The court affirmed that failure to consider the MSMED Act's provisions on interest constitutes a significant error, leading to the setting aside of the arbitral award.

JUDGMENT

Vibhu Bakhru, J. (Oral)

CM No. 34754/2021

1. This is an application filed by the appellant seeking condonation of delay in filing the present appeal.

2. Dr Amit George, learned counsel appearing for the respondent, fairly states that in view of the orders passed by the Supreme Court in Suo Motu Writ Petition (Civil) No.3/2020: Re: Cognizance for Extension of Limitation, the limitation stands condoned and he is not opposing the present application.

3. In view of the above, the application is allowed.

FAO (COMM) 117/2021 and CM Nos. 22615/2021, 22616/2021 & 31776/2021

4. Issue notice.

5. The learned counsel appearing for the respondent accepts notice.

6. The appellant has filed the present appeal impugning an order dated 16.12.2019 (hereafter `the impugned order') passed by the learned Commercial Court in Arb. No. 21058/2016 captioned "M/s Bhatia Engineering Company v. M/s BHEL India".

7. By the impugned order, the learned Commercial Court has allowed the respondent's application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter `the A&C Act') and set aside the arbitral award dated 29.06.2016 (hereafter `the impugned award') rendered by an Arbitral Tribunal comprising of a Sole Arbitrator (hereafter `the Arbitral Tribunal').

8. The dispute between the parties relates to payment of three items supplied by the respondent to the appellant. The appellant had placed Purchase Orders upon the respondent for supply of three totally different independent items-Y Strainers, Duplex Strainers and Conical Strainers for its Bhilai Project by a Purchase Order No. PW:PE:MM-PG-II:BHL:P-380/06 dated 20.03.2007 for Duplex Strainers and Conical Strainers and Purchase Order No. PW:PE:MM-PG-II.BHL:P-381/06 dated 13.03.2007 for Y Strainers in March 2007.

9. The respondent had raised invoices for supply of the said items. The appellant had made certain payments against the said invoices; however, the same were not for the entire amount. In addition, the respondent claimed that the payments were delayed. The respondent claimed that it had followed up with the appellant for release of the balance payments; however, the appellant had failed and neglected to clear the same.

10. In the aforesaid context, the respondent made a reference to the Micro and Small Enterprise Facilitation Council (hereafter `the MSEFC') for resolution of the disputes under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereafter `the MSMED Act') on 05.06.2013. The dispute was not resolved by conciliation. In terms of Section 18(3) of the MSMED Act, the MSEFC referred the parties to arbitration under the aegis of the Delhi International Arbitration and Conciliation Centre. Before the Arbitral Tribunal, the respondent claimed the balance unpaid amount, which according to it remained unpaid, along with interest at the rate of 27% per annum compounded monthly. The respondent claimed that it is entitled to such interest in terms of Sections 15 and 16 of the MSMED Act.

11. The Arbitral Tribunal found that the appellant had unjustifiably withheld the amount due to the respondent and awarded a sum of Rs.1,60,000/-, in favour of the respondent. The Arbitral Tribunal further awarded interest at the rate of 12% per annum from 07.10.2009 till the date of payment, in the event the amount awarded was not paid within a period of ninety days from the date of the award.

12. The respondent had assailed the impugned award to the limited extent that the Arbitral Tribunal had not allowed the respondent's claim for intere