Bharat Heavy Electricals Limited vs Optimal Power Synergy India ...
2023 Latest Caselaw 820 Cal/2

                        IN THE HIGH COURT AT CALCUTTA
                         Ordinary Original Civil Jurisdiction
                                  ORIGINAL SIDE
Present :-

THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA

                              A.P. No. 175 of 2020

               Bharat Heavy Electricals Limited, Electronics Division
                                           Vs.
                     Optimal Power Synergy India Private Limited


For the petitioner                     :         Mr. Jishnu Saha, Sr. Adv.
                                                 Mr. Ishan Saha, Adv.
                                                 Mr. Touseef Khan, Adv.
                                                 Mr. Arindam Pal, Adv.

For the respondent                     :         Mr. Tilak Bose, Sr. Adv.
                                                 Mr. Rohit Mukherjee, Adv.
                                                 Mr. G.P. Shaw, Adv.
                                                 Mr. Gourav Kumar, Adv.


Last Heard on                          :         13.03.2023.



Delivered on                           :         29.03.2023.


Moushumi Bhattacharya, J.

1. The petitioner has made an application under section 34 of The

Arbitration and Conciliation Act, 1996 for setting aside of an Arbitral Award

dated 24.9.2019 which was communicated to the petitioner under cover of a

letter dated 7.11.2019. The impugned Award was passed by the West Bengal

State Micro Small Enterprises Facilitation Council before which the petitioner

was the respondent / buyer. The impugned Award was passed on an

application made by the supplier unit which is the respondent before this

Court.

2. By the impugned Award, the respondent's claim of supply of materials to

the petitioner (buyer) and performing the work as per the order of the petitioner

was established. The petitioner was accordingly held liable to pay the total

outstanding principal amount of Rs. 61,08,654/- together with the interest on

the said amount at 3 times of the Bank rate of the RBI compounded with

monthly rests to the respondent under section 16 of The Micro, Small and

Medium Enterprises Development Act, 2006. The respondent was directed to

submit its claim of interest on the principal amount to the petitioner duly

certified by a Chartered Accountant along with the claim of the outstanding

principal amount. The petitioner was directed to pay the amount within 30

days from the date of submission of the respondent's claim failing which the

respondent would be entitled to realise the amount in accordance with law.

3. The petitioner / buyer unit i.e., the respondent before the Council, has

challenged the Award on primarily the ground that the petitioner was deprived

of a sufficient opportunity of presenting its case and that the Award suffers

from unequal treatment of the parties. Learned counsel appearing for the

petitioner submits that the impugned Award suffers from non-application of

mind and a failure to take admitted facts into account. Counsel further

submits that the Award is devoid of reasons and does not establish any nexus

between the facts presented by the respondent and the denial thereof by the

petitioner. Counsel urges that the Award is such that it would shock the

conscience of this Court and is hence liable to be set aside.

4. Learned counsel appearing for the respondent / supplier seeks to defend

the impugned Award on the ground that it is a reasoned Award. Counsel places

several provisions of the MSMED Act, 2006 to urge that the rate of interest

awarded is strictly provided under the Statute. Counsel relies on a list of dates

to show that the petitioner had sufficient notice of the proceedings at all

relevant times and that there was no breach of the principles of natural justice.

Counsel places emphasis on the fact that the petitioner did not attend any of

the conciliation proceedings but was represented in the arbitration and also

filed its counter-claim to the claim of the respondent without any documents in

support thereof.

5. The petitioner's case, as expressed from the submissions of counsel and

the notes of argument, shows that the impugned Award has been challenged

on several grounds. The decision of this Court is given on each of these

grounds with reference to the specific heads of challenge.

Jurisdiction of the Tribunal

6. Section 18(1) of the MSMED Act, 2006 enables a party to make a

reference to the Micro and Small Enterprises Facilitation Council provided the

reference is made by a party to a dispute with regard to an amount due under

section 17 of the Act. The Supreme Court in Gujarat State Civil Supplies

Corporation Ltd. v. Mahakali Foods Pvt. Ltd.; 2022 SCC OnLine SC 1492,

construed section 18(1) to be an enabling provision which gives an option to a

party to a dispute covered under section 17 of the Act to approach the

Facilitation Council despite an arbitration agreement existing between the

parties.

7. Moreover, section 18(4) of the Act begins with a non-obstante clause and

provides that the Facilitation Council shall have jurisdiction to act as an

Arbitrator and Conciliator in a dispute between a supplier located within the

jurisdiction of the Council and the buyer located anywhere in India. In the

present case, Optimal/supplier (respondent before this Court) is based in

Kolkata. Hence, the Facilitation Council in West Bengal had jurisdiction to deal

with the dispute. The purchase orders of the petitioner were also sent by the

petitioner/buyer to the supplier respondent at his office in Saltlake, Kolkata.

8. Moreover, the statutory mechanism under section 18(1) is therefore

triggered by any party who is a party to the dispute and would override any

other agreement entered into between the parties in view of the non-obstante

clauses in section 18(1) and (4) of the MSMED Act.

9. The objection taken on behalf of the petitioner with regard to the

jurisdiction of the Facilitation Council is hence rejected.

10. The connected objection taken by the petitioner that the conciliator

cannot be the arbitrator has also been answered by the Supreme Court in

Gujarat State Civil Supplies Corporation Ltd. where it was held that although

section 80 of The Arbitration and Conciliation Act, 1996 stipulates that unless

otherwise agreed by the parties, the conciliator shall not act as an arbitrator in

any arbitral proceedings in respect of the dispute that is the subject matter of

the conciliation proceedings, the statutory bar is superseded by section 18 of

the MSMED Act read with section 24 of the said Act. Section 24 of the MSMED

Act provides that sections 15-23 of the said Act shall have effect

notwithstanding anything inconsistent to the said provisions contained in any

other law for the time being in force.

11. Moreover, section 18(3) of the MSMED Act provides that where the

conciliation under section 18(2) fails, the Council shall take up the dispute

thereafter for arbitration either by itself or refer the dispute to any institution

for such arbitration and the provisions of the Arbitration and Conciliation Act,

1996 shall apply to the dispute. The Supreme Court in Gujarat State Civil

Supplies Corporation Ltd. also held that the Facilitation Council acting as an

arbitral tribunal in pursuance of section 18(3) of the MSMED Act would be

competent to rule on its own jurisdiction like any other arbitral tribunal under

section 16 of the 1996 Act.

Notice of the proceedings/the petitioner was not able to present its case

12. A tabulated statement of the particulars of the notice of proceedings was

placed before the Court. The statement starts from 29th August, 2017 when the

respondent commenced a reference under the MSMED Act before the

Facilitation Council and the Council issued a notice for holding the second

conciliation meeting between the parties. The statement ends with 24th

September, 2019 when the 5th sitting of the arbitration was held and attended

by both the parties and the petitioner filed an application for termination of the

arbitration proceedings. The particulars of proceedings show that the Council

held at least two conciliation meetings on 24th January and 27th March, 2018

when the petitioner was absent. The Council issued a letter on 26th June, 2018

to inform the parties about the termination of the conciliation proceedings and

commencement of the arbitration proceedings and directed the respondent to

file its statement of facts within 7 days from receipt of the letter and the

petitioner to file its statement of defence within 10 days after receiving the

statement of facts.

13. The 1st sitting of the arbitration was held on 28th August, 2018 where the

petitioner was given 15 days to file its defence and directed to ensure presence

of its representative who has technical knowledge in the matter. The 2nd sitting

of arbitration was held on 4th October, 2018 when again both the parties were

represented followed by the 3rd sitting on 24th April, 2019. The Minutes of the

proceeding was shared with the respondent on 12th June, 2019 as well as the

copy of the Minutes of the proceeding held on 24th April, 2019. The parties

were again informed by way of a notice that the 5th arbitration sitting would be

held on 24th September, 2019. The petitioner filed an application for

termination of the arbitration proceedings on 24th September, 2019 at the 5th

sitting. The particulars in the statement would suggest that the petitioner was

given notice of the arbitration proceedings at all relevant points of time and

that the petitioner was not represented during the conciliation proceedings.

14. Further, the Minutes of the proceedings record that (a) the petitioner did

not attend any of the conciliation meetings / proceeding but appeared

throughout the arbitration; (b) the petitioner submitted its counter claim at the

3rd hearing but without any supporting document; (c) the petitioner had

informed of filing the proceedings before this Court as also that there was no

stay granted in respect of the arbitration. The impugned Award also records in

the course of the proceedings held on 24th September, 2019 that the Council

decided to proceed to deliver the arbitral award under section 31 of the 1996

Act.

15. It may be relevant to point out at this stage that the petitioner filed an

application under Article 227 of the Constitution before this Court on 24th

April, 2019 which was disposed of on 27th September, 2019 without interfering

with the arbitration or the award passed by the Council. The order of the High

Court was communicated to the Council only on 16th October, 2019.

The petitioner contends violation of the principles of natural justice

16. The said contention is rejected for the following reasons:

(a) The Council informed the parties on 26th June, 2018 about the

commencing of arbitration and directed the respondent to file its

statement of facts within seven days and the petitioner to file its

statement of defence within 10 days thereafter.

(b) The respondent filed its statement of facts on 10th July, 2018 which

was sent to the petitioner on the same date.

(c) The Council directed the petitioner on 28th August, 2018 to file its

statement of defence within 15 days.

(d) The preliminary objections raised by the petitioner were considered

and rejected on 24th April, 2019. The petitioner was given time to submit

its counter-claim and other necessary documents. The Minutes record

that the petitioner's failure to submit documents would result in a final

decision on the basis of oral deposition.

(e) The petitioner again attempted to obfuscate the contents of a mail

sent by the respondent on 10th May, 2019 where the respondent had

requested for correction of a typographical error in recording of the

arbitration proceedings held on 24th April, 2019. This correction was duly

noted and corrected in the Minutes supplied to both the parties in June,

2019. The petitioner did not make any further complaints with regard to

the Minutes circulated by the Council.

(f) The petitioner sought to file a counter-claim beyond the prescribed

time. However, the Council permitted the filing of the counter-claim. The

petitioner's Advocate also sought inspection of the records which was

allowed by the Council. The petitioner sought time to file its submission

on 29th August, 2019 and the Council recorded that the petitioner would

be required to bring a technical person to represent its case failing which

the Council would pronounce a decision on the basis of the existing

records.

17. The facts and documents placed before the Court including the Minutes

of proceedings in the conciliation followed by the arbitration conducted by the

Council fails to substantiate the arguments made on behalf of the petitioner of

violation of the principles of natural justice. The Minutes of the 1st sitting held

on 28th August, 2018 and the 2nd sitting held on 4th October, 2018 do not

substantiate any of the allegations made on behalf of the petitioner that the

Minutes were not circulated to the petitioner. The alleged irregularities in any

event were cured by 6th March, 2019 when the certified copies of the

proceedings of the Minutes were given to the petitioner.

18. It should also be noted that the respondent found certain discrepancies

in the Minutes held on 24th April, 2019 and sought for correction of the same

by a mail dated 10th May, 2019 which was thereafter corrected and the

corrected copies of the Minutes held on 24th April, 2019 was sent to both the

parties by a letter dated 10th June, 2019. Even assuming that the petitioner

had a case, the petitioner failed to raise any objection before the Council at

next meeting held on 29th August, 2019 or even at any other subsequent

meeting with regard to any alleged procedural irregularity. Significantly, the

petitioner's Advocate, after receiving the corrected Minutes of 24th April, 2019,

sent a mail on 18th June, 2019 to the petitioner seeking instructions in the

matter to make appropriate submission on the next date of hearing.

Constitution of the Tribunal :

19. The petitioner has also raised an objection to the composition of the

Tribunal as its constituent members were allegedly changed in violation of the

settled principle that the person who has heard the dispute must decide it.

Contrary to the allegation, the impugned Award has been signed by 5 members

of the West Bengal State Micro Small Enterprises Facilitation Council. Rule 16

of the West Bengal Micro and Small Enterprises Facilitation Council Rules,

2016 states that the Council is to make an award in accordance with section

31 of The Arbitration and Conciliation Act, 1996. Section 31 of the 1996 Act

states that an award is to be signed by the members of the arbitral tribunal

and the signatures of the majority of the members of the tribunal will be

sufficient when the arbitral proceedings has more than one arbitrator. Section

21(1) of the MSMED Act provides that the Council shall consist of not less than

3 but not more than 5 Members. The Award indicates that the 2 hearings for

conciliation before the Council on 24th January, 2018 and 27th March, 2018

failed by reason of the non-appearance of the petitioner. The Council thereafter

held 5 sittings on 28th August, 2018, 4th October, 2018, 24th April, 2019, 29th

August, 2019 and 24th September, 2019. The Award also reflects that only on

one occasion, that is at the second sitting held on 4th October, 2018, the

Chairman of the Council had to leave the meeting midway as a result of which

the Council could not take any decision on that date. It may further be noted

that the Council is always represented by a Chairperson who is appointed

under section 21(2) of the MSMED Act. The Facilitation Rules are also relevant

in this context.

20. On the factual score, the first 3 Arbitration sittings had one Vijay Bharti

as the Chairperson who ceased to be the Chairperson on and from the fourth

Sitting held on 29th August, 2019. The 4th and 5th sittings had Anurag

Srivastava as the Chairperson. Although, names of different members of the

Council have been printed in the Award, the name of the Chairperson has not

been printed in the Award. In any event the Chairperson of the Council, who

signed the final Award attended at least 2 dates of the hearing in the arbitral

proceedings.

21. The objection taken on behalf of the petitioner with regard to the

constitution of the Council affecting the principles of natural justice is hence

without any basis and is accordingly rejected.

Limitation :

22. The present petition for setting aside of the impugned award dated 24th

September, 2019 does not contain any grounds with regard to limitation. In

any event, the allegation made in the petition would show that the claim of the

respondent/supplier is essentially for recovery of the retention amount which

was payable 3 years after installation of the equipment. The invocation of the

facilitation was done as early as in 2017.

The impugned Award is a reasoned Award:

23. The impugned Award is not only replete with reasons but also segregates

the claim of the respondent supplier against the petitioner under the 8 projects

for which the respondent made supplies to the petitioner in accordance with

the purchase orders individually issued for the 8 projects. The Award goes into

details of the claims of the respondent/ supplier for retention and completion

of the projects at Bangalore, Bhilai, Kanchipuram and also the claim for

Bareilly, Rawra, Raichur and Lakshadweep Island.

24. The specific amounts claimed are mentioned against each of the heads

together with the response of the petitioner / buyer (or the lack of it) to the

claim. The Award also notes that the supplier completed the work as per the

specification of the purchase orders and the counter-claim of the petitioner

particularly with regard to Rawra or the allegations for loss of energy

generation for equipment for Bareilly or non-performance of the supplier for

Lakshadweep were without basis. The Award has gone into the particulars of

each claim, the claim of the respondent, counter-claim or response/denial by

the petitioner and recorded the finding under each of the 8 claims. The Award

also notes that the petitioner was given sufficient opportunity to substantiate

its claim but failed to establish the same.

25. This Court is of the view that the impugned Award does not leave any

space for interference. It is well settled that the Court exercising jurisdiction

under section 34 of The Arbitration and Conciliation Act, 1996, does not sit in

appeal over the decision of the Arbitrator / Tribunal. It is not the business of

the Court to reappraise the evidence or review the merits of the dispute: refer

section 34(2)(b) Explanation 2 and the proviso to section 34(2A).

The Award of interest :

26. The Arbitral Tribunal directed for payment of interest on the principal

amount awarded in terms of section 16 of the MSMED Act. The earlier petition

filed by the petitioner for stay of the impugned Award can be referred to in this

context. This Court had considered the argument of the petitioner that the

Award of interest is vague, uncertain and non-executable. The petitioner's

argument had earlier been rejected by the judgment dated 1.9.2021. The

computation made by the Chartered Accountant of Rs. 2,78,88,228/- as

directed in the Award was furnished by the respondent to the petitioner and

the petitioner did not dispute the computation. It was further found that the

amount of Rs. 2,78,88,228/- payable by the petitioner to the respondent was

made from the date of the invoices as opposed to the date of delivery of the

goods by the respondent to the petitioner. Hence, the total outstanding amount

inclusive of interest would have been substantially higher had the interest been

calculated from the date of delivery of goods which were made pursuant to the

purchase orders from 2011-2014. The dispute raised by the petitioner on the

alleged confusion of the "appointed day" under section 2(b) of the Act was also

found to be self-defeating as the total of the outstanding amount together with

interest would increase many times over if the appointed day is taken from the

date of actual delivery of the goods.

27. The objection of the petitioner to the rate of interest imposed by the

Award should also be rejected since section 16 of the MSMED Act specifically

provides for the same. Section 16 of the Act takes into account a buyer's failure

to make payment of the amount due to the supplier under section 15 of the

Act and the buyer notwithstanding anything contained in any agreement

between the buyer and the supplier or in any law for the time being in force

would be liable to pay the compound interest and monthly rests to the supplier

on the amount from the appointed day or from the date immediately following

the date agreed upon at 3 times of the bank rate notified by the RBI.

28. The petitioner and the respondent, as the buyer and supplier

respectively, fulfill the criteria to come within the operation of sections 15 and

16 of the MSMED Act, the object of which is to facilitate the promotion and

development of Micro, Small and Medium Enterprises and to enhance their

competitiveness.

29. The judgment delivered by the Court in the application filed by the

petitioner came to certain specific findings with regard to the petitioner failing

to make payment to the respondent and the consequent imposition of interest

on the petitioner. The Court accordingly did not find any error in imposition of

the interest at three times of the bank rate notified by the RBI. The present

proceeding relates to stay of the Award which was also the subject matter

before the Court in the earlier application. The petitioner has not been able to

place any material for the Court to take a different view from the judgment

pronounced or to differ from the reasons contained therein. In any event,

sections 15 and 16 are in keeping with the object of the MSMED Act where a

defaulting buyer who fails to make payment to a supplier, is put to task and to

compensate the loss caused to the supplier for the intervening period.

30. The above discussion would show that the impugned Award dated

24.9.2019 cannot be assailed under section 34 of the 1996 Act. The petitioner

has not made out or established any ground to seek recourse for setting aside

of the impugned Award under any of the grounds available to the petitioner

under section 34 of the 1996 Act. All the points raised by the petitioner are

contrary to the special statute enacted by the Parliament namely the MSMED

Act, 2006 as well as The Arbitration and Conciliation Act, 1996 and this Court

accordingly finds no reason to interfere with the reasoned Award.

31. On the relevant factual score, the respondent supplier remains unpaid

till date for supplies made to the petitioner between 2011-2014 and despite an

Award of 24.9.2019. This is indeed a sorry state of affairs and in stark

contradiction to the object which the MSMED Act, 2006 sought to promote and

protect. The respondent is a medium-scale business running from one

proceeding to another for recovery of its dues.

32. An award under The Arbitration and Conciliation Act, 1996, is akin to a

decree in a suit and indicates finitum- an end to proceedings. The Act

reinforces curtailing of interference in a challenge to an award on the necessary

logic of the award being a final view on the merits of the dispute before the

arbitral tribunal. The legislature could certainly not have contemplated

proceedings ad infinitum where the award-holder is put through the

hierarchical grind of proceedings without finality in sight. In the present case,

the petitioner is waiting - 4 years on- for that finality despite having an Award

and an order of execution in its favour.

33. It is also evident from the series of proceedings filed by the petitioner that

the petitioner is desperate to deny payment to the respondent or to delay the

same as long as the petitioner is able to under the garb of proceedings pending

before a Court of law. All the grounds raised in the petition are frivolous and

aimed solely at keeping proceedings alive before this Court.

34. AP 175 of 2020 is accordingly dismissed with costs of Rs. 5 lakhs on the

petitioner which is to be paid to the respondent within 10 days from the date of

this judgment.

35. The prayer for stay made on behalf of learned counsel appearing for the

petitioner is considered and refused for the reasons stated in the judgment.

Urgent photostat certified copies of this judgment, if applied for, be

supplied to the parties upon fulfillment of requisite formalities.

(Moushumi Bhattacharya, J.)