Interest Under MSMED Act Is to Be Calculated Monthly at Variable RBI Rates | HC Directs Award Debtor to Pay Full Interest

Case Details: V.K. Patel and Co v. Simplex Infrastructure Ltd. - [2024] 164 taxmann.com 679 (HC-Calcutta)

Judiciary and Counsel Details

• Sabyasachi Bhattacharyya, J.
• Swatarup Banerjee & Ms Sonal Agarwal, Advs. for the Appellant.
• Sarvapriya Mukherjee & Abhishek Banerjee, Advs. for the Respondent.

Facts of the Case

In the instant case, the Council constituted under the MSMED Act rendered a money award in favour of the petitioner, a partnership firm registered as an MSE unit under provisos of the Micro, Small and Medium Enterprises Development Act, 2006.

The Council did not calculate in detail the exact amount of interest payable in the award but merely referred to section 16 of the MSME Act.

It was noted that upon a comprehensive assessment of the provisions of Section 16, the inevitable conclusion was that the interest envisaged therein was to be paid at a rate of three times the RBI-notified rates, the incidence of which would be at each monthly rest, meaning thereby that rates would fluctuate along with RBI-notified rates at variable points of time, to be taken at each monthly interval, which was the point of incidence of such rates.

High Court Held

The High Court observed that the mode of calculation having thus been determined, the award debtor was directed to make full payment of interest as per calculations to the award holder.

Further, the High Court observed that for this purpose, along with paying the entire interest component over and above the principal awarded amount, deducting amounts already paid/deposited in terms of court orders, the award debtor would also file in court a copy of detailed calculations for arriving at the amount paid to the award holder.

The High Court held that the award holder would be at liberty to withdraw (if deposited) or utilize (if paid directly) the amount already deposited/paid by the award debtor.

Further, the High Court held that the matter would next be listed under the heading ‘For orders’ on 6.08.2024 when award debtors would file an affidavit of compliance, showing payment of such entire amount of interest along with principal to award holder, annexing to the said affidavit a break up of detailed calculations of interest till date of payment.