upa 1 app1128-10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 1128 OF 2010 IN CHAMBER SUMMONS NO. 553 OF 2010 IN ARBITRATION PETITION NO. 499 OF 2003 The Maharashtra Small Scale Industries ) Development Corporation Ltd. ).. Appellant Versus Snehadeep Structurs Pvt. Ltd. ).. Respondent Mr. M.C. Shah with Mr. A.C. Mahimkar for the Appellant. Dr. V.V. Tulzapurkar, Senior Advocate, with Ms.Chandana Salgaonkar for the Respondent. CORAM : MOHIT S. SHAH, C.J. AND S.J. KATHAWALLA, J. WEDNESDAY, NOVEMBER 24, 2010 P. C. : Appeal is admitted. 2. The learned Advocate for the respondents waives service of notice of admission of the appeal. 3. With the consent of the parties, the appeal is taken up for final hearing. 4. The appellant-Maharashtra Small Scale Industries Development Corporation Ltd. Has challenged the judgment and order upa 2 app1128-10 dated 22nd October, 2010 of the learned Single Judge allowing Chamber Summons taken out by the respondent for dismissing Arbitration Petition No.499 of 2003 filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Arbitration Act”) on the ground of non-compliance with the condition stipulated in judgment of the Supreme Court in the matter between the appellant and the respondent reported in (2010) 3 SCC 34. 5. The claim of the respondent pertained to the sum due for supply of goods to the appellant. The Arbitrator was appointed by an order of this Court under Section 11 of the Arbitration Act. The above numbered petition has been filed by the appellant to set aside the award of the Arbitrator dated 30th June, 2003. The operative part of the award reads as under :- “(1) The Respondent shall pay to the claimant a sum of Rs.78,19,540.73 ps (Rupees seventy eight lacs nineteen thousand five hundred forty and paise seventy three only as per the claim in Annexure “L” to the Statement of Claim. (2) The Respondent shall pay to the Claimant simple interest on the said amount at the rate of 10% per annum from the date of the Statement of Claim till the date of Award and future interest at the same rate from the date of the Award till payment and/or realization. (3) In case the Respondent fails to pay the amount awarded within three months from today, the Respondent would be liable to pay to the claimant compounded interest with monthly rests at 1.1/2 times of Prime Lending Rate charged by the State Bank of India from the date of the claim until payment and/or realization. (4) Parties to bear their own costs.” upa 3 app1128-10 6. On 23rd August, 2005, the learned Single Judge hearing Arbitration Petition under Section 34 dismissed the petition on the ground that the expression “Appeal” used in Section 7 of the Small Scale and Ancillary Industrial Undertakings Act, 1993 (hereinafter referred to as “the 1993 Act”) would also apply to Section 34 of the Arbitration Act and the appellant petitioner had failed to comply with the provisions of the 1993 Act requiring deposit of 75% of the award amount. The appeal filed against the said judgment by the present appellant-petitioner was allowed by the Division Bench on 17th November 2005 and the Division Bench restored the Arbitration petition for consideration of the learned Single Judge after holding that the expression “appeal” would not include a petition under Section 34 of the Arbitration Act. This judgment of the Division Bench was challenged before the Apex Court and by judgment dated 5th January 2010 reported in (2010) 3 SCC 34, the Apex Court set aside the judgment of the Division Bench of this Court and upheld the decision of the learned Single Judge. The Apex Court, whilst disposing of the appeal, inter alia, recorded the following facts and gave the following directions : “5. Aggrieved by the refusal of the respondents to refer the matter to arbitration, the appellant Company preferred an arbitration application under Section 11 of the Arbitration and Conciliation Act, 1996 (for short “the Arbitration Act”) before the High Court of Bombay. The High Court appointed a former Judge of the High Court, Mr. Justice S.W Puranik as the sole arbitrator. The arbitrator by his award dated 30.6.2003 directed the Corporation to pay a sum of Rs.78,19,540.73 to the appellant company. 65. Keeping in mind the language of Section 7, object of the legislation and the contextual meaning of the term appeal, we are, therefore, of the view that the term upa 4 app1128-10 “appeal” appearing in Section 7 of the Interest Act should include an application under Section 34 as well. The judgment and order of the High Court shall, therefore, stand set aside and the appeal is allowed to the extent indicated above. The respondent Corporation shall make a deposit of 75% of the amount awarded by the learned arbitrator by his award dated 30.06.2003 in court where the application for setting aside the award is now pending decision. Such deposit shall be made within three months from this date. In the event, such deposit is made the court shall decide the application for setting aside the award filed under Section 34 of the Arbitration Act as expeditiously as possible preferably within six months from the date of deposit by the Corporation. 66. The appeal is thus allowed to the extent indicated above. There will be no order as to costs.” (emphasis supplied) 7. There is no dispute that thereafter the appellant-Corporation has deposited 75% amount of the principal amount of Rs.78,19,540.73 (as indicated in paragraph 1 of the operative part of the award quoted hereinabove) on 30th March 2010 i.e. within the time prescribed by the Apex Court. The respondent, however, took out the said Chamber Summons No.553 of 2010 contending that the appellant petitioner has failed to comply with the directions of the Apex Court by not depositing 75% of the interest amount as directed in paragraph 3 of the operative part of the award of the Arbitrator. 8. The appellant-petitioner resisted the chamber summons by contending that the Apex Court had directed the appellant-petitioner to deposit 75% of the principal amount of Rs.78,19,540.73 awarded by the Arbitrator. The learned Single Judge did not accept the above submission and held that the appellant-petitioner was required to deposit 75% of the principal amount as quantified in paragraph 1 of the upa 5 app1128-10 operative part of the award and also interest amount as directed in the subsequent paragraphs of the operative part of the award. The learned Single Judge accordingly allowed the chamber summons taken out by the respondent and also rejected the Corporation's request for extension of time to deposit the balance amount on the ground that time granted to deposit the amount was stipulated by the Apex Court and the same having expired, this Court could not grant the extension. 9. At the hearing of the appeal, the learned counsel for the appellant has made the following submissions :- (I) The directions of the Apex Court to make deposit of 75% did not provide for deposit of any interest amount. In paragraph 5 of the judgment of the Apex Court reference is only made to principal amount of Rs.78,19,540.73 and, therefore, it is obvious that the Apex Court did not intent to require the appellant Corporation to deposit any part of the interest amount awarded by the Arbitrator. (ii) The object of Section 7 of the 1993 Act and the directions given by the Apex Court was only to ensure that the appellant- Corporation is not allowed to challenge the award made by the Arbitrator without depositing a substantial amount i.e. 75% of the principal amount. The appellant-petitioner has, in compliance with the directions of the Apex Court, already deposited a substantial amount of Rs. 58,64,656/- i.e. 75% of the principal amount awarded by the Arbitrator. (iii) The appellant-Corporation is a Public body and if the upa 6 app1128-10 appellant is required to deposit 75% of the penal interest awarded by the Arbitrator at the rate of 1.1/2 time of Prime Lending Rate charged by the State Bank of India from the date of the claim which was made sometime in the year 2001-2002 the Corporation would be saddled with a huge liability and in case of failure on part of the Corporation to deposit such amount, the appellant will not be able to challenge the award of the Arbitrator for which the appellant has very good grounds of challenge. 10. On the other hand, the learned counsel for the respondent has opposed the appeal and has contended that only the Apex Court can modify or clarify its directions. It is further submitted that the directions of the Apex Court require the appellant to deposit 75% of the amount awarded by the Arbitrator which would include 75% of compounded interest with monthly rests at 1.1/2 times of Prime Lending Rate charged by the State Bank of India from the date of the claim until payment and/or realization of the payment. Since the appellant-petitioner had failed to make payments to the respondent as set out in clauses (2) and (3) of the operative portion of the award within a period of three months from the date of the award, the learned Judge has committed no error. 11. In rejoinder, learned counsel for the appellant-Corporation states that, without prejudice to the rights and contentions of the appellant-Corporation in the petition under Section 34 of the Arbitration Act, the appellant-Corporation is ready to deposit the full principal amount of Rs.78,19,540.73 (inclusive of the amount of Rs.56,64,656/- already deposited on 30th March 2010) and further deposit the full amount towards simple interest on the aforesaid principal amount at the rate of 10% per annum from the date of the Statement of Claim till the upa 7 app1128-10 date of deposit. It is submitted that the Corporation may not be required to deposit further 75% of the penal interest which is a very high rate and submitted that public interest will suffer and irreparable loss and injury will be caused to the Corporation if the contentions of the respondent were to be accepted. 12. We have given anxious consideration to the rival contentions of the parties. 13. Before proceeding further, we may note that the amount referred to by the Apex Court in the reported judgment dated 5th January 2010 to the award of the Arbitrator is to be found in paragraph 5 of the judgment which reads thus :- “5. Aggrieved by the refusal of the respondents to refer the matter to arbitration, the appellant Company preferred an arbitration application under Section 11 of the Arbitration and Conciliation Act, 1996 (for short “the Arbitration Act”) before the High Court of Bombay. The High Court appointed a former Judge of the High Court, Mr. Justice S.W Puranik as the sole arbitrator. The arbitrator by his award dated 30.6.2003 directed the Corporation to pay a sum of Rs.78,19,540.73 to the appellant company.” (emphasis supplied) 14. A perusal of the judgment of the Apex Court would indicate that no reference was made to that port of the award by which the Arbitrator awarded simple interest at the rate of 10% per annum from the date of the Statement of Claim till the date of the award and further interest at the same rate till the date of payment or to the portion pertaining to payment of compounded interest with monthly rests at upa 8 app1128-10 1.1.2 times of Prime Lending Rate charged by the State Bank of India from the date of the claim until payment in case of default. In view of the above and particularly, in view of the fact that the learned counsel for the Corporation has stated that the Corporation is ready and willing to deposit, without prejudice to its rights and contentions in the petition under Section 34 of the Arbitration Act, the entire principal amount of Rs.78,19,540.73 as well as simple interest on the said amount at the rate of 10% from the date of statement of the claim till the date of the award and also from the date of the award till the date of deposit, we are of the view that interests of justice do not require the appellant Corporation to deposit any part of the penal interest awarded by the Arbitrator in paragraph (3) of the operative part of the award, when the appellant- Corporation, a public body, has already challenged the arbitration award in petition under Section 34 of the Arbitration Act. 15. However, having regard to the contention raised by the learned counsel for the respondent, that this order may amount to modification of the directions given by the Apex Court, we make it clear that this order shall not come in the way of the respondent approaching the Apex Court for getting any further directions from the Apex Court as regards deposit of the penal interest awarded by the Arbitrator. 16. In the result, the appeal is partly allowed. The appellant-Corporation shall deposit the balance amount so as to cover the total principal amount of Rs.78,19,540.73 within three weeks from today. The appellant-Corporation shall further deposit simple interest on the aforesaid principal amount at the rate of 10% from upa 9 app1128-10 the date of the Statement of Claim till the date of award and interest at the same rate from the date of the award till the date of deposit, within four weeks from today. 17. As regards the prayer made by the learned counsel for the respondent that respondent may be permitted to withdraw the amount on furnishing security, we leave it open to the respondent to make such prayer before the learned Single Judge taking up arbitration petitions to the extent of the amount deposited till now. 18. The Apex Court had required this Court to decide the petition under Section 34 of the Arbitration Act as expeditiously as possible and preferably within six months from the date of deposit of the amount by the appellant-Corporation. Having regard to the fact that appellant-Corporation is going to deposit the entire principal amount as well as simple interest awarded by the Arbitrator within four to five weeks from today, we expect that the above petition under Section 34 shall be heard by the learned Single Judge as expeditiously as possible and preferably within six weeks from the date of such deposit. 19. The appeal stands disposed of in the above terms. CHIEF JUSTICE S.J. KATHAWALLA, J.