Unison Hotels PVT LTD vs. Knm Chemicals PVT LTD

Facts

The petitioner, Unison Hotels Pvt Ltd, filed a petition under Section 34 of the Arbitration & Conciliation Act, 1996, to set aside an arbitral award dated 20.11.2024. The award directed the petitioner to pay the respondent, KNM Chemicals Pvt Ltd, Rs. 40,70,271.17 (Rs. 17,06,492/- + Rs. 23,63,779.17/-) for services rendered, including interest, and future interest. The petitioner's counterclaims were rejected. The dispute arose from the supply of chemicals by the respondent to the petitioner's hotel. The respondent, registered under the MSMED Act, 2006, claimed outstanding payments. The petitioner alleged substandard supplies and sought damages. The Arbitral Tribunal (AT) found the respondent to be a supplier under the MSMED Act and held that objections to the goods were raised after an unreasonable delay, specifically after four and a half months from the last supply date of 12.06.2019.

Held

The Court held that the Arbitral Tribunal (AT) did not err in awarding the sum of Rs. 17,06,492/-. The AT had noted that the parties maintained a running account and, after considering the respondent's documents and the petitioner's payment of Rs. 3,00,000/-, arrived at the awarded principal amount. The contention regarding the unaddressed Rs. 6,10,430/- was deemed misplaced as the AT had considered the running account. Regarding the dismissal of the counterclaim, the AT rightly applied Section 42 of the Sale of Goods Act, 1930, and Section 2(i)(b) of the MSMED Act, 2006. The petitioner's objections to the goods were raised after approximately four and a half months from the last supply date (12.06.2019), which was beyond the reasonable time stipulated by law. The AT also correctly disregarded the Shriram Institute's test report because the sampling was not done by the Institute itself but by the petitioner, diminishing its evidentiary value. Furthermore, the AT found no documentary evidence to support the petitioner's counterclaims. The Court found no grounds to interfere with the award under Section 34 of the A&C Act.

Key Issues

1. Whether the Arbitral Tribunal erred in awarding Rs. 17,06,492/- to the respondent, failing to account for the petitioner's submission of advancing Rs. 9,49,774/- and only granting credit for Rs. 3,00,000/-, leaving Rs. 6,10,430/- unaddressed? (Mixed law and fact, concerning calculation of dues and Section 34 of A&C Act). 2. Whether the arbitral award is unreasoned and the dismissal of the petitioner's counterclaim is contrary to Section 12(3) of the Sale of Goods Act, 1930, and Sections 59 and 63 of the same Act? (Law, concerning the grounds for setting aside an award and the application of the Sale of Goods Act). 3. Whether the Arbitral Tribunal erred in discarding the test report from Shriram Institute submitted by the petitioner, which was intended to prove the substandard quality of the goods supplied? (Mixed law and fact, concerning the evidentiary value of the report and Section 34 of A&C Act). Petitioner's Arguments: The petitioner argued that the AT failed to consider the full amount advanced by them and that the award was unreasoned. They contended that the dismissal of their counterclaim was contrary to the Sale of Goods Act and that the AT wrongly discarded the Shriram Institute's test report. They relied on Sections 12(3), 59, and 63 of the Sale of Goods Act, 1930. Respondent's Arguments: The respondent did not record any arguments in the judgment.