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2024 Supreme(Mad) 431
IN THE HIGH COURT OF JUDICATURE AT MADRAS
R. Subramanian, R. Sakthivel, JJ.
Nellai Concrete Products & Constructions Co. Pvt. Ltd. – Appellant
Versus
Union of India, Rep. by its Secretary, Ministry of Railway, New Delhi and Others – Respondents
Original Side Appeal No. 100 of 2020 CMP. No. 4615 of 2020
Decided On : 11-03-2024
Advocate Appeared:
For the Appellant :E. Manoharan, Advocate.
For the Respondent:P.T. Ramkumar, Advocate.
Headnote:
Arbitration - Interest - Arbitration and Conciliation Act 1996 - Clauses 503 & 504, Clauses 2401 & 2403 of IRS conditions - The appellant was awarded a contract for supply of Concrete Sleepers to the Railways. Disputes arose, and an Arbitrator was appointed. The Arbitrator rejected most claims but directed the refund of the security deposit with interest. Railways challenged the interest portion alone under Section 34 of the Arbitration and Conciliation Act. The Single Judge set aside the interest portion, relying on Clauses 2401 and 2403 of IRS conditions. The appellant contended that Clauses 503 & 504 on forfeiture of security deposit should apply. The Court held that the appellant was entitled to interest as granted by the Arbitrator, and the MSME Act did not apply to the appellant.
Fact of the Case:
The appellant was awarded a contract for supply of Concrete Sleepers to the Railways. Disputes arose, and an Arbitrator was appointed. The Arbitrator rejected most claims but directed the refund of the security deposit with interest. Railways challenged the interest portion alone under Section 34 of the Arbitration and Conciliation Act.
Finding of the Court:
The Court found that the appellant was entitled to interest as granted by the Arbitrator, and the MSME Act did not apply to the appellant.
Issues: The issues included the applicability of Clauses 503 & 504, Clauses 2401 & 2403 of IRS conditions, and the entitlement of the appellant under the MSME Act.
Ratio Decidendi: The Court held that the appellant was entitled to interest as granted by the Arbitrator, and the MSME Act did not apply to the appellant.
Final Decision: The Appeal was allowed, the order of the learned Single Judge setting aside the portion of the award granting interest to the appellant was set aside, and the entire award stood restored. The liberty granted to the appellant to move the MSME Council was also set aside. The parties shall bear their own costs in this Appeal.
JUDGMENT :
R. Subramanian, J.
(Prayer: Original Side Appeal filed under Order XXXVI Rule 1 of the Original Side Rules read with Clause 15 of Letters Patent, to set aside the judgment and decree dated 11.12.2018 in OP. No.1022 of 2017.)
1. Challenge in this Appeal is to the order of the learned Single Judge passed in exercise of the powers conferred under Section 34 of the Arbitration and conciliation Act 1996, in and by which, the learned Single Judge set aside the award of the Arbitrator with reference to the interest portion alone.
2. The brief facts that led to the challenge to the award are as follows:
The appellant was awarded a contract for supply of 100 sets of Concrete Sleepers to the Railways vide agreement dated 10.09.2013. Certain disputes arose in the performance of the contract which led to the appellant making a request for appointment of an Arbitrator on 23.01.2014. Subsequently on 29.05.2014, the railways terminated the contract and forfeited the security deposit of Rs. 10,00,000/-. Upon being moved under section 11 of the Arbitration and Conciliation Act in OP No.14 of 2015, this court appointed a Former Judge of this Court as the Arbitrator. The Arbitrator initiated the arbitration and a claim was made by the appellant on the following heads:
1. Refund of Security Deposit of Rs.10,00,000/- to the Claimant.
2. Pay a sum of Rs.76,342/- (amended on 29.07.2016) towards the differential Basic Value of 36 sets of 1 in 8.5 Turnout Sleepers sold at different Basic prices to the claimant.
3. Pay a sum of Rs.8,78,164/- (amended on 29.07.2016) towards the value of 4 sets of 1 in 8.5. Turn Out Sleepers available on stock (219541x4) to the claimant.
4. Pay a sum of Rs.11,63,567/- towards 10% value of 53 sets of 1 in 8.5 Turn Out Sleepers (219541 x 53 x 10%) to claimant.
5. Pay a sum of Rs.11,15,310/- towards the value of 1 set of Mould fabricated exclusively for executing this contract agreement, to the claimant.
6. Pay interest on Rs.10,00,000/- at 18% to the Claimant (in accordance with the Micro, Small and Medium Enterprises Development Act, 2006), from the date of encashment of Bank Guarantee (i.e.,) 12.09.2014 till the amount is refunded.
7. Pay interest in accordance with the Micro, Small and Medium Enterprises Development Act, 2006 on value of 4 sets (i.e.,) Rs.8,78,164/-. (amended on 29.07.2016) from 09.11.2013 till the amount is released to the claimant.
8. Pay interest of Rs.12,86,837/- (amended on 29.07.2016) to the claimant (in accordance with the Micro, Small and Medium Enterprises Development Act, 2006) – interest on the basic value of 40 sets of 1 in 8.5 Turn Outs sleepers and 7 sets of Trap switches from 09.11.2013 till the Sale at different basic prices.
9. Pay interest (in accordance with the Micro, Small and Medium Enterprises Development Act, 2006) on 1 set of Mould i.e. Rs.11,15,310/- from 09.11.2013, date of completion of 47 sets of 1 in 8.5 Turn Out Sleepers till the amount is realized, to the claimant.
3. The Railways filed a counter and also raised a counter claim. The counter set out in detail, the denials for each and every claim, and also made a counter claim, stating that, in view of the delay on the part of the appellant, the Railways had suffered 7% interest loss on invested capital which works out to Rs.20.13 Crores. On the basis of the pleadings the Arbitrator framed the following issues:
1) Whether the Claimant is a “New Firm” as sought to be projected by the respondent;
2) Whether the respondent has committed any breach of contract;
3) Whether the Claimant has committed any breach of contract;
4) Whether the claimant is entitled to the relief claimed by them;
5) Whether the respondent is entitled to the counterclaim raised by them; and
6) What other reliefs the parties are entitled to?
4. Both the oral and documentary evidence was placed before the learned Arbitrator. The Arbitrator by his award dated 19.01.2017 rejected all the claims except the one for refund of security deposit. The counter claim was als
