent judgment titled "Cited case name (petitioner side) Vs. Cited case name (respondent side)", delivered by Justice Judge's name in cited judgment, wherein it was held that even if a supplier obtains registration with the MSEFC during the course of supply, such supplier shall nonetheless be entitled to pursue its dues under the provisions of the MSMED Act, 2006.
The aforesaid legal proposition was further affirmed by the Hon'ble Division Bench of the Delhi High Court in LPA No. LPA number, titled "LPA case name", decided by LPA deciding judge's name.
In light of the foregoing considerations, it is evident that the respondent's objection to the claimant's recourse to the MSMED Act, 2006 is untenable. Notwithstanding the claimant's admission that its registration was obtained on Date of MSME registration, it remains an undisputed fact that the business relationship between the parties, which commenced in 2017, continued until Year of last invoice, that is, well after the claimant's registration with the MSEFC under the MSMED Act, 2006.
Furthermore, the learned counsel for the respondent contends that, since the claimant is a partnership firm which is not registered, it does not qualify as a valid supplier within the meaning of Section 2(n)(iii) of the MSMED Act, 2006.
However, this contention of the respondent is unsustainable. As noticed above, Section 2(n)(iii) of the MSMED Act, 2006 stipulates that a supplier may be any company, cooperative society, trust, or a body registered or constituted under any law for the time being in force, engaged in the production of goods by micro or small enterprises and in the rendering of services. In the present case, although the claimant is not a registered partnership firm, it is constituted under the provisions of the Partnership Act, 1932, and registration of the firm for the purpose of carrying on business is not mandatory. Moreover, this Tribunal concurs with the submission of the learned counsel for the claimant that Section 2(n)(iii) of the MSMED Act, 2006, in addition to the expressions "company, cooperative society, and trust", also employs the phrase "or a Body", which encompasses the claimant. Accordingly, the claimant satisfies the definition and requirements of Section 2(n)(iii) of the MSMED Act, 2006.
Therefore, this Tribunal, upon its considered observation and opinion, determines that the claimant is indeed entitled to avail the benefits of the MSMED Act, 2006 in respect of its claim before this Arbitral Tribunal. Consequently, the present issue is resolved in favour of the claimant and against the respondent.
31.With regard to Issue No. (ii), namely, that the claimant is not entitled to seek remedy from this MSME Arbitral Tribunal, being an unregistered partnership firm as required under Section 69 of the Partnership Act, 1932, the learned Arbitrator held as under:
The learned counsel for the respondent raised an objection founded upon Section 69 of the Partnership Act, 1932, arguing that since the claimant is not a registered partnership firm, it cannot seek any remedy in its firm name. As the present claim has been filed in the name of the firm, the learned counsel contended that the claim ought to be dismissed or rejected.
In contrast, the counsel for the claimant submitted that although the registration certificate could not initially be placed on record, the claimant is in fact a registered partnership firm since 2004, as evidenced by the registration certificate issued under No. Registration certificate number dated Date of MSME registration by the office of the Commissioner of Industries, Office of commissioner of industries location. The claimant has subsequently produced the said certificate.
The learned counsel for the respondent strongly objected to the inclusion of this registration certificate in the record, contending that the matter was not at the stage of final arguments and that, at such a belated stage, no new document ought to be accepted. This Tribunal concurs with the submission of the learned counsel for the respondent in this regard. It is, however, observed that even if the said registration certificate of the claimant is not admitted into the record, the claimant remains entitled to seek a remedy before this forum, for the reason that the present proceedings are arbitration proceedings and cannot be equated with, or treated as, a lawsuit.
Further, as this Arbitral Tribunal is in no case a "Court" within the meaning of Section 2 of the Arbitration and Conciliation Act, 1996, it is quite clear that Section 69 of the Partnership Act, 1932 does not apply to any proceeding before this Tribunal. Reliance in this behalf may be derived from the judgment titled "Cited judgment name".
It is thus that this issue is answered in the negative, against the respondent and in favour of the claimant, by holding that the claimant is well entitled to seek the claimed remedy before this forum, that is, this Arbitral Tribunal.
32.With regard to Issue No. (iii), namely, that the bills/invoices raised by the claimant upon the respondent are bogus and not genuine, the learned Arbitrator, upon perusal of the documents coupled with the arguments addressed, recorded the finding as below:
This Tribunal finds the submission of the respondent to be wholly misconceived and untenable. The reason for this conclusion lies in the fact that the respondent, having acknowledged its liability, entered into and executed a settlement agreement in Year of settlement agreement. It is thereafter inconsistent and contradictory for the respondent to challenge the bills, especially after entering into the settlement. Moreover, all the invoices in question are GST-paid invoices, and there is nothing on record to indicate that the respondent has not taken or availed of the GST input credit in respect of the said bills/invoices. Furthermore, the respondent's own ledger indicates an outstanding balance of INR Outstanding balance per ledger (₹)/-. Consequently, the respondent's characterisation of the claimant's bills as bogus is an incorrect submission. Therefore, this issue is resolved in the negative against the respondent and in favour of the claimant, affirming that the bills/invoices are neither bogus nor false.
33.With regard to Issue No. (iv), namely, whether the claim is time-barred, the learned Arbitrator, upon perusal of the documents coupled with the arguments addressed, recorded the finding as below:
The respondent contends that the claim raised by the claimant is time-barred because the business relations commenced on 16.10.2017 (the date of the first invoice), and the claim petition was filed before this Tribunal in Month of claim petition filing. It is argued that even reckoning from the execution of the settlement agreement in Year of settlement agreement, the claim petition is still time-barred, as it was filed well beyond the permissible period of three years, which would have expired in January Year of limitation period end.
Countering this, the learned counsel for the claimant submitted that the claim petition is within the period of limitation and is therefore not barred by time. It was argued that, since there existed an unchallenged running account of the respondent maintained by the claimant, and demands had been raised on the basis of that account, Article 1 of the Schedule of the Limitation Act, 1963 applies. Under Article 1, the last cause of action arises at the close of the year in which the last entry of the transaction is made in that account. In the present case, the ledger of the respondent (Exb. CW-1/1, pages 122 to 127 of the SOC) shows that the last transaction was made vide Voucher No. Voucher number of last transaction on Date of last transaction. Therefore, the claim petition filed in Year of claim petition filing falls well within the three-year limitation period ending in Year of limitation period end.
Consequently, this issue is answered in the negative against the respondent and in favour of the claimant, confirming that the claim petition is not time-barred.
34.With regard to Issue No. (v), namely, the respondent's non-liability to honour the Settlement Agreement on account of the novation of contract arising from the claimant's resumption of business with it, as per Section 62 of the Contract Act, 1872, the learned Arbitrator, upon perusal of the documents coupled with the arguments addressed, recorded the finding as below:
The learned counsel for the respondent argues that the resumption of business relations with the claimant after the non-compliance with the settlement agreement dated January Year of settlement agreement constitutes a novation of the contract. It is contended that, by virtue of Section 62 of the Indian Contract Act, 1872, the respondent is not obligated to perform or honour the said settlement agreement, thereby absolving the respondent of any liability towards the claimant.
In response, the learned counsel for the claimant counters this submission by referring to Clauses 6 and 7.3 of the said settlement agreement dated January Year of settlement agreement. It is pointed out that Clause 6 permits any modification of the agreement only through a written document signed by both parties. Since no such written and mutually signed document exists, it is argued, there has been no novation of the settlement agreement. Furthermore, Clause 7.3 of the settlement agreement stipulates that it is an irrevocable agreement and cannot be dissolved under any circumstances.
Thus, based on the provisions of the settlement agreement and the absence of a written and mutually signed document indicating any modification or novation, the claimant's counsel asserts that the original terms of the settlement agreement remain binding and enforceable.
However, it is an acknowledged fact between the parties that, despite the non-compliance with the settlement agreement, the respondent failed to pay the last two instalments of Rs. Amount per unpaid instalment (₹) each within the scheduled timeframe specified in the agreement, and has only made a part-payment to the claimant during an extended period of approximately 5 months. It is also a recognised fact that the claimant accepted this part-payment from the respondent without objection. Furthermore, the parties resumed their transactions, with the claimant making the last sale on Date of last sale, and the respondent completing the last payment to the claimant via bank transfer on Date of last payment.
In light of the aforementioned circumstances, this tribunal holds the considered view that the settlement agreement between the parties was duly complied with and concluded after the claimant received the last payment on Date of last payment received. Therefore, the claimant is not entitled to reopen the issue of delayed payments for transactions that occurred before Cut-off date for delayed payment claims. Subsequent transactions, which resumed from Date transactions resumed, do not form part of the settlement agreement between the parties and were conducted under a mutual understanding without any formal agreement.
Thus, this question is resolved in favour of the respondent, specifically regarding the finding that the respondent has fulfilled its obligations under the settlement agreement and is not liable to pay the claimant for any transactions that occurred before Cut-off date for liability.
35.With regard to Issue No. (vi), i.e., whether the claim petition was filed by an authorised person or not, to which the Ld. Arbitrator, after perusal of the documents coupled with the arguments as addressed, gave the finding as below:
In response, the learned counsel for the claimant referred to Paragraph 1 of the claim petition and argued that the claim petition was filed by Mr. Partner's name, who is one of the partners of the claimant firm, and therefore it was properly filed by an authorised person.
There is no doubt that Mr. Authorised partner's name was a proper and authorised individual to file the claim on behalf of the claimant firm.
Consequently, the present question is resolved against the respondent and in favour of the claimant, affirming that the claim petition was properly filed by an authorised person.
36.With regard to Issue No. (vii), i.e., the applicability of force majeure to the present matter, to which the Ld. Arbitrator, after perusal of the documents coupled with the arguments as addressed, gave the finding as below:
This tribunal, in its findings on the related issues at 9.B.v, observes that the settlement agreement between the parties was effectively concluded after the respondent made the last part-payment on Date of last part-payment. Additionally, the business transactions which resumed from Date transactions resumed continued until Date transactions continued until, with the claimant receiving the last payment on Date of last payment, without any protest or objection. Therefore, there was no basis to invoke a plea of force majeure in the current proceedings, and any such claim is deemed to be without merit.
37.With regard to Issue No. (viii), i.e., the plausibility of the respondent's defence of having received low-grade/inferior quality goods from the claimant, to which the Ld. Arbitrator, after perusal of the documents coupled with the arguments as addressed, gave the finding as below:
The tribunal observes that the respondent's own ledger records an outstanding principal amount of Rs. Outstanding principal per ledger (₹)/- owed to the claimant, which raises questions about the legitimacy of the alleged rejections of goods worth Rs. Value of rejected goods (₹)/-. Apart from a single email, the respondent has not produced substantial evidence regarding the quality of the goods supplied by the claimant or any direct loss suffered on account of the alleged inferior quality. Therefore, the tribunal concludes that the respondent has failed to substantiate its claim that the goods supplied by the claimant were of inferior quality or low grade.
Consequently, this question is resolved in the negative against the respondent and in favour of the claimant.
38.With regard to the Issue qua the liability of the respondent to pay the entire claim amount of Rs. Principal claim amount (₹) as principal amount and the balance as interest, to which the Ld. Arbitrator, after perusal of the documents coupled with the arguments as addressed, gave the finding as below:
Therefore, considering the facts of the present case, this tribunal is of the view that the claimant is entitled only to delayed payment interest as per the provisions of the MSMED Act, 2006, from June 14, 2022, the date of the last payment received from the respondent, and only on the principal amount of Principal amount (₹). The claimant's request for interest amounting to INR Interest amount claimed (₹), as per its calculation sheet, is deemed misconceived and is accordingly rejected.
39.The Learned Arbitrator, while adjudicating upon the counter-claim as filed by the respondent, and on the pleadings, rightly came to the conclusion that, upon consideration of all submissions, pleas and contentions of the respective parties and the evidence on record, the Learned Tribunal found it clear that the counter-claim, based upon a claim of suffering loss of sales/revenue to the tune of INR Loss of sales amount claimed (₹)/-, is not supported by any documentary evidence which may substantiate, or even reflect, the actual loss suffered by the counter-claimant, more particularly solely for the claimed reason of non-receipt back of the alleged defective/low-grade material at the end of the appellant. The said emails nowhere make out a case that the respondent had directed or demanded the appellant to take back the alleged defective materials from it. There is also nothing on record to show that the alleged supply of defective goods/material was brought to the notice of the appellant within time, nor has any debit note been supplied/issued to the appellant, and the same is also not reflected in the account statement of the appellant maintained by the respondent. Hence, the Learned Tribunal, in total agreement with the plea of the appellant, held that for claiming damages, breach of contract is a pre-condition, and in this entire issue there is no allegation by the respondent that the contract was breached by the appellant in any manner or at any given point of time.
40.Hence, the Learned Tribunal rightly held that the entire onus to prove its counter-claim lay upon the respondent, and the respondent failed to prove the case as alleged by it before the Learned Arbitrator, as the grounds of the counter-claim were similar to those raised in the Statement of Defence, and hence the Ld. Tribunal, without any doubt, was pleased to dismiss the counter-claim of the respondent.
41.That the Learned Arbitrator, while awarding interest on the amount in issue — and more particularly on the issue which was decided against the Appellant — placed reliance upon Sections 16 and 17 of the MSMED Act and awarded interest at three times the rate of Bank interest rate per annum per annum, which works out to Three-times interest rate. Accordingly, the Learned Tribunal awarded interest of INR Interest amount awarded (₹)/- against the interest as claimed by the Appellant before the Learned Arbitrator. The said finding, which is under challenge, is patently wrong and is liable to be interfered with.
42.That the said order passed under the provisions of the Arbitration Act, as impugned before this Hon'ble Court, is challenged primarily on the following grounds.
F.GROUNDS
43.BECAUSE, the Learned Arbitrator failed to note the clauses of the Settlement Agreement, and more particularly Clause No. 3.1, which, inter alia, records that the Respondent agreed, confirmed and acknowledged that it would pay an amount of INR Settlement amount (₹)/- to the Appellant in order to amicably resolve the present matter, in accordance with the payment schedule, and in lieu whereof four cheques of INR Amount per settlement cheque (₹)/- each were issued by the Respondent to the Appellant.
44.BECAUSE, the Learned Arbitrator failed to appreciate Clause No. 3.2 of the Settlement Agreement, which, inter alia, records that the Respondent irrevocably agreed and confirmed that the Demand Notice dated Date of demand notice shall remain in force and effect until payment of the entire dues mentioned in Clause 3.1.
45.BECAUSE, the Learned Arbitrator failed to appreciate the Legal Notice, i.e., Legal/demand notice reference, wherein the total amount of debt was INR Total debt amount in notice (₹)/-, out of which INR Principal outstanding in notice (₹)/- was the outstanding principal amount and INR Interest in notice (₹)/- was towards interest. It is an admitted fact that the said amount of INR Admitted amount (₹)/- was admitted by the Respondent, in consequence whereof the parties entered into the aforementioned Settlement Agreement. A perusal of the Settlement Agreement would reveal that it was binding upon the parties to the present arbitration, their successors in interest, and their present and future affiliates, subsidiaries, assignees or acquirers, including any acquirer of substantially all of the assets.
46.BECAUSE, the Learned Arbitrator failed to note and acknowledge Clause 3.3 of the Settlement Agreement, which, inter alia and more specifically, stated that in consideration of the Respondent agreeing to pay the sum of INR Payment sum agreed (₹)/- in accordance with the payment schedule mentioned in Clause 3.1 above, the Appellant had agreed to amicably resolve the present matter for an amount of INR Settlement amount (₹)/-. The Learned Arbitrator patently failed to note the further clauses of the Settlement Agreement which conveyed the intent of the parties, namely, that the Respondent had unequivocally agreed that in the event of a breach of the payment plan/schedule mentioned in Clause 3.1 of the Settlement Agreement, the Respondent shall be liable to pay the entire amount with interest as claimed in the Demand Notice dated Date of demand notice, for an amount of INR Amount after deductions (₹)/-, after deducting the amount already paid by the Respondent.
47.BECAUSE, the Learned Arbitrator failed to appreciate the statement of defence on record, wherein the Respondent itself admitted to the Settlement Agreement and to the amount mentioned in the Legal Notice dated Date of legal notice, and also to the fact that the cheques, as mentioned above, had been handed over.
48.BECAUSE, the Learned Arbitrator, in the Award, recorded a categorical finding on one of the issues which is interlinked with the second issue, and despite adjudicating that issue in favour of the Appellant, turned the finding against the Appellant. The Learned Arbitrator held the submissions of the Appellant to be correct to the extent that the claim as filed by the Appellant was well within time, and, after perusing the pleadings on record and hearing the submissions, rightly held that it is an admitted and acknowledged fact between the parties that "despite the non-compliance with the settlement agreement, given that the Respondent failed to pay the last two instalments of INR Instalment amount (₹)/- each within the scheduled timeframe specified in the agreement, and has only made a part payment to the Appellant."
49.BECAUSE, the Learned Arbitrator, despite having recorded a conclusive finding that the Settlement Agreement, entered into by the parties of their own free will, was not complied with by the Respondent, and that the Respondent had thereby violated Clause 3.3 of the Settlement Agreement, inter alia, pursuant to which it became incumbent upon the Respondent to pay the entire amount of the Demand Notice minus the amount already paid, gave a perverse and patently wrong finding to the effect that, since the parties to the petition resumed their transactions — the Appellant having made its last sale on Date of last sale and the Respondent having made its last payment to the Appellant on Date of last payment — coupled with the fact that the Appellant accepted the part-payment from the Respondent without objection, the Appellant is not entitled to reopen the issue of delayed payments for the transactions that took place earlier.
50.BECAUSE, the aforementioned findings of the Learned Arbitrator are in complete contradiction to the documents on record and, moreover, to the admissions which are evident from the documents filed by the Respondent, to the effect that there was no question of the Appellant accepting or rejecting the part-payments (if any), since the parties to the contract were fully governed by Clause 3.3 of the Settlement Agreement, which made it clear that in the event of default the Respondent was liable to pay the entire amount with interest as claimed in the Demand Notice, after deducting the amount already paid by the Respondent.
51.BECAUSE, the Appellant, without prejudice to its rights and contentions, states that the total amount as claimed in the Demand Notice dated Date of demand notice was INR Amount in demand notice (₹)/-. Even if the version of the Respondent is accepted — a fact also acknowledged by the Learned Arbitrator — that the payment of the first two instalments amounting to INR Amount of first two instalments (₹)/- has been made, and even if the entire payments made between 1st April 2020 and 6th July 2020 are taken into account, namely INR Instalment amount 1 (₹)/-, INR Instalment amount 2 (₹)/-, INR Instalment amount 3 (₹)/-, INR Instalment amount 4 (₹)/-, INR Instalment amount 5 (₹)/- and INR Instalment amount 6 (₹)/-, the total thereof comes to INR Total of instalments (₹)/-, thereby leaving a balance of INR Balance amount (₹)/-, by which figure the Learned Arbitrator also affirmed that the Settlement Agreement has not been complied with. Consequently, Clause 3.3 was attracted, which the Learned Arbitrator failed to appreciate, with the result that the Respondent was under an obligation to pay INR Amount payable (₹)/-, i.e., {INR Principal amount (₹)/- minus INR Amount (₹)/- minus INR Amount already paid (₹)/-}, together with an amount of INR Amount added (₹)/-, coupled with interest at the rate prescribed under the provisions of the MSMED Act.
52.BECAUSE, the Learned Arbitrator, out of nine issues, rightly awarded and decided seven issues in favour of the Appellant; however, the Learned Arbitrator patently failed to decide the remaining two issues correctly in the light of the documents on record and the submissions of the Respondent, which renders the present Award perverse and patently wrong, and hence in conflict with the public policy of India and with the most basic notions of morality and justice. The present Appeal under the relevant provisions of law is therefore confined to those two findings alone, the last issue being read in conjunction with Issue No. 5, since the Learned Arbitrator at one place records that there was a default on the part of the Respondent, and at another place rules in favour of the Respondent by holding that the Respondent has fulfilled its obligations under the Settlement Agreement.
53.BECAUSE, the expression "patent illegality" was explained in detail and brought within the scope of the public policy of India for the first time by the Hon'ble Apex Court in Supreme Court case name on public policy. However, by virtue of the amendments made to Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the said Act") by the Arbitration and Conciliation (Amendment) Act, 2015, with effect from Date of 2015 Arbitration Amendment Act effect, the expanded interpretation of the expression "public policy of India" as laid down by the Courts in earlier decisions has been done away with.
54.BECAUSE, the Law Commission of India examined the said Act and submitted its 246th Report on "Amendments to the Arbitration and Conciliation Act, 1996" in August, 2014, recommending various amendments thereto. The proposed amendments were intended to facilitate and encourage alternative dispute resolution mechanisms, especially arbitration, for the settlement of disputes in a more user-friendly, cost-effective and expeditious manner, since India stands committed to improving its legal framework for the disposal of cases. The 246th Report recommended considerable changes to Section 34 of the said Act, narrowing down the grounds of challenge to an arbitral award, apart from providing for the appointment of independent, impartial and neutral arbitrators, amongst several other amendments. The judgment in ONGC's case (supra), together with the judgment in ONGC v. Western Geco International Ltd. Citation of ONGC v. Western Geco, has been expressly done away with.
55.BECAUSE, both Sections 34 and 48 of the said Act have now been restored to the position of law contained in Case name of cited company Ltd. v. Case name of opposing party in cited case (1994) Supp (1) SCC 644 : (AIR 1994 SC 860), whereunder "public policy" will now include only two of the three grounds set out therein, namely, "fundamental policy of Indian law" and "justice or morality", in addition to the ground where the making of the award was induced or affected by fraud or corruption, or was in violation of Section 75 or Section 81, as provided in Section 34 of the amended Act. The ground relating to "the interest of India" stated in the said judgment is no longer available as a valid ground. "Fundamental policy of Indian law" is now to be understood as laid down in Renusagar (supra). The meaning of "justice or morality" has been tightened and is now to be understood as only the basic notions of justice and morality, that is, such notions as would shock the conscience of the Court, as understood in Associate Builders v. Delhi Development Authority (2015) 3 SCC 49 : (AIR 2015 SC 620). The principal object of the 2015 Amendment is to expedite the arbitration process and to minimise judicial intervention, which would ultimately facilitate ease of doing business in India.
56.BECAUSE, the 2015 Amendment clearly defines the expression "public policy of India" and has introduced a new ground, namely Section 34(2A), for setting aside domestic arbitral awards on the ground of patent illegality. This ground applies only to arbitrations taking place in India and not to international commercial arbitrations, as is evident from the wording of the section, which states "other than international commercial arbitration".
57.BECAUSE, in one of its earlier decisions in Gherulal Parekh v. Mohadeodas Maiya, AIR 1959 SC 781, the Hon'ble Supreme Court adopted a narrow interpretation of public policy, holding that within the public policy of India there lie certain determinate and specified heads, and that it would not be prudent to embark upon a search for new heads. However, in Central Inland Water Transport Corp. Ltd. v. Brojo Nath Ganguly, the Hon'ble Supreme Court adopted a wider stance by interpreting the expression "public policy" on the pillars of public conscience, public good and public interest.
58.BECAUSE, the Petitioner submits that an award rendered without any reasoning whatsoever is patently illegal and also in violation of the public policy of India. On this basis, it is submitted that this constitutes a sufficient ground under Section 34 of the Arbitration Act for setting aside the impugned award.
59.BECAUSE, the MSME Act was enacted with the object of facilitating the promotion and development of micro, small and medium enterprises and of ensuring their competitiveness. It aims at ensuring a timely and smooth flow of credit to such enterprises and at minimising instances of sickness among them. Further, the Act itself provides a statutory remedy of appeal under Section 19 of the MSME Act.
60.BECAUSE, in support of the above contentions, the Appellant has relied upon various judgments of the Hon'ble Apex Court in Tirupati Steels v. Shubh Industrial Component and Ors., reported in (2022) 7 SCC 429; Modern Industries v. Steel Authority of India Limited and Others, reported in (2010) 5 SCC 44 : 2010 LAWPACK(SC) 48090; United Bank of India v. Satyawati Tondon and Others, reported in (2010) 8 SCC 110 : 2010 LAWPACK(SC) 48508; Snehadeep Structures Private Limited v. Maharashtra Small Scale Industries Development Corporation Limited, reported in (2010) 3 SCC 34 : 2010 LAWPACK(SC) 47743 : 2010(1) R.A.J. 532; Goodyear India Limited v. Norton Intech Rubbers Private Limited and Another, reported in (2012) 6 SCC 345 : 2012 LAWPACK(SC) 51351; Gujarat State Disaster Management Authority v. Aska Equipments Limited, reported in (2022) 1 SCC 61 : 2021 LAWPACK(SC) 65628; Sri Paravathi Parmeshwar Cables and Others v. Andhra Pradesh Transmission Corporation Limited and Another, reported in (2013) 10 SCC 693 : 2012 LAWPACK(SC) 51904 : 2013(1) R.A.J. 148; and Authorized Officer, State Bank of Travancore and Another v. Mathew K.C., reported in (2018) 3 SCC 85 : 2018 LAWPACK(SC) 60356. Reliance is also placed upon the judgment of this Hon'ble Court in Sanghi Industries Ltd. and Anr. v. Micro Small Enterprises Facilitation Council and Anr. (SBCWP No. 988/2018), which has been upheld by the Hon'ble Division Bench in DBSAW No. 591/2018, titled Sanghi Industries Ltd. and Anr. v. Micro Small Enterprises Facilitation Council and Anr. Relying upon the same, the Appellant submits that the MSME Act is a special and beneficial piece of legislation and has an overriding effect over other laws, in terms of Section 24 of the MSME Act; that Section 15 of the MSME Act imposes a liability upon the buyer to make timely payment; and that Section 16 of the MSME Act imposes a liability of heavy interest for delay. It is submitted that where Sections 18 and 19 of the MSME Act prescribe a statutory and specific mechanism, the same cannot be bypassed. In the present facts and circumstances, both on merits and in accordance with the statutory mechanism, the learned Arbitrator has committed an error, in law as well as on facts, in entertaining the two issues, and in relaxing the provisions of the MSMED Act and the Indian Contract Act, which is contrary to the above-cited judgments of the Hon'ble Apex Court.
61.BECAUSE, it is only where the interpretation of contractual provisions is patently unreasonable or perverse, or is contradictory to well-settled principles governing the interpretation of contracts, that a court would interfere. Further, it is equally well settled that an arbitral tribunal, being a creature of contract, is bound to act in terms of the contract. An award may be said to be patently illegal where the arbitral tribunal has failed to act in terms of the contract, or has ignored the specific terms of the contract. In this regard, reference may be made to the judgment of the Hon'ble Supreme Court in Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum, (2022) 4 SCC 463 : 2022 LAWPACK(SC) 66156 : 2022(2) R.A.J. 100, wherein it has been held as under:
"43. An Arbitral Tribunal being a creature of contract, is bound to act in terms of the contract under which it is constituted. An award can be said to be patently illegal where the Arbitral Tribunal has failed to act in terms of the contract or has ignored the specific terms of a contract.
44. However, a distinction must be drawn between a failure to act in terms of a contract and an erroneous interpretation of the terms of a contract. An Arbitral Tribunal is entitled to interpret the terms and conditions of a contract while adjudicating a dispute. Where disputes have been validly and lawfully submitted to an Arbitral Tribunal, an error in the interpretation of a contract is an error within jurisdiction.
45. The Court does not sit in appeal over the award rendered by an Arbitral Tribunal. The Court does not ordinarily interfere with an interpretation placed by the Arbitral Tribunal upon a contractual provision, unless such interpretation is patently unreasonable or perverse. Where a contractual provision is ambiguous or is capable of more than one interpretation, the Court cannot interfere with the arbitral award merely because, in the opinion of the Court, another possible interpretation would have been the better one.
62.BECAUSE, similar observations have been made by the Supreme Court in UHL Power Co. Ltd. v. State of H.P., (2022) 4 SCC 116: 2022 LAWPACK(SC) 65937: 2022(1) R.A.J. 193; Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1: 2019 LAWPACK(SC) 63557: 2020(1) R.A.J. 33; State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2 SCC 275: 2021 LAWPACK(SC) 65698: 2021(6) R.A.J. 154; ParsaKente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236: 2019 LAWPACK(SC) 62577: 2019(5) R.A.J. 1; and South East Asia Marine Engg. & Constructions Ltd. (SEAMEC LTD.) v. Oil India Ltd., (2020) 5 SCC 164: 2020 LAWPACK(SC) 64119: 2020(3) R.A.J. 234.
63.BECAUSE, it is settled law that the Section 34 Court can interfere only where the interpretation of the contractual covenants is plainly unacceptable, or is contrary to well-settled principles governing the interpretation of contractual covenants, or where the interpretation accorded by the Arbitral Tribunal to a contractual covenant would be inconsistent with other covenants of the same contract.
64.BECAUSE, it is a well-settled principle of contractual interpretation that where a contractual provision is unambiguous, effect must be given to it. Only where there is any ambiguity is it permissible to resort to internal aids to resolve that ambiguity; and only where the internal aids prove insufficient is recourse to external aids permissible. In Pandit Chunchun Jha v. Sheikh Ebadat Ali (supra), it has been held as under:
"6. The first is that the intention of the parties is the determining factor: see Balkishen Das v. Legge. But there is nothing special about that in this class of cases and here, as in every other case where a document has to be construed, the intention must be gathered, in the first place, from the document itself. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If, however, there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended.
65.BECAUSE, as is well known, a document must primarily be construed on the basis of the terms and conditions contained therein. It is also trite that, while construing a document, the Court shall not supply any words which the author thereof did not use.
66.BECAUSE, the primary rule of construction of a document is the intention of the executants, which must be found in the words used in the document. The question is not what may be supposed to have been intended, but what has been said. The exercise of construction or interpretation of a document need be undertaken only where the document is ambiguous or its meaning is uncertain. If the language used in the document is unambiguous and the meaning is clear, that is evidently what the executants of the document meant. In such situations, contemporary events and the circumstances surrounding the execution of the document are not relevant.
67.BECAUSE, an Arbitral Tribunal, being a creature of contract, is bound to act in terms of the contract under which it is constituted. An award may be said to be patently illegal where the Arbitral Tribunal has failed to act in terms of the contract or has ignored the specific terms of a contract.
68.BECAUSE, where the meaning of a word, phrase or sentence is clear, extrinsic evidence is not admissible. It is only where there is latent ambiguity that extrinsic evidence in the shape of an interpreting statement concurred in by both parties should be admissible. The parties themselves may not have been clear as to the meaning of a word or phrase when they entered into the contract. An unanticipated situation may arise, or come into the contemplation of the parties subsequently, which would sharpen their focus; and any statement by them which would illuminate the darkness arising out of the ambiguity of the language ought not to be shut out. In the case of an ambiguous instrument, there is no reason why a subsequent interpreting statement should be inadmissible.
G.NON-FILING PARA
69.The Appellant fairly states before this Hon'ble Court that the present Appeal was inadvertently initially filed, within time, before the Name of the court where the appeal was first filed and the same was marked to the Court of Bench or judge's court to which the earlier case was marked vide Case bearing Number Case number of the earlier filing, in which notice and reply were also received. However, the said petition was withdrawn in order to be filed before this Hon'ble Court. The Appellant is also preferring a separate application under the provisions of the Limitation Act, since the petition before the Name of the court where the appeal was first filed was contested by the Appellant with due diligence, in good faith and under a bona fide mistake.
70.The present Appeal is being filed within the period of limitation prescribed by the provisions of the Act and within the time frame provided under the Arbitration Act as well as the MSMED Act; however, as mentioned supra, a separate application is also being filed along with the present petition.
71.The requisite Court Fee, in accordance with the valuation in the Statement of Claim, has been affixed on the present Appeal. It is stated that the compliance with Section 34(5) of the Arbitration Act, by way of notice, has been duly dealt with.
72.The Appellant reserves its right and otherwise craves the liberty and indulgence of this Hon'ble Court to file such other documents, applications and affidavits as may be necessary to add to and supplement the present Appeal.
73.This Appeal has been made bona fide and in the interest of justice.
74.PRAYER
It is, therefore, most respectfully prayed that this Hon'ble Court may graciously be pleased to:
A.Allow the present Appeal and set aside the Impugned Order under challenge, qua the amount granted by the Ld. Arbitrator;
B.Pass such other and further orders as this Hon'ble Court may deem just and fit in the facts and circumstances of the present matter.
APPELLANT
Through
Counsel's name
Advocate's name
Advocate's name
Advocate's name
Place of signing
Date of signing
BEFORE THE HON'BLE Name of the District Court before which the appeal is filed
O.M.P. COMM O.M.P. COMM case number OF Year of the O.M.P. COMM case
IN THE MATTER OF:
M/s Appellant's name… APPELLANT
VERSUS
M/s Respondent's name… RESPONDENT
AFFIDAVIT
Affidavit of Mr. Deponent's name, Partner of M/s Appellant's name, having its address at Appellant's address, do hereby solemnly affirm and state as under:-
1. That I am the authorised representative/Partner of the Appellant Company in the above matter and am competent to swear this Affidavit.
2.That I have signed, verified and instituted the present Appeal for and on behalf of the Deponent.
3.That the contents of the paragraphs of the accompanying Appeal under Section 19 of the MSMED Act read with Section 34(2) of the Arbitration and Conciliation Act have been drafted by my counsel as per my instructions; the contents thereof have been duly read and understood by me; and, after fully understanding the same, I hereby state that the facts stated therein are true and correct to my knowledge.
DEPONENT
I, Deponent's name, the deponent named hereinabove, do solemnly affirm and verify that the contents of the aforesaid Affidavit are true and correct to my knowledge. No part thereof is false, and nothing material has been concealed therefrom.
Verified at Delhi on this Day of verification day of Month and year of verification
DEPONENT
BEFORE THE HON'BLE DISTRICT JUDGE, COMMERCIAL COURTS, CENTRAL DISTRICT, TIS HAZARI COURTS AT NEW DELHI
O.M.P. COMM O.M.P. COMM case number OF 2024
IN THE MATTER OF
M/S Appellant's name… APPELLANT
VERSUS
M/S Respondent's name… RESPONDENT
STATEMENT OF TRUTH
(Under the First Schedule, Order VI Rule 15A and Order XI Rule 3)
Affidavit of Mr. Deponent's name, Partner of M/s Appellant's name, having its address at Appellant's address, do hereby solemnly affirm and state as under:-
1. I am the authorised representative/Partner of the Appellant Company in the above Suit and am competent to swear this Affidavit.
2. I am fully conversant with the facts of the case and have also examined all relevant documents and records.
3. I say that the statements made in paragraphs Paragraph numbers to knowledge are true to my knowledge; the statements made in _ _ _ _ _ paragraphs are based on information received and believed by me to be correct; and the statements made in —-— paragraphs are based on legal advice.
4. I say that there is no false statement or concealment of any material fact, document or record. I have included information relevant to the present Suit in the Reply, which is based on records.
5. All documents in my power, possession, control and custody pertaining to the facts and circumstances of the proceedings initiated against me have been disclosed. Copies thereof are annexed to the Suit, and the Deponent prefers an application under the provisions of Order XI Rule 1(4) as amended by the Commercial Courts, Commercial Appellate Division of the High Courts Act, 2015, read with Section 151 of the Code of Civil Procedure, 1908.
6. The above-mentioned Suit consists of Number of pages pages, each of which I have duly signed.
7. The Annexures hereto are true copies of the documents referred to and relied upon.
8. I am aware that for any false statement or concealment, I shall be liable for action taken against me under the law for the time being in force.
(DEPONENT)
VERIFICATION:
I, Deponent's name, the deponent named hereinabove, do solemnly affirm and verify that the contents of the aforesaid Affidavit are true and correct to my knowledge. No part thereof is false, and nothing material has been concealed therefrom.
Verified at Delhi on this Day of verification day of Month and year of verification
DEPONENT
BEFORE THE HON'BLE DISTRICT JUDGE, COMMERCIAL COURTS, CENTRAL DISTRICT, TIS HAZARI COURTS AT NEW DELHI
O.M.P. COMM O.M.P. COMM case number OF 2024
IN THE MATTER OF
M/S Appellant's name… APPELLANT
VERSUS
M/S Respondent's name… RESPONDENT
INTERIM APPLICATION ON BEHALF OF THE APPLICANT/APPELLANT UNDER THE PROVISIONS OF SECTION 5 READ WITH SECTION 14 OF THE LIMITATION ACT FOR CONDONATION OF Number of days of delay DAYS OF DELAY IN FILING THE PRESENT APPEAL BEFORE THIS HON'BLE COURT
MOST RESPECTFULLY SHOWETH
1.The Appellant prefers the present application before this Hon'ble Court in the above-mentioned matter, filed under the provisions of Section 19 of the MSMED Act, 2006 read with Section 34(2) of the Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act") and Section 151 of the Code of Civil Procedure, 1908 (for short "the CPC"), whereby the Appellant is challenging the Order dated Date of impugned order (for short "the Impugned Order") on a limited aspect, namely that the Respondent was directed to pay a sum of INR Amount awarded (₹)/-, inclusive of interest, along with litigation costs, against a claim of INR Amount claimed (₹)/- (inclusive of interest) as filed by the Appellant before the Learned Arbitrator in the Statement of Claim, under the relevant provisions of Section 5 read with Section 14 of the Limitation Act, 1963.
2.The Appellant/Applicant inadvertently filed the present Appeal before the Ld. District and Sessions Judge, West District, Tis Hazari Courts, on Date of first Section 34 filing, i.e., within the period of limitation as prescribed under the ambit of the Arbitration and Conciliation Act, 1996, as amended from time to time, and the Ld. District Judge-04 vide Order dated Date of order issuing notice was pleased to issue notice in the matter. Copies of the Order so passed are annexed hereto as Annexure A-1 (Colly.).
3.The Appellant/Applicant instituted the appeal before the Respondent, preferring a petition under Section 34 before the Ld. District Judge, Commercial Court-04, Central Delhi, which was subsequently filed by the Respondent. The Appellant/Applicant reserved the right to dispute the jurisdiction; however, with an intent to have the said issue finally adjudicated on merits, the Appellant/Applicant, vide order dated Date of withdrawal of appeal, withdrew the said Appeal from the Ld. District Judge-04, West District, Tis Hazari Courts, New Delhi, with liberty to file the Appeal before this Hon'ble Court. The said Appeal was thereafter filed immediately, on Date of refiling before commercial court, before this Hon'ble Commercial Court.
4.That there is no delay; however, as an abundant precaution, the Applicant prefers the present application for condonation of delay under the provisions of Section 5 read with Section 14 of the Limitation Act, seeking condonation of 183 days.
5.It is a settled proposition of law, as held by the Hon'ble Supreme Court, that Section 14 of the Limitation Act applies to proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 if the petition under Section 34 (at the first instance) was filed within time.
6.The Hon'ble Supreme Court in Cited case name (Oriental Insurance) Citation of Oriental Insurance case dealt with the issue "whether the presentation of the petition before the Judge, Jodhpur, should be considered as a fresh petition and the explanation for the entire period from the original limitation period, i.e., from the date of the award, is to be considered for the purpose of condonation of delay for prosecuting in an alternate jurisdiction, while considering the application under Section 14 of the Act", and held as under:
Though the judgment in Simplex Infrastructure Ltd. vs. Union of India, (2019) 2 SCC 455 was relied upon to contend that Section 5 of the Limitation Act has no application to a petition challenging the arbitral award under Section 34 of the Act, 1996, the bench noted that the same judgment indicated that Section 14 of the Limitation Act is applicable to an application submitted under Section 34 of the Act, 1996, seeking exclusion of a certain period, if the application under Section 34 of the Act, 1996 is at the first instance filed within the limitation period provided under Section 34(3) of the Act, 1996. While allowing the appeal, the bench observed:
"In the instant case, as already indicated above, the condonation of delay sought is not for filing the petition under Section 34 of the Act, 1996 for the first time. The petition filed under Section 34 of the Act, 1996 at Jaipur was within the period of limitation, and the delay regarding which explanation is put forth is for the period of 8 days in re-presenting the petition beyond the date fixed after it was returned under Order 7 Rule 10 of the Civil Procedure Code. Therefore, in that circumstance, even if the term 'sufficient cause' as contained under Section 5 of the Limitation Act is taken note of, in the present facts the same is not with reference to a petition under Section 34 of the Act, 1996 for condonation of delay beyond the period prescribed under Section 34(3) of the Act, 1996. Though that be the position, what is necessary to be taken note of herein is that the application filed for excluding the time is under Section 14 of the Limitation Act. In addition to the very decisions cited above indicating that Section 14 of the Limitation Act would be applicable to the proceedings under Section 34 of the Act, 1996, subject to the petition under Section 34 being filed within time, the learned counsel for the appellant has also relied upon the decision in the case of M/s Consolidated Engineering Enterprises vs. The Principal Secretary, Irrigation Department & Ors., (2008) 7 SCC 169, wherein the same position is reiterated."
7.Recently, the Hon’ble Delhi High Court in National Seeds Corporation versus Ram Avtar GuptaCitation of National Seeds case has held that Section 14 of the Limitation Act, 1963, which provides for the exclusion of time consumed in civil proceedings initiated before a Court lacking jurisdiction, applies to proceedings under Section 34 of the A&C Act. The analysis of the Hon’ble Court was as follows:
Analysis by the Court
The Court thoroughly analysed the case in light of the relevant judgments of the Supreme Court. It acknowledged the undisputed chronology of events, wherein the petitioners challenged the award through a Section 34 petition within the stipulated three-month period. The Court then examined the diligence displayed by the petitioners in their pursuit of legal remedies. Notably, the petitioners’ initial filing was made under the genuine impression that the jurisdictional threshold was met. The Court observed that this filing was made well within the statutory period.
Considering the arguments advanced by both parties, the Court addressed the respondent’s contention regarding the exclusion of the limitation period under Section 14 of the 1963 Act. The Court found that the petitioners fulfilled the conditions laid down by the Supreme Court in ‘Suryachakra Power Corporation Limited v. Electricity Department Represented by its Superintending Engineer, Port Blair and Others, (2016) 16 SCC 152’, thereby establishing their diligent and good-faith efforts.
The respondent’s opposition to the benefit of Section 14 was countered by the Court, which emphasised that the petitioners’ actions were not indicative of unnecessary delay. The Court also examined the respondent’s arguments concerning the condonable period under the proviso to Section 34(3). The Court clarified that the petitioners’ reliance on the Supreme Court’s exclusion order (Re: Cognizance for Extension of Limitation) and on Section 14 rendered their filing well within the extended limitation period.
The Court rejected the respondent’s claim that the extension applied only to the limitation period and not to the condonable period, holding that, irrespective of such interpretation, the petitioners’ filing on Date of filing was within the extended period of Extended limitation period. In conclusion, the Court held that the petition was filed within the limitation period, allowed the application, and disposed of the matter.
8.That the Applicant states that the Applicant, in good faith, filed the Petition before the District and Sessions Judge, West District, instead of filing it under the purview of Section 10(3) of the Commercial Courts Act, 2015 before the Ld. Commercial Courts. Notice was issued therein and a Reply was also filed, as a consequence of which the Applicant was constrained to spend 183 days, i.e., from the filing of the said Petition until Date limitation expired, and thereafter the Applicant filed the Section 34 Petition before this Hon’ble Court.
9.That the Appellant states that the Appeal of the Appellant has been filed within time and there is no delay; however, as an abundant precaution, and owing to the objection raised by the Respondent, the Appellant is preferring the present application for condonation of the delay of 183 days, if any, and such delay, if any, has been occasioned for the reasons stated in the foregoing paragraphs of the Petition.
10.It is stated that the present application is made bona fide and in the interest of justice, and no prejudice shall be caused to the Respondent if the present application is allowed and the matter is heard on merits.
11.PRAYER
In light of the foregoing submissions and the circumstances of the case, it is, therefore, most respectfully prayed that this Hon’ble Court may be pleased to:
A.Allow the present application and condone the delay of 183 days in the filing of the present Appeal; and
B.Pass such other and further orders as this Hon’ble Court may deem just and fit in the facts and circumstances of the present matter.
APPELLANT
Through
Counsel's name
Advocate's name
New Delhi
Date of signing
BEFORE THE HON’BLE DISTRICT JUDGE (COMMERCIAL COURTS), CENTRAL DISTRICT, TIS HAZARI COURTS AT NEW DELHI
O.M.P. COMM O.M.P. COMM case number OF 2024
IN THE MATTER OF:
M/S Appellant's name… APPELLANT
VERSUS
M/S Respondent's name… RESPONDENT
AFFIDAVIT
Affidavit of Mr. Deponent's name, Partner of M/s Appellant's name, having its address at Appellant's address, who do hereby solemnly affirm and state as under:-
1.I am the Authorised Representative/Partner of the Appellant Company in the above matter and am competent to swear this Affidavit.
2.I say that I have signed, verified and instituted the present Appeal for and on behalf of the deponent.
3.I say that the contents of the paragraphs of the accompanying Application have been drafted by my counsel as per my instructions, and the contents thereof have been duly read and understood by me. Having fully understood the contents thereof, I hereby state that the facts stated therein are true and correct to my knowledge.
DEPONENT
VERIFICATION:
I, Deponent's name, the deponent named hereinabove, solemnly affirm and verify that the contents of the above Affidavit are true and correct to my knowledge, that no part of it is false, and that nothing material has been concealed therefrom.
Verified at Delhi on this Day of verification day of Month and year of verification
DEPONENT
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CIVIL APPEAL NO. Civil appeal number
Footnote citation
O.M.P. COMM O.M.P. COMM case number