Calcutta High Court
Cat'S Whiskers Pvt. Ltd vs G D Engineering Co (India) Pvt. Ltd on 27 February, 2024
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
OCD-28
ORDER SHEET
EC/237/2023
IA NO: GA/1/2023, GA-COM/2/2024
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
(Commercial Division)
CAT'S WHISKERS PVT. LTD.
VS
G D ENGINEERING CO (INDIA) PVT. LTD.
BEFORE:
The Hon'ble JUSTICE MOUSHUMI BHATTACHARYA
Date : 27th February, 2024.
Appearance:
Mr. Priyankar Saha, Adv.
Mr. Arindam Samanta, Adv.
Mr. Hemant Tiwari, Adv.
..for the decree-holder Mr. Sakya Sen, Adv.
Mr. Sukrit Mukherjee, Adv.
Mr. Amritam Mandal, Adv.
Ms. Ananya Chakraborty, Adv.
Ms. Shipra Naskar, Adv.
...for the award-debtor The Court: The Court was under a mistaken belief on the last occasion, i.e., on 22nd February, 2024, that the award-debtor had complied with the statutory mandate of Section 19 of the MSMED Act, 2006. This fact was brought to the Court's notice after close of arguments on that day and learned counsel for the award-debtor was requested to address on Section 19 of the MSMED Act today.2
It became evident today that the award-debtor has continued filing one proceeding after another in challenge to the Award without complying with the statutory mandate under the MSMED Act.
Learned counsel appearing for the award-debtor seeks to justify the non- compliance on the ground that the stage for compliance has passed since the stated position of the award-debtor is that the Award is now ripe for execution. The award-debtor has made two applications for dismissal of the execution petition filed by the award-holder and for declaring that the impugned Award is a nullity. The statutory basis for making these applications is Section 47 of the Code of Civil Procedure, 1908, more specifically, that this Court lacks jurisdiction to execute the Award.
After prodding by the Court to address on Section 19 of the MSMED Act, counsel submits that there is no requirement of statutory compliance of Section 19 since the award-debtor does not dispute the fact that the Award is ready for execution. This stand would however be belied by the two applications filed by the award-debtor which seeks to put the brakes in the momentum of the execution of the Award by questioning the jurisdiction of the executing Court.
Counsel thereafter takes the point of the Chartered Accountant's calculation of the interest-component of the Award under Section 16 of the MSMED Act to be a delegated function which was held to be of questionable import in Government of Maharashtra vs. Shrivin Pharma Pvt. Ltd. (AP 90 of 2023): 2023 SCC OnLine Cal 3482.3
The relevant facts, first.
The impugned Award, which is now before the Court for execution, is dated 25th September, 2019. By the said Award the Council assessed the principal amount to be Rs.12,13,174/- + interest at three times of the Bank rate of RBI compounded with monthly rests. The calculation was to be made under Section 16 of the MSMED Act. The Chartered Accountant's certificate is of 21st February, 2023 and calculated the interest approximately at Rs.37.39 lakhs which made the total award being approximately Rs.49.52 lakhs. Hence, as of 21st February, 2023, the award-debtor was indebted to the petitioner/ award-holder for an amount of approximately Rs.49.52 lakhs.
Although the Court doubted total delegation to a Chartered Accountant for calculating the interest component to an award in Government of Maharashtra, there cannot be any doubt of the scope or mandate of Section 19 of the MSMED Act.
Section 19 constitutes a bar on the Court from entertaining any challenge to an award passed by the Facilitation Council without requiring the award-debtor, who is not the supplier, to deposit 75% of the awarded amount. The language of Section 19 mentions the words "...amount in terms of the decree, award..." thereby making it clear that the interest component under Section 16 of the Act should be treated as part and parcel of the awarded amount. The petitioner or a buyer who intends to challenge an award of the Facilitation Council must first comply with the mandate of Section 19 by depositing 75% of the awarded amount.
4
The Supreme Court in Tirupati Steels v. Shubh Industrial Component, (2022) 7 SCC 429 held that the mandate of Section 19 cannot be by-passed and there was no scope for taking any other view. The only allowance which may be made by a Court is to allow the pre-deposit to be made in installments and that too on a plea of hardship taken by the award-debtor : Also ref. Gujarat State Disaster Management Authority vs. Aska Equipments (2022) 1 SCC 61.
The argument that the stage for making the pre-deposit has gone is contrary to the statutory mandate. The argument in any event is speculative and contrary to the admitted facts which are before the Court.
The facts are :
The award was passed by the Council on 25th September, 2019. The award-debtor applied for stay of the Award before the learned First Court, Howrah. The application for stay was rejected by an order passed by that Court on 19th July, 2023 by holding that the award-debtor is not entitled to seek unconditional stay of the arbitral Award by-passing the specific provisions of Section 19 of the MSMED Act. The award-debtor also applied for setting aside of the Award before the same Court, which was thereafter made reserved for judgment on 2nd December, 2023. The award-debtor filed a third proceeding, namely, a Civil Revisional Application before the Calcutta High Court in December, 2023 which is presently pending.
Besides the above three actions/applications challenging the impugned Award, the award-debtor filed two separate applications in the execution 5 proceedings for questioning the jurisdiction of this Court and seeking a stay of the execution proceedings on that basis.
The sequence of events would show that the award-debtor took not one, but four separate and well-thought out measures to challenge the order passed by the MSMED Council and that too in 2019. All this was done in blatant violation of the statutory mandate under Section 19 of the MSMED Act i.e., without the award-debtor making deposit of 75% of the awarded amount.
Whether this Court is the executing Court or whether the execution of the Award should go before another Court is not the relevant question. The question is whether the Court should sit back and acquiesce to the award- debtor repeatedly violating the mandate of Section 19 of the MSMED Act by shifting the proceedings from one Court to other in complete indifference and conscious refusal to act in terms of the statutory mandate.
As stated in the first paragraph of this order, the Court was unaware of the defiance of the award-debtor to comply with the statutory mandate and hence entertained the submissions on the alleged lack of jurisdiction of this Court. Even if the award-debtor succeeds in the argument of this Court not being the proper Court for executing the Award, the award-debtor must be brought within the statutory mandate of Section 19 of the MSMED Act before the award-debtor is permitted to proceed any further.
This Court takes serious note of the award-debtor's reckless resistance to the statutory mandate of Section 19 of the MSMED Act. It is reiterated that any attempt made by an award-debtor to challenge an Award in terms of an 6 application for stay of the Award is to be treated as "still-born" under the provisions of the MSMED Act read with The Arbitration and Conciliation Act, 1996; The Board of Major Port Authority for the Shyama Prasad Mookerjee Port, Kolkata v. Marine Craft Engineers Private Limited, AP 252 of 2023 with AP 179 of 2023.
For the reasons stated above, the award-debtor shall deposit 75% of Rs.12,13,171/- with the Registrar, Original Side. This shall be done before any further submissions are entertained on the part of the award-debtor.
The aforesaid amount is the principal sum which was stated in the impugned Award. The Court is not inclined to include the interest component in the said amount by reason of the view taken by the Court in at least one recent matter where the delegation to the Chartered Accountant without any particulars was held to be contrary to the provisions of the 1996 Act. The deposit shall be made by 4.30 pm tomorrow, i.e., 28th February, 2024.
The deposit will be transferred to the Court if the award-debtor succeeds in the 2 applications questioning the jurisdiction of this Court.
List the execution case for further hearing on 29th February, 2024.
(MOUSHUMI BHATTACHARYA, J.) kc/sg.