Delhi District Court
Smt. Usha Goel vs M/S Govind Cable Industries on 9 June, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 56/2020
Smt. Usha Goel,
Prop. of M/s V.D. Industries,
W/o Sh. V.D. Goel,
C/o Plot No. 140, Pocket D,
Sector-5, DSIIDC Bawan,
Delhi-110039 ...Petitioner/Objector
versus
1. M/s Govind Cable Industries,
Registered partnership firm,
7/36-37, Site-IV, Sahibabad Industrial Area,
Ghaziabad-201010 (Uttar Pradesh)
E-mail: [email protected]
2. Smt. Nirmala Devi Jindal,
Partner of M/s Govind Cable Industries,
A-25, Vivek Vihar, Phase-II,
Delhi-110095.
Through Adv. Princce Arora
Mob. : 9971271734
E-mail: [email protected]
3. Sh. Gopal Krishna Agrawal,
Partner of M/s Govind Cable Industries,
A-22, Ground Floor, Nirman Vihar,
Delhi-110092
Mob. : 9711997851
E-mail: [email protected]
4. Sh. Radhey Shyam Aggarwal
S/o Late Sh. Gopi Ram Aggarwal
Partner of M/s Govind Cable Industries,
R/o 73/1, Cotton Street,
Kolkata-700007 ...Respondents
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and
OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 1 of 38
Date of Institution : 05/08/2020
Arguments concluded on : 28/05/2022
Decided on : 09/06/2022
Appearances : Sh. O.P Gupta and Sh. Nitin Garg,
Ld. Counsel for petitioner.
Sh. Princce Aroraa, Ld. Counsel for
respondent no. 2.
AND
OMP (Comm.) No. 12/2021
Smt. Nirmala Devi Jindal,
Partner of M/s Govind Cable Industries,
A-25, Vivek Vihar, Phase-II,
Delhi-110095 ...Petitioner
versus
1. Smt. Usha Goel,
Prop. of M/s V.D. Industries,
W/o Sh. V.D. Goel,
C/o Plot No. 140, Pocket D,
Sector-5, DSIIDC Bawan,
Delhi-110039.
E-mail: [email protected] (Adv. Nitin Garg)
2. M/s Govind Cable Industries,
Registered partnership firm,
7/36-37, Site-IV, Sahibabad Industrial Area,
Ghaziabad-201010 (Uttar Pradesh)
E-mail: [email protected]
3. Sh. Gopal Krishna Aggarwal,
Partner of M/s Govind Cable Industries,
A-22, Ground Floor, Nirman Vihar,
Delhi-110092
E-mail: [email protected]
4. Sh. Radhey Shyam Aggarwal,
Partner of M/s Govind Cable Industries,
R/o 73/1, Cotton Street,
Kolkata-700007 ...Respondents
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and
OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 2 of 38
Date of Institution : 18/01/2021
Arguments concluded on : 28/05/2022
Decided on : 09/06/2022
Appearances : Sh. Princce Aroraa, Ld. Counsel for petitioner.
Sh. O.P Gupta and Sh. Nitin Garg,
Ld.Counsel for for respondent no. 1.
JUDGMENT
1. Finding it expedient in the interest of justice, I shall decide by this common judgment the following two petitions under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act) filed by the parties to the arbitration as these arise out of the impugned common award dated 14/03/2020 passed by Ld. Sole Arbitrator Sh. G.D. Dhanuka, Additional District Judge (Retired) in case No. DIAC/2538/D/09-19 titled 'Smt. Usha Goel vs M/s Govind Cable Industries & Ors'. First petition is OMP (Comm.) No. 56/2020 titled 'Smt. Usha Goel (hereinafter referred as claimant) vs M/s Govind Cable Industries (hereinafter referred as respondent firm) & Ors'. Second petition is OMP (Comm.) No. 12/2021 titled Smt. Nirmala Devi Jindal (hereinafter referred as petitioner N) vs Smt. Usha Goel; respondent firm; Sh. Gopal Krishna Aggarwal (hereinafter referred as respondent G) and Sh. Radhey Shyam Aggarwal (hereinafter referred as respondent R). Ld. Sole Arbitrator awarded Rs. 22,87,317/- with interest @ 8% per annum from the date of award till the date of payment in favour of claimant payable by the respondents, jointly and severally, as detailed in petition OMP (Comm.) No. 56/2020.
2. I have heard Sh. O.P Gupta and Sh. Nitin Garg, Ld. Counsel OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 3 of 38 for claimant; Sh. Princce Aroraa, Ld. Counsel for petitioner N and perused the record of the case, replies in petition OMP (Comm.) No. 56/2020, the arbitral proceedings record, relied upon precedents, filed brief written arguments of parties and given my thoughtful consideration to the rival contentions put forth.
3. Adumbrated in brief the facts of the case of the parties are as follows. Claimant supplied PVC compound granules to respondent firm from December, 2017 to June, 2018 worth Rs. 26,77,420/- as was detailed in para no. 2 of the claim petition before Ld. Sole Arbitrator. Respondent G, respondent R and petitioner N were the partners of respondent firm and had failed to make the payment. Claimant being registered under The Micro, Small & Medium Enterprises Development Act, 2006 (in short MSMED Act) filed applications to the Micro and Small Enterprises Facilitation Council (in short MSEFC). After nothing was heard from MSEFC by the claimant, claimant filed a Writ Petition bearing W.P. (C) No. 6625/2019 before Delhi High Court seeking directions to MSEFC to decide its applications. Above said writ petition was disposed off on 31/05/2019 by Delhi High Court upon statement of Counsel for MSEFC therein that applications of claimant would be considered as expeditiously as possible. MSEFC conducted the proceedings on 12/06/2019 and 30/07/2019 wherein MSEFC arrived at the conclusion that both the parties were not interested for conciliation towards the disputed amount and felt that conciliation is not possible; so it decided to terminate the conciliation proceedings and referred the case under Section 18(3) of MSMED Act to Delhi International OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 4 of 38 Arbitration Centre (in short DIAC) for initiating arbitration proceedings, as per the Act. Ld. Sole Arbitrator was appointed by the Hon'ble Chairperson of DIAC on 11/10/2019. Arbitral proceedings culminated into impugned arbitral award. Claimant in petition OMP (Comm.) No. 56/2020 through Ld. Counsel prayed as follows:-
"PRAYER It is therefore most respectfully prayed to this Hon'ble Court that the award dated 14.03.2020 may kindly be modified in respect of the interest and interest may kindly be enhanced from 8% to 18% which is even lesser than the agreed rate @ 24% as per invoices and as per section 15 & 16 of MSME Act, 2006 to be compounded on monthly rest.
It is further prayed that the award dated 14.03.2020 may also be modified and be enhanced from Rs. 19,81,220/- (Principal Amount) to Rs 26,77,420/- (Principal Amount), besides the interest as mentioned above, in the interest of justice."
4. Claimant has impugned the arbitral award for above said prayer mainly on the following grounds. Impugned award needs modification as far as the rate of interest is concerned. Ld. Sole Arbitrator has not considered at all Sections 15 and 16 of MSMED Act which mandates that the interest shall be compound interest with monthly rest and it will be three times of the bank rate notified by the Reserve Bank notwithstanding anything contained in any agreement......or in any law for the time being in force. Ld. Sole Arbitrator did not consider the invoices according to which, respondent firm agreed to pay the amount of the invoices within 60 days from the date of the invoices, failing which the interest @ 24% had to be charged. Finding of Ld. Sole Arbitrator on issue no. d is totally illegal, against the material and evidence on record and is also in contradiction to Section 56 of The Indian Evidence Act. Respondent firm and partners OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 5 of 38 respondent G, respondent R and petitioner N had categorically admitted that they had received the goods supplied by the claimant mentioned in para no. 2 of the claim petition before Ld. Sole Arbitrator and could not pay because of closure of factory due to disputes amongst the partners of respondent firm. This categorical admission of the respondent firm and its partners was totally brushed aside by Ld. Sole Arbitrator who did not give any finding on this admission in the impugned award. Respondent firm and its partners only stated that payments were made against particular three invoices mentioned in the ledger account prepared by respondent firm; whereas claimant stated that these payments were not against those particular invoices but were rather received as on account payments. There was no dispute about total due amount against the respondent firm payable to claimant. Finding of Ld. Sole Arbitrator was against Section 56 of The Indian Evidence Act and documents on record. Accordingly, the impugned award needs modification being against public policy wherein Ld. Sole Arbitrator had reduced the amount of impugned award after admission of respondent firm and its partners. Finding of Ld. Sole Arbitrator is not only radically wrong, vicious but contrary to natural justice as petitioner N has not filed any record or evidence to show that there was no amount due against respondent firm previous to these invoices. So in these circumstances, the seller/claimant will adjust the payment in chorological order and not leaving the previous payment due and will adjust the payment against the latest invoice; more so when the ledger of claimant is not disputed by respondent firm and its partners whereas respondent firm and its partners cannot get their payment adjusted against OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 6 of 38 the latest invoice leaving the previous payment that too without any filing of any letter informing the seller that they are payment against such and such invoices. Hence, the finding of Ld. Sole Arbitrator is not only illegal on the face of it but against the principles of natural justice also. Ld. Sole Arbitrator has proceeded illegally and passed the award based upon unsoundness in law.
5. Petitioner N has impugned the arbitral award vide petition OMP (Comm.) No. 12/2021 seeking to set aside the said award mainly on the following grounds. The impugned award is wholly arbitrary and illegal. The manner in which impugned award was passed is like a forced compulsion on petitioner N to pay the award amount. Impugned award is in violation of principles of natural justice as it was passed without just and fair procedure. Ld. Sole Arbitrator failed to appreciate that claimant was in collusion with respondent firm and other partners of respondent firm had filed the arbitration proceedings which are prima facie proven from the acts of claimant and respondent G and respondent R. Impugned award is in violation of Section 25 of The Indian Partnership Act, 1932 since petitioner N became the effective partner of respondent firm from 20/04/2018 till 05/10/2018 and is only liable to pay for the transaction held during that period. Respondent G and respondent R had also affirmed the same in their representation to Senior Superintendent of Police (in short SSP), Ghaziabad, U.P. which was exhibited as Ex RW3/D in evidence of petitioner N before Ld. Sole Arbitrator whereas petitioner N had also referred the same through a letter dated 24/02/2018 to the bank of respondent OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 7 of 38 firm which was exhibited as Ex RW3/C before Ld. Sole Arbitrator in arbitral proceedings. Even Ld. Sole Arbitrator illegally and arbitrarily imposed cost of Rs. 2,000/- upon petitioner N to bring on record the above said application. Ld. Sole Arbitrator illegally and arbitrarily dismissed the application of petitioner N seeking direction to claimant and respondent firm to bring on record certain documents at the time of evidence of petitioner N only after denial of claimant, respondent G and respondent R. Said application is the essence of defence of petitioner N and liability of partners can be easily determined by allowing said application. Arbitral proceedings were nothing but a mere abuse of the process of law as claimant colluded with respondent G and respondent R as claimant was very much aware that outstanding amount was not a liability of petitioner N's period as operating partner and can only be settled from respondent G and respondent R. Despite knowing the same, claimant colluded to shift the whole alleged liability on the petitioner N only. Respondent G and respondent R did not even cross examine the claimant in arbitral proceedings and also did not argue at the time of final arguments whereas their Counsel argued the application filed by petitioner N for bringing certain documents on record. Ld. Sole Arbitrator did not pass a speaking order in the impugned arbitral award for the averments made by petitioner N in her written statement as well as the above mentioned application seeking direction to claimant and respondent firm for bringing certain documents on record. It was prayed for setting aside the impugned arbitral award accordingly.
6. Respondent firm, respondent G through Ld. Counsel filed OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 8 of 38 reply to the petition which was also termed as reply of respondent R but was neither signed by respondent R nor supported with affidavit of respondent R. Accordingly, it was taken as reply only of respondent firm and respondent G in OMP (Comm.) No. 56/2020. Petitioner N also filed reply to petition of claimant. In OMP (Comm.) No. 56/2020, written arguments were filed by Ld. Counsel for all parties.
7. Respondent firm and respondent G in filed reply through Ld. Counsel termed the petition to be not maintainable and liable to be dismissed. It was averred that claimant has not approached this Court with clean hands and suppressed the material, relevant, true and correct facts. It was also averred that claimant had already filed one execution petition for execution of the petition, which was pending; so, present petition was not maintainable and liable to be dismissed; since also claimant concealed the factum of pendency of the execution petition of impugned arbitral award from this Court. Claimant partly challenged the award and simultaneous filing of execution petition for remaining part of award is not permissible as per law and hence objections/petition of claimant is liable to be dismissed as well on this ground. Objections of claimant do not fall in the ambit of Section 34 of the Act. Ld. Sole Arbitrator after considering the material, evidence and law had passed the impugned arbitral award legally and hence no modification is required. Demand of claimant is contrary to public policy which cannot be considered.
8. In filed reply to petition OMP (Comm.) No. 56/2020, petitioner N through Ld. Counsel averred that claimant failed to OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 9 of 38 make any case or raise any sustainable ground for modification of the impugned award whereas ground raised therein were vague, vexatious and far from the truth. Petitioner N through Ld. Counsel averred that present petition of claimant is baseless, barred by law, not maintainable on following premise. The Act makes provision for the supervisory role of Courts for the review of the arbitral award only to ensure fairness, therefore, the Court cannot correct the errors of the Arbitrator rather it can only quash the impugned award leaving the parties free to begin the arbitration again if it desires. There is no specific power granted to the Court to itself allow the claims originally made before the Arbitral Tribunal where it finds the Arbitral Tribunal erred in rejecting such claims whereas only within the ambit of Section 34(4) of the Act only on receipt of an application under sub Section (1) of Section 34 of the Act; the Court may adjourn the proceedings for a period of time determined by it in order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal will eliminate the ground for setting aside the arbitral award. It is not so in this case. A party cannot use proceedings under Section 34 of the Act to convert it into remedy of appeal, as mere erroneous interpretation of evidence or fact by the Arbitral Tribunal cannot be looked into by this Court as it will set at naught the whole purpose of the amendment of old Act i.e., The Arbitration Act, 1940. This Court under Section 34 of the Act simply has the power of annulment and not an appeal as the intent of the Act is minimal intervention by the Court in arbitral proceedings. Ld. Sole Arbitrator had categorically reasoned all the issues framed at the time of arbitration proceeding and passed OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 10 of 38 the speaking order. Petition of claimant is abuse of process of law to raise a dispute against other parties. Petitioner N prayed for dismissal of petition of claimant, also submitting that the MSMED Act itself speaks about the process of adjudication of the dispute once the conciliation proceedings stand terminated; for which Section 18(3) of The MSMED Act is to be adverted to, which makes it clear that after conciliation has been terminated by MSEFC without any settlement between the parties, the dispute is referred for arbitration, then provisions of Act shall 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 the Act. Accordingly, Ld. Sole Arbitrator had to abide by Section 18(3) of MSMED Act and adjudicate the whole claim accordingly in accordance with provisions of the Act; including that of interest under Section 31(7) of the Act. Also was averred that ledger account of respondent firm in books of accounts of claimant was not filed by the claimant with the claim petition before Ld. Sole Arbitrator; rather claimant raised premise of claim inter alia on filed invoices with the aid of the ledger account of claimant in the books of respondent firm.
9. Despite opportunities, replies were not filed by the claimant, respondent firm, respondent G, respondent R to petition OMP (Comm.) No. 12/2021 of petitioner N.
10. Claimant through Ld. Counsel argued in terms of the grounds for enhancing/modifying the impugned award. It was argued that despite admissions of respondent firm, respondent G and respondent R for receipt of goods supplied by claimant and OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 11 of 38 their inability to pay because of closure of factory due to disputes amongst partners; such categorical admission was totally brushed aside by Ld. Sole Arbitrator without giving finding on the admission which needs to be proved in terms of Section 56 of The Indian Evidence Act. It was also argued that Ld. Sole Arbitrator failed to consider that there was no difference in the amount of total payment paid by respondent firm and received by claimant and even the copy of ledger account of claimant in books of respondent firm mentioned payment due as Rs. 26,77,420/-. Claimant through Ld. Counsel argued that award amount need enhancement accordingly since Ld. Sole Arbitrator ignored Section 56 of The Indian Evidence Act and not only such ignorance was illegal but against the public policy of India. Also was argued that award be modified in respect of interest which be enhanced from 8% to 18% which is even lesser than the agreed rate @ 24% as per invoices and as per Sections 15 & 16 of MSMED Act, 2006. It was argued that award be modified and enhanced from Rs. 19,81,220/- (Principal amount) to Rs. 26,77,420/- (Principal amount) besides the interest as mentioned above. Ld. Counsel for claimant relied upon the following precedents:-
1. M/s J.K. Fenner (India) Limited vs M/s Neyveli Lignite Corporation, O.P. No. 252 of 2014 decided by Madras High Court on 20/05/2020;
2. B.B.M. Enterprises vs The State of West Bengal & Anr., Civil Appeal No. 2834 of 2020 decided by Supreme Court on 30/07/2020;
3. Post Graduate Institute of Medical Education & Research Chandigarh vs M/s Kalsi Construction Company, (2019) 8 SCC 726;
4. State of Karnataka & Ors. Vs Siddaiah, 2001 STPL 14451 SC;
5. M/s Nagori & Company vs Indian Sugar Industries Export Corporation Ltd., 1989 STPL 1824 Delhi;
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 12 of 38
6. Union of India (UOI) vs Hind Wire Industries Limited, 2007 STPL 6232 Delhi and
7. The Project Director, National Highways No. 45 E And 220 National Highways Authority of India vs M. Hakeem & Anr., Civil Appeal No. of 2021 [Arising out of SLP (Civil No.13020 of 2020)] decided by Supreme Court on 20/07/2021.
Ld. Counsel for the claimant also argued that the objections of petitioner N are devoid of merits and deserve rejection as with respect to the part of the claimed amount awarded; the impugned award is not liable to be set aside.
11. In filed written arguments on behalf of respondent firm; respondent G; respondent R; through Ld. Counsel put forth that claimant had already filed one execution petition for execution of impugned arbitral award; so separate petition under Section 34 of the Act was not maintainable and liable to be dismissed whereas claimant also concealed the factum of pendency of the execution petition for the same arbitral award from this Court. It was also averred therein that the spirit of the Act was to minimize the judicial intervention, but claimant is trying to misuse the machinery of law deliberately to harass the respondents. It was also averred that the objections do not fall in the ambit of Section 34 of the Act and are also time barred. Also was averred that Ld. Sole Arbitrator was having ample power for modification of the order but claimant surpassed the said opportunity by filing the present objections. Also was averred that Supreme Court in various judgments have expressed that interest should not be more than prevailing bank rates and in this case also the interest was awarded @ 8% per annum which was much more than the prevailing bank interest; yet claimant is seeking interest on very OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 13 of 38 higher rate which is not reasonable and shall prejudice the right of respondents. It was also averred that the present case is not the case where respondents acted deliberately and withheld the amount of claimant as it is well within the knowledge of claimant that the factory of respondents was completely shut down since year 2018 and even the property of the respondents is on the verge of auction due to non payment of bank loan.
12. Ld. Counsel for petitioner N argued that the petition of claimant for modification of impugned award is not maintainable under the Act whereas the Act make provision for the supervisory role of Courts for the review of the arbitral award only to ensure fairness, therefore, the Court cannot correct the errors of the Arbitrator rather it can only quash the impugned award leaving the parties free to begin the arbitration again if it desired. It was also argued that there is no specific power granted to the Court to itself allow the claims originally made before the Arbitral Tribunal even if the Court finds the Arbitral Tribunal erred in rejecting such claims. Remedy under Section 34 of the Act cannot be converted into an appeal whereas any erroneous interpretation of evidence or fact by the Arbitral Tribunal cannot be looked into by this Court as it will set at naught the whole purpose of the amendment of old Act i.e., The Arbitration Act, 1940 whereas the intent of the Act is minimal intervention by the Court in arbitral proceedings. Ld. Sole Arbitrator has reasoned all the issues framed with speaking order after taking into consideration all material and evidences before Tribunal. It was also argued that even under Section 18(3) of MSMED Act, after conciliation fails and stands terminated without settlement inter OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 14 of 38 se parties; then the dispute is referred for arbitration whereas provisions of the Act then apply; in accordance with which Ld. Sole Arbitrator has adjudicated the facet of interest under Section 31(7)(a) of the Act. It was also argued that claimant did not file the ledger of respondent firm in books of account of claimant; rather had relied upon the ledger of claimant in the books of respondent firm and filed it in arbitral proceedings, which reflected payment made to claimant against particular invoice numbers.
13. With respect to petition of petitioner N, Ld. Counsel for petitioner N argued in terms of above elicited grounds for impugning the arbitral award and prayed for setting aside of the impugned arbitral award accordingly.
29 An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
15. Supreme Court in Suo Moto Writ Petition (Civil) no. 3 of OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 15 of 38 2020, In Re: Cognizance For Extension Of Limitation vide order dated 10/01/2022 has excluded the period from 15/03/2020 till 28/02/2022 for computing the period of limitation for any suit, appeal, application or proceedings and the petition under Section 34 of The Act is also eligible for the same. Accordingly, the petitions (i) OMP (Comm.) No. 56/2020 filed on 05/08/2020 and (ii) OMP (Comm.) No. 12/2021 filed on 18/01/2021 are within the period of limitation
16. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 16 of 38 arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 17 of 38 three months it may entertain the application within a further period of thirty days, but not thereafter."
17. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
Also was held therein that:
"33. "...when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award....
Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
18. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of The Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 18 of 38 not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
19. In arbitral proceedings before Ld. Sole Arbitrator respondent firm, respondent R and respondent G filed Written Statement to the claim statement of claimant taking stand that payments for the supply made in year 2017 were made and the supply of goods in year 2018 was admitted wherein defence taken was that the payment was held up because the goods supplied were deficient in quality. Petitioner N filed separate reply before Ld. Sole Arbitrator to the claim petition of claimant taking mere defence that she was a partner in respondent firm for the period 20/04/2018 to 05/10/2018 and the payment for the goods supplied during this period vide invoices no. 025 dated 19/04/2018; 026 dated 25/04/2018; 027 dated 04/05/2018; 029 dated 27/06/2018 were made; hence, she did not owe any amount to the claimant. Following issues were framed by Ld. Sole Arbitrator:-
"i) Whether the respondent no. 1, 3 and 4 have paid for the supply dated 14.12.2017?
ii) Whether there was a deficiency in the goods supplied? If so, its effect?
iii) Whether respondent no. 2 was partner of the firm respondent no. 1 only from 20.04.2018 to 05.10.2018?
iv) Whether the goods supplied vide the invoices dated 19.04.2018, 25.04.2018, 04.05.2018 and 27.06.2018 stand paid for as claimed by respondent no. 2?
v) Whether the claimant is entitled to the interest claimed?
vi) Relief."
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 19 of 38
20. In adjudication of issue no. 4 after appreciating the material and evidences, oral and documentary before Arbitral Tribunal, Ld. Sole Arbitrator gave finding that the reference before him was for non payment for the goods supplied vide specific invoices and not for a claim based on running account and hence, Arbitral Tribunal cannot go beyond the reference. Ld. Sole Arbitrator also reached the finding that it was clear from ledger account Ex CW1/6 (Colly) (the copy of the ledger account of the claimant in the books of respondent firm) that out of 12 invoices, detailed in para no. 2 of claim statement, for which the payment was claimed by claimant, payments were made specially against the invoice nos. 025 dated 19/04/2018 for Rs. 2,24,200/-; 026 dated 25/04/2018 for Rs. 2,36,000/- and 027 dated 04/05/2018 for Rs. 2,36,000/-; hence, it cannot be said that these payments were made on account, as was so alleged by the claimant through Ld. Counsel. Ld. Sole Arbitrator also reached the finding that notwithstanding the admission of the liability by respondent firm, respondent G and respondent R; it must be held that payment in respect of the invoices nos. 025, 026 and 027, above mentioned, had been made. It is fact of the matter that claim of the claimant is not based upon the balance due on mutual, open and current account of respondent firm maintained in books of account of claimant in accordance with Article 1 of The Schedule of The Limitation Act, 1963. Ld. Sole Arbitrator had reached on the reasonable and plausible conclusion that the reference was for non payment for the goods supplied vide specific invoices and not for claim based upon running account. Though the claimant heavily relied upon the copy of ledger account of claimant in the books of respondent firm but so far as the appreciation of the OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 20 of 38 evidence of Ld. Sole Arbitrator is concerned, no fault can be found in any manner for his conclusion with respect to the payments received by claimant for above said invoices 025; 026 and 027, as was borne out from ledger account Ex CW1/6 (Colly) of claimant in books of respondent firm; heavily relied upon by the claimant as said ledger account depicted payment made against above mentioned invoices. When the claim of claimant was not laid for the balance due on mutual, open and current account of respondent firm in the books of claimant in terms of Article 1 of the Schedule of The Limitation Act, 1963;
claimant through Ld. Counsel cannot cry hoarse for having not been held entitled for the depicted balance outstanding payable as per the ledger account since for the reasons best known to claimant it withheld its own books of account and did not file the copy of ledger account of respondent firm in the books of claimant maintained in ordinary course of business. True that in terms of Section 19 of the Act, the Arbitral Tribunal is not bound inter alia by The Indian Evidence Act, 1872 but fact remains that the evidence which could be and is not produced would, if produced, be unfavorable to the person who withheld it. Said principle is enshrined in illustration (g) of Section 114 of The Indian Evidence Act, 1872. It also holds good in common parlance of ordinary/common course of business as well. It is not the case of the claimant that she did not maintain the books of account in ordinary course of business. Ledger account of respondent firm in books of claimant could have been produced with the claim petition and proved before Ld. Sole Arbitrator in arbitral proceedings. Nothing of sort was done. Accordingly, only course open would be that if produced, such ledger account OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 21 of 38 of respondent firm in the books of claimant, would be unfavorable to the claimant who withheld it. For Arbitral Tribunal having confined its scope of adjudication within the reference and having not traveled beyond the reference; no fault can be found in the adjudication of Ld. Sole Arbitrator for findings on the liability of respondent firm and its partners with respect to payments for invoices nos. 025; 026 and 027, above said.
21. Admitted case of petitioner N is that Partnership Deed Ex RW1/A was executed between the parties on 24/08/2017. Section 18 of The Indian Partnership Act, 1932 (in short IPA) envisages that every partner is agent of the firm for its business. As per Section 19 of IPA, the act of a partner done in the usual course of business binds the firm. No material has been put before this Court in terms of which and per contra to Sections 18 and 19 of IPA, the petitioner N can escape her liability borne out in Section 25 of IPA whereby every partner is liable jointly with all other partners and also severally for all the acts of the firm done while he/she is a partner. Petitioner N, respondent G and respondent R are partners of respondent firm. There was nothing in the Partnership Deed Ex RW1/A before Arbitral Tribunal to depict that partnership evidenced by it was not to commence till certain date i.e., 20/04/2018 or to commence on happening of event viz. petitioner N being made authorized signatory in bank account of respondent firm. Ld. Sole Arbitrator had reached the logical finding that the presumption was that the partnership came into existence on the very date of the execution of the deed Ex RW1/A on 24/08/2017 and accordingly, petitioner N cannot OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 22 of 38 claim that she became effective partner only with effect from 20/04/2018 when she was made one of the authorized signatories in the bank account of the respondent firm nor can she evade her liability as partner of partnership firm for the business of partnership firm even after 05/10/2018 on the premise of arising of disputes between the partners of the firm. Also Ld. Sole Arbitrator reached a plausible, reasonable and logical finding that claimant cannot he held to be concerned with any internal arrangement between the partners of partnership firm, of which claimant had no notice and it was so held in the context of letter Ex RW3/D addressed to SSP, Ghaziabad in a criminal case by partner of partnership firm. Ld. Sole Arbitrator had placed reliance upon the case, reported as (1957) 59 Bom. LR 1053, eliciting that it was held therein that a person who deals with a firm may or may not have any knowledge of the constitution of the firm. It was always open to him to say that when he entered into any contract with the firm he was doing so with whosoever constituted that firm on the date of the contract. He is not bound to make any enquiry. When he makes a claim against a firm, he does so as against those who were carrying on business in that name. After appreciating the material and evidences before him Ld. Sole Arbitrator had opined that there was nothing on record to show that claimant was aware of the statement made in Ex RW3/D. The claimant dealt with respondent firm and whosoever were partners on the date of contract were liable. With above observations, Ld. Sole Arbitrator had held petitioner N to be liable also being partner in the respondent firm for the award sum payable to claimant. This finding of fact by Ld. Sole Arbitrator is logical, reasonable, plausible in accordance with law and is not OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 23 of 38 against any public policy and no fault can be found with it nor on such premise there can be any inference of collusion of respondent R and respondent G to make petitioner N liable as with open eyes petitioner N entered into partnership vide Partnership Deed Ex RW1/A.
22. Sections 15, 16, 18 and 24 of The Micro, Small and Medium Enterprises Development Act, 2006 read as under:
"15. Liability of buyer to make payment.--Where any supplier, supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
16. Date from which and rate at which interest is payable.--
Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.
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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 it to any institution or centre OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 24 of 38 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.
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24. Overriding effect.--The provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force."
23. After failure of conciliation in proceedings on 12/06/2019 and 30/07/2019, conciliation was terminated and MSEFC referred the dispute between the parties to DIAC as per above elicited Section 18(3) of MSMED Act for arbitration as per the Act. Section 18 (3) of MSMED Act makes it ample clear that when conciliation stands terminated without any settlement between the parties then matter is referred for arbitration; provisions of The Arbitration and Conciliation Act, 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 the Act.
24. Section 7 (1) of the Act reads as under:-
"7 Arbitration agreement.--(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not."
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 25 of 38
25. Statement of Claim filed by claimant before Ld. Sole Arbitrator in Arbitral Tribunal is bereft of any averment for claim of interest in the manner as provided in above elicited Section 16 of MSMED Act. Pendentelite and future interest claimed in Statement of Claim by the claimant was @ 18% per annum on the claim amount of Rs 32,59,758/-. Said claim was not in accordance with the covenant of interest in the tax invoices for goods supplied as such tax invoices contained covenant of interest @ 24% will be charged if payment is not made within 60 days of issue of invoices.
26. Following is the finding on issue no. 5 by Ld. Sole Arbitrator:-
" Issue No. 5 Whether the claimant is entitled to the interest claimed?
12. The last invoice no. 029 is dated 27.06.2018. The claimant has claimed interest @ 18% p.a. w.e.f. 27.06.2018 till the filing of the claim statement (21.09.2019) on the original principal amount of Rs. 24,77,420/-. This amount has been calculated as Rs. 5,82,338/-. However, the principal amount to which the claimant has been found to be entitled is Rs. 19,81,220/-. The claim being for business deals between the parties, the claimant is entitled to interest under section 31(7) (a) of the Arbitration and Conciliation Act, 1996 on the amount of Rs. 19,81,220/- w.e.f. 27.06.2018 to 14.03.2020 (the date of award). Keeping in view the present trend of reduction in interest, the rate of 9% p.a. would be reasonable. Calculated at this rate the interest comes to Rs. 3,06,097/- (for 1 year 08 months 18 days). This amount shall form part of the award.
12.1 The claimant is also entitled to interest on the sum of the arbitral award from the date of the award to the date of payment under section 31 (7) (b) of the Act. This interest has to be two percent higher than the current rate of interest prevalent on the date of award. The latest rate of interest announced by the State Bank of India for a fixed deposit above rupees one lakh is 6%. Hence, it is ordered that the award amount of Rs.
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 26 of 38 22,87,317/- (Rs. 19,81,220 + Rs. 3,06,097) shall carry interest of 8% p.a. from the date of the award to the date of payment."
27. Section 31 (7) and (8) of the Act read as under:-
"31. Form and contents of arbitral award.--. ........................................................................ (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.
Explanation.- The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978).
(8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A"
28. In the case of Ashi Limited vs Union of India, O.M.P. 200/2015 decided by Delhi High Court on 19/05/2020, Hon'ble Ms. Justice Jyoti Singh had also appreciated law laid by Supreme Court in the case of Sree Kamatchi Amman Constructions vs The Divisional Railway Manager (Works) Palghat & Ors. MANU/SC/0625/2010 and inter alia held as follows:
"54. In so far as the grant of interest by an Arbitrator is concerned, the law is no longer res integra, Section 31(7)(a) of the Act clearly stipulates that unless otherwise agreed by the parties, where the Award is for payment of money, the Tribunal may grant such rate as it deems reasonable, on the whole or any part of the money and for the whole or any part of the period between the date of cause of action and the date of the Award. In the case of Jaiprakash Associates Ltd. (Jal) v. Tehri Hydro Development Corporation India Ltd., MANU/SC/0157/2019, the Supreme Court after noticing the provisions of the 1996 Act and various judgments on the issue of interest, more particularly, the recent judgment in the case of Reliance Cellulose Products Ltd. v.
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 27 of 38 ONGC Ltd., MANU/SC/0777/2018: (2018) 9 SCC 266, summed up the law on interest as under:
"13. Insofar as power of the arbitral tribunal in granting pre- preference and/or pendente lite interest is concerned, the principles which can be deducted from the various judgments are summed up below:
(a) A Constitution Bench judgment of this Court in the case of Secretary, Irrigation Department, Government of Orissa vs G.C. Roy exhaustively dealt with this very issue, namely, power of the arbitral tribunal to grant pre-
reference and pendente lite interest. The Constitution Bench, of course, construed the provision of the 1940 Act which Act was in vogue at that time. At the same time, the Constitution Bench also considered the principle for grant of interest applying the common law principles. It held that under the general law, the arbitrator is empowered to award interest for the pre- reference, pendente lite or post award period. This proposition was culled out with the following reasoning:
"43 The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 28 of 38 have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point).
All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas [Seth Thawardas Pherumal v.
Union of India, MANU/SC/0070/1955 : (1955) 2 SCR 48: AIR 1955 SC 468] has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case [MANU/SC/ 0004/ 1987: (1988) 1 SCC 418: (1988) 1 SCR 253] almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred."
It is clear from the above that the Court decided to fall back on general principle that a person who is deprived of the use of money to which he is legitimately entitled to, has a right to be compensated for the deprivation and, therefore, such compensation may be called interest compensation or damages.
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 29 of 38
(b) As a sequitur, the arbitrator would be within his jurisdiction to award pre-reference or pendente lite interest even if agreement between the parties was silent as to whether interest is to be awarded or not.
(c) Conversely, if the agreement between the parties specifically prohibits grant of interest, the arbitrator cannot award pendente lite interest in such cases. This proposition is predicated on the principles that an arbitrator is the creature of an agreement and he is supposed to act and make his award in accordance with the general law of the land and the agreement. This position was made amply clear in G.C Roy case in the discussion thereafter:
"44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes or refer the dispute as to interest as such to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
(d) Insofar as 1940 Act is concerned, it was silent about the jurisdiction of the arbitrator in awarding pendente lite interest. However, there is a significant departure on this aspect insofar as 1996 Act is concerned. This distinction has been spelt out in Sayeed Ahmed case in the following manner:
"Re: Interest from the date of cause of action to date of award
7. The issue regarding interest as noticed above OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 30 of 38 revolves around Clause G1.09 of the Technical Provisions forming part of the contract extracted below:
"G. 1.09. No claim for interest or damages will be entertained by the Government with respect to any money or balance which may be lying with the Government or any become due owing to any dispute, difference or misunderstanding between the Engineer-in- Charge on the one hand and the contractor on the other hand or with respect to any delay on the part of the Engineer-in-Charge in making periodical or final payment or any other respect whatsoever."
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14. The decisions of this Court with reference to the awards under the old Arbitration Act making a distinction between the pre-reference period and pendente lite period and the observation therein that the arbitrator has the discretion to award interest during pendente lite period in spite of any bar against interest contained in the contract between the parties are not applicable to arbitrations governed by the Arbitration and Conciliation Act, 1996."
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56. In the case of Union of India v. Bright Power Projects (India) (P) Ltd., MANU/SC/0712/2015 : (2015) 9 SCC 695, Supreme Court held that when agreement between the parties bars interest on the amounts from cause of action to the date of the Award, the Arbitrator is bound by it and cannot award interest as Section 31 (7)(a) clearly begins with the words 'unless otherwise agreed by parties'.
57. In State of Haryana v. S.L Arora & Co., MANU/SC/ 0131/2010 : (2010) 3 SCC 690, Supreme Court has held that it is not open to the courts to interfere in the discretion exercised by an Arbitrator in granting the rate of interest. This is purely the domain, power and prerogative of the Arbitrator. Relevant part of the judgment reads as under:-
"23. The difference between clauses (a) and (b) of Section 31(7) of the Act may conveniently be noted at this stage. They are:
(i) Clause (a) relates to pre-award period and clause
(b) relates to post-award period. The contract binds and OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 31 of 38 prevails in regard to interest during the pre-award period. The contract has no application in regard to interest during the post-award period.
(ii) Clause (a) gives discretion to the Arbitral Tribunal in regard to the rate, the period, the quantum (principal which is to be subjected to interest) when awarding interest. But such discretion is always subject to the contract between the parties. Clause (b) also gives discretion to the Arbitral Tribunal to award interest for the post-award period but that discretion is not subject to any contract; and if that discretion is not exercised by the Arbitral Tribunal, then the statute steps in and mandates payment of interest, at the specified rate of 18% per annum for the post-award period.
(iii) While clause (a) gives the parties an option to contract out of interest, no such option is available in regard to the post-award period.
In a nutshell, in regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of contract, as per discretion of the Arbitral Tribunal. On the other hand, in regard to the post-award period, interest is payable as per the discretion of the Arbitral Tribunal and in the absence of exercise of such discretion, at a mandatory statutory rate of 18% per annum."
29. The proceedings under Section 34 of the Act are summary in nature and the scope of enquiry in the proceedings under Section 34 of the Act is restricted to specified grounds for setting aside only, as was held in the case of Canara Nidhi Limited vs M. Shashikala & Ors., 2019 SCC Online SC 1244. The Court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole purpose behind holding the arbitration proceedings as an alternative to Civil Court's forum would stand defeated, as was held in the case of Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd., AIR 2002 SC 2221. An award is not open to challenge on the ground that the arbitrator had reached a OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 32 of 38 wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award; as was held by Supreme Court in the case of Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd., (2010)13 SCC 377. Reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under the Arbitration Act; as was held by Supreme Court in the case of Ispat Engineering & Foundry Works vs Steel Authority of India Ltd., (2001) 6 SCC 347. In order to provide a balance and to avoid excessive intervention, the award is not to be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence; as was held by Supreme Court in the case of P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt.Ltd. & Ors., (2012) 1 SCC 594. At global level the doctrine of 'Contra Proferentem' is generally applied by the Judges/Arbitrator in the cases where a contract appears ambiguous to them; the Judges/Arbitrator in India have appreciated and adopted similar line of reasoning in the cases involving ambiguous contract wherein it is believed that 'an ambiguity is needed to be resolved' in order to find the correct intention of the contract. If the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award and if the Arbitrator relies on a plausible interpretation out of the two possible views, then it would not render the award perverse; as was held by Supreme Court in the case of M/s Sumitomo Heavy Industries Ltd. vs Oil OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 33 of 38 & Natural Gas Commission of India, 2010 (11) SCC 296. Award is not open to challenge on the ground that the Arbitral Tribunal had reached a wrong conclusion or had failed to appreciate the facts; the appreciation of evidence by the arbitrator is never a matter which the Court considers in the proceeding under Section 34 of the Act, as the Court is not sitting in appeal over the adjudication of the arbitrator.; as was held by Delhi High Court in the case of NTPC Ltd vs Marathon Electric Motors India Ltd., 2012 SCC OnLine Del 3995. Supreme Court in the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 449 has restricted the scope of public policy, so the Court does not act as a Court of appeal and consequently errors of fact cannot be corrected. An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award; as was held by Supreme Court in the case of Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd., (2009) 10 SCC
63.
30. Section 18(3) read with Section 24 of MSMED Act makes it abundant clear that after conciliation is not successful and stands terminated without settlement between the parties and MSEFC referred the dispute for arbitration; the provisions of the Act shall apply.
31. Keeping in mind the trend of reduction in interest, Ld. Sole Arbitrator opined that rate of interest @ 9% per annum would be reasonable and so calculated interest accordingly, as above said.
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 34 of 38 Even above said logical reasoning is given for future interest in consonance with Section 31 (7) (b) of the Act, as above said.
32. Delhi High Court in case of Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games, 2014 SCC OnLine Del 4834 had inter alia held:-
34. A party like the Organizing Committee which has its claims rejected, except a part, but which subsumes into the larger amount awarded in favour of the opposite party, even if succeeds in the objections to the award would at best have the award set aside for the reason the Arbitration and Conciliation Act, 1996 as distinct from the power of the Court under the Arbitration Act, 1940, does not empower the Court to modify an award. If a claim which has been rejected by an Arbitral Tribunal is found to be faulty, the Court seized of the objections under Section 34 of the Arbitration and Conciliation Act, 1996 has to set aside the award and leave the matter at that. It would be open to the party concerned to commence fresh proceedings (including arbitration) and for this view one may for purposes of convenience refer to sub-Section (4) of Section 43 of the Arbitration and Conciliation Act, 1996. It reads: -
"43. Limitations-
(1) xxxxx (2) xxxxx (3) xxxxx (4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963, for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted."
33. Aforesaid pronouncements of Delhi High Court in the case of Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games (supra) found approval of Supreme Court in case of The Project Director, National Highways No. 45 E AND 220 National Highways Authority of India vs. M. Hakeem & Anr., Civil Appeal No. of 2021 [Arising out of SLP (Civil) No.13020 of 2020] decided on 20/07/2021.
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 35 of 38
34. Division Bench of Delhi High Court in the case of Mahanagar Telephone Nigam Limited vs Fujitshu India Private Limited, MANU/DE/0459/2015 inter alia appreciated the following law laid by Supreme Court in the case of McDermott International Inc. v. Burn Standard Co. Ltd. and Ors., MANU/ SC/8177/2006:(2006) 11 SCC 181 :-
"The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."
35. Supreme Court in the case of Kinnari Mullick & Anr. vs Ghanshyam Das Damani, Civil Appeal No. 5172 of 2017 [Arising out of SLP (Civil) No. 2370 of 2015 decided on 20/04/2017 appreciated the legal position expounded in the case of McDermott International Inc. vs Burn Standard Ltd., (supra) wherein it was observed that parliament had not conferred any power of remand to the Court to remit the matter to the arbitral tribunal except to adjourn the proceedings as provided under sub-section (4) of Section 34 of the Act. It was also held therein that the limited discretion available to the Court under Section 34(4) of the Act can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings. It is crystal clear that the Court cannot exercise this limited power of deferring the proceedings before it suo moto.
OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 36 of 38
36. Delhi High Court in the case of Steel Authority of India Limited vs Indian Council of Arbitration & Anr., LPA 103/2016 decided on 28/03/2016 placed reliance upon the decision of Supreme Court in the case of McDermott International Inc. vs Burn Standard Ltd. (supra), wherein it was held that once an award has been set aside, the parties would be free to begin the arbitration once again.
37. Precedents relied upon by Ld. Counsel for claimant are not applicable in the present case as they embody facts and circumstances entirely different and distinguishable to the facts and circumstances of case in hand. Claimant through Ld. Counsel cannot in present petition under Section 34 of the Act seek either enhancement of principal amount or interest component of award in modification of impugned award resting/laying premise over pronouncements of Supreme Court in exercise of power under Article 142 of The Constitution of India.
38. The impugned award was passed by an experienced Additional District Judge (Retired), Ld. Sole Arbitrator whereas the findings were given, based on appreciation of facts, evidences and law after giving all reasonable opportunities to the parties to present their case. Not only the reasonings of Ld. Sole Arbitrator are logical but all the material and evidences were taken note of by the Ld. Sole Arbitrator. The Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of the Ld. Sole Arbitrator, as per the law laid in the precedents, elicited herein above. Cogent grounds, sufficient reasons have been assigned by the Ld. Sole Arbitrator in reaching OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 37 of 38 the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Ld. Sole Arbitrator. The conclusion of the Ld. Sole Arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Ld. Sole Arbitrator cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the claimant and petitioner N attract Section 34 of the Act.
39. For the foregoing reasons, the petitions are hereby dismissed.
40. The parties are left to bear their own costs.
41. File be consigned to record room.
Digitally signed by GURVINDER GURVINDER PAL SINGH
PAL SINGH Date: 2022.06.09
11:41:10 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
On 09th June, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 56/2020 Smt. Usha Goel vs M/s Govind Cable Industries & Ors. and OMP (Comm.) No. 12/2021 Smt. Nirmala Devi Jindal vs Smt. Usha Goel & Ors. Page 38 of 38