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No Ledger No Relief - Madras HC Backs Arbitrator’s Rejection of Fabrication Claim

Best and Fast Metal Fab v. Sri Shakra Computer Offset Printers

Arb. O.P. No. 242 of 2023

 N. Anand Venkatesh, J

Madras High Court heard two cross-petitions presented under Section 34(2) of the Arbitration and Conciliation Act, 1996, against an arbitral award dated 29th October 2022, made by sole arbitrator Mr. Mohammed Fayaz Ali. The conflict arose due to a subcontract between Best and Fast Metal Fab, the subcontractor, and Sri Shakra Computer Offset Printers, the main contractor, for fabrication and erection works for cattle sheds in the Coimbatore and Tuticorin districts. The main contractor had engaged the petitioner as a subcontractor by a letter dated 3rd   October 2015 for undertaking the aforesaid works. The subcontractor performed several jobs, such as fabrication and erection at both districts, providing tricycle spares for garbage collection, and job work with the processing of raw materials. The subcontractor, being a registered entity under the Micro, Small and Medium Enterprises Development Act, 2006, approached the MSE Facilitation Council, which referred the case to arbitration under Section 18(3) of the MSME Act.

Before the arbitrator, the claimant had four claims totalling approximately ?3.76 crores under different heads, whereas the respondent had only admitted liability to the tune of ?13.79 lakhs. Upon considering the evidence, the sole arbitrator granted Claim Nos. 1, 3, and 4 but disallowed Claim No. 2 relating to ?1.55 crore for fabrication and erection work at Tuticorin on the ground of lack of evidence. Aggrieved, the claimant filed a claim to set aside the dismissal of Claim 2, while the respondent petitioned for the reversal of the grant of the remaining three claims. The second petition, however, remained unnumbered due to the respondent's neglect to deposit the requisite 75% pre-deposit as mandated by Section 19 of the MSME Act.

In considering the initial petition, the High Court noted that the single arbitrator had dismissed Claim No. 2 on the basis that the claimant had not provided primary evidence, i.e., books of accounts or ledger statements, to support the invoices. The arbitrator commented upon the inconsistency in the claimant's claims and concluded that essential invoices lacked corroboration by documentary evidence. Even though the claimant had depended on the respondent's ledger statement (Ex.B6) and a letter from the Commercial Tax Department dated 2nd January 2019 in order to prove VAT payments on some invoices, these records were not tabled in front of the arbitrator or were unclear. The Court pointed out that documents that were not stamped before the arbitrator would not be considered at the Section 34 stage.

The court held that the reasoning of the arbitrator was not perverse or manifestly illegal because the claimant had sufficient scope to submit its accounts and supporting documents before the arbitral proceedings, but did not do so. The Court again reemphasized that interference under Section 34 applies in cases of patent illegality or perversity and not reappreciation of evidence. The petition was thus dismissed, upholding the dismissal of Claim 2.

Case Reference: Best and Fast Metal Fab v. Sri Shakra Computer Offset Printers Arb. O.P. No. 242 of 2023