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2025 SCC OnLine Del 970

In the High Court of Delhi at New Delhi

(BEFORE MANOJ KUMAR OHRI, J.)

Unison Hotels Pvt. Ltd. … Petitioner;

Versus
KNM Chemicals Pvt. Ltd. … Respondent.
O.M.P. (COMM) 53/2025, I.A. 2636/2025 and I.A. 2637/2025
Decided on February 20, 2025, [Reserved on : 13.02.2025]
Advocates who appeared in this case :
Mr. Anil K. Airi, Sr. Advocate with Mr. Gaurav Bahl, Mr. Mudit
Ruhella, Mr. Vishal, Ms. Sadhna and Ms. Bindiya, Advocates.
Counsel for respondent (presence not given)
The Judgment of the Court was delivered by
MANOJ KUMAR OHRI, J.:— 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. 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
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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 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 substandard material from 2010 to 2015, the
respondent with the connivance of the petitioner's three employees got
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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 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.
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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 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,
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
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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 the present petition and the same is accordingly dismissed
along with pending applications.
———
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