Maharrashtra State Electricity ... vs Maharashtra Conductor ...
2016 Latest Caselaw 5992 Bom

    dgm                                  1                  Judgment-app260.06.odt

               IN THE  HIGH COURT OF JUDICATURE AT BOMBAY
                   ORDINARY ORIGINAL CIVIL JURISDICTION




                                                                                
                            APPEAL NO.  260  OF 2006
                                      IN




                                                        
                      ARBITRATION PETITION NO. 29 OF 2005
                                    WITH
                     NOTICE OF MOTION (L) NO. 1368 OF 2013
                                      IN




                                                       
                            APPEAL NO.  260  OF 2006

    1      Maharashtra State Electricity Board 
           through its Chairman, having office at




                                              
           Prakashgad, Bandra (E), Mumbai - 400 051

    2
                                   
            Maharashtra State Distribution Company Ltd.
            A Public Limited Company incorporated and
            registered under the provisions of the
                                  
            Companies Act, 1956, (I of 1956) having its
            Office at Prakashgad, Bandra (E), Mumbai-51.    ....   Appellants 
                        Vs
    Maharashtra Conductor Association (SSI)
          


    having its office at 45, Ratan Jyoti Industrial
    Estate, Irla Lane, Vile Parle (W), Mumbai - 56
       



    through its President, Shri Jitendra Dalal
    having address at Kamal Kunj, First Floor,
    Block No. 8, Vithalbhai Patel Road,





    Andheri (West), Mumbai.                             ....    Respondent


    Mr. Prashant Chavan, Mr. Nirav Shah, Ms. Reshma Nathani i/b Little & 
    Co., for the Appellants.
    Mr. S.S. Voditel, for the Respondent.





                                     CORAM:    ANOOP V. MOHTA AND 
                                               G. S. KULKARNI,  JJ. 

RESERVED ON : 12 July 2016 PRONOUNCED ON : 14 October 2016

dgm 2 Judgment-app260.06.odt

JUDGMENT (PER - ANOOP V. MOHTA, J.):-

The Appellants being aggrieved by the judgment/order

passed by the learned Single Judge, dated 27 September 2005

whereby the Award passed by the learned Arbitrator dated 30 April

2004 is set aside only restricted to Point Nos. 4, 8 and 11, as

challenged.

The important part of the learned Single Judge order is as

under :

In my opinion, therefore, it cannot be said that the Award is satisfied and therefore, the petition is not maintainable.

In the result therefore, the present petition succeeds and is allowed. The findings recorded and the Award made by the

learned Arbitrator in the impugned Award against point no. 8 is set aside. The Award made by the learned Arbitrator in so far as interest at the rate of 10% per

annum for the period subsequent to 26.04.2001, is set aside. Similarly, the Award made against point no. 11 by the learned Arbitrator is set aside. The respondent is directed to pay cost of this petition to the petitioner as incurred by the petitioner.

It is also observed in para 5 as under :

"5 .....The fixation of rate of interest at 10% per annum without disclosing any reason in the aforesaid circumstances, is totally unjustified and therefore, the Award in this regard is liable to be set aside. Section 31

dgm 3 Judgment-app260.06.odt

(7)(b) of the Arbitration & Conciliation Act, 1996 lays down that if no interest is awarded by the Arbitrator then for the period from the date of the award till the

date of payment, interest at the rate of 18% per annum can be recovered. Therefore, it is for the petitioner to

decide what course of action they want to adopt."

3 The background of this litigation, is as under:

The appellants floated two tenders being Tender No. T-

0901 and Tender No. T-0805 for supply of conductors. The tenders

submitted by the members of the Respondent were accepted by the

Appellants for various quantities. In the month of March 2001, the

four members of Respondent namely, (i) Patrik Conductors Pvt. Ltd.

(ii) Galaxy Cables Industries (iii) Dattatraya Cables Pvt. Ltd. (iv)

Reliance Cables and Conductors Private Ltd., who were not in position

to complete the orders requested for a termination of contract with no

liability on either side. In April/September the Appellant considered

the request/offer of the aforesaid four (4) Members of the Respondent

and cancel the contract for balance quantity, without any financial

liability on either side.

4 On 27 April 2001, the Respondent filed Writ Petition No.

1347 of 2001 claiming an interest on delayed payment against the

dgm 4 Judgment-app260.06.odt

Appellants under the Interest on Delayed Payments to Small Scale and

Ancillary Industrial Undertakings Act, 1993 ("the Act"). On 10

December 2002, consent terms were filed in the Writ Petition

referring the claims of the respective Members of the Respondent only

on interest issues under the Act, to Arbitration. Between January

2003 to April 2004, the statement of claims - reply were filed by the

parties. The impugned award was dated 30.04.2004 passed after

the conclusion of arguments. The Award challenged in Arbitration

Petition was as set aside by the learned Judge to the extent as set out

above - hence this Appeal.

5 The Respondents had also challenged part of the Award

on some other issues by filing Arbitration Petition No.328/2004 prior

to August 2004, through the same Advocate. The same was dismissed

on 30 August 2004 after hearing the parties. The Appellants came to

know about Arbitration Petition No.328/2004 only on 20 January

2005. The Appellants filed affidavit dated 5/2/2005 in Arbitration

Petition No.29/2005 and opposed the same. The Respondents in

rejoinder affidavit admitted the receipt of the amount of the Award

without any reservation.

     dgm                                   5                         Judgment-app260.06.odt




    6                The   written   submission   are   filed   on   behalf   of   the 




                                                                                       

Appellants along with judgments and by the Respondent. The

judgments relied by the learned counsel appearing for the Respondent

are - (i) Snehadeep Structures Private Limited Vs. Maharashtra Small-

Scale Industries Development Corporation Limited 1 (ii) Modern

Industries Vs. Steel Authority of India Limited 2 and (iii) R.S. Jiwani

(M/s.), Mumbai Vs. Ircon International Ltd., Mumbai 3. The judgments

relied by the learned counsel appearing for the appellant are - (i)

Commissioner of Customs, Mumbai Vs. Virgo Steels, Bombay and

Another 4 (ii) Babulal Badriprasad Varma Vs. Surat Municipal

Corporation & Ors.5

7 Both the parties have read and referred Section 4 of the

Act.

"4. 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 3, the buyer shall notwithstanding anything contained in any

1 (2010) 3 SCC 34 2 (2010) 5 SCC 44 3 2010 (1) Mh.L.J. 547 4 (2002) 4 SCC 316 5 AIR 2008 SC 2919

dgm 6 Judgment-app260.06.odt

agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest 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 one-and-a-half time

of Prime Lending Rate charged by the State Bank of India."

8 The relevant points determined by the learned Arbitrator

and dealt with by the learned Single Judge are as under :

"4 Whether the claimants establish the claim for payment

of interest in accordance with the provisions of the Act, if so, the quantum?"

"8 Whether four members of the Claimants, namely,

(i) Patrik Conductors Pvt. Ltd.

(ii) Galaxy Cables Industries,

(iii) Dattatraya Cable Pvt. Ltd.

(iv) Reliance Cables and Conductors Private Ltd.

are entitled to raise the claim for interest in respect of the Contract No. T-0901?"

"11 Whether the claimant is entitled to interest lite and future interest on the amount found due and if so at what rate?"

9 From the reading of Section 4 so reproduced above, the

Act and in view of the mandate of the specific wording of the

provisions namely, "Notwithstanding anything contained in any

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agreement between the buyer and the supplier or in any law for the

time being in force". The buyer, if fails to make payment of the

amount to the supplier as required under Section 3, he is liable to pay

interest, as per law from the appointed day, at one-and-a-half time of

Prime Lending Rate charged by the State Bank of India.

10 With reference to issue no. 4, the learned judge has set

aside the award of interest at the rate of 10% per annum from 26

April 2001. We are not in agreement with the view taken by the

Arbitrator, in so far as non grant of interest as per Section 4 of the Act

merely because of filing of Petition by the Respondent Association.

There was no interim relief in favour of the Appellant. Ultimately, in

view of the arbitration clause in agreement, the matter was referred to

the Arbitral Tribunal through the consent terms. The interest rate

should have been as per the provisions of law. The learned judge has

not granted and/or passed order in this regard. It is left to the parties

to ascertain the prime lending rate charged by the State Bank of India,

at the relevant time. The delay in claiming the rate of interest was an

important aspect, which the learned Arbitrator has considered. But

the rate cannot be less than the Section 4 requirement.

     dgm                                  8                       Judgment-app260.06.odt



    11              The   Apex   Court   in   "SRI   Paravathi   Parmeshwar   Cables  




                                                                                     

and Others Vs. Andhra Pradesh Transmission Corporation Limited

and Another 6 has maintained, affirmed and applied the Supreme

Court judgment in Snehadeep Structures Private Limited Vs.

Maharashtra Small-Scale Industries Development Corporation Limited

(Supra) and Modern Industries Vs. Steel Authority of India Limited

(Supra) with regard to the mandate of the Act in question. The Apex

Court in, M/s. Purbanchal Cables & Conductors Pvt. Ltd. Vs. Assam

State Electricity Board & Anr. 7 held that the Act is applicable to the

transaction enter into after coming in force the amended provision of

right of supplier to pay interest at higher rate. The cause of action of

this matter arose on 24.11.2005.

12 Therefore, though there exists the agreement between 4

members of the Petitioners and as they agreed to cancel the contract

for supply of balance quantity, these members waived their right to

receive interest under Section 4 of the Act is unacceptable. There was

no question of waiver of any rights to receive interest specifically

6 (2013) 10 SCC 693 7 AIR 2012 SC 3167

dgm 9 Judgment-app260.06.odt

when admittedly there was no payment made in time so fixed. That

itself should result into entitlement of interest as per provision of

Section 4. The decision so arrived at by the parties and agreed to

cancel the contract for supply of balance quantity, that itself, in our

view, should not be read to mean that the supplier who admittedly

did not receive payment in time and lost their rights or entitlement of

statutory interest on the delayed payment. The seller, having once

supplied the goods, are entitled for the amount in time and if payment

is delayed by the buyer, the interest as per the Act/provisions should

follow. The view taken by the learned Single Judge is correct on this

point and need no interference.

13 In so far as point nos. 8 and 11 with regard to entitlement

of claim of interest rate and future interest on the amount due and if

so, at what rate, whereby the learned Arbitrator has directed the

payment of interest @ of 10% per annum for the period subsequent to

26 April 2001 from the date of Award till the date of realization is also

got set aside. This resulted into setting aside of the Award passed by

the learned Arbitrator on interest on all counts i.e. issue no. 8 and 11.

dgm 10 Judgment-app260.06.odt

However, the remaining part of the Award on other points remain

undisturbed.

14 Taking overall view of the matter, we would have

remanded the matter back for reconsideration on limited issue.

However, when inquired and as noted, inspite of the order passed by

this Court permitting the parties to approach afresh for the interest

part, as observed, no steps whatsoever have been taken by the

Appellants and as no course they have adopted till this date on the

aspect of interest as per the provisions of the Act. Therefore, in these

circumstances, we see no reason to interfere with the order so passed,

to avoid further delay to the proceedings. Let the parties, as already

ordered, decide the course of action in this regard.

15 The Appeal and Notice of Motion are accordingly

dismissed. No costs.

    (G. S. KULKARNI, J.)                           (ANOOP V. MOHTA, J.)