Bangalore District Court
By Filing Its Written Statement vs Herein Along With Interest Of 3 on 2 December, 2021
IN THE COURT OF LXXXV ADDL. CITY CIVIL &
SESSIONS JUDGE, AT BENGALURU (CCH-86)
THIS THE 2nd DAY OF DECEMBER 2021
PRESENT:
SMT. M. LATHAKUMARI. M.A., LL. M.,
LXXXV ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com. A.S. No. 128/2019
BETWEEN:
Alectrona Energy Pvt. Ltd.
3rd Floor, Block A,
Bannari Amman Towers,
No.29 Dr.Radhakrishnan Salai,
Mylapore, Chennai-600 004
: PLAINTIFF
(Represented by Sri. Aditya.D -
Advocate.)
AND
TESCOM
Plot No.42(P), 1st Floor, KIADB Industrial area,
Electronic City Phase II,
Bengaluru-560 100
: DEFENDANT
(Defendant is represented by Sri.
V.Anand - Advocate).
Date of Institution of the 17.08.2019
suit
Nature of the suit (suit on
pronote, suit for Arbitration Suit under
declaration & Possession, Arbitration Act
Suit for injunction etc.)
2
Com.A.S.No.128/2019
Date of commencement of
recording of evidence ---
Date on which judgment 02.12.2021
was pronounced
Total Duration Year/s Month/s Day/s
02 03 15
(M.LATHAKUMARI)
LXXXV Addl. City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
This is an Arbitration Suit filed under section 34 of Arbitration and Conciliation Act 1996 (herein after refer to as the Act for short) against award dated 07.02.2019 delivered by the member secretary, Micro and Small Enterprises Facilitation Council, Bengaluru (MSEFC in short) in case No.44/16, while considering an application dated 04.04.2017 filed by the defendant herein U/s 18 of MSMED Act, 2006 before the council to decide the dispute between the parties arising out of agreement dated 05.09.2015.
The plaintiff was the respondent before MSEFC and respondent was the claimant before said council who sought for recovery of Rs.50,42,545/- along with interest of Rs.8,42,753/- from plaintiff herein. Parties are 3 Com.A.S.No.128/2019 accordingly referred as plaintiff/respondent and defendant/petitioner in this case.
2. The Brief facts of the plaintiff's case is that, he is in the business renewable energy, particularly Solar power and has built tremendous reputation and goodwill in the said field. The defendant is engaged in the business of manufacturing and supplying fully assembled Printed Circuit Boards (PCB) used in solar inverters for Solar home lighting systems. Both plaintiff and defendant entered in to an agreement dated 05.09.2015 under which defendant agreed to supplied goods to the plaintiff herein based on his requirement. The plaintiff decided to enter into said agreement with the defendant for his PCB requirements. However there were some defects in installation and assembly of PCB and also delays crossed by the defendant on several occasions which was prayed to the notice of defendant by the plaintiff. The plaintiff further mentioned that in spite of the same the defendant demanded a payment of Rs.50,42,545/- for the products delivered. The plaintiff objected to the said claim resulting in the defendant filing petition U/s 18 before the MSEFC Bengaluru claiming said amount of Rs.50,42,545/- along with interest of Rs.8,42,753/-. The Tribunal MSEFC passed award in the above proceedings on 7/2/2019 with regard to disputes arising out of the parties out of the said agreement dated 05.09.2015. The plaintiff has 4 Com.A.S.No.128/2019 challenged the said award on the ground that impugned award in so far is perverse, arbitrary and contrary to settled principles of law. It is further mentioned at para 10 that the impugned award insofar it allows claim of the defendant is perverse and contrary to law and same has been passed without considering the fact that the materials provided by the defendant were of poor quality and the parties had agreed at the time of entering into the contract that the payment would be made only for those products found to be of required quality and delivered on time. Hence, the impugned award is liable to be set aside on account of Section 51 and 52 of the Indian Contract Act, which state that no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise. The award is perverse and liable to be set aside. The commission has not placed reliance on the plaintiff's submissions. The award has been passed solely stating that the plaintiff has not shown interest in contesting the matter. The same is false and totally contrary to the records and as such shows the bias of the Tribunal in favour of the defendant herein has filed its counter Statement but later contradicts the above by stating that counter was not filed. It is completely on non reasoned award and liable to be set aside. The award is contrary to Section 28(3) of the Arbitration and Conciliation Act and hence liable to be set aside. The Tribunal has given a complete go by to this 5 Com.A.S.No.128/2019 Principle and has passed the award despite the fact that the defendant herein has breached the contract by supplying defective goods. Hon'ble Apex Court has observed in ONGC Ltd. Vs. Western Geco International Ltd. (2014) 9 SCC 263: (2014) 5 SC that if the award is against to public policy the same is liable to be set aside besides the award in question is contrary to the principles of Natural Justice and also Audi Alteram Partem rule the award is liable to be set aside on the ground of Bias. The award is dated 07.02.2019 and has been sent to the plaintiff here in only on 18.05.2019. The plaintiff has suffered losses of approximately Rs.75,50,000/- due to the defective products provided by the defendant which resulted in undue delay in assembly and hence states that it is necessary to set aside the award passed by MSEFC Bangalore which passed an award directing the plaintiff herein to pay a sum of Rs.63,46,051/- with interest at three times of the bank rate notified by the Reserve Bank of India to the defendant. It is further mentioned that the cause of action for the present suit substantially arose within the jurisdiction of this court and hence this suit for the reliefs mentioned supra.
3. On issuance of suit notice defendant/petitioner appeared through its council and resisted the suit of the plaintiff/respondent by filing its written statement 6 Com.A.S.No.128/2019 asserting that MSEFC has passed the award on 07.02.2019. The Micro Small and Medium Enterprises Development Act 2006, is legislated for a speedy disposal of the cases and the statement of objects to the said Act clearly specifies that the recovery of the money passed and hence the objects of the said Act itself would be defeated in case if the same is tried as a original suit. That the part the plaintiff/respondent has filed this appeal without making deposit as required under law. The MSEFC after going through all the records furnished have come to a just conclusion that the plaintiff/respondent is liable to pay the amount of Rs.63,46,051/- towards principle with interest at three times of bank rate notified by the Reserve Bank of India within 90 days and hence prayed for dismissal of this suit with cost.
4. On 16.11.2021 the learned councils for both parties. Plaintiff council Sri.G.N. argued the matter on merits and canvassed that MSEFC passed the award on 07.02.2019 directing the plaintiff herein to pay the amount of Rs.63,46,051/- along with interest within 90 days. But however, the plaintiff has not complied the same till today. Plaintiff/respondent without making deposit as required U/s 19 of the Micro Small and Medium Enterprises Development Act, 2006, and hence submits that plaintiff/respondent has not made out ground to 7 Com.A.S.No.128/2019 consider this suit and thereby sought for upheld the impugned award.
5. On 19.11.2021, learned defendant/petitioner council submitted written arguments along with citation so also learned council for plaintiff/respondent and hence matter posted for judgment on 02.12.2021.
6. On 29.11.2021, advocate for plaintiff filed advancement application seeking to advance the case from 02.12.2021 to 29.11.2021. Accordingly, matter was called on 29.11.2021. Both councils for plaintiff/respondent and defendant petitioner were present. Learned council for plaintiff/respondent filed memo along with certified copy of Order of Hon'ble High Court of Karnataka passed in Writ Petition No.20328/2021 filed by plaintiff herein against MSEFC and defendant herein and canvassed that plaintiff has question the award dated 07.02.2019 passed in case No.44/2016 before Hon'ble High Court of Karnataka and Hon'ble High Court of Karnataka has stayed the matter. On the other hand the learned council for defendant/respondent canvassed that this is a delay tactics of plaintiff who has file the above writ petition after lapse of more than two years and even otherwise neither the proceedings of this court stayed nor their exists any stay Order and Hon'ble High Court of Karnataka only Order to issue emergent 8 Com.A.S.No.128/2019 notice on Interim Application filed by the plaintiff herein and hence prays to pass the judgment. After hearing both parties with regard to pendency of W.P.No.20328/2021 filed by plaintiff herein, this court posted the matter on actual hearing date.
7. I have carefully scrutinized entire records before me, heard arguments also perused written arguments filed by respective counsels. In the light of the above submissions, the question which arises for my consideration is as to:
8. Point No.1: Whether the impugned award needs to be set aside U/s 34 of the Act?
9. It is not in dispute that the plaintiff/respondent herein is in the business of renewable energy particularly, Solar Power purchased assembled Printed Circuit Boards (PCB) from defendant who is engaged in the business of manufacturing and supplying of the same. In this regard the parties entered in to an agreement dated 05.09.2015 which is also not in dispute and plaintiff/respondent has mentioned about the same in his plaint at para 3 to 5. The defendant/respondent having supplied the goods failed to receive the amount for the materials supplied by him i.e., assembled PCB. Receipt of goods is also not in dispute. However, the dispute arose between the parties 9 Com.A.S.No.128/2019 relating to the quality of the material and also delay in supplying the material and non-payment amount of the material which led to be filing of an application U/s 18 of MSMED Act 2006, by the defendant/petitioner on 04.04.2017 before Micro and Small Enterprise Facilitation Council, Bengaluru for recovery of principle of Rs.50,42,545/- and interest of Rs.8,42,753/- from the plaintiff/respondent company. The council of MSEFC after hearing parties to the dispute delivered this award and directed the plaintiff/respondent to pay an amount of Rs.63,46,051/- for the materials supplied by the defendant/respondent herein along with interest of 3 times of the bank rate notified by the Reserve Bank of India, from the due dates as per Section 16 of MSMED Act, 2006 within 90 days from the date of this Order.
10. The plaintiff/respondent not being satisfied with the aforesaid relief awarded in the award preferred the present suit and invoked powers of this court U/s 34 of the Act to get the said award set aside.
11. Let us examine the powers of the court under section 34 of the Act. Section 34(1) of the Act provides that arbitral award may be set aside by the court on application for setting aside the same being made on any grounds specified in the sub-section (2) and within the time prescribed. Sub-section 2(a) hereof further provides 10 Com.A.S.No.128/2019 that party making such application shall furnish proof to the court in support of such application. The court is entitled to set aside the award only, if grounds mentioned in sub-section (2) of section 34 read with grounds stated in section 13 and section 16 of the Act are proved to its satisfaction by the party making application for setting aside the award and too if satisfy the court that the allegations are true. The onus to prove that the grounds as per sub-sections (2) of sections 34 of the Act exists and that award is liable to be set aside, lies on the party making application.
12. Arbitral award is not invalid merely because on the basis of some inferences and some arguments it may be alleged that Arbitral Tribunal has committed some mistake in arriving at its conclusion on merits of the dispute referred to it for adjudication.
13. When the court is called upon to decide the objections raised by a party against the arbitral award, the jurisdiction of the court is limited, as expressly indicated in section 34 of the Act and it has no jurisdictions to sit in appeal and to examine the correctness of the award on merits with reference to the material produced before the Arbitral Tribunal. The court cannot sit in appeal over the views of the Arbitral Tribunal by re-examining and re-appreciating the material.
11Com.A.S.No.128/2019
14. Once the aforesaid parameters to challenge the arbitral award are fixed then in that event, one has to turn to the challenges set up in the petition to challenge the arbitral award. If one turns to the present petition; challenges to the award are mainly set out on the following two grounds:
(I) The MSEFC was bias against plintiff/respondent while rejecting his bona fide claims and has drawn his own inconsistent conclusions while recording findings.
(ii) The MSEFC has failed to appreciate the objection brought on record by the plaintiff/respondent in the proceedings.
15. The award is not open to challenge on the ground that the MSEFC has reached to a wrong conclusion or has failed to appreciate the facts and evidence. The parties herein as per the agreement dated 05.09.2015, approached MSEFC for adjudication of dispute arising between them and they bind themselves as a rule to accept the council award has final and conclusive. Further, as rightly canvassed by learned counsel for defendant/petitioner that MSMED Act 2006, is legislated for a speedy disposal of the cases, so that the recovery of the money with regard to material supplied should be 12 Com.A.S.No.128/2019 passed. Further, learned counsel Sri.G.N. also relied upon citation of Hon'ble Supreme Court in the matter of M/s Annapoorna Electronics (petitioner) Vs. Crompton Greaves Limited and Others (respondents) and contended that plaintiff/petitioner has not complied with the mandatory provision of Section 19 of the said Act. At this stage, it is necessary to go through the provisions of Section 19 of MSMED Act 2006, which reads as under:
19. "Application for setting aside decree, award or order.- No application for setting aside any decree, award or other order made either by the council itself or by any institution or center providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court:
Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose."13
Com.A.S.No.128/2019
16. The objective of the remedy at Section 19 incorporating mandatory deposit of 75% amount in terms of the award to entertain the appeal/contest by the buyer U/s 34 of the Arbitration and Conciliation Act by the buyer of the court is in order to ensure timely flow of finance to Small and Medium Enterprises supplier so as to remain viable in the event of delay, default or dispute regarding payment by the buyer. The object of effective and expeditions remedy incorporated at Section 18(5) and 19 of MSMED Act 2006, is to be appreciated by reading together with Section 34(3) and 36 of Arbitration Act. Whenever the MSEFC has passed an award, no application shall be entertain by this court unless the purchaser deposits the 75% of the amount in terms of the award passed against him. Hon'ble Supreme Court in M/s Crompton Grieves case referred supra, observed that the purchaser not complied with the requirement of Section 19(1) of the MSMED Act and directed it to comply the same. The plaintiff/respondent herein filed this petition on 17.08.2019, seeking for setting aside the award without even complying the mandatory requirement of Section 19(1) of the MSMED Act till today. On the other hand, after arguing the matter on merits and after matter posted for judgment, plaintiff/respondent got the case advanced and filed a memo along with certified copy of orders of Hon'ble High Court of Karnataka passed in W.P.20328/2021 asserting that Hon'ble High Court has 14 Com.A.S.No.128/2019 stayed the operation of very award passed in case No.44/2016 by MSEFC. I have perused the Order of Hon'ble High Court of Karnataka dated 26.11.2021 in W.P.No.20328/2021. Hon'ble High Court of Karnataka has issued emergent notice on Interim Order has prayed by petitioner i.e., the plaintiff herein. Said Writ Petition even otherwise is filed by the plaintiff herein in respect of case No.44/2016. Hon'ble High Court of Karnataka has not stayed the proceedings of this court in this Arbitration suit filed by the plaintiff. After lapse of almost three years, plaintiff without even complying the requirement of the Section 19(1) of the MSMED Act 2006, with regard to deposit of 75% of the amount awarded with interest has approached Hon'ble High Court of Karnataka. This itself establishes that plaintiff is making all attempts to delay the payment due to the defendant herein.
Plaintiff/respondent neither established any ground available U/s 34 of the Act discussed supra for interference nor approached this court with clean hand. There is absolutely no grounds made out by the plaintiff/respondent for any interference by this court. Entertainment of this plaint only defeats the very object of MSMED Act 2006, under which the dispute as per Section 17(5) shall be decided within a period of 90 days from the date of making such a reference. Admittedly the defendant/respondent filed an application before the MSEFC on 04.04.2017 and the plaintiff/respondent was 15 Com.A.S.No.128/2019 before the council all along for two years two months. Plaintiff engaged the council to represent his case before MSEFC and have taken several adjournments. This circumstances establishes that plaintiff/respondent is only evading the payment after enjoying the receipt of materials from Small Enterprises i.e., the defendant/petitioner. There is absolutely no grounds made out to set aside the impugned award. Accordingly, I proceed to pass the following:
ORDER The Arbitration Suit filed by the plaintiff u/s 34 of the Arbitration and Conciliation Act seeking to set aside the impugned order dated 07.02.2019 passed in Case No. 44/2016 before MSEFC is dismissed with costs.
(Dictated to the Stenographer directly, verified and pronounced in the open court on 2nd day of December 2021).
(M.LATHAKUMARI) LXXXV Addl. City Civil & Sessions Judge, Bengaluru.