Limitation Must Be Decided First, and the Full Award Deposited with 15% Annual Interest.

The respondent challenged an arbitral award before the Commercial Court and sought a stay of its operation and execution in the pending execution proceedings.

The Commercial Court granted a stay subject to deposit of 75% of the awarded amount.

The petitioner challenged that order under Article 227, arguing, among other things, that the challenge to the award was delayed by 346 days, that the respondent had not complied with the pre-deposit requirement under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”), and that the deposit should include interest.

The respondent maintained that limitation had not begun because the award had not been served, and disputed the calculation of interest under the award.

The Commercial Court had kept limitation open; the High Court therefore left the parties’ contentions for that court to decide.

Section 19 of the MSMED Act requires a party challenging an award to deposit 75% of the amount in terms of the award or decree before the court entertains the challenge; the provision also permits the court to impose conditions concerning the deposit.

Section 16 of the MSMED Act provides for interest at three times the bank rate notified by the Reserve Bank of India, with interest compounded monthly; the rate and the method of calculating the amount are distinct questions.

The Court also referred to Indian Oil Corpn. Ltd. v. Fepl Engineering (P) Ltd., 2020 SCC OnLine Del 2799, where a deposit made after presentation of the appeal was accepted, and to Board of Major Port Authority for the Shyama Prasad Mookerjee Port v. Marine Craft Engineers (P) Ltd., 2023 SCC OnLine Cal 2200.

Because the Commercial Court had not decided whether the award challenge was time-barred, the High Court declined to determine the parties’ limitation arguments and directed that limitation be decided before the merits.

It also noted that the interest payable under the award was disputed and that the quantum, including interest, remained to be determined; it therefore did not conclusively rule on the proper interest calculation or the scope of the Section 19 deposit.

In light of the respondent’s offer to deposit the award amount with interest at 15% per annum, and the Delhi High Court’s acceptance of a post-filing deposit in comparable circumstances, the Court modified the stay order to require that deposit, while preserving the parties’ arguments for the Commercial Court.

The Commercial Court must decide limitation before proceeding to the merits.

The respondent must deposit the entire award amount together with interest at 15% per annum within the period fixed by the Commercial Court; if a deposit has already been made, the respondent must deposit the differential amount within the time directed.

The stated figure of Rs. 4,32,992 was tentative, not conclusive, and all parties’ contentions were left open for determination by the Commercial Court.