Court Allows Appeal in NTPC BHEL Power Projects Pvt. Ltd. vs. Shree Electricals & Engineers (India) Pvt. Ltd.

The appellant, NTPC BHEL Power Projects Pvt. Ltd., filed a writ petition challenging an arbitral award passed by a facilitation council under the Micro, Small and Medium Enterprises Development Act (MSMED Act). The decision of the Division Bench in the Gujarat State Civil Supplies Corporation Ltd. vs. Mahakali Foods Pvt. Ltd. & Anr. (2023) partially reversed the Bombay High Court’s earlier decision in Gujarat State Petronet Ltd. This decision by the Supreme Court allowed the facilitation council to act as an arbitrator despite the provisions in Section 80 of the Arbitration Act that bar the facilitation council from rendering arbitral awards.

Key Issues

The appellant initially filed a writ petition challenging the arbitral award based on the earlier Division Bench decision, which held that the facilitation council did not have jurisdiction to render an arbitral award. This decision was still in operation at the time of filing, making the writ petition maintainable. However, following the Supreme Court's ruling in 2023, which partially reversed the earlier decision, the petitioner withdrew the writ petition to pursue the appropriate remedy as per the law and filed Section 34 proceedings before the District Judge on 17 March 2023.

The District Judge had rejected the petitioner’s application to condone the delay in filing the Section 34 proceedings, leading to the current appeal.

Court’s Analysis

The court observed that despite the delay in filing the Section 34 proceedings, the appellant was justified in filing the writ petition at the time of its initiation, as the Gujarat State Petronet Ltd. case had not yet been reversed. The court ruled that Section 14 of the Limitation Act would apply to the filing of an application under Section 34 of the Arbitration Act for setting aside an arbitral award. This provision allows for exclusion of time when a party has been pursuing an earlier proceeding in good faith.

The court referenced Supreme Court precedents, such as the Consolidated Engineering Enterprises case (2008), which held that Section 14 of the Limitation Act applies to proceedings under Section 34 of the Arbitration Act. The Deena (Dead) case (2002) further clarified that litigants pursuing earlier proceedings in good faith are entitled to the exclusion of that time period, even if they filed a case in a court lacking jurisdiction.

Court's Conclusion

The court concluded that Section 34 proceedings should have been allowed, as the appellant had filed the writ petition in good faith and had exercised due care while doing so. Given the Supreme Court’s orders extending the period of limitation during COVID-19 and the legal position laid down by the Bombay High Court in the Gujarat State Petronet Ltd. case, the appellant acted appropriately by filing the writ petition to challenge the arbitral award. The court held that the delay in filing the Section 34 proceedings should have been condoned, as the appellant had acted in good faith in seeking a remedy based on the legal position at the time. As a result, the appeal was allowed, and the impugned order was set aside.

Case Title: NTPC BHEL Power Projects Pvt. Ltd. Versus Shree Electricals & Engineers (India) Pvt. Ltd