Narmada Transmission Private Limited vs Rajasthan Rajya Vidyut Prasaran Nigam Limited

We have heard learned counsel appearing for the parties.

An application has been filed to vacate the interim order dated 21.08.2014, by which after issuing notices in the Special Appeal to the respondents, we had stayed the operation of the interim order passed by learned Single Judge on 15.02.2012, as well as the order dated 28.04.2014, by which the application to vacate the interim order, was dismissed. With the consent of the parties, we have finally heard the Special Appeal.

On 21.08.2014, we passed the following order:-

"Issue notice to the respondents. Steps will be taken within a week. The respondents will file reply within three weeks thereafter.

List for hearing on 15.10.2014.

Shri M.K. Sharma, Senior Manager, appearing for the appellant-Company, submits that the writ petition filed by the respondent No. 1-Rajasthan Rajya Vidyut Prasaran Nigam Limited, against the award passed by the Madhya Pradesh Micro And Small Enterprises Facilitation Council, Bhopal, under the Interest on Delayed Payments to Small Scale Ancillary Undertaking Act, was not maintainable, in view of the alternative remedy of filing an appeal against the award given by the Council under Section 34 of the Arbitration Act and further such appeal was not maintainable unless it was accompanied with pre-deposit of 75% of the amount, under Section 19 of the Act.

It is submitted that the point in issue is covered by the judgment of the Supreme Court in Snehadeep Structures Private Limited Vs. Maharashtra Small Scale Industries Development Corporation Limited, , in which it was held that pre-deposit of 75% of the amount is a mandatory condition for preferring an appeal under Section 34 of the Arbitration Act against the award. The applicability of Section 19 of the Interest Act was held to include reference to arbitration.

In the present case, we find that instead of preferring an appeal, the Rajasthan Rajya Vidyut Prasaran Nigam Limited filed a writ petition in the High Court, in which the application for vacating the interim was order dismissed.

The award passed under the Act by the Facilitation Council could be challenged by the writ-petitioner by filing an appeal under Section 34 of the Arbitration Act and for which, pre-deposit of 75% of the amount under Section 19 of the Act is mandatory.

Prima-facie, we find that the writ Court should not have interfered in the matter where alternative remedy of filing appeal against the award was available. The amount of interest of Rs. 76,000/- had swelled to Rs. 1,02,93,962/- in view of the mandatory provisions of the Act, which seeks to protect the small scale units from oppression by large industries in withholding the payments. Since the amount of interest has to be computed every month, it is obvious that it will swell to much large amount.

Be that as it may, the respondents have neither set up any case of lack of jurisdiction with the Facilitation Council, nor any case of financial hardship has been set up, which may make the remedy of appeal onerous.

In view of the aforesaid, we find that the interim order passed by the learned Single Judge was not justified in law. The interim order dated 15.02.2012 as well as order dated 28.04.2014, passed by the learned Single Judge, are thus stayed.

It will be open to the respondent No. 1 to file an appeal under Section 34 of the Arbitration Act, subject to limitation and for condonation of delay, after deposit of 75% of the amount, as awarded by the Facilitation Council."

It is submitted by the Counsel appearing for the respondents that the Award passed by the Madhya Pradesh Micro and Small Enterprises Facilitation Council, Bhopal (in short, ''the Facilitation Council'') under the Micro, Small and Medium Enterprises Development Act, 2006 (in short, the Act of 2006''), is not only grossly illegal, but is without jurisdiction inasmuch as the claim of the appellant for interest on delayed payment related to the supplies made from 15.03.1999 to 20.03.1999. The Micro, Small and Medium Enterprises Development Act, 2006 (Act No. 27 of 2006) came into force on 16.06.2006, and that any claim for delayed interest under the Act, was not maintainable for the period prior to the enforcement of the Act. It is submitted that the claim made by the appellant was also hopelessly barred by limitation. The Facilitation Council under the Act of 2006, acts as a Conciliator, and thus the limitation of three years provided under the Arbitration and Conciliation Act, 1996 (in short, the Act of 1996''), will be applicable to the claims made to the Facilitation Council. It is submitted that in the present case, the claim was made with regard to the delayed interest for the supplies made between 15.03.1999 to 20.03.1999, and thus the claim was stale and could not be entertained by the Facilitation Council. The Facilitation Council acted beyond its authority in awarding the claim, for an amount of Rs. 76,000/- only, with compound interest for Rs. 1,02,93,962.

It is submitted that alternative remedy is not an absolute bar for filing a writ petition, when a judgment, order, or award is wholly without jurisdiction, and further that the alternative remedy is extremely onerous, in view of Section 19 of the Act, providing for 75% of the amount, to be deposited as a pre condition for filing an appeal. It is submitted that there was no delay in making the payment, and in any case, for a claim of an amount of Rs. 76,000/-, which is said to have accrued in the year 1999, the Award of more than Rs. One crore, requires deposit of Rs. 75 lacs, which, in view of various pronouncement of the Hon''ble Supreme Court, was a remedy, which was too onerous, and for which, the Award can be challenged by filing a writ petition.

Learned counsel appearing for the respondents has relied upon the judgments of the Apex Court in J.M. Baxi and Co. Vs. Commissioner of Customs and Another, , U.P. State Spinning Co. Ltd. Vs. R.S. Pandey and Another, , and Bhilwara Spinners Ltd., Bhilwara and Another Vs. Collector (Stamps) Bhilwara and Others, , in submitting that alternative remedy is not an absolute bar, where the order assailed is without jurisdiction, and the amount to be deposited, is extremely high for availing the alternative remedy. He has distinguished the judgment in Snehadeep Structures Private Limited Vs. Maharashtra Small Scale Industries Development Corporation Limited, , relied upon in the interim order passed by us, on the ground that the question which was raised in that judgment, was only with regard to expression "appeal" under Section 7 of the Interest Act, which does not include an application to set aside the Arbitral award, filed under Section 34 of the Act of 1996.

Learned counsel appearing for the appellant, on the other hand, submits that the Act of 2006 has not repealed but has replaced, on the enactment of the Arbitration and Conciliation Act, 1996, the Interest on Delayed Payments to Small Scale And Ancillary Industrial Undertakings Act, 1993 (in short, ''the Act of 1993''). He submits that since the bank guarantee was not released, for which the appellant was regularly paying the charges for renewal of the bank guarantee, limitation for claiming delayed interest survived, and that the claim made by the appellant is not beyond limitation, as provided under the Act of 1996. He further submits that Section 32 of the Act of 2006, providing for repeal of the Act No. 32 of 1993, could not make the claim of the appellant, for which cause of action arose in the year 1999, barred by limitation, even if no action was initiated under the old Act, provided the limitation survived. The Act of 2006, in continuity, of the Act of 1993, provides that claim, which was maintainable under the Act of 1993, could be entertained, subject to limitation, before the Facilitation Council, established under the Act of 2006.

Learned counsel appearing for the appellant has further relied upon the judgment in Goodyear India Limited Vs. Norton Intech Rubbers (P) Ltd. and Another, , in which the Supreme Court held that deposit of 75% of the Award, as a condition precedent for filing an appeal, is a valid condition, and that there was no reason to interfere with the Division Bench judgment of the Kerala High Court, interpreting Section 19 of the Act of 2006.

After hearing learned counsel appearing for the parties, we are, prima-facie, of the view, subject to final decision which may be taken by learned Single Judge in the pending writ petition, that interference with the Award by granting interim order, was not proper inasmuch as it could not be said that the Award given by the Facilitation Council at Bhopal, was either without jurisdiction, or suffered from such gross error of law, for which it could be said that alternative remedy of appeal could be avoided, and the Award be challenged in a writ petition. The question as to whether a claim for delayed interest could be made under the Act of 2006, had to be seen with relevance to the fact that the Act of 2006, is the successor of the Act of 1993, and if cause of action had arisen under the Act of 1993, it could be raised by way of dispute before the Facilitation Council under the Act of 2006 subject to the limitation provided in the Arbitration & Conciliation Act, 1996. In this case, we do not agree that the claim of the appellant was barred by limitation, and for which, no argument could be advanced, to explain that the claim was well within limitation, provided under the Arbitration & Conciliation Act, 1996. The question as to whether the respondents were justified in not releasing the bank guarantee, and which would have given continuing cause of action, is a question, which was considered by the Facilitation Council, and was required, if the respondents had filed an appeal, to be decided in appeal. The claim was not so apparently barred by limitation without any defence, so as to consider the Award, to have entertained the claim.

In view of the above, and considering the ratio of the judgments of the Supreme Court in Snehadeep Structures Private Limited Vs. Maharashtra Small-Scale Industries Development Corporation Limited(supra), and Goodyear India Limited Vs. Norton Intech Rubbers(P) Ltd. (supra), learned Single Judge had patently fallen in error in entertaining the writ petition, and staying the operation of the Award given by the Facilitation Council.

For the aforesaid reasons, we allow the Special Appeal, and set aside the order passed by learned Single Judge dated 15.02.2012 as well as the order dated 28.04.2014. As observed earlier, it will be open to the respondents to file an appeal under Section 34 of the Arbitration Act, subject to limitation, and after deposit of 75% of the amount, as awarded by the Facilitation Council.

Learned Single Judge is requested to decide the writ petition, as expeditiously as possible.