Arbitral awards can only be set aside for patent illegality or non-compliance with statutory provisions; mere errors in application of law do not warrant intervention.

JUDGMENT :

ANU SIVARAMAN, J.

1. This Commercial Appeal is filed challenging the judgment dated 31.07.2024 passed by the LXXXII Additional City Civil and Sessions Judge, at Bengaluru (CCH.83) ('Commercial Court' for short) in Commercial Appeal No.119/2023.

2. We have heard Shri. S. Sriranga, learned Senior Counsel along with Smt. Ashwini N. Ravindra, learned counsel as instructed by Smt. Sumana Naganand, learned advocate appearing for the appellant and Smt. Lakshmi Iyengar, learned Senior Counsel as instructed by Shri. M. Jagadeesh, learned advocate appearing for the respondent.

3. For the purpose of convenience, the parties are referred to as per their rankings before the Arbitral Tribunal unless otherwise specified.

4. The opposite party, a wholly owned Government Company, invited bids on 07.03.2008 for manufacture and supply of 1000 KMS of Rabbit ACSR conductor. The contract was awarded to the claimant Company, which is registered under the Companies Act, 1956, through a purchase order dated 11.06.2009, which was accepted by the claimant on 15.06.2009. As per the purchase order, the claimant was required to supply 300 KM by June 2009 and 150 KM by July 2009, however the delivery commenced only in August 2009. Payments were arranged by the opposite party upon submission of all documents as required under Clause 4.0 of Schedule A of the purchase order (terms of payment). Subsequently, the claimant issued a letter dated 17.06.2009, alleging delay in payments and sought interest under the Micro, Small and Medium Enterprises Development Act, 2006 ('MSMED Act' for short). The opposite party denied the claim, stating that the terms of payment under the purchase order did not stipulate any time limit for payment of the bills and hence the claimant was not entitled to interest on delayed payment.

5. The claimant filed an application dated 24.05.2010 before the Micro and Small Enterprises Facilitation Council ('MSEFC' for short) alleging that the opposite party had delayed payment of bills by 200 days and sought interest on the delayed payments amounting to Rs.24,47,892/-. The matter was referred to the Arbitration and Conciliation Centre. The claimant filed a detailed claim statement claiming a sum of Rs.1,54,07,011/- and the opposite party filed its objections and a counter claim of Rs.4,04,717/- for delay in supply of materials as per Clause 11 of the Purchase Order.

6. Based on the pleadings of the parties, the Arbitrator framed the following issues:-

1. Whether the Claimant proves that either it is a Micro, Small or Medium Enterprise, as enumerated in Section 7 (1) of the MSME Act, 2006?

2. Whether the Claimant proves that it is entitled for interest as per Section 16 of the MSME Act, 2006?

3. Whether the Claimant proves that it has submitted all documents stipulated in Clause 4 of Schedule A to Purchase Order required for the Respondent to make payment?

4. Whether Claimant proves that there was delay on the part of the Respondent in making payment towards supply of Rabbit ACSR Conductor?

5. Whether the parties are entitled for interest and if so, what is the rate of interest to be awarded, on what amount and from which date it is payable?

6. Whether Claimant proves that it has not waived its right for delayed payment?

7. Whether Respondent proves that the Claimant is liable to pay penalty for delay in supply of material as per Clause 11 of the Purchase Order dated 11.09.2009?

8. Whether there should be any order as to costs and if so, what is the cost to be awarded and from whom it is recoverable?

7. On behalf of the claimant, Mr. Kaardam Patel - M.D of the company was examined as PW.1 and Exs.P1 to P.16 were marked. The opposite party did not lead any evidence.

8. The Arbitrator held that the opposite party was required not only to physically deliver the goods but also to comply with all the conditions under clause 4.0 of Schedule A. The claimant had to prove both date of delivery and the date on which the other conditions under clause 4.0 w