IN THE MATTER OF
Appellant's name… APPELLANT
VERSUS
Respondent's name… RESPONDENT
INDEX
| S.NO | PARTICULARS | PAGE NO. |
|---|
| 1 | MEMO OF PARTIES | |
| 2 | APPEAL UNDER THE PROVISIONS OF SECTION 19 OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT, 2006) READ WITH 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 IN THE ARBITRAL PROCEEDINGS UNDER THE PROVISIONS OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT, 2006), VIDE ORDER DATED Date of arbitral award, ALONG WITH SUPPORTING AFFIDAVIT | |
| 4 | ANNEXURE A-1: COPY OF ORDER DATED Date of arbitral award | |
| 5 | ANNEXURE A-2: AUTHORITY LETTER | |
| 6 | ANNEXURE A-3: SCREENSHOT OF THE COMPANY AFFAIRS QUÁ 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 AND THE COUNTER-CLAIM AS RAISED BY THE RESPONDENT | |
| 9 | ANNEXURE A-6 (COLLY.): COPIES OF DOCUMENTS AND REJOINDER | |
| 10 | ANNEXURE A-7: COPY OF AFFIDAVIT OF ADMISSION AND DENIAL OF DOCUMENTS, REJOINDER TO 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 SECTION 5 READ WITH SECTION 14 OF THE LIMITATION ACT, TO CONDONE A DELAY OF Number of days of delay in filing the appeal DAYS IN FILING THE PRESENT APPEAL BEFORE THIS HON'BLE COURT, ALONG WITH AFFIDAVIT | |
APPELLANT
Through
Counsel's name
ADVOCATES FOR
Appellant's name
Counsel's address
New Delhi
Date of filing before the court
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
Appellant's name… APPELLANT
VERSUS
Respondent's name… RESPONDENT
MEMO OF PARTIES
Appellant's name
Appellant's address
New Delhi… APPELLANT
VERSUS
Respondent's name
Respondent's address
New Delhi… RESPONDENT
APPELLANT
Through
Counsel's name
ADVOCATES
Counsel's address
New Delhi
Date of filing before the court
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
Appellant's name
Appellant's address
New Delhi… APPELLANT
VERSUS
Respondent's name
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 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 IN THE ARBITRAL PROCEEDINGS UNDER THE PROVISIONS OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT, 2006), VIDE ORDER DATED Date of arbitral award
MOST RESPECTFULLY SHOWETH:
A.PURPOSE OF THE PRESENT APPEAL
1.The Appellant herein prefers the present appeal before this Hon'ble Court under 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 "CPC"), whereby the Appellant challenges the Impugned Order dated 1st December 2023 (hereinafter referred to as the "Impugned Order") on a limited ground, namely, that the Respondent was directed to pay a sum of ₹Amount awarded by arbitrator (₹)/-, inclusive of interest, along with litigation costs, against a claim of ₹Amount claimed by appellant (₹)/- (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 arbitral award is annexed hereto as Annexure A-1.
B.BRIEF INTRODUCTION
2.That the Appellant is a firm registered under the provisions of the Indian Partnership Act. The Appellant firm is an emerging firm engaged in the manufacture of bearings, machines and driving elements. The Claimant Company is engaged in the production and manufacture of aluminium castings for LED street lights, fixtures, etc., and is presently operating from the address mentioned in the Memo of Parties. The present claim petition under the provisions of the MSMED Act was filed by Sh. Partner's name who filed claim, whose Authority Letter is annexed hereto as Annexure A-2.
3.That Respondent No. 1 is a company registered under the Companies Act, 1956, as amended from time to time, and is presently operating from the address mentioned in the Memo of Parties, being Respondent's registered address, New Delhi. The Respondent Company bears Corporate Identification Number Respondent's CIN, and its books of account and papers are maintained at Address where respondent's books are kept. The affairs of the Respondent Company are managed through its directors, namely Sh. Director's name, bearing DIN No. Director's DIN, Sh. Second director's name, bearing DIN No. Second director's DIN, and Smt. Third director's name, bearing DIN No. Third director's DIN. A screenshot from the Ministry of Corporate Affairs qua the Respondent's details is annexed hereto as Annexure A-3.
C.BACKGROUND OF THE PRESENT CASE
4.That the Respondent firm, through its directors, in and around the beginning of the year 2017, approached the Appellant firm and represented themselves to be the directors of the Respondent Company, managing its day-to-day affairs. Sh. Director's name, Sh. Second director's name and Smt. Third director's name represented that they were responsible for the entire management of the Respondent Company, and the said directors were, in fact, entrusted with substantial powers of management.
5.The aforesaid directors of the Respondent Company furnished 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/materials supplied by the Appellant firm.
6.That beginning from the year Year orders began, the Respondent, through the said directors, started placing numerous orders with the Appellant firm. It was mutually agreed between the parties, and as per the tax/retail invoices, that the amounts due against the goods supplied by the Appellant firm to the Respondent Company shall be paid/remitted by the directors of Respondent No. 1 within the stipulated period of days as prescribed under law.
7.That beginning from the year Year orders began, the Respondent, through its directors, personally visited the office of the Appellant firm and placed numerous orders, all of which were duly fulfilled by the Appellant firm. The Appellant firm, as and when requested by the Respondent Company through its directors, supplied the goods in the same manner and as per the specifications so requested.
8.That against the orders placed by the Respondent Company with the Appellant firm at their Delhi office, the goods were supplied by the Appellant and were accepted by the Respondent without any protest or demur of any manner whatsoever.
9.That it is pertinent to mention that whenever an order was placed by the Respondent, the Appellant Firm duly delivered the goods to the Respondent, 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 within the time period requested by the Respondent.
10.In respect of the aforesaid 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.
11.That the Respondent Company, through its directors, placed orders in light of the mutually accepted terms and conditions between the parties, and against each such order placed by the Respondent, 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 herein that the Respondent accepted the goods supplied by the Appellant Firm without any protest or demur.
12.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 to the Respondent against the invoices issued by the Appellant Firm to the Respondent, and payments were made on a running account basis, with the Respondent making payments to the Appellant at its Delhi office. The invoices are also annexed hereto.
13.That the Appellant Firm fairly states before this Hon'ble Court that on Date of admission of accounts, the Respondent admitted and confirmed the accounts and the balance payment, i.e., the principal amount, as outstanding to the extent of INR Outstanding principal amount (₹)/-, which was to be paid by the Respondent to the Appellant Firm. That on Date of demand notice, the Appellant Firm, by invoking the provisions of the Insolvency Act, issued a demand notice demanding payment of an unpaid debt to the extent of INR Total amount in demand notice (₹)/-, of which INR Principal amount in demand notice (₹)/- was due towards the principal amount and INR Interest amount in demand notice (₹)/- was due towards interest. The said demand notice very specifically stated that payments were to be made in accordance with the provisions of the MSME Act, as the Appellant Firm is registered under the provisions of the MSME Act, and the Respondent was in continuous default of the said outstanding amount, which can also be confirmed by its own admission of liability for the amount.
14.That the Appellant Firm fairly states before this Hon'ble Tribunal that, after receipt of the demand notice, the Respondent, through its director, approached the partner of the Appellant Firm and requested settlement of the disputes. The directors of the Respondent Company assured that the principal amount stated in the demand notice shall be paid by the Respondent to the Appellant Firm, pursuant to which a settlement agreement was executed, and it was expressly made clear that the outstanding amount shall be paid in four instalments vide Cheque No. First instalment cheque number, Second instalment cheque number, Third instalment cheque number, Fourth instalment cheque number. The Respondent, through its directors, confirmed that in the event of breach of the payment plan/schedule, the Respondent, through its directors, shall be liable to pay the entire amount with interest as claimed in the demand notice dated Date of demand notice.
15.The Appellant Firm fairly states before this Hon'ble Tribunal that two instalments vide Cheque No. First paid cheque number and Second paid cheque number were paid, as can be verified from the statements of account of both the Appellant Firm and the Respondent. Subsequent to the clearance of the aforesaid cheques, the director of the Respondent Company once again requested the resumption of business between the parties, and again upon the personal assurances and representations made by the Respondent, the Appellant Firm once again commenced business dealings between the parties and, on request, returned Cheque No. First returned cheque number and Second returned cheque number, as it was assured by the Respondent that the said payments shall be made in the course of the running account, since the financial condition of the Respondent Company was not sound, and payments would be released only once the business of the Respondent was restored to its original state.
16.Owing to the cordial business relationship between the parties, the Appellant Firm once again commenced supply of goods as per the specifications set out 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 from Date payments stopped until the last invoice dated Date of last invoice, the Respondent failed to make payment of the amounts to the Appellant Firm as required under the provisions of Section 15 of the MSMED Act.
17.As on Date of outstanding calculation, the total principal amount outstanding between the parties to the proceedings was to the extent of INR Total principal outstanding (₹), in addition to interest on delayed payments leviable under the provisions of the MSMED Act.
18.The Appellant had no other option but to file a claim under the provisions of Section 18 of the MSMED Act before the Facilitation Council, as the Respondent failed to make payment under the provisions of Section 15 of the MSME Act, and upon failure to pay interest under the purview of Sections 15 and 16, the application under the provision of Section 18(1) was filed before the Office of the Sub-Divisional Magistrate and the same was registered vide File No. MSMED case file number. Notice was issued to the Respondent, who appeared and filed a reply before the Office of the Sub-Divisional Magistrate, raising objections primarily on the pretext of the interest rate coupled with the settlement, which was in fact not even complied with by the Respondent. All other contents were not denied; hence the same amounts 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 was admitted, the only objection being with regard to the calculation of the interest amount.
19.Despite the indulgence of the learned Council under the provision of Section 18(2) of the Act in order to conduct conciliation in the matter, or by providing an alternate dispute resolution service 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, and upon the failure of the Respondent, despite the services having been rendered by the Appellant and the Respondent failing to discharge the payments, the Council deemed it appropriate to refer the matter to the present Arbitration Centre.
20.That all the directors of the Respondent Company, as stated aforesaid, are jointly and severally liable to the Appellant Firm. Owing to the personal guarantees and assurances given by the Respondent, coupled with the fraud committed by the Respondent, the corporate veil is required to be lifted in the present matter in order to recover the legitimate dues of the Appellant Firm under the provisions of Sections 15 and 16 of the MSME Act, which require the Respondent to make payment to the Appellant Firm within a specific 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 of submission of the Appellant's invoice, and 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 goods for discharging the payments.
21.The MSMED law mandates the payment of compound interest, and the use of the word "shall" in the provision renders it mandatory in nature. The law requires the buyer to pay compound interest at three times the bank rate notified by the Reserve Bank of India, and the said provision applies to all pending dues and belated payments outstanding against the Respondent. In the present matter, the clock for the calculation of compound interest commences from the thirtieth to the forty-fifth day of the Respondent's receipt of the Claimant's invoice, which remained uncleared by the Respondent within the stipulated time frame.
22.In consequence of 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.
23.That, as such, it is evident from the facts set out above that the Respondent has failed to make payments in accordance with the aforesaid provisions of the MSMED Act, and the Appellant therefore approached the Learned Tribunal as enshrined under the relevant provisions of law.
24.The Appellant submitted its claim before the Learned Tribunal by way of a statement of claim, in accordance with the provisions of the MSMED Act, on Date statement of claim filed, along with supporting documents, which are filed and annexed as Annexure A-4 (Colly.).
25.The Respondent thereafter, on Date statement of defence filed, filed its statement of defence, inter alia, praying for dismissal of the statement of claim. Simultaneously, the Respondent also filed a counter claim, inter se, raising a claim of ₹Counterclaim loss of sale amount (₹)/- on account of damages caused by loss of sale, and ₹Counterclaim damages amount (₹)/- as damages on account of loss of reputation and mental distress, together with costs and interest. A copy of the statement of defence, along with the documents and the counter claim raised by the Respondent, is annexed and appended to the present petition as Annexure A-5 (Colly.).
26.The Petitioner thereafter, on Date rejoinder filed, filed a rejoinder to the statement of defence filed by the Respondent in the claim petition, together with a statement of defence to the counter claim filed by the Respondent. In addition, the Petitioner filed an affidavit of admission and denial of documents and its evidence by way of an affidavit before the Learned Tribunal, which was filed over e-mail. Copies of the documents so filed are annexed and appended as Annexure A-6 (Colly.). The Respondent, on Date of admission-denial affidavit, filed its affidavit of admission and denial of documents, and the same is annexed and appended as Annexure A-7.
27.In addition to the above, the Petitioner, on Date appellant's evidence affidavit filed, filed its evidence by way of an affidavit, and the Respondent, on Date respondent's evidence affidavit filed, filed its evidence by way of an affidavit dated Date on respondent's evidence affidavit, which is exhibited as Annexure A-8 (Colly.). In the counter claim, the evidence was filed by the counter claimant on Date counter-claimant's evidence filed, along with the evidence of the Petitioner in the counter claim proceedings, 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, the Appellant also filed an interim application seeking permission to cross-examine the authorised representative of the Respondent, and the same was also dismissed by the Learned Arbitrator for reasons best known to the Learned Arbitrator. 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
28.The Learned Arbitrator, after perusal of the pleadings of the case, inclusive of the arbitration claim as well as the counter claim, framed the following questions for adjudication of the present matter, as is evident from paragraph 9A of the impugned award, 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 any relief from 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 learned 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, by effect of novation of contract as provided under Section 62 of the Indian Contract Act, 1872, in view of the resumption of business with the Respondent by the Claimant after having terminated the settlement agreement, the Respondent was not bound to perform the original agreement (the 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 ₹Entire claim amount with interest (₹)/-; if not, then to what extent.
E.FINDINGS BY THE LEARNED ARBITRATOR
29.Pursuant to the questions framed in the arbitral proceedings, the Learned Arbitrator dealt with the said questions upon perusal of the agreements and on the basis of the documents on record. With respect to serial no. (i), the Learned Arbitrator held as under:
As argued by the learned counsel for the Claimant, the Claimant is a legitimate enterprise, being a company registered with the Ministry of MSME, India, under its Udyog Aadhaar No. Udyog Aadhaar number dated Udyog Aadhaar registration date. The company, structured as a partnership firm, specialises in the manufacture and supply of bearings, machines, driving elements and aluminium castings for LED street lights and fixtures, and operates from its base in Claimant firm's location in Delhi, Delhi.
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 2017 and continued until Date 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 owing 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 and small enterprises to file the same.
Further, this issue has been set at rest by the Hon'ble High Court of Delhi in its recent judgment titled "Jaiprakash Associates Ltd Vs. Micro And Small Enterprises Facilitation Council (South East) Govt Of NCT Of Delhi & Anr., W.P.(C) 4470/2022, CM APPL. 13317/2022, decided on 16.03.2023 by Justice Prathiba M. Singh", wherein it was held that even if, during the course of supply, a supplier gets itself registered with the MSEFC, such supplier shall nevertheless be entitled to seek its dues under the provisions of the MSMED Act, 2006.
The aforesaid legal proposition was further upheld by the Hon'ble Division Bench of the Delhi High Court in LPA No. 565/2023, titled "Jaiprakash Associates Ltd Vs. Micro And Small Enterprises Facilitation Council (South East) Govt Of NCT Of Delhi & Anr.", decided by Justice Saurabh Banerjee and Justice Satish Chandra Sharma (Delhi DB).
In light of the aforesaid considerations, it is evident that the contention of the respondent challenging the claimant's recourse to the MSMED Act, 2006 is untenable. Notwithstanding the claimant's admission that its registration was obtained on Claimant's MSME registration date, it remains an undisputed fact that the business relationship between the claimant and the respondent, which commenced in Year business relationship commenced, continued until Date business relationship ended, which 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, being a partnership firm, is not a registered firm, 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 not sustainable. As observed hereinabove, Section 2(n)(iii) of the MSMED Act, 2006 stipulates that a supplier may be any company, cooperative society, trust, or a body that is registered or constituted under any law for the time being in force, and is engaged in the production of goods by micro or small enterprises and in the rendering of services. In the present case, the claimant, though not a registered partnership firm, is constituted under the provisions of the Partnership Act, 1932, and its registration for the purpose of conducting business is not mandatorily required. 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 squarely encompasses the claimant. Thus, the claimant satisfies the definition and requirements of Section 2(n)(iii) of the MSMED Act, 2006.
Therefore, this Tribunal, in 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.
30.With regard to Issue No. (ii), i.e., whether 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 on Section 69 of the Partnership Act, 1932, contending that, as the claimant is not a registered partnership firm, it cannot seek any remedy in its firm name. Since the claim in the present proceedings has been instituted in the name of the firm, the learned counsel contends that the claim ought to be dismissed or rejected.
In contrast, the learned counsel for the claimant submits that although the registration certificate could not initially be placed on record, the claimant is in fact a registered partnership firm since Year claimant firm was registered, as evidenced by the registration certificate issued under No. Respondent's registration certificate number dated Registration certificate date by the office of the Commissioner of Industries, Place of office of Commissioner of Industries. The claimant has subsequently produced the said certificate before this Tribunal.
The learned counsel for the respondent has strongly objected to the inclusion of the said registration certificate in the record, arguing that the proceedings have not yet reached the stage of final arguments and that, at such a late stage, no new document ought to be taken on record. This Tribunal concurs with the submission of the learned counsel for the respondent in this regard. However, it is observed that even if the said registration certificate of the claimant is not admitted into the record, the claimant would still be entitled to seek a remedy before this platform, for the reason that the present proceedings are arbitration proceedings and cannot be equated with, or treated as, a lawsuit.
Further, since 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 may be placed on the judgment titled Dattatray N. Sawant & Anr. v. Nitida A. Mehta & Ors., 2015 (6) ALL MR 552 (Bom.).
Accordingly, 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 platform, i.e., this Arbitral Tribunal.
31.With regard to Issue No. (iii), i.e., whether the bills/invoices raised by the claimant upon the respondent are bogus and not genuine, the learned Arbitrator, after 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 reasoning for this conclusion lies in the fact that the respondent, having acknowledged its liability, entered into and executed a settlement agreement on Date of settlement agreement. Subsequently, it is inconsistent and contradictory on the part of the respondent to challenge the said 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 respondent's ledger (₹)/-. Consequently, the respondent's characterisation of the claimant's bills as bogus is an incorrect submission. Accordingly, 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.
32.With regard to Issue No. (iv), i.e., whether the claim is barred by limitation, the learned Arbitrator, after 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 barred by limitation, inasmuch as the business relations commenced on Date business relations commenced, the first invoice was raised on Date of first invoice, and the claim petition was filed before this Tribunal on Date claim petition filed. It is argued that even considering the execution of the settlement agreement on Date of settlement agreement, the claim petition remains barred by limitation, having been instituted well beyond the permissible period of three years, which would have expired in Limitation expiry year.
Countering this, the learned counsel for the claimant submits that the claim petition is within the period of limitation and is therefore not barred by time. It is argued that, since an unchallenged running account of the respondent was maintained by the claimant and demands were 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 via voucher no. Voucher number of last ledger transaction on Date of last ledger transaction. Accordingly, the claim petition filed on Date claim petition filed falls well within the three-year period of limitation ending on Limitation period end date.
Consequently, this issue is answered in the negative, against the respondent and in favour of the claimant, confirming that the claim petition is not barred by limitation.
33.With regard to Issue No. (v), i.e., the respondent's non-liability to honour the settlement agreement in effect of the novation of contract, owing to the resumption of business by the claimant with the respondent, as per Section 62 of the Contract Act, 1872, the learned Arbitrator, after 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 Date of settlement agreement, constitutes a novation of the contract. It is contended that, by virtue of Section 62 of the Name of statute, the respondent is not obligated to perform or honour the said settlement agreement, thereby absolving itself of any liability towards the claimant.
In response, the learned counsel for the claimant countered this submission by referring to Clauses 6 and 7.3 of the settlement agreement dated Date of settlement agreement. It was 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 was argued that 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.
It was therefore asserted on behalf of the claimant that, in view of the provisions of the settlement agreement and the absence of any written and mutually signed document evidencing modification or novation, the original terms of the settlement agreement remain binding and enforceable.
However, it is an acknowledged position between the parties that, notwithstanding the non-compliance with the settlement agreement, the respondent failed to pay the last two instalments of ₹Instalment amount (₹) each within the time frame prescribed in the agreement, and made only a part-payment to the claimant over an extended period of approximately Approximate period over which part-payment was made. It is also an acknowledged 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 making the last payment to the claimant by bank transfer on Date of last bank transfer payment.
In light of the aforesaid circumstances, the Arbitral Tribunal took the considered view that the settlement agreement between the parties stood duly complied with and concluded upon the claimant receiving the last payment on Date last payment received. Consequently, the claimant was not entitled to reopen the question of delayed payments in respect of transactions effected prior to Cut-off date of settled transactions. Subsequent transactions, which resumed from Date transactions resumed, were held not to form part of the settlement agreement between the parties, having been conducted under a mutual understanding without any formal agreement.
Accordingly, this question was resolved in favour of the respondent, specifically on the finding that the respondent had fulfilled its obligations under the settlement agreement and was not liable to the claimant for any transactions effected prior to Cut-off date of settled transactions.
34.With regard to Issue No. (vi), i.e., whether the claim petition was filed by an authorised person, the learned Arbitrator, upon perusal of the documents and after hearing the arguments addressed, recorded the finding as follows:
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 Partner's name who filed claim, one of the partners of the claimant firm, and that it was therefore properly filed by an authorised person.
There is no doubt that Partner's name who filed claim is a proper and authorised person to institute the claim on behalf of the claimant firm.
Consequently, the present question was resolved against the respondent and in favour of the claimant, affirming that the claim petition was properly filed by an authorised person.
35.With regard to Issue No. (vii), i.e., the applicability of force majeure to the present matter, the learned Arbitrator, upon perusal of the documents and after hearing the arguments addressed, recorded the finding as follows:
The Arbitral Tribunal, in its findings on the related issues at 9.B.v, observed that the settlement agreement between the parties stood effectively concluded upon the respondent making the last part-payment on Date of last part-payment. Further, the business transactions which resumed from Date transactions resumed continued until Date transactions ended, with the claimant receiving the last payment on Date last payment received, without any protest or objection. It was therefore held that there was no basis for invoking a plea of force majeure in the proceedings, and any such claim was without merit.
36.With regard to Issue No. (viii), i.e., the plausibility of the respondent's defence that it received low-graded/inferior quality goods from the claimant, the learned Arbitrator, upon perusal of the documents and after hearing the arguments addressed, recorded the finding as follows:
The Arbitral Tribunal observed that the respondent's own ledger recorded an outstanding principal amount of ₹Outstanding principal per respondent's ledger (₹)/- owed to the claimant, which cast doubt upon the legitimacy of the alleged rejection of goods worth ₹Value of allegedly rejected goods (₹)/. Apart from a single email, the respondent adduced no substantial evidence regarding the quality of the goods supplied by the claimant or any direct loss suffered on account of the alleged inferior quality. The Tribunal accordingly concluded that the respondent had failed to substantiate its contention that the goods supplied by the claimant were of inferior quality or low grade.
Consequently, this question was resolved in the negative against the respondent and in favour of the claimant.
37.With regard to the issue of the liability of the respondent to pay the entire claim amount of ₹Entire claim amount (₹)/- (₹Principal amount (₹)/- as principal and the balance as interest), the learned Arbitrator, upon perusal of the documents and after hearing the arguments addressed, recorded the finding as follows:
Having regard to the facts of the case, the Arbitral Tribunal took the view that the claimant was entitled only to delayed payment interest under the provisions of the MSMED Act, 2006, with effect from Date last payment received, being the date of the last payment received from the respondent, and only on the principal amount of ₹Principal amount (₹). The claimant's claim for interest amounting to ₹Interest amount claimed (₹), as per its calculation sheet, was held to be misconceived and was accordingly rejected.
38.The learned Arbitrator, while adjudicating upon the counter-claim filed by the respondent, and upon the pleadings, rightly came to the conclusion that, upon consideration of all the submissions, pleas and contentions of the respective parties and the evidence on record, the counter-claim founded upon an alleged loss of sales/revenue to the tune of ₹Claimed loss of sales amount (₹)/- was not supported by any documentary evidence capable of substantiating, or even reflecting, the actual loss alleged to have been suffered by the respondent, more particularly for the sole stated reason of the alleged defective/low-graded material not being taken back by the appellant. The said emails did not disclose any case that the respondent had directed or demanded the appellant to take back the alleged defective materials. Further, there is nothing on record to show that the alleged supply of defective goods/material was brought to the notice of the appellant within time; nor was any debit note issued or supplied to the appellant, and no such entry is reflected in the account statement of the appellant maintained by the respondent. The learned Tribunal accordingly, in full agreement with the plea of the appellant, held that breach of contract is a pre-condition for a claim of damages, and that nowhere in this entire issue had the respondent alleged that the contract was breached by the appellant in any manner or at any point of time.
39.The learned Tribunal therefore rightly held that the entire onus of proving the counter-claim lay upon the respondent, and that the respondent had failed to prove the case alleged before the learned Arbitrator, inasmuch as the grounds of the counter-claim were identical to those raised in the statement of defence. The learned Tribunal accordingly dismissed the counter-claim of the respondent.
40.While awarding interest on the amount held due on one of the issues framed before the learned Arbitrator, more particularly the issue decided against the appellant, the learned Arbitrator placed reliance upon Sections 16 and 17 of the MSMED Act and awarded interest at three times the rate of Bank rate per annum, which works out to Interest rate (% per annum)% per annum. The learned Tribunal accordingly awarded interest of ₹Interest amount awarded (₹)/- as against the interest claimed by the appellant before the learned Arbitrator. This finding is under challenge in the present proceedings, as the said finding of the learned Arbitrator is patently erroneous and liable to be interfered with.
41.The order passed under the Arbitration Act, which is impugned before this Hon'ble Court, is challenged primarily on the following grounds.
F.GROUNDS
42.BECAUSE, the Learned Arbitrator failed to take note of the clauses of the Settlement Agreement, and more particularly Clause No. 3.1, which inter alia states and records that the Respondent agreed, confirmed and acknowledged its obligation to pay an amount of ₹ 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 ₹ Amount of each of four cheques (₹)/- each were handed over by the Respondent to the Appellant.
43.BECAUSE, the Learned Arbitrator failed to take note of 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 effect and continue to operate until payment of the entire dues mentioned in Clause 3.1.
44.BECAUSE, the Learned Arbitrator failed to appreciate and take note of the Legal Notice dated Date of legal notice, wherein the total amount of debt was ₹ Total debt in notice (₹)/-, out of which ₹ Principal outstanding in notice (₹)/- was the amount outstanding towards principal and ₹ Interest in notice (₹)/- was towards interest. It is an admitted fact that the said amount of ₹ Admitted amount (₹)/- stood admitted by the Respondent, in consequence whereof the Settlement Agreement aforesaid was entered into between the parties. A perusal of the Settlement Agreement would reveal that it was binding upon the parties to the arbitration, their successors in interest, and their present and future affiliates, subsidiaries, assignees or acquirers, including any acquirer of substantially all of the assets.
45.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 Respondents agreeing to pay the sum of ₹ Amount payable per payment schedule (₹)/- 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 ₹ Settlement amount (₹)/-. The Learned Arbitrator patently failed to note the effect of the remaining clauses of the Settlement Agreement, which reflected the intent of the parties, in that the Respondent expressly and unequivocally agreed that, in the event of 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, amounting to ₹ Amount payable after deduction (₹)/-, after deducting the amount already paid by the Respondent.
46.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 stated in the Legal Notice dated Date of legal notice, and also to the fact that the cheques, as mentioned above, were handed over.
47.BECAUSE, the Learned Arbitrator recorded a categorical finding on one of the issues, which is correlated to the second issue. Despite adjudicating the issues in favour of the Appellant, the Learned Arbitrator turned the finding against the Appellant. The Learned Arbitrator held the submissions of the Appellant to be correct to the extent that the claim filed by the Appellant was well within time, and after perusing the pleadings on record and hearing the submissions, rightly held that it was 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 ₹ Instalment amount (₹)/- each within the timeframe scheduled in the agreement and has only made a part payment to the Appellant."
48.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, whereby it became the Respondent's obligation to pay the entire amount of the Demand Notice minus the amount already paid, recorded a perverse and patently wrong finding that, since the parties resumed their transactions — with the Appellant making its last sale on Date of last sale and the Respondent making its last payment to the Appellant on Date of last payment — coupled with the fact that the Appellant accepted the part-payments from the Respondent without objection, the Appellant is not entitled to re-open the issue of delayed payments for transactions that took place earlier.
49.BECAUSE, the aforesaid findings of the Learned Arbitrator are in complete contradiction to the documents on record and, moreover, to the admissions 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), and that the parties to the contract were fully governed by Clause 3.3 of the Settlement Agreement, which made it clear that the Respondent would be liable to pay the entire amount with interest as claimed in the Demand Notice, after deducting the amount already paid by the Respondent.
50.BECAUSE, the Appellant, without prejudice to its rights and contentions, states that the total amount claimed in the Demand Notice dated Date of demand notice was ₹ Total amount in demand notice (₹)/-, and even assuming the version of the Respondent — a fact also acknowledged by the Learned Arbitrator — that the first two instalments amounting to ₹ Amount of first two instalments (₹)/- had been paid, and further assuming, without prejudice, that the payments made from Start date of payments till End date of payments, being Payment amount (₹)/-, coupled with Payment amount (₹)/-, ₹ Payment amount (₹)/-, ₹ Payment amount (₹)/-, ₹ Payment amount (₹)/- and ₹ Payment amount (₹)/-, total ₹ Total of payments (₹)/-, thereby leaving a balance of ₹ Balance amount (₹)/-, the Learned Arbitrator also affirmed that the Settlement Agreement had not been complied with; therefore, Clause 3.3 stood attracted, which the Learned Arbitrator failed to appreciate, with the result that the Respondent was under an obligation to pay ₹ Amount owed (₹)/-, together with an additional amount of ₹ Additional amount (₹)/-, coupled with interest at the rate prescribed under the provisions of the MSMED Act.
51.BECAUSE, of the nine issues framed, the Learned Arbitrator rightly decided seven issues in favour of the Appellant; however, the Learned Arbitrator patently failed to correctly decide the remaining two issues in light of the documents and the submissions of the Respondent, rendering the 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 accordingly limited to those two findings, as the last issue must be read in conjunction with Issue No. 5, the Learned Arbitrator having held at one place that there was a default on the part of the Respondent, and at another place ruled in favour of the Respondent by stating that the Respondent had fulfilled its obligations under the Settlement Agreement.
52.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 Apex Court in ONGC v. Saw Pipes, Citation of ONGC v. Saw Pipes. However, by reason of the amendments to Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the said Act"), made by the Arbitration and Conciliation (Amendment) Act, 2015, with effect from Date of commencement of 2015 Amendment Act, the expansion of the expression "public policy of India" as previously interpreted by the Courts has been done away with.
53.BECAUSE, the Law Commission of India examined the Arbitration and Conciliation Act, 1996 and submitted its 246th Report on "Amendments to the Arbitration and Conciliation Act, 1996" in August, 2014, recommending various amendments to the said Act. The proposed amendments were intended to facilitate and encourage alternative dispute resolution mechanisms, especially arbitration, so as to ensure a more user-friendly, cost-effective and expeditious disposal of cases, since India is committed to improving its legal framework for the speedy disposal of disputes. The 246th Report of the Law Commission 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 stated supra, along with the judgment in ONGC v. Western Geco International Ltd. (2014) 9 SCC 263 : (AIR 2015 SC 363), stands expressly done away with by the said amendments.
54.BECAUSE, both Sections 34 and 48 of the said Act have been brought back to the position of the law contained in Renu Sagar Power Plant Co. Ltd. v. General Electric Co. (1994) Supp (1) SCC 644 : (AIR 1994 SC 860), whereby "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", as 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 Renu Sagar (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, i.e., 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 main object of the 2015 Amendment is to expedite the arbitration process and to minimise the intervention of the Courts, which would ultimately ease the conduct of business in India.
55.BECAUSE, the 2015 Amendment clearly defines the term "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 is applicable 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".
56.BECAUSE, in one of its earlier decisions in Gherulal Parekh v. Mohadeodas Maiya, AIR 1959 SC 781, the Hon'ble Supreme Court gave a narrow interpretation of public policy and held that within the public policy of India lay certain determinate, specified heads, and that it would not be prudent to begin 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 term public policy on the pillars of public conscience, public good and public interest.
57.BECAUSE, the Petitioner states that such awards, rendered without an iota of reasoning, are 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 awards.
58.BECAUSE, the MSME Act was introduced with the purpose of facilitating the promotion and development of micro, small and medium enterprises and of ensuring their competitiveness. It aims at ensuring the timely and smooth flow of credit to such enterprises as well as minimising instances of sickness among them. Further, the Act itself provides a statutory remedy of appeal under Section 19 of the MSME Act.
59.BECAUSE, in support of the above contentions, the Appellant relies upon various judgments of the Hon'ble Supreme Court, namely, Tirupati Steels v. Shubh Industrial Components 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 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 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 heavy liability of interest for delay in payment. It is submitted that where the provisions of Sections 18 and 19 of the MSME Act prescribe a specific statutory mechanism, the same cannot be bypassed. On the facts and circumstances of the present case, both on merits and as per the statutory mechanism, the learned Arbitrator has committed an error, legally and factually, in entertaining the two issues, and in relaxing the provisions of the MSMED Act and the Indian Contract Act, which is contrary to the judgments of the Hon'ble Supreme Court cited above.
60.BECAUSE, it is only when 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 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 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 has to be drawn between 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. An error in interpretation of a contract in a case where there is valid and lawful submission of arbitral disputes to an Arbitral Tribunal is an error within jurisdiction.
45. The Court does not sit in appeal over the award made by an Arbitral Tribunal. The Court does not ordinarily interfere with interpretation made by the Arbitral Tribunal of a contractual provision, unless such interpretation is patently unreasonable or perverse. Where a contractual provision is ambiguous or is capable of being interpreted in more ways than one, the Court cannot interfere with the arbitral award, only because the Court is of the opinion that another possible interpretation would have been a better one."
61.BECAUSE, similar observations have been made by the Hon'ble 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.
62.BECAUSE, it is a settled principle of law that the Section 34 Court may interfere only where the interpretation placed by the Arbitral Tribunal upon the contractual covenants is plainly unacceptable, or is contrary to the well-settled principles governing the interpretation of contractual covenants, or where the interpretation accorded by the Arbitral Tribunal to one contractual covenant is inconsistent with the other covenants of the same contract.
63.BECAUSE, it is a well-settled principle of contractual interpretation that where a contractual provision is unambiguous, effect must be given to it as it stands. It is only where any ambiguity exists that recourse may be had to internal aids to resolve such ambiguity, and only where such 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.
64.BECAUSE, as is well settled, 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.
65.BECAUSE, the primary rule of construction of a document is the intention of the executants, which must be gathered from the words used in the document itself. The question is not what may be supposed to have been intended, but what has in fact 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. Where the language employed in the document is unambiguous and its meaning clear, that meaning is evidently what the executants of the document intended. In such situations, contemporary events and the circumstances surrounding the execution of the document are not relevant.
66.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 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 the contract.
67.BECAUSE, where the meaning of a word, phrase or sentence is clear, extrinsic evidence is not admissible. It is only in cases of latent ambiguity that extrinsic evidence, in the shape of an interpreting statement concurred in by both parties, ought to be admitted. The parties themselves may not have been clear as to the meaning of a word or phrase at the time of entering into the contract, and unanticipated situations may subsequently arise or come within the contemplation of the parties, thereby sharpening their focus; any statement made by them which illuminates the ambiguity in the language ought not, therefore, 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
68.The Appellant fairly states before this Hon'ble Court that the present Appeal was, inadvertently and within time, initially filed before the Name of the court where the appeal was initially filed, whereupon the same was marked to the Court of District Judge-04 vide case bearing Number Case number before District Judge-04, in which notice was also issued and a reply was received. The said petition was, however, 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, inasmuch as the petition before the prior Court was contested by the Appellant with due diligence, in good faith and under a bona fide mistake.
69.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 to that effect is also being filed alongside the present petition.
70.That 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 the requirement of communication under sub-section (5) of Section 34 of the Arbitration Act has been dealt with.
71.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.
72.This Appeal has been made bona fide and in the interest of justice.
73.PRAYER
It is, therefore, most respectfully prayed that this Hon'ble Court may graciously be pleased to:
A.Allow the instant Appeal and set aside the Impugned Award, which is 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
ADVOCATES
Counsel's address
Date of filing of the appeal
BEFORE THE HON'BLE DISTRICT JUDGE, COMMERCIAL COURTS, District and courts complex name, AT City
O.M.P. (COMM) O.M.P. (COMM) case number OF Year of institution of the case
IN THE MATTER OF
Appellant's name… APPELLANT
VERSUS
Respondent's name… RESPONDENT
AFFIDAVIT
Affidavit of Mr. Deponent's name, Partner of M/s Appellant firm's name, having its office at Deponent's address, do hereby solemnly affirm and state as under: -
1.That I am the authorised representative/Partner of the Appellant 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 Appellant.
3.That the contents of the paragraphs of the accompanying Appeal under Section 19 of the MSMED Act read with sub-section (2) of Section 34 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 state that the facts stated therein are true and correct to my knowledge.
DEPONENT
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 Date of verification day of Month and year of verification
DEPONENT
BEFORE THE HON'BLE DISTRICT JUDGE, COMMERCIAL COURTS, District and courts complex name, AT City
O.M.P. (COMM) O.M.P. (COMM) case number OF Year of institution of the case
IN THE MATTER OF
Appellant's name… APPELLANT
VERSUS
Respondent's name… RESPONDENT
STATEMENT OF TRUTH
Under the First Schedule, Order VI Rule 15A and Order XI Rule 3
AFFIDAVIT
AFFIDAVIT OF Deponent's name
I, Deponent's name, Partner of M/s Appellant firm's name, having my address at Deponent's address, New Delhi, do hereby solemnly affirm and state as under:-
1.I am the authorised representative and Partner of the Appellant in the above proceedings and am competent to swear this Affidavit.
2.I am fully conversant with the facts of the case and have examined all the relevant documents and records pertaining thereto.
3.That the statements made in Paragraphs of affidavit paragraphs are true to my personal knowledge; the statements made in _ _ _ _ _ paragraphs are based on information received, which I believe to be correct; and the statements made in —-— paragraphs are based on legal advice.
4.That there is no false statement or concealment of any material fact, document or record. All information relevant to the present proceedings, based on the records, has been fully disclosed.
5.That all documents in my power, possession, control and custody pertaining to the facts and circumstances of the proceedings have been disclosed, and copies thereof are annexed to the Appeal. The Deponent also prefers an application under the provisions of Order XI Rule 1(4) of the Code of Civil Procedure, 1908, 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.That the above-mentioned Appeal consists of Number of pages pages, each of which has been duly signed by me.
7.That the Annexures hereto are true copies of the documents referred to and relied upon.
8.That I am aware that, for any false statement or concealment of material facts, I shall be liable to action 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 above Affidavit are true and correct to my knowledge; no part of it is false and nothing material has been concealed therefrom.
Verified at Delhi on this Date of verification day of Month of verification, 2024.
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
Appellant's name… APPELLANT
VERSUS
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, 1963, FOR CONDONATION OF THE Days of delay in filing appeal DAYS OF DELAY IN FILING THE PRESENT APPEAL BEFORE THIS HON'BLE COURT
MOST RESPECTFULLY SHOWETH
1.The Appellant before this Hon'ble Court prefers the present application, filed under the provisions of Section 19 of the MSMED Act, 2006 read with Section 34(2) of the Arbitration and Conciliation Act, 1996 (hereinafter, "the Arbitration Act") and Section 151 of the Code of Civil Procedure, 1908 (hereinafter, "the Code"), whereby the Appellant challenges the Order dated Date of arbitral award (hereinafter, "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. The present application is moved under the relevant provisions of Section 5 read with Section 14 of the Limitation Act, 1963.
2.That the Appellant/Applicant inadvertently filed the present Appeal before the Learned District and Sessions Judge, West District, Tis Hazari Courts, on Date of first appeal filed, i.e., within the period of limitation prescribed under the Arbitration and Conciliation Act, 1996, as amended from time to time, and the Learned District Judge-04 was pleased to issue notice in the matter vide Order dated Date of notice order. Copies of the Order so passed are appended herewith as Annexure A-1 (Colly.).
3.That the Appellant/Applicant, while reserving its right to dispute the jurisdiction of the said Court, instituted the appeal there before the Respondent filed a Section 34 Petition before the Learned District Judge, Commercial Court-04, Central Delhi. However, with an intent to have the said issue finally adjudicated on merits, the Appellant/Applicant was permitted, vide Order dated Date of withdrawal order, to withdraw the said Appeal from the Learned 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 accordingly filed immediately thereafter, on Date present appeal filed, before this Hon'ble Commercial Court.
4.That, in the circumstances, there is in fact no delay; however, as an abundant precaution, the Applicant prefers the present application under the provisions of Section 5 read with Section 14 of the Limitation Act, 1963, seeking condonation of 183 days of delay in filing the present Appeal.
5.That it is a settled proposition of law, as held by the Hon'ble Supreme Court, that Section 14 of the Limitation Act, 1963 would apply to proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 if the petition under Section 34 (at the first instance) were filed within time.
6.That the Hon'ble Supreme Court in Oriental Insurance Co. Ltd. versus M/s Teparas Associates & Exports Pvt. LimitedFootnote citation reference 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 for exclusion of 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, in the present facts the same is not with reference to petition under Section 34 of 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 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 GuptaFootnote citation reference has held that Section 14 of the Limitation Act, 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 Hon’ble Supreme Court. It acknowledged the undisputed chronology of events, wherein the petitioners challenged the award by way of a Section 34 petition within the stipulated period of three months. 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, and the Court observed that such filing was made well within the statutory period.
Considering the arguments advanced by both parties, the Court dealt with the respondent's contention regarding the exclusion of the limitation period under Section 14 of the Limitation Act, 1963. The Court found that the petitioners had fulfilled the conditions laid down by the Hon’ble 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 rejected 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), and clarified that the petitioners' reliance on the Hon’ble 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 submission 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 of the Section 34 petition referred to in the court's analysis was within the extended period of Extended limitation deadline date referred to in the court's analysis. In conclusion, the Court held that the petition had been filed within the limitation period, allowed the application and disposed of the matter accordingly.
8.That the Applicant states that the Applicant, in good faith, filed the petition before Forum where the petition was initially filed in good faith instead of filing it, in terms 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 Number of days of delay to be condoned days, that is, from the filing of the said petition till Date of filing of the Section 34 petition before this Hon'ble Court, and thereafter the Applicant filed the Section 34 petition before this Hon’ble Court.
9.That the Appellant states that the present Appeal 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 Number of days of delay to be condoned days, if any, and the delay, if any, has been occasioned for the reasons stated in the above paragraph 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 most respectfully prayed that this Hon’ble Court may be pleased to:
A.Allow the present Application and condone the delay of Number of days of delay to be condoned 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
ADVOCATES
Counsel's address
Date of filing of the Section 34 petition before this Hon'ble Court
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
Appellant's name… APPELLANT
VERSUS
Respondent's name… RESPONDENT
AFFIDAVIT
Affidavit of Deponent's name, Partner of Appellant firm's name, having its address at Deponent's address, New Delhi, who do hereby solemnly affirm and state as under:
1.I am the Authorised Representative/Partner of the Appellant 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 Appellant.
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. I, having fully understood the contents thereof, 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 Date of verification.
DEPONENT
\* \* \*
Footnote citation reference — National Seeds Corporation v. Ram Avtar Gupta
Footnote citation reference — Suryachakra Power Corporation Limited v. Electricity Department Represented by its Superintending Engineer, Port Blair and Others