1 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 21.03.2013 CORAM THE HONOURABLE Ms. JUSTICE K.B.K.VASUKI OP.No.888 of 2010 M/s.Goodyear India Ltd., Mathura Road, Balagarh Faridabad, Haryana-121 004. rep by its Zonal Manager, A.Baburaj .... Petitioner Vs. 1.M/s.Nortan Intec Rubber (P) Ltd., A4, SIPCOT Complex, Gunnidipoondi-601 201. 2.The Chairman, MSE Facilitation Council & Industries Commissioner and Director of Industries & Commerce, Thiru.Vi.Ka.Industrial Estate, Guindy, Ch-32. .. respondents Petitions filed under section 34 of the Arbitration and Conciliation Act 1996 to set aside the purported award dated 31.12.2009 passed by the second respondent. For Petitioner : Mr.S.silambanan Sr.Counsel for Mr.S.Rajeni Ramadass. For respondent : Mr.Sathish Parasaran for R1. ORDER This Original Petition is filed under Section 34 of the Arbitration & Conciliation Act against the award dated 31.10.2010 passed in favour of the first respondent M/s.Nortan Intec Rubber (P) Ltd by second respondent MSE Facilitation Council and Industries Commissioner and Director of Industries and Commerce (hereinafter shortly referred to as "MSMED"). 2. The facts, which are relevant for consideration https://hcservices.ecourts.gov.in/hcservices/ 2 herein are as follows: The petitioner company M/s.Goodyear India Ltd and the first respondent M/s.Nortan Intec Rubber (P) Ltd. entered into agreements on 14.05.1997 and 01.04.1999 thereby the petitioner company agreed to supply to the first respondent required quantity of butyl rubber, carbon black, valve components, chemicals for the manufacture and packing of butyl tubes by using the plant and machinery belonging to the first respondent. The first respondent was entitled to get conversion charges and excise duty payable thereon against invoices. The petitioner in terms of the agreement supplied the materials, but the first respondent, according to the petitioner defaulted in supply of finished goods, as such, dispute arose between the parties, which was followed by Memorandum of Understanding dated 04.11.2000. There was renewal of supply of raw materials. Again, according to the petitioner, there was default in supply of finished goods and the same was again followed by further dispute and misunderstanding and exchange of notices between the two. In the meanwhile Micro, Small and Medium Enterprises Development Act, 2006 (Act 27 of 2006 came into force) (herein after shortly referred to as "MSMED Act". The first respondent by invoking the relevant provisions of law under Act 27 of 2006 filed a claim for Rs.80,31,956/- against the petitioner herein before the second respondent council. https://hcservices.ecourts.gov.in/hcservices/ 3 3. The petitioner company filed a detailed counter thereby seriously questioning the applicability of the provisions of Act 27 of 2006 for the claim relating to the period between 1997 to 1999 and by denying the liability and the quantum of liability and prayed for rejection of the claim made by the first respondent. The parties are permitted to file their written objections and also to advance hearings and oral arguments on the hearing dates and last of such hearing date was on 23.11.2009. The petitioner company herein and the first respondent made the claim before the second respondent herein and seriously opposed the maintainability of the claim before the second respondent on the ground of non-applicability of provisions of Act 27 of 2006. The impugned award came to be passed on 31.12.2009 in and under which, the plea of the petitioner herein as the respondent therein was rejected and the respondent company was directed to pay the principal amount of Rs.80,11,495/- with interest at the rate prescribed in "the interest on delayed payments to small scale and ancillary undertaking Act" from the appointed due dates till the date of coming into force of MSMED Act compounded with monthly rests on the amounts so arrived, at three times of the bank rate and notified by the Reserve Bank of India from the date of coming into effect of the MSMED Act till date of settlement and order of the council. The award was received by the petitioner company on 15.01.2010. https://hcservices.ecourts.gov.in/hcservices/ 4 Aggrieved against the award, the present original petition came to be filed by the petitioner on 29.03.2010. 4. The petitioner company has in this original petition questioned the claim made by the first respondent before the 2nd respondent not only on the following legal grounds viz., (i)limitation (ii)jurisdiction of the council to entertain the claim (iii)non applicability of provisions of Act 27 of 2006 and (iv)the manner in which the award was passed as if without going into the merits of the claim and without coram but also on merits by denying their liability and quantum of liability not only in respect of principle but also interest and also the rate of interest. 5. Whereas, the first respondent has seriously opposed the very maintainability of the present arbitration OP both on the ground of non-compliance of statutory mandatory requirement of pre-deposit of 75% of the award impugned and also defended the correctness of the award on merits. 6.Here is the case, wherein, the award is as stated above for payment of principle amount of Rs.80,11,495/- with interest at the rate prescribed in the Act, for the period from appointed date till coming into force of MSMED Act. It may be true that the validity of the award is seriously challenged herein on various grounds, which go to https://hcservices.ecourts.gov.in/hcservices/ 5 the root of the jurisdiction of the second respondent. The petitioner company has seriously contended that the award passed by the 2nd respondent cannot be treated as legal award in the eye of law, for want of coram and for want of signatures of the members of the council and hearing and the award is hence incomplete and invalid in nature. However, the grounds so raised are to be agitated, discussed and decided in this OP and until and otherwise the award is varied, reversed or set aside in the manner known to law the same is deemed to be legal and valid for all other practical purposes, particularly for the compliance of the statutory requirement laid down under section 19 of MSMED Act. 7.Before going into the correctness of the award and claim of the petitioner on merits, this Court is inclined to first to go into the issue relating to pre-deposit as contemplated under Section 19 of MSMED Act. For better appreciation, Section 19 of MSMED Act is reproduced herein : 19 Application for setting aside decree, award or order : No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any Court unless the appellant (not being a supplier) has deposited with it seventy- five percent. of the amount in terms of the https://hcservices.ecourts.gov.in/hcservices/ 6 decree, award or, as the case may be, the other order in the manner directed by such Court : Provided that pending disposal of the application to set aside the decree, award or order, the Court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose. 8.Our High court in a batch of writ petitions in W.P.16908 of 2010 etc reported in 2010 (2) CWC 886 (Eden Exports Company rep. By its Partner Mrs.Faiqua Shameel v. Union of India) referred to the Division Bench Judgement of Kerala High court reported in 2010 (1) KLT 65 (K.S.R.T.C v. Union of India), which upheld the validity of constitutionality of Section 19 of MSMED Act. 9. Section 34(3) of the Arbitration and Conciliation Act prescribes time limit for filing the petition to set aside the award as three months from the date of receipt of the arbitral award and the proviso to section 34(3) prescribes further grace period of thirty days for entertaining an application under Section 34 provided the applicant satisfy the court with sufficient cause for not making an application within a period of three months. As rightly argued by the learned counsel for the first respondent, the combined appreciation of Section 34 of the https://hcservices.ecourts.gov.in/hcservices/ 7 Arbitration and Conciliation Act and Section 19 of the MSMED would undoubtedly go the show that the petition under Section 34 shall be filed within 90 days or within 30 days thereafter i.e., within 120 days either from the date of the award or from the date of receipt of copy of the award by the applicant and not thereafter and the appeal or petition shall not be entertained, unless the petitioner deposits 75% of the amount in terms of the impugned award and the petition under Section 34 shall be entertained with deposit of 75% of the amount in terms of the award. The Apex Court in Lalta Prasad Khinni Lal Case referred to the full bench decision reported in AIR 1968 SC 488 (Lakshmi Rattan Engineering Works ltd. V. Assistant Commissioner, Sales Tax) wherein the Supreme Court has observed that the word "entertain" means "admitting to consideration" and the Court shall not proceed to admit to consideration an appeal, which is not accompanied by satisfactory proof of the payment of the admitted tax, which is the statutory requirement as laid down under law. 10.In the instant case, admittedly, the petitioner has not deposited 75% of the award amount within 120 days which is the statutory period prescribed for filing an appeal including this petition under Section 34 of the Arbitration Act. Though the appeal is filed within 30 days from the https://hcservices.ecourts.gov.in/hcservices/ 8 date of receipt of copy of this award, the same is not filed along with 75% of the award amount. The perusal of the records relating to this case and the particulars furnished by the first respondent under the caption 'list of dates and events' would reveal that the arbitration award was received by the petitioner on 15.01.2010 and the limitation period of three months came to end on 14.04.2010 and further grace period of 30 days ended on 13.5.2010. But the present OP was filed on 29.03.2010 without mandatory pre-deposit of 75% of the award amount. The OP.D.No.14214 of 2010 was hence returned by the Registry, which compelled the petitioner to come forward with an application Appln.D.No.14215 of 2010 on 05.10.2010 and the same was disposed of on 5.10.2010 on the basis of the statement made by learned senior counsel appearing for the petitioner to deposit the amount within six weeks, with further direction issued to the Registry to number the petition on compliance of pre-deposit of 75% of the award amount. The petitioner deposited Rs.60,08,622/- on 10.11.2010, which is admittedly 75% of only the principal amount of Rs.80,11,495/- without including the interest as per the award. The main OP was thereafter represented with the delay of 111 days and the delay was condoned by Master on 23.11.2010 and thereafter, the OP was numbered as OP.No.888 of 2010 and OP was admitted on 09.12.2010 and stood adjourned to 21.12.2010 at the instance of the first respondent, who took notice on https://hcservices.ecourts.gov.in/hcservices/ 9 caveat. The matter was again listed on 24.01.2011 and preliminary objection was seriously raised by the first respondent regarding maintainability of the OP, without the deposit of 75% of the award amount and the same was decided as preliminary issue by detailed order dated 07.04.2011. This court has categorically held that the petitioner has deposited 75% principal amount and not 75% of the entire award amount consisting of principal and interest in compliance with Section 19 of the Act and unless the petitioner deposits 75% of the award amount of principal and interest within six weeks from the date of receipt of copy of the order, OP will be dismissed. Aggrieved against the same, the petitioner preferred OSA.No.119 of 2011. The Division Bench of this Court concurred with the finding of the learned single judge regarding non compliance of pre- deposit of 75% of the award amount, however disposed of the appeal by granting six more weeks time to the petitioner to comply with the mandatory requirement. The same was again challenged by the petitioner in SLP.Nos.16919 and 16920 of 2011. The first respondent herein also filed SLP.Nos.31468 and 31469 of 2011 by questioning the maintainability of the OP on the ground of limitation for non deposit of 75% of the award amount. 11.In the meanwhile, the first respondent/ awardee filed EP.No.1300 of 2011 for execution of the award and https://hcservices.ecourts.gov.in/hcservices/ 10 pending EP, the Supreme Court by an order dated 12.07.2011 granted further period of 8 weeks to deposit the amount in terms of the order passed in OSA. The first respondent has also filed A.No.3037 of 2011 in OP.No.888 of 2010 for payment out of Rs.60,08,821/- deposited by the petitioner to the first respondent and an order was passed on the same day on 22.07.2011 by directing the Registrar General to invest the amount in fixed deposit, for three months in Indian Bank, High Court Branch. Thereafter, the Hon'ble Supreme Court by another order dated 02.11.2011 directed the petitioner to deposit further sum of Rs.1Crore in the Reserve Bank of India and the same was complied with by the petitioner on 08.11.2011. While doing so, this court observed that in the absence of deposit of 75% of the amount, OP cannot be treated as properly filed. In the same order, liberty was given to the awardee to make an application before the Master for payment out or to obtain order in EP.No.1300 of 2011 for executing the award. The order dated 15.12.2011 further clarified on 21.12.2011 by directing the Master to consider any application filed by the awardee for payment of pre-deposit in the light of the Hon'ble Apex Court order dated 02.11.2011 as referred to above. The Supreme Court has finally disposed of all the four SLPs filed by the petitioner as well as the first respondent herein by common order dated 15.03.2012 thereby concurred with the view expressed by the learned single https://hcservices.ecourts.gov.in/hcservices/ 11 judge with regard to deposit of 75% of the award amount under Section 19 of the 2006 Act and by extending the time for deposit the amount within the period of 12 weeks. It is further observed by the Supreme Court that in the event of pre-deposit being made, the OP will be treated to be in order and may be proceeded with. The Supreme Court has in the same order disposed of the SLP filed by the first respondent by granting liberty to the first respondent to take whatever objections that have been taken in the SLP in the O.P at the time of hearing in the OP. Thereafter, the petitioner deposited a sum of Rs.2,82,77,540/- on 04.06.2012, pursuant to the order of the Hon'ble Supreme Court. Thus, the total sum deposited by the petitioner i.e, Rs.4,42,86,162/- on 04.06.2012 is towards 75% of the award amount and the pre-deposit condition laid down under Section 19 of MSMED Act is thus to be treated as complied with only on 04.06.2012. 12. In this context another serious dispute arose between the parties is regarding the total amount and 75% of the amount payable towards principal and interest as per the award as on the date of filing of the petition i.e., on 29.3.2010 and separate calculation memos are filed on both sides regarding the principal and interest due as on the date of filing of this petition i.e., 29.3.2010 and as on the date of deposit of last payment i.e., 4.6.2012 in https://hcservices.ecourts.gov.in/hcservices/ 12 pursuance of the order of the Supreme Court. Before going into the calculation memo filed by both sides, it is but necessary to reproduce the operative portions of the award impugned herein, which read as follows: "In the light of the above findings, we conclude that the respondents have failed to pay for 52 number bills with due dates from 22.7.97 till 13.3.98 and 7 bills with due dates from 25.9.99 till 15.11.99 for a total principal sum of Rs.80,11,495/- for goods received by them. In the foregoing circumstances, the plea of the respondent fails and the Council directs that the respondent company shall be liable to pay interest from the appointed due dates respectively as above. The principal amount of Rs.80,11,495/- with interest at rate prescribed in the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertaking Act 1993 to till the date of coming into force of the MSMED Act 2006 and further be liable to pay compound interest with monthly rests to the supplier (applicant) on that amount at the three times of the Bank rate notified by the Reserve Bank of India from the date of coming into the effect of MSMED Act 2006, till the date of settlement and orders passed by this Council as above." 13. In the concluding paragraph of the award, the arbitration Tribunal has stated the total number of bills https://hcservices.ecourts.gov.in/hcservices/ 13 to be payable as 52 bills relating to the period from 22.7.97 to 13.3.98 and 7 bills from 25.9.1999 to 15.11.99. The total principal amount covered under 52 + 7 bills, according to the award, is Rs.80,11,495/- and the same is also referred to in the second part of the concluding paragraph and the rate of interest awarded is at the rate prescribed "in the interest on delayed payments to Small Scale and Ancillary Industrial Undertaking Act". As far as the rate prescribed in the Interest on delayed payments to Small Scale and Ancillary Industrial Undertaking Act, is concerned, the same was repealed with effect from 2.10.2006 by MSMED Act 27/2006. Thereafter, the interest became payable under Section 16 of MSMED Act. While interest payable as per repealed Act is 1 ½ times of prime lending rate (PLR), the same is under section 16 of the new Act 3 times of the rate notified by the Reserve Bank of India. Thus, as far as principal amount is concerned, the same is accepted as Rs.80,11,495/- for the purpose of calculation. As far as rate of interest is concerned, the same is calculated at 18% (3 times of 6% as notified by Reserve Bank of India) for the period from 1.10.2006 till the date of petition i.e., on 29.3.2010 by the petitioner. Whereas, the respondent calculated the rate upto the date of last payment i.e., on 4.6.2012. As per such calculation, the total amount payable towards principal and interest as per the award by the petitioner is Rs.5,90,48,215/- as on https://hcservices.ecourts.gov.in/hcservices/ 14 29.3.2010 and 75% of the same is 4,42,86,161.25. Whereas, as per the respondent, the total amount payable is Rs.6,05,92,156/- and 75% of the same is Rs.4,54,44,117/-. For the limited purpose of deciding the issue relating compliance of predeposit of 75% of the award, this court is inclined to accept the calculation memo made on the petitioner's side, as per which, the amount payable towards principal and interest as on 29.3.2010 is Rs.5,90,48,215/- and 75% of the same comes to Rs.4,42,86,161.25. 14.Next aspect to be considered relating to limitation is whether the petitioner deposited the pre-deposit amount and whether the OP is filed within the time limit prescribed for filing the petition i.e. 90+30 days along with such pre-deposit. The particulars as furnished above would reveal that the total amount of Rs.4,42,86,162/- came to be filed only on 4.6.2012. Here is the case, wherein, the petitioner filed the arbitration OP on 29.3.2010 without complying with mandatory predeposit of 75% of the award amount. At the risk of repetition it is stated herein that the limitation period prescribed under section 34 of the Arbitration Act i.e., 90+30 days came to end on 14.4.2010 and OP was returned on 20.4.2010 for compliance of statutory requirement of deposit of 75% of the award amount and the petition was represented along with the application for waiving pre-deposit of 75% of the award amount and the same was disposed of on 5.10.2010 and the https://hcservices.ecourts.gov.in/hcservices/ 15 first amount of Rs.60,08,622/- towards 75% of the principal amount came to be deposited only 10.11.2010 i.e, much after 90+30days limitation period for filing appeal against the arbitral award expired. Thereafter, the entire 75% of principal and interest as per the award and as per the calculation made by the petitioner as referred to above, came to be deposited on various dates, only in pursuance of the order of the Supreme court on 2.11.2011, i.e., Rs.1 crore on 8.11.2011 and further sum of Rs.2,82,77,540/- on 04.06.2012, thereby total amount Rs.4.42.86,162/- came to be deposited by the petitioner only on 04.06.2012. The petitioner was given time for complying with pre-deposit of 75% of principal and interest on more than one occasion and further time was granted in OP by our High court as well as in SLP by Hon'ble Supreme Court. Inspite of the same, conditional order was not complied with. 15.Whereas, it is repeatedly argued by the learned senior counsel for the petitioner that as the correctness legality and validity of the arbitration award is being challenged in the O.P, the same would absolve the petitioner from his liability to comply with the statutory requirement of 75% of the impugned award. It is sought to be argued before this court on the side of the petitioner that in the light of the grounds raised against the correctness of the award, the award is to be treated as non https://hcservices.ecourts.gov.in/hcservices/ 16 est in law, insofar as it relates to award of interest is concerned as such deposit of 75% of principal amount shall be treated as sufficient compliance of the statutory requirement of 75% pre-deposit of the award amount. This court is, as rightly argued by the learned counsel for the respondent, not inclined to accept such contention raised on the side of the petitioner. The award having been passed on merits, after contest, unless and until it is modified or set aside, is deemed to be in force and the statutory requirement laid down under section 19 of MSMED Act shall be only relating to entire award impugned in the O.P and the petitioner has no right much less any legal right to split the award into two categories viz., admitted and disputed portion, for the purpose of complying with the statutory requirement for entertaining the arbitration petition. As the award passed is for the principal of Rs.80,11,495/- with interest as prescribed under two Acts, the value of the petition, for the purpose of filing the petition, shall be both principal and interest as awarded and not otherwise. 16.Even assuming that the argument of the petitioner is acceptable, here again, the petitioner failed to comply with the statutory requirement as on the date of filing of the petition. The petition was admittedly filed on 29.3.2010 without any pre-deposit of 75% of the admitted https://hcservices.ecourts.gov.in/hcservices/ 17 amount and 75% of the principal amount was deposited only on 10.11.2010, which is much after the expiry of limitation period i.e. 14.04.2010. The grace period of 30 days from the date of filing the petition expired on 13.5.2010 as on which date, admittedly no deposit of even admitted portion of the award amount was made. Though the application was filed for waiving the pre-deposit requirement, it was not supported by any provision of law under MSMED Act. Further, the application for waiving pre-deposit was disposed of on 5.10.2010 granting 6 weeks time for depositing 75% of the entire award amount. Again, the order was complied with only in part. Thus, the petitioner has not complied with the pre-deposit condition either as on the date of filing of the petition or before expiry of period of limitation specified for filing the petition and even after the expiry of the time specified in the order made in the waiver application. In view of the mandatory requirement prescribed under section 19 of MSMED Act, the arbitration petition cannot be treated as maintainable either on 29.3.2010 or on 13.5.2010 without 75% of pre-deposit. If at all the same shall be treated as in order, it was only on 4.6.2012, the date on which pre-deposit of 75% of award amount stands complied with. The petition is,