The Arbitral Tribunal retained jurisdiction despite the expiration of statutory deadlines, and the rejection of a belated counter-claim was justified under the Arbitration Act.

JUDGEMENT :

[SOMASEKHAR SUNDARESAN, J.]

Context and Background :

1. In this Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the Petitioner, the Maharashtra Public Service Commission (“MPSC”) has challenged an arbitral award dated December 16, 2022 (“Impugned Award”) passed in favour of the Respondent Vast India Private Ltd. (“Vast India”).

2. The Impugned Award has been passed under the statutory arbitration process conducted by the Facilitation Council (“Arbitral Tribunal”) formed under the Micro, Small and Medium Enterprises Development Act, 2006 (“MSME Act”) – Vast India is a “small enterprise” for purposes of the MSME Act.

3. MPSC’s attack on the Impugned Award is based on two specific grounds that were pressed into service by Mr. Ashutosh Kulkarni, Learned Counsel on behalf of MPSC, and reduced to writing in a cogent and articulate Note on Submissions. First, that the Impugned Award is passed belatedly, beyond the permissible deadline, and after expiry of mandate of the Arbitral Tribunal, as stipulated in the law. Second, the Arbitral Tribunal erred by deciding not to entertain the counter-claim of MPSC, which is fatal to the Impugned Award.

Factual Matrix:

4. In order to deal with the challenge posed in this Petition, a basic overview of the factual context, mindful of the scope of Section 34 of the Arbitration Act, would be in order. It may be summarised as under:-

a. MPSC floated a Tender Document for Digital Asset Management on July 20, 2010;

b. Vast India was awarded the contract on January 3, 2011;

c. The work involved scanning of 30-year old documents of MPSC under the stipulated methodology at the rate Rs. 2.63 per page, and the contract was for a three-year period;

d. According to Vast India, such work was completed by October 22, 2012, and its work was accepted without any contemporaneous complaint;

e. MPSC had a right to terminate the contract by one month’s notice, and this right was not exercised throughout the life of the contract;

f. An invoice dated January 11, 2013 was not paid, and on follow up, queries were raised by MPSC in May 2013, which were clarified in June 2013. In 2014, a server and software for conducting search on the documents was installed in MPSC’s premises, after space was provided. Training was alsoprovided to MPSC staff to use the digitised documents;

g. According to MPSC, the methodology for document retention under the Tender Conditions was not adhered to by Vast India, and it was only after May 2014 that all the files became available from Vast India. According to Vast India, the files physically returned by MPSC had not been classified on a department-wise basis, and it could not be faulted for not creating a department-wise list of files when the physical files were handed back;

h. MPSC asserted that nothing was payable to Vast India as invoiced. Vast India filed a reference before the Facilitation Council under the MSME Act in August 2018.

i. Relations turned sour, and on December 30, 2019, MPSC issued a show cause notice for black-listing of Vast India;

j. On February 13, 2020, Vast India was black-listed by MPSC;

k. Vast India filed an application on February 14, 2019 to hear its petition. Vast India claimed a sum of Rs. ~2.03 crores coupled with interest under Section 16 of the MSME Act (computed at Rs. ~8.03 crores as of the date of filing of the reference to the Facilitation Council). According to Vast India, at the agreed rate of Rs. 2.63 per page, payment for 83,31,636 pages has been made by MPSC, while the payment for 77,46,123 pages amounting to Rs. 2,03,72,303 was not paid;

l. Conciliation efforts over three meetings (with both parties present) held between May 14, 2019 and November 4, 2020, failed;

m. The matter was then taken up for arbitration by issuance of a notice of arbitration on June 10, 2021. The first arbitration hearing took place on June 17, 2021;

n. One day before before the first hearing, the Statement of Defence was filed by MPSC i.