Himachal Pradesh High Court sets aside ₹95Cr arbitration award, orders fresh proceedings
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Shimla, July 11,
A recent ruling by the High Court of Himachal Pradesh has set aside an arbitral award of over Rs. 95 crore (approximately Rs. 95,71,00,208/-) issued in favor of M/s Medipole Pharmaceutical India Pvt. Ltd. (the Supplier) against The Bihar Medical Services and Infrastructure Corp. Ltd. (the Buyer). The court has directed the Himachal Pradesh Micro and Small Enterprises Facilitation Council to nominate a fresh and different arbitrator from its panel for the settlement of the long-standing dispute between the parties. The order was delivered by Justice G.S. Sandhawalia, Chief Justice, and Justice Ranjan Sharma, Judge, on July 11, 2025.
The case, which involved CWP and Arbitration centered on an ex parte award passed by an arbitrator appointed by the Council. The Buyer, Bihar Medical Services and Infrastructure Corp. Ltd., challenged this award, arguing that the ex parte proceedings were conducted with undue haste during the COVID-19 pandemic, preventing their appearance. They further contended that the claim amount was substantially and disproportionately enhanced multiple times, from an initial Rs. 14.50 crore to over Rs. 95 crore, without proper notice or opportunity to present their case. The Buyer also raised concerns regarding the arbitrator’s jurisdiction, citing an agreement dated October 4, 2013, which stipulated that disputes would be subject to the jurisdiction of the High Court of Bihar at Patna.
Conversely, the Supplier maintained that the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, is a special statute with an overriding effect, justifying the enhanced claim due to the Buyer’s prolonged non-payment since 2014, leading to a significant increase in the amount through compound interest. They also asserted that the Council had the jurisdiction to act as an arbitrator regardless of the Buyer’s location in India, and emphasized the statutory requirement for a 75% pre-deposit to challenge an arbitral award.
The High Court, in its judgment, noted several instances of the Buyer being blacklisted by the Managing Director for alleged quality failures of supplied drugs, including ‘Cefixime Oral Suspension IP.’ The court observed that the arbitrator failed to adequately address crucial issues of limitation and jurisdiction, and that the Buyer was not given a full and equal opportunity to present its case, leading to a finding of “misconduct” on the face of the record. The court further noted that while the MSMED Act, 2006, provides for expeditious resolution, it does not preclude the fundamental principles of natural justice and fair hearing. The judgment also deliberated on the applicability of the Limitation Act, 1963, to arbitration proceedings under the MSMED Act, affirming its relevance. The Court stated, “In such circumstances, we are constrained to set aside the impugned Award passed by respondent No.2 and resultantly, we direct the respondent-Council as such to nominate a fresh and different Arbitrator from its panel for settlement of dispute inter se the parties.” It added, “Needless to say that the observations made by us both for the purposes of jurisdiction and limitation are only for the purpose of coming to the prima facie, conclusion that the Ex parte Award passed by respondent No. 2 as such is not legally sustainable. It will be open to the Arbitrator as such to decide the said issues fresh by taking into consideration the evidence which comes on record and in view of the legal provisions.”
The Court’s decision to set aside the award highlights the importance of adherence to proper arbitral procedures, including ensuring fair opportunity for both parties and proper consideration of jurisdictional and limitation issues.
About the Author
The HimachalScape Bureau comprises seasoned journalists from Himachal Pradesh with over 25 years of experience in leading media conglomerates such as The Times of India and United News of India. Known for their in-depth regional insights, the team brings credible, research-driven, and balanced reportage on Himachal’s socio-political and developmental landscape.
