Authority: Supreme Court of India, Civil Appellate Jurisdiction

Order Date: August 13, 2026

Case Overview

  • Parties: Appellant – M/S Unicon Engineers; Respondent – M/S Super Steam Boiler Engineers Pvt Ltd.
  • Origin: Appeal (Special Leave Petition (C) No.25835/2026) against the High Court of Judicature at Madras order dated 02‑04‑2026, which affirmed an interim order of a learned Single Judge.
  • Background: The arbitral award granted the appellant a claim of Rs 30,71,386 with simple interest @ 6.5% per annum from 18‑09‑2010 to 04‑07‑2025. The Single Judge directed the respondent to deposit 75% of the award amount along with the simple interest, failing which the Section 34 arbitration appeal would be rejected.
  • Legal Issues: Interpretation of Sections 16 and 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). Whether the 75% pre‑deposit must include the interest component and whether interest should be computed at the compound rate of three times the RBI‑notified bank rate.
  • Counsel Submissions:
  • Appellant (Ms. Mrinal Kanwar, AOR) relied on Goodyear India Ltd. v. Norton Intech Rubbers Pvt Ltd. and Gujarat State Disaster Management Authority v. Aska Equipments Ltd. to argue that the deposit must include compound interest at three times the RBI bank rate.
  • Respondent (Mr. Arjun Amanchi) contended lack of clarity on interest, noting that the arbitral tribunal declined clarification.
  • Court Findings:
  • Section 16 is a non‑obstante clause mandating compound interest with monthly rests at three times the RBI‑notified bank rate.
  • Section 19 requires a pre‑deposit of 75% of the “amount in terms of the decree, award or any other order in the manner directed by such court,” leaving discretion only for instalment terms, not for reducing the percentage.
  • The award itself specifies: “Rs 30,71,386 … with the compound interest with monthly rests at three times the bank rate of 6.50% notified by the Reserve Bank of India … as stipulated in Section 15 & 16 of the MSMED Act, 2006 from 18‑09‑2010 till the date of realization.”
  • Consequently, interest must be calculated at 19.5% per annum (3 × 6.5%) on a compounded basis with monthly rests.

Final Outcome

  • The Supreme Court allows the appeal without commenting on the merits of the underlying dispute.
  • The respondent is directed to calculate interest at 19.5% compounded monthly, add it to the principal award, and deposit 75% of the total amount, after deducting the simple interest of 6.5% already paid, within two months from the date of the order.
  • Until such deposit is made, the Section 34 application remains deferred; failure to comply will result in the Section 34 appeal being rejected.
  • The appellant may seek disbursement of any amounts already deposited, subject to conditions the Court may impose, and similar conditions will apply to further deposits to ensure security for potential refunds.
  • All pending applications, if any, are ordered disposed of.

Topics: Arbitration Deposit, Interest Calculation