Bharat Heavy Electrical Ltd. Bhel vs M/S Control Systems

NEUTRAL CITATION NO. 2026:MPHC-JBP:68085
1 MP-5200-2026
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR

BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA,
ACTING CHIEF JUSTICE
&
HON'BLE SHRI JUSTICE PRADEEP MITTAL
rd
ON THE 3 OF SEPTEMBER, 2026
MISC. PETITION No. 5200 of 2026
BHARAT HEAVY ELECTRICAL LTD. BHEL
Versus
M/S CONTROL SYSTEMS AND OTHERS
Appearance:
Shri Sanjeev Sagar - Senior Advocate (through VC) with Shri Ruchir
Chaturvedi, Shri Prateek Jain, Shri Niraj Kumar and Shri Ashish Raj -
Advocate for the petitioner.
Shri Qasim Ali - Advocate (through VC) with Shri Sahil Yadav -
Advocate for the respondent No.1.
Shri Rajvardhan Dutt Padraha - Government Advocate for the
respondent No.2/State.
ORDER
Per: Vivek Rusia, Acting Chief Justice
By way of the present petition under Article 227 of the Constitution
of India, the petitioner, Bharat Heavy Electricals Limited (BHEL), a Public
Sector Undertaking, has called in question the legality and validity of the
order dated 06.07.2026 (Annexure P-5) passed by the learned Commercial
Court, Bhopal in MJC (AV) No.44/2023, whereby the application preferred
Signature Not Verified
Signed by: SHIVANI TIWARI
Signing time: 9/8/2026
3:12:18 PM

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by respondent No.1 under Section 19 of the Micro, Small and Medium

Enterprises Development Act, 2006 (in short "MSMED Act") was allowed
and the petitioner was directed to deposit 75% of the award amount,
including interest calculated up to the date of filing of the proceedings under
Section 34 of the Arbitration and Conciliation Act, 1996 (in short, "the Act
of 1996 ").
Facts of the case, in short, are as under:
2. That the petitioner, Bharat Heavy Electricals Limited (BHEL), a
Public Sector Undertaking, was awarded certain electrical package works for
the Bina Refinery Project pursuant to a Letter of Award dated 29.02.2008,
followed by an agreement dated 08.09.2008 executed between the parties.
Disputes subsequently arose between the petitioner and respondent No.1,
M/s. Control Systems, in relation to payments towards final bills and extra
items.
3 . The respondent No.1 had initially invoked the arbitration
mechanism and approached the Bombay High Court under Section 11(6) of
the Act of 1996, pursuant to which a sole arbitrator was appointed.
Subsequently, respondent No.1 approached the Madhya Pradesh Micro and
Small Enterprises Facilitation Council (respondent No.2), which entertained
the claim and ultimately passed an arbitral award dated 15.12.2022
(Annexure P-1) directing the petitioner to pay a principal amount of
Rs.1,46,79,568/- and interest of Rs.3,62,00,405/- calculated up to
28.02.2016, aggregating to Rs.5,08,79,972/-. It was further directed that
the payment of interest from 01.03.2016 till payment in terms of the
Signature Not Verified
Signed by: SHIVANI TIWARI
Signing time: 9/8/2026
3:12:18 PM

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MSMED Act, without specifying the rate or methodology for calculation.

4 . Aggrieved by the said award, the petitioner has preferred an
application under Section 34 of the Arbitration and Conciliation Act, 1996
before the Commercial Court, Bhopal, on 21.03.2023 (Annexure P-2). In
compliance with Section 19 of the MSMED Act, the petitioner deposited
Rs.3,81,59,979/-, stated to be 75% of the quantified award amount.
Subsequently, respondent No.1 filed an application contending that the pre-
deposit was deficient and sought deposit of a further amount by calculating
interest up to February 2025. The petitioner opposed the application, inter
alia, contending that the award was vague and did not specify the rate of
future interest and that the additional amount could not be determined on the
basis of a unilateral calculation.
5. The Commercial Court, by order dated 06.07.2026 (Annexure P-
5) passed in MJC (AV) No.44/2023, allowed the application of respondent
No.1 and has directed the petitioner to deposit 75% of the award amount
calculated with interest up to the date of filing of the application
under Section 34 Act of 1996. Aggrieved thereby, the petitioner approached
this Court under Article 227 of the Constitution of India, seeking quashment
of the said order and a declaration that the deposit already made by it
constitutes sufficient compliance with Section 19 of the MSMED Act.
Submissions on behalf of the petitioner:
6. Learned senior counsel for the petitioner submitted that the
impugned order is contrary to law, as the arbitral award itself is vague and
ambiguous insofar as it does not specify the rate of future interest or the
Signature Not Verified
Signed by: SHIVANI TIWARI
Signing time: 9/8/2026
3:12:18 PM

NEUTRAL CITATION NO. 2026:MPHC-JBP:68085
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methodology for its computation. It was contended that the expression

“amount in terms of the award” under Section 19 of the MSMED Act cannot
include an unquantified or disputed liability based upon a unilateral
calculation by the respondent.
7. It was further submitted that the petitioner had already deposited
Rs.3,81,59,979/-, being 75% of the amount quantified in the award, and
therefore had substantially complied with Section 19. According to the
petitioner, directing a further deposit on the basis of subsequently calculated
interest would impose an onerous condition and render its statutory remedy
under Section 34 of the Act of 1996 illusory.
8. Learned senior counsel further submitted that the award suffers
from patent illegality and non-application of mind, including absence of
reasons for allowing the claim towards extra items and grant of interest on
bank charges. It was also argued that the Facilitation Council lacked
jurisdiction as the dispute arose out of a works contract.
9. It was lastly submitted that the proceedings before the Facilitation
Council were concluded after an inordinate delay of more than six years
from the date of reference, contrary to the statutory mandate of expeditious
adjudication, and that the petitioner ought not to be burdened with the
additional interest liability arising from such delay.
Submissions on behalf of the respondents:
10. Learned counsel appearing for the respondents opposed the
petition and supported the impugned order passed by the Commercial Court.
It is submitted that the amount deposited by the petitioner was deficient and
Signature Not Verified
Signed by: SHIVANI TIWARI
Signing time: 9/8/2026
3:12:18 PM

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that, under Section 19 of the MSMED Act, the award amount was required

to be computed along with the interest payable thereon till the date of filing
the appeal. On this basis, respondent No.1 sought a direction for deposit of
the requisite 75% amount, and the learned court has rightly passed the
impugned order; hence, no interference is liable to be made in the writ
petition.
Appreciation & Conclusions
1 1 . The petitioner has filed this petition under Article 227 of the
Constitution of India challenging the order dated 06.07.2026 passed in
Miscellaneous Judicial Case (AV) No.44/2023 by the Commercial Court,
Bhopal (II Additional Judge to the Court of I District & Additional Sessions
Judge) whereby the petitioner has been directed to deposit 75% of
Rs.5,08,79,973/- as per calculation up to the date 28.02.2016 as required
under Section 19 of the "MSMED Act".
12. The petitioner filed an appeal under Section 19 of the MSMED
Act read with Section 34 of the Act of 1996 challenging the award dated
15.12.2022 passed by the MSME Council, be depositing Rs.3,81,59,979/-
which said to be 75% of the amount as per the petitioner's own calculation.
The respondent submitted an objection that up to February, 2025, the
decretal amount has become Rs.40,42,18,819/- as per the calculation made
by the Chartered Accountant; therefore, the appellant/petitioner be directed
to deposit 75% of the aforesaid amount in order to maintain the appeal filed
under Section 34 of the Act.
13. The said application was objected by submitting that the
Signature Not Verified
Signed by: SHIVANI TIWARI
Signing time: 9/8/2026
3:12:18 PM

NEUTRAL CITATION NO. 2026:MPHC-JBP:68085
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principal amount is Rs.1,46,79,568/- and the interest is Rs.3,62,00,405/-, in

total Rs.5,08,79,972/- becomes a total amount payable by the appellant, and
accordingly Rs.3,81,59,979/- (75% of the total amount of Rs.5,08,79,972/-)
has been deposited. It was argued that the impugned award is silent about the
payment of interest after the date of 28.02.2016; hence, no interest is liable
to be calculated and paid after 28.02.2016; hence, the appellant/petitioner
cannot be compelled to pay the 75% of the said amount of interest.
14. Learned Senior Counsel appearing for the petitioner submitted
that the petitioner has challenged the award passed by the MSME Council on
the ground that it is a non est award passed contrary to the principles of
natural justice and settled provisions of law. The award, while quantifying
the principal amount and interest up to 28.02.2016, is completely silent on
the specific rate of interest applicable thereafter. The petitioner had made a
bonafide deposit of Rs.3,81,59,979/- which is 75% of the total sum payable
by the appellant/petitioner in compliance of the award, hence, further
direction to deposit extra amounting to Rs.1,13,23,225/- is contrary to the
judgment passed by the Apex Court in the case of "Associate Builders Vs.
Delhi Development Authority, 2015 (3) SCC 49,".
15. As per Section 19 of the MSMED Act, the 75% amount of
decretal amount is liable to be deposited and the decretal amount is to be
calculated on the basis of the award. The petitioner did not deposit the
amount of 75% along with memo of appeal but deposited the amount of
Rs.3,81,59,979/- in compliance with the order dated 13.01.2025, i.e. after 3
years. The appeal is not entertainable unless 75% of the amount is deposited.
Signature Not Verified
Signed by: SHIVANI TIWARI
Signing time: 9/8/2026
3:12:18 PM

NEUTRAL CITATION NO. 2026:MPHC-JBP:68085
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The amount was deposited after a period of almost 2-3 years; hence interstate

is liable to be calculated for an extra 3 years also.
16. Section 17 of the MSMED Act provides that the buyer shall be
liable to pay the amount with interest thereon as provided under Section 16
for any goods supplied or services rendered by the supplier. Section 16
provides that where any buyer fails to make payment of the amount to the
supplier as required under Section 15, the buyer shall be liable to pay the
principal amount and compound interest with monthly rests to the supplier.
17. In this case, the learned Facilitation Council had calculated the
principal amount Rs.1,47,79,563/- and calculated the interest
Rs.3,62,00,405/- up to February, 2016 and directed to make payment interest
on 01.03.2016 till the date of payment, therefore, the interest is liable to be
calculated on principal amount till the date of deposit because as per Section
19 of the MSMED Act, the appeal shall not be entertainable, unless the
appellant has not deposited the requisite amount.
18. Before parting with this matter, we would like to observe our
serious concern about the approach of the petitioner adopted till date. The
petitioner is a public sector undertaking dealing with the public money. The
petitioner has been challenging the impugned award of the MSME Council
mainly on technical grounds. The principal amount claimed by the
respondent-MSME is only Rs.1,46,79,568/- as on 28.02.2016 was not
contested on merit before the Council. Had this amount claimed by the
respondent been settled at that relevant point of time, the liability to pay
Rs.5,08,79,972/- and interest thereon would not have fallen to this petitioner.
Signature Not Verified
Signed by: SHIVANI TIWARI
Signing time: 9/8/2026
3:12:18 PM

NEUTRAL CITATION NO. 2026:MPHC-JBP:68085
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Therefore, the public sector, which is dealing in public money, should have

examined the matter before contesting Court of Law whether it is advisable
to invite such a high rate of interest payable on a small principal
amount. Now, the total recovery comes to Rs.40,42,18,819/- as on February,
2025 against the principal amount Rs.5,08,79,972/-. Still, the petitioner may
think of settlement with the respondent in order to avoid payment of the
principal amount at such a high rate of interest. This Miscellaneous Petition
i s dismissed, as we do not find any error in the impugned order dated
06.07.2026 passed by the learned Commercial Court, Bhopal.
19. No order as to cost.
(VIVEK RUSIA)
ACTING CHIEF JUSTICE
(PRADEEP MITTAL)
JUDGE
Shivani
Signature Not Verified
Signed by: SHIVANI TIWARI
Signing time: 9/8/2026
3:12:18 PM