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2010 (1) TMI 1223 - SC - Indian LawsArbitration proceedings - Interpretation of the term 'appeal' appearing in Section 7 the Interest on Delayed Payments to Small Scale and Ancillary Undertakings Act - Whether the expression 'appeal' used in Section 7 of the Interest Act includes an application to set aside the arbitral award filed u/s 34 of the Arbitration Act? - Small Scale Industrial Undertaking for the purposes of the Interest Act - The Maharashtra State Electricity Board ('MSEB') issued a Work Order in favour of Maharashtra Small Scale Industries Development Corporation ('the Corporation') - work was completed and the bills were duly submitted - huge delay on the part of the Corporation in paying the said bills - demanded interest on delayed payment under the Interest Act - claim denied by the Corporation - Arbitration Application u/s 11 - the Corporation filed an application u/s 34 - During the pendency of these proceedings the Appellant company pointed out that u/s 7 of the Interest Act the Corporation has to deposit 75 % of the amount awarded by Arbitrator under the Award - Division Bench of the High Court had held that if one considers the expression appeal in the context of the expression decree, it can only be a judicial determination by a Regular Civil Court considering the hierarchy of courts. HELD THAT - We fail to understand why the expression appeal shall be construed solely in the context of a decree or order when the Section clearly makes reference to 'Awards' as well. According to the Respondents, the word 'award' appearing in Section 7 relates to those that result from a reference made under Maharashtra Cooperative Societies Act to the Industry Facilitation Council. The provisions for such reference, which is to be governed by Arbitration Act, were incorporated in 1998 by way of an amendment in the INterest Act. However, section 7 contained the word 'award' even before such reference mechanism was incorporated in the Interest Act by way of the Amendment Act, 1998. Therefore, it is difficult to see why 'award' in section 7 should not include an arbitral award other than the one arising from reference made to the Industries Facilitation Council. It is true that in almost all definitions of appeal', there is reference to removal of a cause from an inferior Court to a superior Court. It is also trite that an arbitrator deriving his authority from a private agreement does not fit into the ordinary hierarchy of Courts. In our opinion, however, an appeal need not necessarily lie from an inferior Court to a superior Court, especially within the meaning of Section 7. We are of the view that appeal is a term that carries a wide range of connotations with it and that appellate jurisdiction can be exercised in a variety of forms. It is not necessary that the exercise of appellate jurisdiction will always involve reagitation of entire matrix of facts and law. We have already seen in the case of Abhayankar 1969 (4) TMI 106 - SUPREME COURT that even an order passed by virtue of limited power of revision u/s 115 of the Code is treated as an exercise of appellate jurisdiction, though under that provision, the Court cannot go into the questions of facts. There is no quarrel that Section 34 envisages only limited grounds of challenge to an award; however, we see no reason why that alone should take out an application u/s 34 outside the ambit of an appeal especially when even a power of revision is treated as an exercise of appellate jurisdiction by this Court and the Privy Council. While the learned counsel for the appellant company urged that the Legislature had used the terms 'appeal' and application' interchangeably, we are of the view that we cannot conclusively infer the same. Use of the term 'application' appears to be in the context of the dispute resolution mechanism provided for under Section 17 which essentially comprises of conciliation and arbitration, to be governed by Arbitration Act, 1996. The legislature has intended to bring about improvements to the Interest Act as stated in the Statement of Objects and Reasons of the Act of 2006. Indeed, it might have contemplated a change in the legal position while enacting the Act of 2006, but we cannot make that change apply retrospectively. In this respect, we agree with the reasoning of the High Court and with the contentions of learned counsel for the respondents as we cannot read the provision of a subsequent enactment into an Act which was repealed by the former. The interest Act is a beneficial piece of legislation intended to expedite timely payment of money owed to Small Scale Industries. Most of the contracts of supply or sale that Small Scale Industries enter into contain arbitration clauses. These arbitration proceedings result in an 'award'. If the term appeal' is interpreted in the limited context of a 'decree or order' and as excluding an application to set aside or remit such awards, the very purpose behind the enactment of Interest Act will be defeated.
Issues Involved:
1. Interpretation of the term 'appeal' in Section 7 of the Interest on Delayed Payments to Small Scale and Ancillary Undertakings Act, 1993. 2. Applicability of Section 7 of the Interest Act to applications under Section 34 of the Arbitration and Conciliation Act, 1996. 3. Liability for interest payment between the Corporation and the Maharashtra State Electricity Board (MSEB). 4. Application of the Micro Small and Medium Enterprises Development Act, 2006 to the case. 5. Procedural requirements for setting aside an arbitral award. Issue-wise Detailed Analysis: 1. Interpretation of the term 'appeal' in Section 7 of the Interest Act: The primary issue was the interpretation of the term 'appeal' in Section 7 of the Interest Act. The court considered whether the term 'appeal' includes an application to set aside an arbitral award under Section 34 of the Arbitration Act. The Supreme Court held that "appeal" should be given a wide meaning, considering the object and purpose of the legislation. The court noted that "appeal" is a term that carries a wide range of connotations and can include various forms of appellate jurisdiction. The court concluded that the term 'appeal' in Section 7 of the Interest Act should include an application under Section 34 of the Arbitration Act. 2. Applicability of Section 7 of the Interest Act to applications under Section 34 of the Arbitration Act: The court examined whether Section 7 of the Interest Act, which requires a pre-deposit of 75% of the awarded amount for an appeal to be entertained, applies to applications under Section 34 of the Arbitration Act. The Supreme Court disagreed with the Division Bench of the High Court and held that the requirement of pre-deposit under Section 7 of the Interest Act applies to applications under Section 34 of the Arbitration Act. The court emphasized that limiting the term 'appeal' to exclude applications under Section 34 would render the term 'award' redundant and defeat the purpose of the Interest Act. 3. Liability for interest payment between the Corporation and MSEB: The court addressed the issue of whether the Corporation or MSEB was liable to pay the interest on delayed payments. The learned Single Judge had found that the conditions in the Supply Order established a buyer-supplier relationship between the Corporation and the appellant company, making the Corporation liable for the interest payment. The Division Bench of the High Court did not decide on this issue, stating that it would be addressed when the challenge to the award under Section 34 is heard and disposed of. 4. Application of the Micro Small and Medium Enterprises Development Act, 2006: The court considered whether Section 19 of the Micro Small and Medium Enterprises Development Act, 2006, which also requires a pre-deposit for appeals, was applicable. The Division Bench of the High Court held that the Act of 2006 was not applicable as the reference to arbitration was not in terms of Section 19 of the Act of 2006, and the Act was not in force when the challenge of pre-deposit under Section 7 of the Interest Act was heard. The Supreme Court agreed with this reasoning and held that the 2006 Act could not be applied retrospectively. 5. Procedural requirements for setting aside an arbitral award: The court examined the procedural requirements for setting aside an arbitral award under Section 34 of the Arbitration Act. The Supreme Court held that an application under Section 34 should be treated as an appeal for the purposes of the Interest Act, requiring a pre-deposit of 75% of the awarded amount. The court emphasized that this interpretation aligns with the object of the Interest Act, which aims to prevent dilatory tactics by buyers and ensure timely payment to Small Scale Industries. Conclusion: The Supreme Court set aside the judgment and order of the Division Bench of the High Court and allowed the appeal to the extent indicated. The respondent-corporation was directed to deposit 75% of the amount awarded by the Arbitrator within three months. The court also ordered that the application for setting aside the award under Section 34 of the Arbitration Act be decided expeditiously within six months from the date of deposit. The appeal was allowed without any order as to costs.
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