In the Matter of New India Assurance Co. Ltd. v. Winsome International Ltd, The arbitrator issued an arbitration ruling ordering the petitioner to pay the respondent Rs. 24,11,07,449.15. The petitioner filed an application with this court seeking a stay on the contested arbitral award and requesting to distinguish between a Medium Micro and Small enterprise as defined by the MSMED Act. The challenged ruling, which included interest estimated at 24.6% based on the respondent’s classification as a medium firm under Section 16 of the MSMED Act, infuriated the petitioner. The respondent argued that, in accordance with Section 34 of the Arbitration and Conciliation Act, 1996, the petitioner’s arguments should only be taken into account when the Award is being set aside.
Analysis of Court Decision
A single bench of the Calcutta High Court led by Moushumi Bhattacharya noted that if the supplier is a medium enterprise, the buyer in default will not be required to pay interest at three times the bank rate under Section 16 of the Micro, Small and Medium Enterprises Development Act, 2006, and held that the petitioner is required to pay an interest rate of 8% rather than 24.6% on the principal sum.
The Court noted that a median enterprise is not a supplier under Section 2(g) of the MSMED Act. When examining Section 2(g), (h), (m), and (n) of the MSMED Act, the Court noted that if the supplier is a median enterprise, the defaulting buyer will not be required to pay the interest three times that charged by the Bank, but the same principle is not applicable in cases where the supplier is a micro or small enterprise. The petitioner shall pay the main sum of Rs. 5,17,09,732.78 plus expenses at a rate of Rs. 1 crore, according to the court’s opinion, in order to get a stay of the Award. The Court further noted that the issue at hand was the unreasonableness of the amount of fees that must be assessed in accordance with Section 34 of the Act, 1996.
The court determined that the party is required to secure 50% of the entire amount through a cash deposit and the remaining 50% by a bank guarantee with the Registrar, Original Side of this Court within two weeks of today. The petitioner must secure the specified sum by the date the court orders, or the challenged arbitral award will no longer be in effect. The application was denied by the court, but the respondent was given the freedom to take the proper actions to carry out the arbitral award.
CASE NAME – New India Assurance Co. Ltd. v. Winsome International Ltd., AP/418/2023