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Delhi District Court

M/S. Telecommunication Consultants ... vs M/S. Creative Entrepreneurs on 29 August, 2022

IN THE COURT OF ADJ­07, SOUTH­EAST DISTRICT, SAKET COURTS, DELHI

Presided By : Sh. Jay Thareja, DHJS

Arbtn No: 113/17

M/s. Telecommunication Consultants India Limited
{Through its Group General Manager (S&TC)}
TCIL Bhawan, Greater Kailash­I,
New Delhi­110048.
                                                                                            ... Petitioner
                                             Versus
M/s. Creative Entrepreneurs
A­3/332, Sector­8,
Rohini, Delhi­110085.
                                                                                       ... Respondent

               PETITION UNDER SECTION 34 OF THE ARBITRATION
                          & CONCILIATION ACT, 1996

                                                     DATE OF INSTITUTION : 23.01.2017
                                                DATE OF FINAL ARGUMENTS : 12.07.2022
                                                         DATE OF DECISION : 29.08.2022

                                              JUDGMENT

1. The applicant/petitioner (henceforth 'petitioner') has filed this application/petition (henceforth 'petition') against the non­applicant/respondent (henceforth 'respondent') under Section 34 of the Arbitration and Conciliation Act, 1996 (henceforth 'Arbitration Act, 1996'), challenging the following:­

(a) Order dated 05.09.2015 passed by Sh. Jayant K. Mehta, Ld. Sole Arbitrator in favour of the respondent, dismissing the application filed by the petitioner under Section 16 of the Arbtn No.113/17 M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.1 of 10 Arbitration Act, 1996; and

(b) Arbitral Award dated 21.10.2016 passed by Sh. Jayant K. Mehta, Ld. Sole Arbitrator in favour of the respondent.

2. The arguments qua this petition were heard during a series of dates, starting from 05.10.2021 and ending on 12.07.2022. During the hearing, two questions had emerged for adjudication by this Court:­

(a) Whether the impugned Order dated 05.09.2015 and the Arbitral Award dated 21.10.2016 are liable to be set­aside because in respect of the contract between the parties, the respondent had no basis to invoke the dispute resolution/beneficial provisions of Micro, Small & Medium Enterprises Development Act, 2006 (henceforth 'MSME Act') and because as such, Sh. Jayant K. Mehta, Ld. Sole Arbitrator, who had entered reference on the basis of the dispute resolution provisions of MSME Act, had no jurisdiction to conduct the arbitration proceedings between the parties?

(b) If the answer to the first question lies in the affirmative, how the sum of Rs.36,16,362/­ deposited by the petitioner in this Court, on 24.10.2017, in compliance of Section 19 of MSME Act, is to be restored to the petitioner?

3. In respect of the first question identified in the aforesaid paragraph, the Ld. Advocate for the petitioner had drawn reference to the recent judgment of the Hon'ble Supreme Court in Silpi Industries etc. v Kerala State Road Transport Corporation & Anr., (2021) SCC OnLine SC 439, wherein it has been held that in Arbtn No.113/17 M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.2 of 10 order to avail the benefit of the provisions of MSME Act, the seller should be registered under the provisions of the said Act, on the date of entering into the contract with the buyer. In this case, it is a matter of record that the respondent (seller) had entered into the contract with the petitioner (buyer) vide agreement dated 23.06.2010 read with purchase order dated 01.07.2010 as well as amended purchase order dated 20.10.2010 and that till 20.10.2010, the respondent (seller) was not registered under the provisions of MSME Act. Therefore, the first question identified in the aforesaid paragraph is answered/adjudicated in favour of the petitioner and against the respondent. It is held that in respect of the contract between the parties, the respondent had no basis to invoke the dispute resolution/beneficial provisions of MSME Act; that as a result, Sh. Jayant K. Mehta, Ld. Sole Arbitrator, had no jurisdiction to conduct the arbitration proceedings between the parties and that the arbitration proceedings between the parties, should have happened, as per the terms of clause 21 of the purchase order dated 01.07.2010 (repeated in amended purchase order dated 20.10.2010). 1

4. In respect of the second question identified in paragraph 2 of this judgment, the Ld. Advocate for the petitioner had drawn reference to Section 144 of CPC, 1908 (which codifies the common law concept of 'restitution') and had submitted (a) that in addition to restoring the above­noted sum of Rs.36,16,362/­ along with interest to the petitioner, this Court should grant compensation/damages to the petitioner because right from inception, the petitioner had been submitting before all authorities, including Micro and Small 1 I have made the observation regarding clause 21 of the purchase order dated 01.07.2010 (repeated in amended purchase order dated 20.10.2010), without prejudice to my view that the said clause, most probably does not have any legs to stand upon, in view of the judgments of the Hon'ble Supreme Court in TRF Ltd. v Energo Engineering Projects Ltd., (2017) 8 SCC 377 and Perkins Eastman Architects DPC v HSCC (India) Limited, (2019) SCC OnLine SC 1517.

M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.3 of 10 Enterprises Facilitation Council (henceforth 'MSEF Council'), Delhi International Arbitration Centre (henceforth 'DIAC') etc. that in respect of the contract between the parties, the respondent had no basis to invoke the dispute resolution/beneficial provisions of MSME Act and because the respondent, who had during the execution of the contract between the parties never informed petitioner about its registration under MSME Act, had taken the petitioner by surprise, by invoking the dispute resolution/beneficial provisions of MSME Act; (b) that irrespective of the date, when the respondent had taken the above noted sum of Rs.36,16,362/­ from this Court, the petitioner should be granted interest w.e.f. 24.10.2017, when the petitioner had deposited the above­noted sum of Rs.36,16,362/­ in this Court and

(c) that ideally, the petitioner should be awarded interest at the rates at which, Sh. Jayant K. Mehta, Ld. Sole Arbitrator had awarded interest to the respondent in the impugned arbitral award dated 21.10.2016 and that at the least, the petitioner should be awarded interest at the rate of 18% per annum. In support of his submissions, the Ld. Advocate for the petitioner had relied upon the judgments in Indian Council for Enviro­Legal Action v UOI, MANU/SC/0837/2011 2, Hanuman Parshad & Ors. v National Bank of India, Limited­ MANU/LA/0055/1926 3, Vijaya Bank v Gambro Nexim (I) Medicals Pvt. Ltd. & Ors., MANU/DE/6187/2017 4, Hirabhai Dahyabhai v Maneklal Ranchhod, MANU/MH/0013/1925, Dalu Ram 2 The said judgment was relied upon by the Ld. Advocate for the petitioner (a) to show that in an appropriate case, this Court can grant compound interest, while indulging in the exercise of restitution and (b) that while indulging in the exercise of restitution in this case, this Court should factor the unjust enrichment of the respondent, at the expense of the petitioner. 3 The said judgment was relied upon by the Ld. Advocate for the petitioner to show that upon reversal of a decree, the DH is required to return the money paid by the JD alongwith interest awarded in the decree.

4 The paragraph 12 of the said judgment was relied upon by the Ld. Advocate for the petitioner to show that while indulging in the exercise of restitution, this Court should follow the adage, "what's good for the goose is good for the gander" and ensure that upon reversal of a decree, the JD gets the money back from the DH alongwith interest, as was awarded to the DH, by way of the subject decree.

M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.4 of 10 Gobardhan Das v Ramanand Jurimull, MANU/BH/0161/1929 and Shanmugasundara Mudaliar And Ors. v S. Ratnavelu Mudaliar, MANU/TN/0042/1932.5

5. In respect of the second question identified in paragraph 2 of this judgment, the Ld. Advocate for the respondent had also drawn reference to Section 144 of CPC, 1908 and had submitted (a) that this Court should only restore the above­noted sum of Rs.36,16,362/­ along with interest to the petitioner and not grant compensation/damages to the petitioner because the respondent had invoked the dispute resolution/beneficial provisions of the MSME Act under a bonafide impression of being entitled to do so; (b) that this Court should grant interest to the petitioner on the sum of Rs.36,16,632/­ w.e.f. 26.11.2018 i.e. the date on which the said money was released to the respondent because the respondent cannot be penalized for the time taken by this Court in deciding the application filed by the respondent, on 14.01.2018, as per the proviso to Section 19 of the MSME Act and for ultimately releasing the above­noted sum of Rs.36,16,632/­ to the respondent; (c) that this Court should award interest to the petitioner at any reasonable rate instead of the interest awarded to the respondent in the impugned arbitral award dated 21.10.2016 because the petitioner surely is not entitled to the beneficial provisions of the MSME Act and because unlike the petitioner, which is a public sector undertaking owned by the Government of India (henceforth 'PSU'), the respondent, at least, as of date is a Micro, Small and Medium Enterprise, which as per the extant policy of the Government of India (manifested by way of the MSME Act), deserves protection and (d) that while 5 The latter two judgments cited by the Ld. Advocate for the petitioner, were reported to be considered by the judgment of the Full Bench of the Hon'ble High Court of Madr as in Pappu Reddiar v P.S.V. Rm. Ramanatha Iyer, (1962) SCC OnLine Mad 115, a judgment cited by the Ld. Advocate for the respondent but ultimately relied upon by the Ld. Advocates for both the parties.

M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.5 of 10 restoring the above­noted sum of Rs.36,16,632/­ along with interest to the petitioner, this Court should factor the expense incurred by the respondent in furnishing the bank guarantee of Rs.36,16,632/­, in compliance of Order dated 27.08.2018, passed by this Court, in pursuance of the proviso to Section 19 of the MSME Act, which stipulates that the money deposited by the petitioner can be released to the respondent, subject to conditions and not unconditionally. In support of his submissions, the Ld. Advocate for the respondent had relied upon the judgments in Pappu Reddiar v P.S.V. Rm. Ramanatha Iyer, (1962) SCC OnLine Mad 1156, Gauridutt Ganesh Lal v Madho Prasad, (1942) SCC OnLine Pat 2307, The Amalgamated Electricity Co. Ltd., Ajmer v The Municipal Council, Ajmer, (1968) SCC OnLine Raj 17, Ramlal Golcha v UOI, (1979) SCC OnLine Pat 142, South Eastern Coalfields Ltd. v State of M.P., (2003) 8 SCC 648, Citibank N.A. v Hiten P. Dala, (2016) 1 SCC 411, Kartar Singh v State of Punjab, (1995) 4 SCC 101 and Surajmal Govindram Agarwal, Akola & Anr. v Baxiram Rodmal Firm, Akola, (1940) SCC OnLine MP 59.8

6. After considering the rival submissions made by the Ld. Advocates for 6 The said judgment, which was cited by the Ld. Advocate for the respondent but ultimately relied upon by the Ld. Advocates for both the parties, distills the law regarding restitution (as codified in Section 144 of CPC, 1908) in the best manner and inter­alia lays down (a) that the exercise of restitution, is dependent on the facts and circumstances of each case; (b) that the purpose of restitution is to put the judgment debtor in the position which it would have occupied, if the original decree had not been passed; (c) that in cases where the money deposited by the JD is encumbered by an obstacle, the liability of the DH to pay interest, upon reversal of the decree, will run from the date when the DH is able to remove the obstacle and secure the money; and (d) that it is impossible to lay down a fixed rule, which can apply to all cases of restitution as per Section 144 of CPC, 1908.

7 The said judgment was cited by the Ld. Advocate for the respondent to show that the money which the respondent could have earned by utilizing the sum of Rs.36,16,362/­ released to the respondent, on 26.11.2018, should not be a determinative factor, for this Court, while granting restitution in favour of the petitioner.

8 The other judgments cited by the Ld. Advocate for the respondent, only offer the same wine in different bottles and reflect how the aforesaid time honored principles of restitution (as codified in Section 144 of CPC, 1908) have been applied by the Superior Courts.

M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.6 of 10 the parties in respect of the second question identified in paragraph 2 of this judgment, I find the following:­

(a) That this is not a fit case for granting any compensation/damages to the petitioner, over and above the restitution of Rs.36,16,362/­ along with interest because the conduct of the respondent of invoking the beneficial provisions of MSME Act, is not as abhorrent as the conduct of the industries/polluters, who were criticized by the Hon'ble Supreme Court in Indian Council for Enviro­Legal Action v UOI, MANU/SC/0837/2011 and because it cannot be said that the invoking of the dispute resolution/beneficial provisions of MSME Act by the respondent, was completely mala­fide/rooted in bad faith;

(b) That the claim of the petitioner qua grant of interest for the period, 24.10.2017 to 26.11.2018, can be duly taken care of by the FDR No.38133864991, still lying with State Bank of India, Saket Courts, New Delhi, in pursuance of Orders dated 27.10.2017 and 26.11.2018, passed by this Court;

(c) That the claim of the petitioner qua award of interest at the rates at which, Sh. Jayant K. Mehta, Ld. Sole Arbitrator had awarded interest to the respondent in the impugned arbitral award dated 21.10.2016, cannot be allowed because the petitioner and the respondent are not equals9 and because awarding the said interest to the petitioner would amount to turning the law (MSME Act) on its head and granting to the petitioner, what the legislature had never intended for it 10;

(d) That the claim of the petitioner qua grant of interest at the rate of 18% per annum can also not be allowed because it would amount to penalizing the 9 As pointed out by the Ld. Advocate for the respondent, the petitioner is a PSU and the respondent is a Micro, Small and Medium Enterprise, which as per the extant policy of the Govt. of India (manifested by way of the MSME Act), deserves protection.

10 During the hearing of arguments, the Ld. Advocate for the petitioner had not referred to any provision of MSME Act, which contemplates restitution for the buyer, as per the interest rate mentioned in Section 16 of MSME Act, in case it is later found that the seller/supplier was not entitled to invoke the dispute resolution provisions of MSME Act.

M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.7 of 10 respondent, who, in my considered opinion, as expressed earlier in this judgment, has not indulged in conduct, abhorrent enough to be penalized; because I find it unfair on the part of the petitioner, which is a PSU (an instrumentality of the State) to claim commercial rates of interest from the respondent, without any statutory/contractual backing and because the judgments cited by the Ld. Advocates for the parties, reflect that ordinarily (i.e. in the absence of exceptional circumstances), the Court should grant interest at the rate of 6% per annum, while indulging in the exercise of restitution;11 and

(e) That the expenses incurred by the respondent in furnishing the bank guarantee of Rs.36,16,362/­, in compliance of the Order dated 27.08.2018, passed by this Court are not liable to be factored in the exercise of restitution being done by this Court because the respondent had an option to comply or not to comply with the Order dated 27.08.2018; because the judgments cited by the Ld. Advocates for the parties, do not reflect that while indulging in the exercise of restitution, a Court is suppose to factor all the expenses incurred by the parties, in complying with the Orders of the Court; because the judgments cited by the Ld. Advocates for the parties, lay down law to the effect that restitution is to be done, as far as possible/ practical and not till the last decimal point and because if this Court were to factor the said expenses, it would equally be required to factor the expenses incurred by the petitioner in preparation of DD No. 503067 dated 13.10.2017 of Rs.36,16,362/­, which will make the exercise of restitution in this case, remarkably complicated/complex.

7. As a net result of the findings recorded in the aforesaid paragraph, the 11 At this stage, I must specify that Section 34 of CPC, 1908 and the Interest Act, 1978, contemplate grant of interest at the rate of 6% per annum only and that as of today, the nationalized banks are also granting interest at the rate of 5 to 6% per annum, on long term FDRs.

M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.8 of 10 second question identified in paragraph 2 of this judgment, is answered/adjudicated by holding that the restitution of the sum of Rs.36,16,362/­ deposited by the petitioner in this Court, on 24.10.2017, in compliance of Section 19 of MSME Act, shall be done in the following manner:­

(a) The petitioner will get from State Bank of India, Saket Courts, New Delhi, the FDR No.38133864991, lying with the said bank, in pursuance of Orders dated 27.10.2017 and 26.11.2018, passed by this Court and having maturity value of Rs.3,43,441/­, as on 18.09.2022. The said FDR will inter­alia take care of the claim of the petitioner qua grant of interest for the period, 24.10.2017 to 26.11.2018.

(b) The petitioner will get from the respondent, the sum of Rs.36,16,362/­ alongwith interest at the rate of 6% per annum, starting from 26.11.2018 and continuing till the date of actual payment.

8. In light of the aforesaid answers/adjudication in respect of the questions identified in paragraph 2 of this judgment, this petition is allowed. The impugned Order dated 05.09.2015 as well as the ultimate arbitral award dated 21.10.2016, passed by Sh. Jayant K. Mehta, Ld. Sole Arbitrator, are set aside and the restitution of the sum of Rs.36,16,362/­, deposited by the petitioner in this Court, on 24.10.2017, in compliance of Section 19 of MSME Act, is directed to be done, as per the directions given in paragraph 7 of this judgment.

9. Before parting with this judgment, it is clarified that while ordering restitution of the sum of Rs.36,16,362/­, deposited by the petitioner in this Court, on 24.10.2017, in compliance of Section 19 of MSME Act, as aforesaid, I have also considered, (a) that upon setting aside of the arbitral award dated 21.10.2016, passed by Sh. Jayant K. Mehta, Ld. Sole Arbitrator, the status of the Arbtn No.113/17 M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.9 of 10 respondent, is again of an 'unpaid seller', entitled to recover its dues from the petitioner, in accordance with law and (b) that the petitioner had deposited the sum of Rs.36,16,362/­, on 24.10.2017, in the shape of a demand draft (a form of cash), instead of an FDR/Bond bearing interest and therefore, it is a paradox that the petitioner now wants interest, at least the rate of 18% per annum, on the said sum of money and (c) that even on 27.10.2017, the petitioner had not protested the suo moto direction given by the Ld. Predecessor Judge, regarding conversion of the sum of Rs.36,16,362/­, deposited by the petitioner, into an FDR (to be renewed every three months), instead of any other security that could have fetched better interest and therefore also, it is a paradox that the petitioner now wants interest, at least the rate of 18% per annum, on the said sum of money.

10. After completion of necessary formalities by the Ahlmad, the file shall be consigned to the record room. Digitally signed by JAY JAY THAREJA THAREJA Date:

2022.08.29 17:09:07 +0530 Announced in open Court (Jay Thareja) today on 29.08.2022 Ld. ADJ­07, South East District, Saket Courts/Delhi Arbtn No.113/17 M/s. Telecommunication Consultants India Ltd. v M/s. Creative Entrepreneurs Page No.10 of 10