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2024 Supreme(Cal) 1206
IN THE HIGH COURT AT CALCUTTA
SABYASACHI BHATTACHARYYA, J.
M/s. V.K. Patel and Co. - Appellant
Versus
Simplex Infrastructure Limited - Respondent
E.C. No. 391 of 2022
Decided On : 09-07-2024
For the Award-holder : Mr. Swatarup Banerjee, Ms. Sonal Agarwal.
For the Award-debtor : Mr. Sarvapriya Mukherjee, Mr. Abhishek Banerjee.
IMPORTANT POINT
The court established that under Section 16 of the MSME Act, interest must be calculated as compound interest with monthly rests at three times the RBI bank rate, allowing for variability.
Headnote:
Interest - MSME Act - Section 16, 18; Arbitration and Conciliation Act - Section 31(7) - The court interpreted Section 16 of the MSME Act as mandating compound interest with monthly rests at three times the RBI bank rate, overriding the provisions of the Arbitration Act regarding interest calculation.
Fact of the Case:
The petitioner, a partnership firm registered under the MSME Act, sought enforcement of an award for payment, disputing the method of interest calculation with the respondent, who argued for fluctuating rates.
Finding of the Court:
The court found that Section 16 of the MSME Act mandates compound interest with monthly rests at three times the RBI bank rate, and this provision overrides the Arbitration Act's interest provisions.
Issues: The main issue was whether the interest on the awarded amount should be calculated based on a fixed bank rate on the appointed day or fluctuating rates at monthly intervals.
Ratio Decidendi: The court held that the interest under Section 16 of the MSME Act is to be calculated at three times the RBI bank rate, with the rate being variable and applicable at each monthly rest.
Result: The court directed the award-debtor to pay interest calculated at variable rates as per the RBI notifications, multiplied by three, within four weeks.
JUDGMENT :
Sabyasachi Bhattacharyya, J.
1. The present application has been filed for enforcement of a money-award rendered in favour of the petitioner, which is a partnership firm, registered as an MSME unit under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as, “the MSME Act”). The compass of the present dispute is short. Whereas the award-holder/petitioner argues that the rate of interest directed to be paid in the award to the petitioner is to be calculated on the basis of the bank rate fixed by the Reserve Bank of India (RBI) as on the "appointed date", the award-debtor/respondent contends that the interest should be calculated on the basis of the fluctuating rates at different points of time as notified by the RBI from the appointed date till the date of payment.
2. Learned counsel for the petitioner argues that the MSME Act is a beneficial or welfare statute and should be given a liberal and not a strict interpretation. If capable of constructions, the one which is more in consonance with the object of the Act is to be preferred. In support of such contention, the award-holder cites Regional Provident Fund Commissioner vs. Hooghly Mills Company Limited and others, reported at (2012) 2 SCC 489 as well as a Co-ordinate Bench judgment of this Court in Bharat Heavy Electricals Limited Electric Division Vs. Optimal Power Synergy India Pvt. Ltd., reported at AIR 2021 Cal 274.
3. Learned counsel argues that the Act defines “appointed day” and the notified interest should be calculated on the basis of the rates as on such date. The word “monthly” used in Section 16 of the Act refers to compound interest with “monthly rests” and not “monthly interest”. In case the contention of the respondent is accepted, the calculation has to be made on the basis of several appointed days, taking into account notified rates at different points of time, which is completely contrary to the provisions of the MSME Act. Thus, it is argued that the calculations ought to be made at the rate which prevailed on the appointed day.
4. On the other hand, learned counsel for the respondent/award-debtor argues that Section 16 contemplates fluctuating rates to be the basis of calculation of interest. In support of such contention, learned counsel cites Government of Maharashtra v. Shrivin Pharma Pvt. Ltd., reported at 2023 SCC OnLine Cal 3482 and Usha Martin Ltd. v. Eastern Gases Ltd., reported at 2022 SCC OnLine Cal 3342, both co-ordinate Bench decisions of this Court.
5. Insofar as certain payments were made at the fixed rate as on the appointed day by the award-debtor pursuant to orders of court and undertakings given before the court, it is argued that the same cannot bind the petitioner to a fixed rate. It is argued that there cannot be any estoppel against the law, in support of which proposition learned counsel cites Krishna Rai (dead) represented through LRs and Others v. Banaras Hindu University, reported at (2022) 8 SCC 713.
6. Before delving into an adjudication of the questions involved, the language used by the Micro and Small Enterprises Facilitation Council (in short, “the Council”) in its award is required to be looked into. As per the same, the respondent/award-debtor is required to pay to the petitioner an amount of Rs.31,66,173/- “with interest on each and every due amount payable as per Section 16 of MSMED Act, 2006 till realization of the amount to the Petitioner”.
7. The expression “each and every due amount” is relatable to the different bills on which the said dues arose.
8. Thus, the Council did not calculate in details the exact amount of interest payable but merely referred to Section 16 of the MSME Act.
9. Although it has been insinuated by the parties that the exact amount of interest ought to have been calculated in the award, to be fair, there may be some justification in the Council not doing so, since the date of actual repayment being uncertain, the quantum of interest till s
