Interest at 38.85% under Section 16 of the MSMED Act granted under Ad-hoc Arbitration is legal.

In this case, the Arbitral Award was passed for Rs.6,56,84,982/- with 38.85% interest from the date of award in the arbitration proceedings.  It was contended that the interest at 38.85% could not have been granted as the benefit of Section 16 of the MSMED Act is applicable only where arbitration is conducted institutionally under Section 18 of the said Act.

HELD that the provisions of Sections 15 and 16 of the MSMED Act confer substantive rights and are independent of section 18 remedy. They are independent.  The supplier is entitled to interest if the conditions of Section 15 are complied with.  It is not necessary to resort to section 18 remedy for grant of interest under Section 16 of the said Act.

 Judgment dated 1.5.2025 of the High Court of Delhi in O.M.P (COMM) 246/2022 of Shristi Infrastructure Development  Vs.  Scorpio Engineering Private Limited and another