Allowed

M/S.Bharat Electrica v. Micro and Small Enterp

Orissa HC14 May 2024WP(C)/14518/2014

Case brief

AI extract

What is this about?

Petitioner challenged an order by the Micro and Small Enterprises Facilitation Council modifying its final award to make it contingent. The Court held Section 33 of the Arbitration Act permits only clerical or arithmetic errors, not substantive modifications.

What did the court decide?

The order dated 17th June, 2014 under Annexure-5 passing a contingent award is set aside; the writ petition is allowed.

M/S.Bharat Electrica Vs Micro and Small Enterp — Consumer Protection | Orissa HC (2024)

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Signature Not Verified

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Digitally Signed Signed by: ROJALIN NAYAK Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 21-May-2024 15:02:09

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IN THE HIGH COURT OF ORISSA AT CUTTACK

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W.P.(C). NO.14518 OF 2014

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(An application under Articles 226 and 227 of the Constitution of India) *********

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Gupta Power Infrastructure Limited

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…. Petitioner

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-versus-

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Micro and Small Enterprises …. Opp. Parties Facilitation Council and others

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Advocate for the Parties : For Petitioner : Mr. Saswat Kumar Acharya, Advocate along with Mr. Abhisekh Agrawal, Advocate

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For Opposite Parties : Mr. Sanat Kumar, Senior Advocate along with Mr. Smita Ranjan Pattanaik, Advocate & Mr. Jagannath Pattanaik, Senior Advocate along with Ms. Soma Pattanaik, Advocate

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CORAM:

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JUSTICE K.R. MOHAPATRA

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-------------------------------------------------------------------------- Heard and disposed of on 14.05.2024

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J U D G M E N T

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1. This matter is taken up through hybrid mode.

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Petitioner, being a Supplier, has filed this writ petition challenging the order dated 17^th June, 2014 (Annexure-5) passed in MSEFC Case No. 03 of 2012 wherein the Micro and Small Enterprises Facilitation Council, Cuttack (for brevity ‘the MSEFC’) modified the award dated 26^th March, 2014 passed under Section 18 of The Micro, Small and Medium Enterprises Development Act, 2006 (for brevity ‘the MSMED Act’).

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Page 1 of 8

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W.P.(C). NO.14518 OF 2014

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Signature Not Verified

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Digitally Signed Signed by: ROJALIN NAYAK Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 21-May-2024 15:02:09

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The short point involved in this case is whether the MSEFC after passing an award in MSEFC Case No.03 of 2012 under Section 18 of the MSMED Act, can sit over the matter and pass a contingent award, i.e., order dated 17^th June, 2014 (Annexure-5).

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Mr. Acharya, learned counsel submits that the PetitionerSupplier, pursuant to the agreement, supplied materials to National Small Industries Corporation (NSIC). Since the payment was not made within the stipulated time, MSEFC Case No.03 of 2012 was initiated. The MSEFC, vide its award dated 26^th March, 2014 (Annexure-4), held that the NSIC Ltd., Kolkata-Opposite Party No.2 is liable to pay the principal and interest amount to the PetitionerSupplier. After the award under Annexure-4 was passed, Opposite Party No.2, vide its Letter dated 16^th May, 2014, requested the Secretary, Department of MSME, Government of Odisha to recall the award passed in MSEFC No.02 of 2012, so also in other five cases and to withhold the proceeding in all twenty five cases filed by the Petitioner-Supplier against the NSIC till the hearing of the cases by IFC. Pursuant to the said letter, the Additional Secretary to Government of Odisha in the Department of MSME, vide its Letter No.2913 dated 22^nd May, 2014, requested the MSEFC to reconsider the issues raised by the Director (Finance), NSIC Ltd. in its letter dated 16^th May, 2014 and review the award dated 26^th March, 2014 passed in all the MSEFC Case Nos.2 to 4 of 2012 and 21 to 23 of 2012, which include the instant case.

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Mr. Acharya, learned counsel for the Petitioner further submits that in view of Section 32 of the Arbitration and Conciliation Act, 1996 (for brevity ‘the Arbitration Act’), arbitral proceeding stands terminated by passing final arbitral award. In the instant case,

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W.P.(C). NO.14518 OF 2014

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Signature Not Verified

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Digitally Signed Signed by: ROJALIN NAYAK Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 21-May-2024 15:02:09

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the final arbitral award was passed under Annexure-4. After passing the final award, the arbitral tribunal becomes functus officio in entertaining any objection raised subject to Section 33 of the Arbitration Act. Section 33 of the Arbitration Act provides that within thirty days of receipt of the arbitral award, a party with notice to the other party may request the arbitral tribunal to correct any computation, clerical or typographical error or any other error of a similar nature occurring in the award. In the instant case, neither the letter dated 16^th May, 2014 of the NSIC Ltd. nor Letter No. 2913 dated 22^nd May, 2014 spelt out any clerical, computation or typographical error. However, entertaining aforesaid letters, the MSEFC passed the impugned order dated 17^th June, 2014 reviewing the award itself by making the final award dated 26^th March, 2014 (Annexure-4) a contingent one directing that the NSIC shall pay the outstanding principal and interest amount to the Petitioner-Supplier after realization of the same from the concerned Electricity Board. The aforesaid direction varies the nature of the final award and amounts to passing a fresh award on the reference made under Section 18 of the MSMED Act. Section 33 of the Arbitration Act does not permit the MSEFC to pass a subsequent award by modifying, reviewing or amending the original award passed under Annexure-4. He also relies upon the case of Gyan Prakash Arya -vTitan Industries Limited , reported in (2023) 1 SCC 153 , wherein it is held as under:-

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“13. The original award was passed considering the claim made by the claimant as per its original claim and as per the statement of the claim made and therefore subsequently allowing the application under Section 33 of the 1996 Act to modify the original award in exercise of powers under Section 33 of the 1996 Act is not sustainable. Only in a case

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W.P.(C). NO.14518 OF 2014

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Signature Not Verified

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Digitally Signed Signed by: ROJALIN NAYAK Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 21-May-2024 15:02:09

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of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected. In the present case, it cannot be said that there was any arithmetical and/or clerical error in the original award passed by the learned arbitrator. What was claimed by the original claimant in the statement of claim was awarded. Therefore, the order passed by the learned arbitrator on an application filed under Section 33 of the 1996 Act and thereafter modifying the original award cannot be sustained. The order passed by the learned arbitrator in the application under Section 33 of the 1996 Act is beyond the scope and ambit of Section 33 of the 1996 Act. Therefore, both, the City Civil Court as well as the High Court have committed a grave error in dismissing the arbitration suit/appeal under Sections 34 and 37 of the 1996 Act respectively. The modified award passed by the learned arbitrator allowing the application under Section 33 of the 1996 Act cannot be sustained and the same deserves to be quashed and set aside.”

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( emphasis supplied )

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He, therefore, submits that the MSEFC does not have any jurisdiction to sit over the final ward under Annexure-4 save and except any computation , arithmetical or clerical error in the award. Hence, he prays for setting aside the impugned order under Annexure-5.

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Mr. Pattanaik, learned Senior Advocate appearing for NSIC-Opposite Party No.2 submits that Section 32 (3) of the Arbitration Act makes it clear that the after passing of the final award the Arbitrator does not become functus officio , as alleged. The mandate of the arbitral tribunal terminates subject to Section 33 of the Arbitration Act. Section 33(4) of the Arbitration Act provides that unless and otherwise agreed upon by the parties, a party with a notice to the other party may request, within thirty days from the receipt of the arbitral award to make an additional arbitral award as to the claims presented in the arbitral proceedings, but omitted from

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W.P.(C). NO.14518 OF 2014

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Signature Not Verified

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Digitally Signed Signed by: ROJALIN NAYAK Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 21-May-2024 15:02:09

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the arbitral award. In the instant case, the agreement between the Petitioner and NSIC dated 18^th August, 1994 clearly indicates that both the parties have agreed that NSIC shall make the payment after receipt of the same from the Electricity Boards. The NSIC is a facilitator. NSIC can never be treated to be a Purchaser. It only facilitates the small entrepreneurs to participate in the tender process, which they could not have done individually. It also provides financial assistance to the small entrepreneurs to participate in the tender process. While passing the final award, the same was omitted to be reflected in the arbitral award. Thus, by making an application NSIC requested the MSEFC to add the clause of mode of payment of the awarded amount. Thus, the award became contingent in terms of agreement executed between the Petitioner and NSIC. The request made by NSIC squarely comes under the provision of Section 33 of the Arbitration Act. He further submits that although it is reflected so, the MSEFC did not act upon the letter of the State Government while passing the impugned order under Annexure-5. The impugned order was passed pursuant to the letter issued by the NSIC on 14^th May, 2016. As such, there is no infirmity in the impugned order under Annexure-5. He, therefore, submits that the writ petition is liable to be dismissed being devoid of any merit.

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Mr. Kumar, learned Senior Advocate appearing for NSIC supplemented the argument advanced by Mr. Pattanaik, learned Senior Advocate submitting that the provision under Section 33 of the Arbitration Act is in the light of Section 152 of Code of Civil Procedure (CPC), 1908. Any computation, clerical or typographical error in the award is the effect of an accidental slip or omission, which is the cause. The arbitral tribunal, while passing the final

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W.P.(C). NO.14518 OF 2014

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Signature Not Verified

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Digitally Signed Signed by: ROJALIN NAYAK Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 21-May-2024 15:02:09

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award under Annexure-4, accidentally omitted to reflect that the payment should be made by the NSIC to the Supplier on receipt of the same from the Electricity Boards, which was the ultimate recipient of the product supplied by the Petitioner. The accidental omission or slip of such nature can be rectified in terms of Section 33 of the Arbitration Act. Such clerical error in final award crept in due to accidental slip or omission by the MSEFC because of lack of their experience in the field of arbitration. In that view of the matter, the Court should take a pragmatic view in the matter. He, therefore, submits that there is no illegality in the impugned order under Annexure-5.

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9. Heard learned counsel for the parties.

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Perused the documents, case law and materials placed before this Court.

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The short question that arises for consideration is whether the order passed under Annexure-5 can be clothed under Section 33 of the Arbitration Act. Section 19 of the Arbitration Act makes it clear that the provision of CPC is not applicable to the instant case. It is, however, submitted by Mr. Kumar, learned Senior Advocate that the provision under Section 33 of the Arbitration Act is made in the light of Section 152 of CPC. Thus, the principles of Section 152 CPC may be taken into consideration while entertaining the application under Section 33 of the Arbitration. In the instant case, no application under Section 33 of the Arbitration Act has been made to the MSEFC as would be apparent from the case record. Only a letter was issued by the NSIC to the Secretary, MSME, Government of Odisha on 16^th May, 2014 for review of the final award. On the

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W.P.(C). NO.14518 OF 2014

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Signature Not Verified

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Digitally Signed Signed by: ROJALIN NAYAK Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 21-May-2024 15:02:09

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basis of the said letter, Government in the Department of MSME wrote a letter to the MSEFC on 22^nd May, 2014 to reconsider the issue raised by the Director (Finance, NSIC) in its letter dated 16^th May, 2014 and review the award dated 26^th March, 2014. Admittedly, Government of Odisha is not a party to the arbitral proceeding. Thus, no cognizance of letter dated 22^nd May, 2014 could have been taken by the MSEFC to pass an order after the final award under Annexure-4 was passed. The letter issued by the NSIC to MSME Department, Government of Odisha was certainly not to the MSEFC.

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It further appears that Section 33 of the Arbitration Act operates in a very limited field. After passing the award under Section 32 of the Arbitration Act, the arbitral tribunal has a limited scope to correct any computation, clerical or typographical errors or any other errors of a similar nature occurring in the award. In the final award under Annexure-4, the NSIC was made liable to pay the principal as well as interest accrued therein with monthly rests to the Petitioner-Supplier in terms of Section 15 of the MSMED Act. By virtue of the impugned order, the final award under Annexure-4 was converted to a contingent award by inserting a clause that NSIC would pay the amount to the Petitioner after receiving the same from the concerned Electricity Boards. Incorporation of such a clause in the final award changes the very nature of the award, which is not permissible in exercise of power under Section 33 of the Arbitration Act. Only the errors, those are apparent on the face of the record may be corrected in an exercise of power under Section 33 of the Arbitration Act. The order under Annexure-5 does not appear to be so. Law is well-settled in the case of Gyan Prakash Arya (supra)

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W.P.(C). NO.14518 OF 2014

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Signature Not Verified

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Digitally Signed Signed by: ROJALIN NAYAK Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 21-May-2024 15:02:09

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that only clerical , arithmetical or computation error in the arbitral award can be corrected. Mr. Pattanaik, learned Senior Advocate made an endeavour to persuade the Court that the Opposite Party No. 2 had only requested the MSEFC to pass an additional award in exercise of power under Section 33(4) of the Arbitration Act vide its letter dated 16^th May, 2014. Such a contention is not acceptable; firstly, for the reason that the aforesaid letter was not addressed to the MSEFC. It was addressed to the Secretary, Department of MSME, Government of Odisha. Secondly, in the said letter, a request was made to impress upon the MSME to recall its award under Annexure-4. Thirdly, no request was apparently made within thirty days of the final award under Annexure-4. No document is available on record to suggest that a request was made to MSME to pass an additional award. Further, the impugned order under Annexure-5 cannot be treated to be an additional award in view of the discussions made above.

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In view of the discussions made above, this Court has no hesitation to set aside the order under Annexure-5 being without jurisdiction. As such, the impugned order under Annexure-5 is set aside.

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