Non-compliance with Section 19 of the MSMED Act can result in the dismissal of objections against an arbitral award.

JUDGMENT :

L. Narayana Swamy, J.

This Arbitration Appeal is directed against the judgment dated 29.11.2019, passed by the learned Single Judge of this Court in Arbitration Case No. 58 of 2019, whereby OMP Nos. 448 and 343 of 2019 were allowed and the objections in Arbitration case No. 58 of 2019 was held not entertain able within the ambit of the prohibition contained in Section 19 of the Micro Small and Medium Enterprises Development Act, 2006 for short ‘MSMED Act’, and for setting aside the Arbitral Reference No. 52 of 2017 being perverse, illegal and against the public policy, hereinafter referred to as the impugned judgment, on the grounds taken in the appeal.

2. Briefly stated, the facts leading to the presentation of the appeal can be stated thus. On 3.12.2017, the respondent filed a Claim Reference under the MSMED Act with the HP Micro and small Facilitation Council on the ground that the respondent have an outstanding amount of Rs.33,75,984/-, i.e., Rs.16,01,522/- as principal amount and Rs.17,74,462/- as interest against the appellant. As the name of Shri Rahul Gandhi, has been dropped by the HP Micro and Small Facilitation Council later on, thus the notice dated 4.1.2018 were issued to the appellant herein. It is stated that the appellant, after receiving the notices appeared before the Himachal Pradesh Micro and Small Facilitation Council through their counsel and obtained the copy of Reference. Since the documents annexed with the Reference Petition were not readable, the authorized signatory of the respondent sought time for providing readable documents and the same was prepared by the authorized signatory in his own handwriting and was supplied to the counsel for the appellant. The appellant sought more time to file reply but during pendency of the Reference, respondent through their authorized signatory moved another application on 18.2.2018, seeking certain additions in the main Claim Reference.

3. The appellant moved application seeking dismissal of the Claim Reference on the ground of jurisdiction, maintainability and limitation. With this application, another application was also moved for deletion of name of Sh. Rahul Gandhi in the original Claim Reference from the array of appellants. The Himachal Pradesh Micro and Small Facilitation Council on 30.6.2018 appointed the Arbitrator and referred the matter for arbitration of Shri Ravinder Prakash Sharma, a Retired District and Sessions Judge. The appellant has received notice dated 9.8.2018 whereby the respondents have totally amended the original claim by amending the same. The appellant, after receiving notice dated 9.8.2018 filed CWP No. 2006 of 2018, before this Court which was disposed of by this Court with the consent of the parties, vide order dated 22.11.2018, directing the Arbitrator to pass reasoned award, in terms of the directions contained in the said order. It is apt to reproduce the operative portion of the said order herein.

“(a) whether the Himachal Pradesh Micro & Small Enterprises Facilitation Council was competent to make the subject Reference?

(b) whether the Himachal Pradesh Micro & Small Enterprises Facilitation Council has got territorial jurisdiction to refer the dispute in the matter?

(c) who is the person responsible for making the due payment if it is found that the full payment has not been made to respondent No. 3?

(iii) The petitioner as well as respondent No. 3 shall be at liberty to submit written submissions alongwith relevant documents/part of the pleadings being referred to by them, for consideration of the Arbitrator and the same shall be kept in view while adjudicating the dispute.”

4. On 9.1.2019, the learned Arbitrator passed the award whereby the appellant was held liable to pay a sum of Rs.16,01,522/- (principal) and interest on this amount under Section 16 of MSMED Act, amounting to Rs.17,74,462 totaling to a sum of Rs.33,75,984/- with interest from the date of filing of reference, i.e., 4.1.2018 and litigation charges to the