Bombay HC stays order to pay Rs 92 lakh interest for Rs 43,000 sum

Mumbai: The Bombay high court has stayed an order of the Micro and Small Enterprise Facilitation Council, Konkan Region, Thane, which had directed Bengal Chemicals to pay a principal amount of Rs 43,715 and interest of Rs 92,66,711, which is 200 times the principal to Milan Laboratories for service rendered by the latter in 2006. While granting interim relief to Bengal Chemicals, the HC directed Bengal Chemicals to deposit the principal amount and allowed the petition saying that the award was “unconscionable”. 

A bench of Justice M.S. Sonak was hearing the writ petition filed by Bengal Chemicals and Pharmaceutical Ltd, a government of India enterprise against the award by the council in 2015. While challenging the council’s order, the petitioner contended that the award was not valid as The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 based on which the respondent was claiming interest came into effect only after they were contracted to render services for the amount of Rs 43,715 and hence the provisions of the Act could not be applied.   

Advocate Pradeep Havnur, who represented the company, argued that at the time of contracting Milan, his client was not informed that it was an MSME.