Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on : 13.02.2025
Pronounced on : 20.02.2025
+ O.M.P. (COMM) 53/2025, I.A. 2636/2025, I.A. 2637/2025
UNISON HOTELS PVT LTD .....Petitioner
Through: Mr.Anil K. Airi, Sr. Advocate with
Mr.Gaurav Bahl, Mr.Mudit Ruhella,
Mr.Vishal, Ms.Sadhna and
Ms.Bindiya, Advocates.
versus
KNM CHEMICALS PVT LTD .....Respondent
Through: Counsel for respondent (presence not
given)
CORAM:
HON'BLE MR. JUSTICE MANOJ KUMAR OHRI
JUDGMENT
1. By way of present petition filed under Section 34 of the Arbitration &
Conciliation Act, 1996 (hereafter referred to as ‘A&C Act’), the petitioner
seeks to set aside the impugned award dated 20.11.2024 passed by the
learned Arbitral Tribunal (hereafter referred to as ‘AT’).
2. Vide the impugned award, the AT allowed the
respondent’s/claimant’s claims to the following extent:
(i) Award amount of Rs.40,70,271.17/- (Rs.17,06,492/- +
Rs.23,63,779.17/-) towards services rendered including interest, plus
(ii) future interest on the award amount of Rs.40,70,271.17/- as per same
interest rate as awarded above in accordance with provisions of Sec.
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:20.02.2025
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16 MSMED Act, 2006, w.e.f. from the date of passing of award by
this tribunal till realization.
Pertinently, the counterclaims filed by the petitioner were rejected.
3. The facts, in a nutshell, are that the petitioner claims to be running a
Five-Star Hotel under the name and style of ‘The Grand’ at Vasant Kunj,
New Delhi. The respondent is stated to be in the business of trading of
various types of chemicals for industrial use. The petitioner used to place
orders from time to time for supply of different chemicals to be used for
cleaning air-conditioners, cooling towers, boilers and for treating hard water
etc. in order to minimize the damage to the appliances/machinery used by
the petitioner.
4. Disputes having arisen, the respondent/claimant claims itself to come
under the Micro and Small Entrepreneur Facilitation Council (‘MSEFC’),
Delhi under Section 18 of the MSMED ACT. The conciliation proceedings
under the MSMED ACT having failed, the disputes were subsequently
referred to Delhi Arbitration Centre (now ‘DIAC’) under Section 18(3) of
the MSMED ACT for statutory arbitration. The learned AT enters reference.
In its statement of claim, the respondent/claimant claimed that the supply of
material was made by it against which bills were raised from time to time.
As the petitioner had a running account maintained with the respondent, the
goods were supplied and the payments were made by the petitioner bill-
wise, but from time to time. It was claimed that the last payment made by
the petitioner was on 22.08.2019 vide cheque for a sum of Rs.3 lacs. The
respondent/claimant further claimed that on account of supply of material, a
sum of Rs.99,56,397.41/- was payable by the petitioner to it towards various
outstanding bills raised by it. It was further claimed that the goods were last
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:20.02.2025
15:21:40
supplied by the respondent to the petitioner on 12.06.2019 vide three
invoices bearing no. T1/19-20/151, T1/19-20/152 and T1/19-20/153 for a
sum of Rs.1,08,324.00, Rs.80,122.00 and for Rs.52,967/-. It was claimed
that the petitioner had already taken the GST claim on the bills raised by it.
5. Apparently, during the pendency of the arbitral proceedings, the
present petitioner preferred an application under Section 16 of the A&C Act
and against its rejection vide order dated 08.08.2022, approached this Court
vide writ petition being W.P.(C) No.12270/2022. The said writ petition
came to be disposed of, thereby holding that the respondent was entitled to
claim benefit under the MSMED ACT. It was further clarified that the
respondent would be entitled to claim benefit under the MSMED ACT for
the bills raised after the date of its registration i.e. from 13.02.2019.
6. In pursuance of the aforesaid order, the respondent filed the amended
statement of claim thereby raising a claim of Rs.20,06,492/- alongwith
pendent lite and future interest @ 24% from August, 2019 till its realization
along with other ancillary reliefs. The petitioner also filed its statement of
claim along with counterclaim for Rs.1,22,16,944/-, reimbursement of
Rs.9,49,774/- being amount paid by it and Rs.50,00,000/- towards damages
for loss suffered at the hands of the respondent. The respondent in support of
its claim of Rs.20,06,492/- placed on record the respective bill dated
12.06.2019, including towards goods supplied on 12.06.2019. The petitioner
resisted the claims by submitting that the respondent’s services and the
goods supplied by it were substandard for which the contract was
terminated. In this regard, the petitioner filed a test report from Shriram
Institute for Industrial Research for the chemical supplied by the respondent.
It further alleged that though the respondent had systematically supplied
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:20.02.2025
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substandard material from 2010 to 2015, the respondent with the connivance
of the petitioner’s three employees got the records to disappear. The
petitioner had further stated that the need for seeking the test report was
premised on the fact that the petitioner had received numerous complaints
from its customers/guests. The petitioner further claimed that the respondent
breached warranties by supplying the defective products which led to
financial losses as well as requirement of third party intervention to rectify
the damages. The AT held the respondent to fall within the definition of
supplier under the MSMED Act, 2016 and thus held the dispute to fall
within the ambit of MSMED Act. AT noted that the petitioner had not
disputed the supplies but only claimed them to be of substandard quality.
While taking note of Section 42 of the Sale of Goods Act, 1930, it observed
that the acceptance of the goods is deemed to have occurred if the buyer
retains the goods without raising objection within a reasonable time. AT
noted that the goods were supplied vide last invoice dated 12.06.2019,
however the petitioner raised objections for the first time vide emails dated
25.10.2019, 05.11.2019, 11.11.2019 and 28.11.2019 and nearly after four
and a half months. AT further noted that though the complaints were
premised on the ground that the same was on account of receipt of
complaints from guests, no such complaint was ever produced. AT also
noted that though the petitioner had claimed that the respondent had
connived with the petitioner’s three employees, however none of those
employees were produced to support the allegations. On the aspect of test
report submitted by Shriram Institute, the AT noted that the sampling was
not done by the Institute and the test report was on the basis of sample
supplied by the petitioner, which in AT’s view diminished the evidentiary
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:20.02.2025
15:21:40
value of the report. Considering the respondent’s claim of Rs.20,06,492/-,
AT took note of payment of Rs.3,00,000/- made by the petitioner and
accordingly after adjusting the same, awarded a sum of Rs.17,06,492/- to the
respondent/claimant towards the outstanding principal amount payable.
Having held so, the AT rejected the petitioner’s counterclaim being devoid
of merit. AT while considering award of interest, took note of Sections 16
and 17 of the MSMED Act and held that the interest would be payable from
27.07.2019 upto the date of award as the MSME interest rate compounded
monthly. AT also awarded future interest till realisation.
7. Before this Court, it is urged on behalf of the petitioner that the AT
erred in awarding the sum of Rs.17,06,492/- to the respondent by not taking
the petitioner’s submission that it had advanced a sum of Rs.9,49,774/-.
Though benefit of Rs.3 lacs was granted, there is no discussion of the
remaining Rs.6,10,430/-. It is further contended that the award is unreasoned
and the dismissal of counterclaim is in teeth of Section 12(3) of the Sale of
Goods Act. Reference was also made to Section 59 and Section 63 of the
said Act.
8. Lastly, it was contended that the AT erred in discarding the test report
of Shriram Institute submitted by the petitioner.
9. The scope of interference under Section 34 of the A&C Act being
well defined and the challenge to an award being confined to it being
patently illegal and/or against the public policy, this Court sets out to deal
with the contentions raised on behalf of the petitioner. The arbitral record
reveals that the parties had business dealings with each other for supply of
chemicals since 2004. Though the petitioner had claimed that prior to the
disputes raised before the AT, it had assessment record showing the material
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:20.02.2025
15:21:40
supplied by the respondent to be below standard, however no such material
was placed before the AT. The petitioner claimed conspiracy by its own
staff for the alleged disappearance of records, however this contention
before AT was not substantiated by way of any oral or documentary
evidence. The AT rightly observed that this contention was not supported by
any oral or documentary evidence.
10. Learned Senior Counsel appearing for the petitioner placed reliance
on the provisions of Sale of Goods Act to state that the respondent
committed breach of warrantee and as such, its counterclaims were
maintainable and that the claims were liable to be rejected and counterclaims
ought to have been allowed. At this juncture, the Court takes note of Section
2 (i) (b) of the MSMED Act, which provides as under:-
Section 2 (i) (b)
…
“where any objection is made in writing by the buyer regarding
acceptance of goods or services within fifteen days from the day
of the delivery of goods or the rendering of services, the day on
which such objection is removed by the supplier”
11. Section 42 of the Sale of Goods Act reads as under:
“42. Acceptance.—
The buyer is deemed to have accepted the goods when he
intimates to the seller that he has accepted them, or when the
goods have been delivered to him and he does any act in relation
to them which is inconsistent with the ownership of the seller, or
when, after the lapse of a reasonable time, he retains the goods
without intimating to the seller that he has rejected them…”
12. From the above, the AT after taking of the aforesaid provisions,
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:20.02.2025
15:21:40
observed that the petitioner ought to have aired its objections with regards to
the quality of the goods within 15 days of receipt of the same.
13. This Court notes that as per the admitted case of the parties, the goods
were lastly supplied vide invoice dated 12.06.2019, however the objections
for the first time were put on record vide emails dated 25.10.2019,
05.11.2019, 11.11.2019 and 28.11.2019 i.e. after nearly four and a half
months. To claim that the goods supplied by the respondent were
substandard, the petitioner had relied upon the complaint received by it from
its customers/guests, the test report from Shriram Institute as well as
invoices showing replacement of goods that were alleged to have been
damaged for the substandard chemicals supplied by the respondent. AT
noted that the petitioner did not place any complaint on record of any
customer/guest with regards to the same. The report from the Shriram
Institute was also rightly disregarded by the AT for the sample not being
collected by the Institute, rather having been supplied by the petitioner itself.
14. Apparently, the goods were last supplied by it to the petitioner on
12.06.2019 and the samples were statedly received by Shriram Institute on
18.10.2019. The invoices relied upon by the petitioner in support of its
counterclaims while seeking damages are of the year 2022. AT rightly held
that no documentary evidence was filed in support of the counterclaims.
15. Lastly, it is submitted on behalf of the petitioner that the AT failed to
discuss a sum of Rs.6 lacs is also misplaced as AT while granting benefit of
Rs.3 lacs to the petitioner, also noted the documents submitted by the
respondent and rightly recorded that the parties were maintaining a running
account.
16. For all of the aforementioned reasons, I find no ground to entertain
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Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:20.02.2025
15:21:40
the present petition and the same is accordingly dismissed along with
pending applications.
MANOJ KUMAR OHRI
(JUDGE)
FEBRUARY 20, 2025/ rd/js
Signature Not Verified
O.M.P. (COMM) 53/2025 Page 8 of 8
Digitally Signed By:MANOJ
KUMAR OHRI
Signing Date:20.02.2025
15:21:40