A party challenging an arbitral award under the MSMED Act must deposit 75% of the awarded amount, and courts will not condone delay unless sufficient cause is established.

JUDGMENT :

Somasekhar Sundaresan, J.

Context and Background:

1. The captioned primary proceedings are essentially an application seeking to challenge an arbitral award dated March 3, 2018 (“Impugned Award”) passed by the MSME Facilitation Council, Mumbai (“MSME Council”) under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).

2. The Petitioner, Larsen & Toubro Ltd. (“L&T”) seeks to challenge payment of a princely sum of Rs.44,513/- awarded to the Respondent, High Parra Construction Pvt. Ltd. (“High Parra”) with interest thereon to be computed in terms of the Micro, Small and Medium Enterprises Development Act, 2006 (the “MSMED Act”). Till date, L&T has deposited nothing despite a deposit being a statutory per- condition for any court to entertain a challenge to an arbitral award passed under the MSMED Act.

Hurdles to the Challenge:

3. That apart, the main hurdle to L&T’s challenge is the admitted delay in filing the application under Section 34 of the Arbitration Act. It is L&T’s case that the delay is within the 30-day window after the expiry of three months from the receipt of the Impugned Award. This is the time window within which it is permissible for this Court to condone delay under Section 34 (3) of the Arbitration Act, provided sufficient cause is shown.

4. As noticed above, under Section 19 of the MSMED Act, no Court shall entertain any challenge to an arbitral award passed by the MSME Council unless a deposit of 75% of the amount awarded is made. Section 19 of the MSMED Act contains a statutory embargo on entertainment of the challenge. Admittedly, L&T has not deposited a single rupee since 2018.

5. Mr. Nimay Dave, Learned Counsel representing L&T would submit that L&T is willing to make such a deposit now along with interest computed until today, within a few weeks as permitted by this Court. According to him, L&T has a strong case on merits and the delay ought to be condoned and the deposit ought to be permitted to ensure that a meritorious challenge is not shut out on these two preliminary objections.

6. Mr. Siddharth Chhabria, Learned Counsel representing High Parra would counter these submissions by indicating that there is simply no semblance of a reason in the application for condonation of delay, and that sufficient cause has not been made out.

Factual Matrix:

7. The following facts would be relevant to consider whether a delay in filing this challenge under Section 34 deserves to be condoned:-

a) The Impugned Award is dated March 3, 2018 and is passed by the MSME Council based in Mumbai;

b) The Impugned Award is for a sum of Rs. 44,513 being declared as payable by L&T to High Parra, along with interest in terms of the MSMED Act;

c) L&T, which is also headquartered in Mumbai claims to have received the Impugned Award only on April 12, 2018, nearly 40 days after the Impugned Award was passed. However, there is nothing to show the actual date of receipt of the Impugned Award;

d) Even if one were to accept L&T’s stated date of receipt, the three-month period within which a challenge is permitted under Section 36(3) of the Arbitration Act, would have expired on July 12, 2018;

e) The period of thirty days after the aforesaid three-month window, would end on August 11, 2018; and

f) This challenge under Section 34 of the Arbitration Act is said to have been filed on August 10, 2018, purporting to be just one day before the last date on which this Court wou