2025:MHC:1737Arb O.P(COM.DIV.) No. 10 of 2025

IN THE HIGH COURT OF JUDICATURE AT MADRAS

Reserved on : 17.07.2025

Pronounced on : 23.07.2025

CORAM

THE HON'BLE MR JUSTICE ABDUL QUDDHOSE

Arb O.P(COM.DIV.) No. 10 of 2025

M/s.LARSEN AND TOUBRO LTD.,

Rep by its Authorised signatory Mr.K.Manikandan

Having its registered office at,

L and T House,Ballard Estate,

P.O.BOX 278,Mumbai-400001.

Also having construction Headquarters at,

979,Mount Poonamallee Road,

Manapakkam,

Chennai- 600089

..Petitioner(s)

Vs

M/s.Jain Steels Industries

Rep by its Managing partner Mr.Pankaj Jain

Having its Works and office at

G.T Road,Khanna side,Mandi Gobindgargh,

District Fatehgarh sahib,Punjab-147301

..Respondent(s)

To Set aside the impugned award dated 02.07.2024 in case

NO.MSEFC/68 OF 2021 passed by the District level Micro and small

Enterprises Facilitation Council, Fatehgarh sahib, Punjab.

For Petitioner(s):Mr.Anuraaj Rajagopalan

for Mr.Anirudh Krishnan

For Respondent(s):Mr.B.Arvind Srevatsa

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ORDER

This petition has been filed under Section 34 of the Arbitration and

Conciliation Act, 1996 (in short “the Act”) challenging the impugned arbitral

award dated 02.07.2024 passed by the District Level Micro & Small Enterprises

Facilitation Council, Fatehgarh Sahib, Punjab (in short “Council”) directing the

petitioner to pay a sum of Rs.59,42,986/- along with interest of

Rs.1,39,86,180/- upto 02.07.2024, totally amounting to Rs.1,99,29,166/-, to the

respondent. Further, the petitioner was also held liable to pay future interest on

the delayed payment as per the provisions of the Micro, Small and Medium

Enterprises Development Act, 2006 (in short “MSMED Act”) to the respondent

on the awarded amount from 03.07.2024 till its realization.

2. The respondent had lodged a complaint with the Council against the

petitioner as per the provisions of MSMED Act for the recovery of alleged dues

payable to them by the petitioner for the supplies effected by them. The

conciliation proceedings as per the MSMED Act between the parties failed and

thereafter, the Council referred the dispute to arbitration. The Arbitrator acted

upon the reference and has passed the impugned arbitral award as stated supra

in favour of the respondent against the petitioner.

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3. The petitioner has challenged the impugned arbitral award on the

following grounds:-

(a) The impugned arbitral award is a non-speaking

award and has been passed without any evidence and the

Council has absolutely ignored the evidence placed on record

by the petitioner.

(b) The materials supplied by the respondent to the

petitioner were defective in nature and despite the petitioner

having produced evidence to substantiate the same, the

Council by total non-application of mind to the said evidence

has passed a non-speaking arbitral award.

(c) There is absolutely no discussion in the impugned

arbitral award passed by the Council with regard to the

counter-claim made by the petitioner against the respondent.

(d) The petitioner has complied with the statutory

requirements of making the pre-deposit amount as per the

provisions of Section 19 of the MSMED Act by depositing

75% of the determined amount as stated in the impugned

arbitral award.

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(e) The petitioner has satisfied the requirements of

Section 34 of the Act for the purpose of setting aside the

impugned arbitral award.

4. The learned counsel for the petitioner in support of the aforesaid

grounds raised by the petitioner drew the attention of this court to the following

documents:-

(a) The impugned arbitral award.

(b) The contract entered into between DFFCIL and the petitioner dated

04.03.2015.

(c) Letter of Intent(LOI) dated 10.09.2016 issued by the petitioner to the

respondent for supply of Masts.

(d) Performance Bank Guarantee dated 05.11.2016 for a sum of

Rs.2,11,80,061/-.

(e) Purchase Orders placed by the petitioner on the respondent which

contains General Conditions of the Contract applicable for all the purchase

orders.

(f) A copy of the inspection reports dated 25.03.2017 and 29.03.2017

submitted by the Engineer.

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5. Relying upon the aforesaid documents, the learned counsel for the

petitioner would submit as follows:-

(a) The impugned arbitral award is a non-speaking award and has been

passed without any evidence and by total non-application of mind to the

contentions of the petitioner and by ignoring the documents produced by the

petitioner before the Council.

(b) The inspection reports reveal that the materials supplied by the

respondent were defective and the respondent also did not rectify those defects

thereafter.

(c) The performance bank guarantee as per the LOI dated 10.09.2016

issued by the petitioner in favour of the respondent ought to have been

furnished by the respondent within 15 days from the date of LOI. But, the same

was furnished by the respondent only on 05.11.2016, much beyond the

stipulated time fixed under the LOI. Apart from the delay in supply of

materials, the respondent has also supplied defective materials causing huge

losses to the petitioner.

(d) The counter-claim made by the petitioner against the respondent

before the Council for the losses suffered by them has been rejected without

assigning any reason whatsoever in the impugned arbitral award.

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6. The learned counsel for the petitioner submits that the petitioner

having made the statutory pre-deposit amount as stipulated under Section 19 of

the MSMED Act by depositing 75% of the determined amount under the

impugned arbitral award, this petition filed under Section 34 of the Act is

maintainable. He would further submit that by way of abundant caution, the

petitioner is also willing to deposit 75% of the post-award interest directed to

be paid by the petitioner in the impugned arbitral award, though he would

contend that as per Section 19 of the MSMED Act, the petitioner need not make

such a pre-deposit for the post-award interest and it would be sufficient if the

determined amount under the impugned arbitral award is alone calculated for

the purpose of making the statutory pre-deposit amount as per the provisions of

Section 19 of the MSMED Act. He would point out that under Section 19 of

the MSMED Act, it has been made clear that the petitioner will have to deposit

75% of the amount in terms of the award and, as the case may be, this court can

also pass such other orders to satisfy the requirements of Section 19 of the

MSMED Act. He has also brought a Demand Draft taken by the petitioner for

any balance amount that may be payable by the petitioner for the post-award

interest. He would submit that the petitioner is also prepared to deposit the said

amount by way of abundant caution if so directed by this Court. He also

submits that only in accordance with the General Conditions of the Contract

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applicable for all purchase orders, which are the subject matter of the dispute

between the parties, the petitioner has filed this petition before this Court under

Section 34 of the Act, as, according to him, only this Court has got jurisdiction

to decide this petition as the arbitration clause makes it clear that only Chennai

Courts have got jurisdiction for hearing this petition.

7. He also drew the attention of this Court to Clauses 16 and 17 of the

respective Purchase Orders pertaining to arbitration and jurisdiction and would

submit that all disputes relating to the agreement shall be subject to the court of

competent jurisdiction situated within the limits of Chennai. Hence, he would

submit that only this Court is having the jurisdiction to decide this petition filed

under Section 34 of the Act.

8. The learned counsel for the petitioner, in support of his contentions,

drew the attention of this Court to the following authorities:-

(a) Goodyear India Ltd. Vs. Norton Intech

Rubbers Pvt Ltd and another [2012 (6) SCC 345]; and

(b) Gammon Engineers & Contractors Pvt Ltd

Vs. Sahay Industries and others [AIR 2023 Bom 65].

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9. The learned counsel for the petitioner relying upon the aforesaid

decisions would submit as follows:-

(a) The Court has got no discretion either to waive or reduce the amount

of 75% of the awarded amount as a pre-deposit for filing a petition under

Section 34 of the Act. But, however, the Court has discretion to allow pre-

deposit to be made in instalments if required. The phrase “in the manner

directed by such court” has been interpreted by the Hon'ble Supreme Court in

the aforesaid manner.

(b) Once the arbitral award is pronounced by the Council as per the

provisions of MSMED Act and there is an exclusionary clause of jurisdiction

agreed between the parties, the challenge initiated by the aggrieved party under

the Act, even against an award passed by the Council under the MSMED Act,

will lie only before the court upon which the parties agreed to place exclusive

jurisdiction.

10. On the other hand, the learned counsel for the respondent raised a

preliminary objection questioning the maintainability of this petition, and he

would submit as follows:-

(a) The petitioner has not made the statutory pre-deposit amount of 75%

as per the provisions of Section 19 of the MSMED Act. According to the

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learned counsel for the respondent, the petitioner has calculated the 75%

amount only based on the award amount to the date of the passing the

impugned arbitral award, but, has failed to pay the 75% amount for the post-

award interest payable by the petitioner as per the impugned arbitral award.

Having not paid the full amount in accordance with Section 19 of the MSMED

Act, this petition is not maintainable.

(b) The respondent being a supplier at Punjab and the Council, which has

passed the award, is also situated at Punjab, this court lacks territorial

jurisdiction to decide this petition under Section 34 of the Act.

11. In support of his contentions, the learned counsel for the respondent

has relied upon the following authorities:-

(i) India Glycols Limited & Anr. Vs. Micro and Small Enterprises

Facilitation Council, Medchal-Malkajgiri [2023 SCC Online SC 1852];

(ii) Goodyear India Ltd Vs. Norton Intech Rubbers (P) Ltd Vs. Ors.

[MANU/TN/1768/2013];

(iii) Gujarat State Disaster Management Authority Vs. Aska Equipments

Limited [2022 (1) SCC 61]; and

(iv) Hameed Leather Finishers Vs. Associated Chemical Industries Pvt

Ltd. [2013 SCC Online 9058].

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12. The learned counsel for the respondent would submit that the

petitioner having acknowledged its liability to the respondent through their

email dated 12.05.2017 and it is also reflected in the impugned arbitral award

and therefore, the petitioner cannot now raise a contention that the materials

supplied by the respondent to the petitioner were of defective quality and the

said supplies were also made belatedly. He drew the attention of this Court to

email dated 12.05.2017 sent by the petitioner to the respondent, which,

according to the respondent, is an admission of liability issued by the petitioner.

13. The learned counsel for the respondent also drew the attention of this

Court to the impugned arbitral award and would submit that though the arbitral

award may not be correctly worded, sufficient reasons have been given by the

Arbitrator determining the amount under the impugned arbitral award payable

by the petitioner to the respondent. He would submit that the view taken by the

Arbitrator is a plausible view and therefore, this Court under Section 34 of the

Act cannot interfere with the impugned arbitral award. In support of the said

contention, he has relied upon the following authorities:-

(i) Ssangyong Engineering Vs. National Highway Authority of India

[2019 (15) SCC 131];

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(ii) Dyna Technologies Pvt Ltd. Vs. Crompton Greaves Limited [2019

(20) SCC 1]; and

(iii) Vijay Karia Vs. Prysmian Cavi E Sistemi [2020 (11) SCC 1].

14. Relying upon the aforesaid authorities, the learned counsel for the

respondent would reiterate that as seen from the aforesaid decisions, it is clear

that if the view taken by the Council under the impugned arbitral award is a

plausible view, this Court cannot interfere with the impugned arbitral award

under Section 34 of the Act.

15. He would further submit that a detailed award need not be passed by

the Arbitrator with regard to the respective contentions of the respective parties

to the dispute. In support of the said contention, he drew the attention of this

Court to a decision of the learned Single Judge of the Delhi High Court in the

case of Tex Maco Limited Vs. Union of India [2010 (6) RCR Civil 246].

DISCUSSION:

16. A preliminary objection has been raised by the respondent that this

Court lacks territorial jurisdiction to decide this petition filed under Section 34

of the Act by contending that since the arbitral award has been passed in

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Punjab, the petitioner ought to have filed this petition before Punjab Courts.

This preliminary objection raised by the respondent has to be rejected by this

Court for the following reasons:-

MSMED Act only provides for a mechanism to protect MSME's,

particularly, through arbitration initiated under Section 18 of the MSMED Act.

In the instant case, the impugned arbitral award has been passed under the

MSMED Act in Punjab. The jurisdiction clause mentioned in the purchase

orders, which have to be read in conjunction with the original agreement,

namely, LOI dated 10.09.2016, takes precedence, once the arbitral award is

passed under the MSMED Act. The arbitration venue under the MSMED Act,

which, in the instant case, is at Punjab, is treated only as convenience for the

supplier, namely, the respondent herein, and post-award challenges must follow

the jurisdiction clause contained in the original contract (LOI). Therefore,

challenge initiated by the petitioner aggrieved by the order passed by the

Council will lie only before the Court upon which the parties agreed to place

exclusive jurisdiction. In the case on hand, as seen from the terms and

conditions of the purchase orders, which have to be read in conjunction with

the original agreement, namely, LOI dated 10.09.2016, the jurisdiction is vested

exclusively with the Courts at Chennai. The Bombay High Court, in its

decision rendered in the case of Gammon Engineers (cited supra), relied upon

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by the learned counsel for the petitioner, has also taken the same view. Hence,

the respondent cannot contend that this Court lacks territorial jurisdiction to

decide this petition under Section 34 of the Act.

17. The following are the undisputed facts:-

(a) Through a Letter of Intent (LOI) dated 10.09.2016, the respondent

was employed as a sub-contractor by the petitioner, who entered into a contract

with Dedicated Freight Corridor Corporation of India (DFCCI) on 04.03.2015.

(b) The LOI dated 10.09.2016 issued by the petitioner to the respondent

for supply of Masts contains an arbitration clause. As per the arbitration clause

contained in the LOI, the seat of arbitration is only at Chennai.

(c) As per the LOI dated 10.09.2016, the respondent has to furnish

Performance Bank Guarantee (PBG) for a sum of Rs.2,11,80,061/- within a

period of 15 days from the date of the LOI. However, Performance Bank

Guarantee was submitted by the respondent with the petitioner for the said sum

only on 05.11.2016.

(d) The Inspection Reports dated 25.03.2017 and 29.03.2017, which

reveal that there are certain defects and deformations in the Masts supplied by

the respondent, were marked as exhibits before the Council, but, in the

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impugned arbitral award, the Council has not discussed as to why those

inspection reports are incorrect and they cannot be relied upon.

(e) The respondent made a total claim of Rs.77,42,361/- against the

petitioner, which includes the principal amount of Rs.59,42,986/-, and the

remaining amount towards interest.

(f) The petitioner has also made a counter-claim before the Council

against the respondent for a sum of Rs.71,17,824/-.

(g) Under the impugned arbitral award, the Council has passed an arbitral

award in favour of the respondent by directing the petitioner to pay a sum of

Rs.1,99,29,166/-.

18. Various documents were filed by the petitioner as well as the

respondent before the Council. The petitioner has filed documents dated

15.12.2017, 24.01.2018, 01.01.2018-31.01.2018 and 20.02.2019 in support of

their counter-claim made against the respondent for a sum of Rs.71,17,824/-.

The Council has awarded interest based on the interest calculation sheet, that

was submitted by the respondent, after the arguments were heard by the

Council, without granting an opportunity to the petitioner to dispute the same

either through the cross-examination of the respondent's witness or through

other evidence.

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19. “Reason is the soul of justice” and that is the reason why under

Section 31(3) of the Act, it has been made clear that the arbitral award shall

state the reasons upon which it is based. The Hon'ble Supreme Court in the

case of Kranti Associates Private Limited Vs. Masood Ahmed Khan [2010 (9)

SCC 496] stressed upon the importance of reasoned judicial orders and

elaborated on why “reason is the soul of justice”. Though the said decision was

not dealing with the petition filed under Section 34 of the Act, it can be inferred

that the arbitral award should also contain reasons for arriving at the

conclusions, though proper reasons given need not be so stringent as in the case

of regular civil disputes. The Hon'ble Supreme Court in the aforesaid decision,

summarised the following points:-

(a) Insistence on recording of reasons is meant to

serve the wider principle of justice that justice must not

only be done it must also appear to be done as well.

(b) Recording of reasons also operates as a valid

restraint on any possible arbitrary exercise of judicial and

quasi-judicial or even administrative power.

(c) Reasons reassure that discretion has been

exercised by the decision maker on relevant grounds and

by disregarding extraneous considerations.

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(d) Reasons have virtually become as indispensable

a component of a decision making process as observing

principles of natural justice by judicial, quasi-judicial and

even by administrative bodies.

(e) Reasons facilitate the process of judicial review

by superior Courts.

(f) The ongoing judicial trend in all countries

committed to rule of law and constitutional governance is

in favour of reasoned decisions based on relevant facts.

This is virtually the life blood of judicial decision making

justifying the principle that reason is the soul of justice.

20. The primary contention of the petitioner in this petition is that the

impugned arbitral award is a non-speaking award and is an unintelligible one

and has been passed in violation of the principles of natural justice.

21. The conclusions arrived at by the Council for the points of

determination framed are as follows:-

(a) Contentions regarding jurisdiction:

The respondent is a registered enterprise under the MSMED Act and

therefore, the respondent is entitled to invoke the jurisdiction of the District

Council and the District Council has the jurisdiction to adjudicate the same.

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(b) Contentions regarding the quality of materials supplied:-

The petitioner failed to submit any documentary evidence in support of

their contention regarding defective materials said to have been supplied by the

respondent and the delay in supplying the same.

(c) Relief against the invocation of Performance Bank Guarantee:-

Since the petitioner failed to make payment to the respondent as claimed

by the respondent, the Council decided unanimously that a sum of

Rs.59,42,986/- is due and payable by the petitioner to the respondent and the

petitioner is also liable to pay compound interest with monthly rests to the

supplier on delayed amount at three times of the bank rate notified by the

Reserve Bank of India as per the provisions of Section 16 of the MSMED Act

and the counter-claim of the petitioner against the respondent is rejected.

22. The Council has not given any reason whatsoever in the impugned

arbitral award with regard to the counter-claim made by the petitioner against

the respondent, but, summarily, the Council has rejected the counter-claim.

Various documents were filed by the petitioner before the Council, which

include the documents dated 15.12.2017, 24.01.2018, 01.01.2018-31.01.2018

and 20.02.2019 to substantiate their contentions that no monies are due and

payable by the petitioner to the respondent, but, instead, it is only the

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respondent who owes monies to the petitioner on account of, (a) breach of the

LOI committed by the respondent; (b) not furnishing the Performance Bank

Guarantee on time as per the LOI; and (c) supplying the defective materials

with an inordinate delay. In the impugned arbitral award, there is absolutely no

discussion and analysis made by the Council with regard to the documents filed

by the petitioner and marked as exhibits and the Council has not given any

reason as to why those documents cannot be relied upon in respect of the

petitioner's counter-claim and in respect of the petitioner's contention that they

do not owe any money to the respondent under the LOI dated 10.09.2016,

which is the subject matter of the dispute between the parties.

23. The Hon'ble Supreme Court has interpreted Section 34(2)(b)(ii) of

the Act, by which, this Court is given power to set aside an arbitral award when

the same is in conflict with the public policy of India and the Hon'ble Supreme

Court has held in Vijay Karia (cited supra) that failure to consider vital

evidence by the Arbitrator would amount to the arbitral award being passed in

conflict with the public policy of India. In the case on hand, inspection reports

dated 25.03.2017 and 29.03.2017 were filed by the petitioner before the

Council, which were marked as exhibits and which reveal that there are certain

defects and deformation in the masts supplied by the respondent to the

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petitioner. However, in the impugned arbitral award, there is absolutely no

discussion or analysis made by the Arbitrator with regard to the inspection

reports dated 25.03.2017 and 29.03.2017.

24. Under the LOI dated 10.09.2016, it has been made clear that the

respondent will have to furnish Performance Bank Guarantee for a sum of

Rs.2,11,80,061/- in favour of the petitioner within a period of 15 days from the

date of LOI. However, it is an undisputed fact that the respondent had

furnished the Performance Bank Guarantee for the said sum only on

05.11.2016, well beyond the period of 15 days stipulated under the LOI dated

10.09.2016. In the impugned arbitral award, there is absolutely no discussion

with regard to the delay on the part of the respondent in furnishing a

Performance Bank Guarantee for a sum of Rs.2,11,80,061/- in favour of the

petitioner. The Hon'ble Supreme Court in Ssangyong Engineering (cited supra)

while interpreting patent illegality falling under Section 34(2-A) of the Act has

also made it clear that if the Arbitrator fails to consider the vital evidence, it

amounts to patent illegality. In the case on hand, the inspection reports filed by

the petitioner as well as the Performance Bank Guarantee clause provided

under the LOI dated 10.09.2016 are indeed a vital piece of evidence in support

of the petitioner's counter-claim and the petitioner's contention that they are not

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liable to pay any money to the respondent under the LOI dated 10.09.2016.

However, under the impugned arbitral award, those vital evidences have been

totally ignored by the Council and the Council has also not given any reason as

to why those documents are irrelevant for the purpose of adjudicating the

counter-claim made by the petitioner against the respondent as well as for

adjudicating the petitioner's contention that no monies are due and payable by

the petitioner to the respondent under the LOI dated 10.09.2016. The Hon'ble

Supreme Court in Vijay Karia (cited supra) and Dyna Technologies (cited

supra) has held that failure on the part of the Arbitrator to consider the material

evidence will also amount to the arbitral award having been passed in conflict

with the public policy of India.

25. The petitioner also contended before this Court that the Council

under the impugned arbitral award has awarded interest based on an interest

calculation sheet that was given by the respondent behind the back of the

petitioner, after the final hearing in the arbitral proceedings. There is

absolutely no discussion in the impugned arbitral award as to when interest

calculation sheet was given by the respondent and as to whether the same was

given to the petitioner and whether the petitioner has accepted or rejected it.

Any evidence, based on which, any arbitral award is passed must be recorded

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only in the presence of both the parties to the dispute to enable the other party

against whom the evidence has been produced to rebut the same either through

contra evidence produced by the other party or through oral evidence. The

interest portion of the impugned arbitral award is a huge component. The

petitioner has been directed to pay interest, which is three times more than the

principal amount awarded under the impugned arbitral award. Therefore, any

evidence relied upon by the Council for the purpose of awarding interest ought

to have been made available to the petitioner during the course of arbitral

proceedings, but, not after the final hearing in the arbitration is complete.

Therefore, the petitioner's contention before this Court that for awarding

interest, the Council has relied upon the calculation sheet submitted by the

respondent, which was not given to the petitioner during the course of the

arbitral proceedings, but, was given to the petitioner only after the final

hearing, has to be accepted by this Court, since no contra evidence is placed on

record before this Court to rebut the same.

26. As observed earlier, the interest component under the impugned

arbitral award is three times more than the principal amount stated in the

contract. The interest calculation relied upon by the Council will amount to an

award having been passed in conflict with the public policy of India. Any

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evidence taken behind the back of the parties by the Arbitrator is patently

illegal as held by the Hon'ble Suprmee Court in Ssangyong Engineering (cited

supra), while interpreting Section 34(2)(b)(ii) of the Act.

27. It is also noticed from the impugned arbitral award that the Council

did not allow the parties to cross-examine the witnesses. The impugned arbitral

award has been passed merely by relying upon certain selective documents and

none of the documents, more particularly, inspection reports submitted by the

petitioner to disprove the claim of the respondent, have been considered by the

Council. Besides, the quality issues raised by the petitioner against the

materials supplied by the respondent have been absolutely ignored by the

Council in the impugned arbitral award.

28. The learned counsel for the respondent during the course of his

submissions relied upon email dated 12.05.2017 sent by the petitioner to the

respondent, which is re-produced hereunder:-

“Dear Mr.Jain,

As discussed, please find below status of your pending

payment:-

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Arb O.P(COM.DIV.) No. 10 of 2025

-> Payment of approx. 92 lacs is under processing for

discounting with Bank of America. This payment is

expected to be done by next week starting.

-> Payment of approx. 57 lacs is under processing by

SSC. This payment is expected to be done by next week

end.

-> We are starting processing of your balance pending

bills.It is further requested to extend the validity of

Performance Bank Guarantee which is expiring on 30

th

Jun'17.”

29. The respondent has also contended that the aforesaid email amounts

to admission of liability on the part of the petitioner to pay the respondent.

However, the learned counsel for the petitioner disputes that the aforesaid email

pertains to the subject transaction and it is also evident from the fact that the

respondent has made a claim before the Council against the petitioner for a sum

of Rs.59,42,986/-, whereas in the email dated 12.05.2017, referred to supra, it

refers to various other amounts, which is far exceeding than the respondent's

claim. Under the impugned arbitral award, there is absolutely no discussion

made by the Council with regard to the aforesaid email dated 12.05.2017 as

well, which the respondent claims to be an admission of liability on the part of

the petitioner, though there is a passing reference to the said email by the

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Arb O.P(COM.DIV.) No. 10 of 2025

Council while recording the contentions of the respondent in the arbitral claim

made by them against the petitioner.

30. The petitioner, even prior to the reference of the dispute to the

Council by the respondent as per the provisions of Section 18 of the MSMED

Act, has raised the issue with regard to defective materials supplied by the

respondent, which is also supported by inspection reports of the Engineer,

which were also marked as exhibits before the Council. Therefore, the

contention of the respondent by relying upon the definition “appointed date”

under the MSMED Act that the petitioner did not dispute the claim of the

respondent before the Council within a period of 15 days has to be summarily

rejected as it is a frivolous one. The definition “appointed date” contained in

the MSMED Act is only for the purpose of enabling the supplier to make a

claim as per the provisions of Section 18 of the MSMED Act. The definition

“appointed date” under the MSMED Act is only for the purpose of giving cause

of action for the supplier to make a claim under the MSMED Act and nothing

more.

31. The petitioner has also complied with the statutory requirements of

Section 19 of the MSMED Act by making the statutory pre-deposit of 75% of

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Arb O.P(COM.DIV.) No. 10 of 2025

the awarded amount. Based on the said pre-deposit, the Registry had also

numbered this petition. Section 19 of the MSMED Act enables this Court to

pass such other orders as this Court deems fit with regard to the statutory pre-

deposit amount. Though the statutory pre-deposit amount prescribed under

Section 19 of the MSMED Act is mandatory and the petitioner has also

satisfied the said statutory requirements, if there is any doubt as to whether the

amount deposited is based on correct calculation or not, it can be clarified by

this Court by exercising its power under Section 19 of the MSMED Act and

that is the reason why Section 19 of the MSMED Act makes it clear that 'such

other order' as this Court deems fit, can be passed by this Court. Therefore, the

term 'such other order' found in Section 19 of the MSMED Act enables this

Court to rectify any shortfall in the payment of statutory pre-deposit by

directing the petitioner to pay the deficit amount.

32. In the case on hand, the petitioner had made the statutory pre-deposit

amount, which, according to the petitioner, is the correct amount, and the

Registry has also numbered this petition after satisfying itself that statutory pre-

deposit amount has been paid by the petitioner. Therefore, the question of now

dismissing this petition on the ground that the petitioner has not calculated

correctly the 75% statutory deposit will cause the petitioner irreparable

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Arb O.P(COM.DIV.) No. 10 of 2025

loss/hardship for no fault of theirs. Only to avoid such an eventuality, the

legislature has thought it fit to add the phrase “the other order in the manner

directed by such court” in Section 19 of the MSMED Act. The petitioner, by

way of abundant caution, has also showed a Demand Draft before this Court,

when the matter was heard on 17.07.2025 for the shortfall of the deposit

amount as claimed by the respondent, without admitting the contention of the

respondent that the petitioner has not satisfied the requirements of Section 19

of the MSMED Act by making the required pre-deposit amount. This Court, at

this stage, need not decide as to whether there is any shortfall in the payment of

the statutory deposit amount or not, as the Registry of this Court only after

satisfying itself about the statutory pre-deposit numbered this petition and

therefore, the benefit of doubt should be given to the petitioner. When the

petitioner is ready to deposit the shortfall amount if any for the purpose of

Section 19 of the MSMED Act and that too when this petition having been

numbered by the Registry of this Court and the Registry of this Court having

accepted the amount deposited by the petitioner to satisfy the requirements of

Section 19 of the MSMED Act, this petition cannot be dismissed at this belated

stage only on the ground that the amount deposited by the petitioner is not a

correct amount to satisfy the requirements of Section 19 of the MSMED Act.

The petitioner cannot be made to suffer, when the Registry of this Court has

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Arb O.P(COM.DIV.) No. 10 of 2025

already numbered this petition after satisfying itself that the petitioner has

complied with the requirements of Section 19 of the MSMED Act.

33. In fact, as seen from the decisions relied upon by the learned counsels

for the petitioner as well as the respondent, it is clear that though the statutory

pre-deposit amount prescribed under Section 19 of the MSMED Act is

mandatory, the Court deciding an application under Section 34 of the Act is

having the power to allow the pre-depoist to be made in instalments. When

such a power is given, the question of raising a dispute that the amount

deposited by the petitioner to comply with the requirements of Section 19 of the

MSMED Act is not a correct amount, cannot be entertained by this Court at this

belated stage.

34. Though the learned counsel for the respondent would submit that

there is no necessity for the Arbitrator to pass a detailed judgment, but,

however, the law is now well settled that the Arbitrator in the award should

give reasons for arriving at the conclusion though the said reasoning may not

be an elaborate one. As observed earlier by this Court, reasons are the soul of

justice. But, in the impugned arbitral award, the Arbitrator has totally ignored

the counter-claim made by the petitioner and has also ignored the contentions

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Arb O.P(COM.DIV.) No. 10 of 2025

of the petitioner through the statement of defence filed by them. The decision

relied upon by the learned counsel for the respondent in Tex Maco Limited

(cited supra) is not dealing with the calculation of the statutory pre-deposit

amount prescribed under any legislation, but, it is only dealing with the case of

a defendant questioning the jurisdiction of the Court after the suit got numbered

by the court registry. Therefore, the said decision is not applicable to the facts

and circumstances of the present case.

35. For the foregoing reasons, the impugned arbitral award passed by the

Council has to be set aside by this Court as the said arbitral award passed by the

Arbitrator is in conflict with the public policy of India and is also patently

illegal. Accordingly, the impugned arbitral award dated 02.07.2024 passed by

the Council is set aside and this petition is allowed. However, liberty is granted

to both the parties to initiate fresh arbitration against the other party in

accordance with law. The time spent by both the parties before the Council in

the arbitration as well as before this Court in this petition shall stand excluded

for the purpose of saving limitation under Section 14 of the Limitation Act,

1963. No Costs.

23 -07-2025

Index: Yes

Speaking

Neutral Citation: Yes

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Arb O.P(COM.DIV.) No. 10 of 2025

ABDUL QUDDHOSE J.

RKM

Arb O.P(COM.DIV.) No. 10 of 2025

23-07-2025

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