Calcutta High Court (Appellete Side)
Union Of India vs H.M.R. Construction Pvt. Ltd. & Anr on 12 April, 2017
Author: Shivakant Prasad
Bench: Shivakant Prasad
IN THE HIGH COURT AT CALCUTTA
CIVIL REVISIONAL JURISDICTION
APPELLATE SIDE
Present :
The Hon'ble Justice Shivakant Prasad
C.O. 3853 of 2016
Union of India
Vs.
H.M.R. Construction Pvt. Ltd. & Anr.
For the Petitioner : Mr. A.Banerjee
For the Opposite Party No. 1 : Mr. Mohit Gupta
CAV On : 30.3.2017
Judgment On : 12.04.2017
SHIVAKANT PRASAD, J.
Orders dated 19.4.2016 and 11.9.2014 passed in Misc. case no. 82 of 2009 by the learned Additional District Judge, 2nd Court, Barasat challenging the purported award dated 02.3.2009 passed by the learned Arbitrator Mr. S. C. Padhi is under challenge by the petitioner.
Brief facts leading to this case is that the petitioner filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award published by the learned Arbitrator which was registered as Misc. case in which the opposite party filed an application dated 21.6.2014 for directions upon the petitioner to deposit 75% of the awarded amount which was allowed by order dated 11.9.2014.
Moot question which falls for consideration is whether provisions of Delayed Payment and Small Scale and Ancillary Undertaking Act, 1993 Act and the Micro, Small and Medium Enterprises Development Act, 2006 apply in an application for setting aside the award under Section 34 of the Arbitration and Conciliation Act, 1996.
The opposite party is undoubtedly a small scale unit within the meaning of Micro, Small and Medium Enterprises Development Act, 2006. It is submitted on behalf of the petitioner that application under Section 34 was filed prior to coming into force of the amendment which came in to effect in the month of October, 2015 and that the Micro, Small and Medium Enterprises Act, 2006 does not apply in the present case and when the award is under challenge.
Learned Advocate for the petitioner submitted that reference to the arbitrator was made on 10.8.2006 and award was published on 23.12.2008.
The moot question before this Court for decision as to whether the Micro, Small and Medium Enterprises Development Act, 2006 would apply in the given case of the petitioner. The said Act come into force with effect from 02.10.2006. The arbitrator entered upon reference on 10.8.2006 that is to say, prior to the said Act, 2006 coming into effect. My attention is invited to the provision of Section 18 relating to reference to Micro and Small Enterprises Facilitation Council and the provision of Section 19 relating to application for setting aside decree, award or order of the said Act. The said provisions may be reproduced hereunder for profitable consideration as to whether the Micro, Small and Medium Enterprises Development Act, 2006 would be applicable in the instant case as admittedly the arbitrator had entered reference on 10.8.2006 prior to the said Act coming into effect.
"18. Reference to Micro and Small Enterprises Facilitation Council.--
(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.
(3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub- section (1) of section 7 of that Act.
(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. (5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference."
"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 centre 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."
It would appear that Section 18 clearly provides for referring the dispute between the parties with regard to the amount due under Section 17 of the Act to the Micro and Small Enterprises Facilitation Council and the Council shall either itself conduct conciliation in the matter or seek assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre for the purpose of conciliation. It also provides under Sub- section 2 of Section 18 that whenever there is reference to the Council or any institution holding conciliation, the provisions of Sections 65 to 81 of Arbitration & Conciliation Act, 1996 shall be applicable to such dispute as if the conciliation was initiated under part III of that Act.
In conjoint reading of Sections 18 & 19 of the Act, it reflects that no Court shall take cognizance over application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre for alternate dispute resolution services to which reference has been made by the Council under the said Act. Learned Advocate for the petitioner further invites my attention to the application under Section 34 of Arbitration & Conciliation Act, 1996 whereby the appellant had prayed for setting aside the award dated 2nd March, 2009 made by the respondent no. 2 and further direction for refund of the excess payment made by and on behalf of the petitioner against their bills as the respondent no. 1 is not entitled to receive the same and accordingly also prayed for interim stay and the operation of the impugned order dated 2nd March, 2009 made by the respondent no. 2 in favour of the respondent no.1.
Learned Advocate for the opposite adverted to the provision of Section 7 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 which enjoins as under--
"7. Appeal.--No appeal against any decree, award or other order shall be entertained by any court or other authority unless the appellant (not being a supplier) has deposited with it seventy-five percent of the amount in terms of the decree, award or, as the case may be, other order in the manner directed by such court or, as the case may be, such authority."
By referring to the above provision, Mr. Mohit Gupta appearing for the opposite party fortified his argument relying on the authority of the Hon'ble Supreme Court in case of Snehadeep Structures Private Limited Vs. Maharashtra Small Scale Industries Development Corporation Limited reported in AIR (SCW)-2010-0-1763/AIR(SC)-2010-0-1497/SCC-2010-3- 34 in which case Maharashtra State Electricity Board (in short 'MSEB') had issued a work order dated 27th March, 1995 in favour of Maharashtra Small Scale Industries Development Corporation, the appellant company is a Small Scale Industrial undertaking for the purpose of Interest Act, the work was completed and the bills were submitted by the appellant company. There was huge delay on the part of the Corporation in paying the said bills to the appellant company and that the appellant company demanded interest on delayed payment under Interest Act from the respondent concern which was turned down and dispute arose referrable to the Chairman of the Corporation in accordance with clause 27 of supplied order but the Chairman of the Corporation though had acknowledged the delay and claim for interest by a letter dated 5th February, 2002 but it held the view that the liability to pay the interest by MSEB, which was the buyer, and not on the Corporation. Therefore, reference to the dispute cannot be held by an arbitrator. On being aggrieved by such view and the refusal by the respondent to refer the matter to arbitration, the appellant company preferred an Arbitration Application under Section 11 of the Arbitration & Conciliation Act, 1996 before the High Court of Bombay in which a former Judge of the High Court was appointed as the Sole Arbitrator who published his award on 30th June, 2003 directing the Corporation a sum of Rs. 78,19,540.73 to the Appellant company.
On being aggrieved the Corporation filed an application under Section 34 of the Arbitration Act before the High Court of Bombay for setting aside the award and during pendency of the proceedings the appellant company pointed out that the provision of Section 7 of the Interest Act is attracted under which the Corporation has to deposit 75% of the amount awarded by Arbitrator under the award.
It was also the contention in the said decision by the High Court, that under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 cannot be made applicable to the case as the reference to arbitration was not in terms of Section 19 of the Act of 2006. At the time when the challenge of pre-deposit under Section 7 of Interest Act was heard the Act of 2000 was not in force.
This is how the petitioner in this case has also contended that Section 7 of Interest Act could not be attracted as there is no force of it in view of the Act being Micro, Small and Medium Enterprises Development Act, 2006 which came into effect only 02.10.2006 after the reference was made to the arbitrator on 10.8.2006 but the learned Advocate for the opposite party relying on the above cited decision supported the order passed by the learned District Judge by which the application dated 21.6.2014 of the opposite party was allowed directing the Union of India, the petitioner herein to deposit 75% of the amount of the award by 27.11.2014. The application under Section 151 of C.P. Code filed on behalf of the petitioner, Union of India in Misc. Case No. 82/2009 (ARB) was also dismissed vide impugned order no. 66 dated 19.4.2016 whereby the petitioner had prayed for modification and revising the order dated 11.9.2014.
In my view, the learned Judge has rightly rejected the application under Section 151 of C.P. Code because consideration of application under Section 151 of C.P. Code to modify or revise its own order by invocation of inherent power of Court tantamount to sitting in appeal or in revision.
In the case of Snehadeep Structures Private Limited (supra) observation is made in paragraph 26 to the effect as under--
"Keeping in mind the language of Section 7, object of the legislation and the contextual meaning of the term appeal, we are, therefore, of the view that the term "appeal" appearing in Section 7 of the Interest Act should include an application under Section 34 as well. The judgment and order of the High Court shall, therefore, stand set aside and the appeal is allowed to the extent indicated above. The respondent-corporation shall make a deposit of 75% of the amount awarded by the learned Arbitrator by his award dated 30th June, 2003 in Court where the application for setting aside the award is now pending decision. Such deposit shall be made within three months from this date. In the event, such deposit is made the court shall decide the application for setting aside the award filed under Section 34 of the Arbitration Act as expeditiously as possible preferably within six months from the date of deposit to the Corporation."
It is true as per the above observation that the term appeal appearing in Section 7 of Interest Act should include an application under Section 34 as well since the petitioner has preferred the application under Section 34 of Arbitration & Conciliation Act, 1996 for setting aside the award published by the arbitrator despite the fact that the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 has been repealed vide Section 32 of the Micro, Small and Medium Enterprises Development Act, 2006. But in the facts of the case I find that the award was published on 23.12.2008 by the arbitrator who had entered upon reference on 10.8.2006, which award is the subject matter of challenge by both the parties herein as the opposite party has also submitted an application under Section 34 of Arbitration & Conciliation Act, 1996. The petitioner has challenged the whole of the award wherein he has prayed for adjustment of the awarded amount and refund of the excess payment made to the opposite party on behest of the Union of India who has submitted that there is no lack of security and the question of Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 would not be applicable as the said Act has been repealed by the Micro, Small and Medium Enterprises Development Act, 2006 which came into effect on and from 2nd October, 2006 which act was not in existence as on the date of reference to the arbitrator on 10th August, 2006 and publication an award on 23.12.2008 by the arbitrator. Since the Act has not come into effect, obviously, reference of the dispute to council as per Sections 18 and 19 of Act, 2006 would not apply and was not made applicable in the instant case. Since the Section 7 of the Interest Act does not exit the same cannot be applied in the given facts of the case. I find that the facts and circumstances of the cited decision is distinguishable in the case and would not be attracted.
In the context above, the moot question as to whether provisions of Delayed Payment and Small Scale and Ancillary Undertaking Act, 1993 Act and the Micro, Small and Medium Enterprises Development Act, 2006 would be applicable in an application for setting aside the award under Section 34 of the Arbitration and Conciliation Act, 1996 is answered in the negative. Therefore, the order impugned passed by the learned Court below directing deposit of 75% of the awarded amount is devoid of merit and is accordingly set aside.
Civil Revision being C.O. 3853 of 2016 is thus allowed, however, there shall be no order as to costs.
A copy of this judgment be sent to the learned Court below to decide the Miscellaneous Cases under Section 34 of the Arbitration and Conciliation Act, 1996 filed by both the parties as expeditiously as possible preferable within three months from the date of communication of the order.
Urgent certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.
(SHIVAKANT PRASAD, J.)