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2019 DIGILAW 271 (KER)

M. S. Sajith Kumar Proprietor v. State of Kerala

2019-03-19

SHAJI P.CHALY

body2019
JUDGMENT : 1. The captioned writ petitions are materially connected, filed by one and the same petitioner against the State Express Transport Corporation, Chennai challenging the awards passed by the Arbitrator under the provisions of the Micro Small and Medium Enterprises Development Act, 2006 and the Arbitration and Conciliation Act, 1996, hereinafter called “Act, 2006” and “Act, 1996” respectively. Therefore, I heard them together and propose to pass a common judgment. 2. Petitioner supplied tread rubber to the State Express Transport Corporation, Chennai pursuant to the orders placed on 10.3.1999. According to the petitioner, it is stipulated in clause 12(a) of conditions of tender that, 95% of the payment due will be released within 45 days to the suppliers and the remaining 5% of the payment will be released only after ensuring that, supply of the particular lot has met the guaranteed kilometers as specified in the tender. As per the terms and conditions, 95% of the payment was made to the petitioner within the stipulated time. But as per the terms of the contract, no time limit has been prescribed for making performance assessment. Though the petitioner submitted numerous letters to the 3rd respondent, there was no response regarding the performance assessment and the payment of 5% of the balance amount due to the petitioner. Thereupon petitioner has raised claims by invoking section 18 of Act, 2006. However, the claims were rejected by the 2nd respondent as per the awards passed on 23.5.2014 holding that, the claims raised by the petitioner are for realisation of belated payment and also that the applications are not maintainable under Act, 2006. As per the claim, the supply were made during the years 1999 and 2000. But the original application for non-payment was filed only during the year 2012 i.e., after a long lapse of 12 years. Therefore, the original application is infested with serious lacunae. According to the Arbitrator, the letters purported to have been sent to the 3rd respondent by the petitioner was of the years 2001, 2002, 2006 and 2009, which are produced as evidence by the petitioner. However, the acknowledgements thereof were not produced for substantiating the claim. Therefore, it raised serious doubt about the genuineness. Thus the petitioner has failed to specify the date on which the supply was made. Therefore, the Arbitral Council found that, the application is not maintainable and hence dismissed with costs. 3. However, the acknowledgements thereof were not produced for substantiating the claim. Therefore, it raised serious doubt about the genuineness. Thus the petitioner has failed to specify the date on which the supply was made. Therefore, the Arbitral Council found that, the application is not maintainable and hence dismissed with costs. 3. I have heard learned counsel for petitioner, learned Government Pleader as well as counsel appearing for 3rd respondent. 4. The issue revolves around section 15 of the Act, 2006 whereby liability is cast upon the buyer to make payment, wherein it is stipulated that, where any supplier, supplied any goods or renders any services to any buyer, the buyer shall make payment there for on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day. The proviso stipulates that, in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance. Therefore, on a reading of section 15 it is clear, the payment will have to be effected in accordance with the agreed terms and conditions by and between the parties. However, the proviso makes it clear that, the payment fall due at a maximum period of 45 days from the day of acceptance or the day of deemed acceptance of the supplies made. Section 16 is relevant to the context, which deals with the rate at which interest is payable. It stipulates that, where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank. The liability to pay interest is also recoverable as per section 17 of the Act. The liability to pay interest is also recoverable as per section 17 of the Act. Anyhow section 18 is the crucial provision which deals with the claims submitted before the Council constituted for settling disputes by and between the parties, which read thus: (1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under S.17, make a reference to the Micro and Small Enterprises Facilitation Council. (2) On receipt of a reference under sub-s.(1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of Ss.65 to 81 of the Arbitration and Conciliation Act, 1996 shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under sub-s.(2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996, (96 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-s.(1) of S.7 of that Act. (4)Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. 5. It was on the basis of the right conferred on the petitioner as a small scale industrialist, claims were raised before the Arbitrator. Sub-sections (2) and (3) make it clear that, the provisions of the Arbitration and Conciliation Act, 1996 will apply to the proceedings constituted as per section 18 of Act, 2006. In the subject case, awards were passed by the Council dismissing the claims raised by the petitioner on the ground of delay and maintainability. Sub-sections (2) and (3) make it clear that, the provisions of the Arbitration and Conciliation Act, 1996 will apply to the proceedings constituted as per section 18 of Act, 2006. In the subject case, awards were passed by the Council dismissing the claims raised by the petitioner on the ground of delay and maintainability. Even though reasons are not assigned in the awards passed in respect of the maintainability, learned counsel for 3rd respondent has invited my attention to the provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. Therefore, according to the learned counsel, prior to the introduction of Act, 2006, the provisions that were applicable to small scale enterprises were the provisions of Act, 1993 and therefore, the claims raised by the petitioner before the 2nd respondent were prior to the year, 2006 when Act, 2006 has come into force and therefore, petitioner is not entitled to make any claims as per Act, 2006. 6. Be that as it may, as I have pointed out earlier, by virtue of the provisions contained under Section 18 of Act, 2006, the procedure that are applicable under the Arbitration and Conciliation Act, 1996 is to be adopted. Therefore, when an award is passed by the 2nd respondent, the same will have to be treated as an award passed under the provisions of Act, 1996. Therefore, the recourse that was available to the petitioner against the arbitral award was to seek, setting aside of the arbitral award under section 34 of the Act, 1996 which deals with application for setting aside arbitral award, and stipulates in sub-section (1) that, recourse to a court against the arbitral award may be made only by an application for setting aside such award in accordance with sub-sections (2) and (3) of Section 34. On a reading of section 34, it is quite explicit, clear and evident that, when an award is passed by an arbitrator or Arbitral Tribunal, it can only be challenged by filing suitable application as contemplated under section 34 of Act, 1996. Instead of seeking recourse under that provision, petitioner has filed writ petitions challenging the award passed by the 2nd respondent. Therefore, on that ground itself the writ petitions are not maintainable under law. Instead of seeking recourse under that provision, petitioner has filed writ petitions challenging the award passed by the 2nd respondent. Therefore, on that ground itself the writ petitions are not maintainable under law. Moreover, it is clear from the claims raised by the petitioner that, claims are raised before the Arbitrator during the period 2011-2012 to recover amounts due for the period, 1999-2000. 7. As discussed above, section 16 deals with the liability of a buyer to make payment and it can be in accordance with the terms and conditions executed by and between the parties under an agreement but as per the proviso thereto the period so agreed upon can never exceed 45 days. Which thus means the period of limitation starts from 45 days from the date of supply. True as per the agreement executed by and between the parties, 5% is liable to be paid by the buyer only after ensuring that, the product supplied completed the sufficient kilometers as agreed upon by and between the parties. However, that will not stand in the way of petitioner making claim in accordance with the provisions of section 15 of Act, 2006. This I say so because the Arbitration and Conciliation Act has adopted the provisions of Limitation Act. As per section 21 of the Act, the commencement of arbitral proceedings is prescribed which read thus: “Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.” 8. As is noted above, the Arbitrator has found that, the notices were issued for the supplies made during 1999-2000 on 2.5.2001 onwards. However, petitioner has not produced any documents to show that, such letters were issued, especially when receipt of such letters were disputed by the 3rd respondent. Therefore, as per section 21 of Act, 1996, as and when a claim is raised, the proceedings starts. That apart sub-section (1) of section 43 of Act, 1996 deals with limitations which stipulates that, the Limitation Act, 1963 (36 of 1963) shall apply to arbitrations as it applies to proceedings in court and sub-section (2) specifies that, for the purposes of section 43 and the Limitation Act, 1963, an arbitration shall be deemed to have commenced on the date referred in section 21. Therefore, it is significant to note that, the date of raising the claim by the petitioner was important and it will have to be substantiated by the petitioner for the purpose of calculation of the limitation period. However, the Arbitrator has found that, petitioner has not produced any document to show that any claims were raised against the supplies made. It was thereupon that, Arbitrator dismissed the claims raised by the petitioner. It is also significant to note that, petitioner has failed to challenge the award in terms of the provisions of Act, 2006 vis-v-vis the provisions of Act, 1996. Therefore, the writ remedy cannot be alternatively invoked by the petitioner in order to get over the consequences suffered by the petitioner on account of any action under challenge, and the awards passed by the Arbitrator by invoking the provisions of Act, 2006 read with the provisions of Act, 1996. Moreover, I do not find any illegality or arbitrariness or perversity on the part of the Arbitrator to interfere invoking the power of judicial review under Article 226 of the Constitution of India. Further, reasons are assigned though not in specific terms and petitioner was heard and if the petitioner was aggrieved by the awards passed, there was a clear remedy available to the petitioner under Act, 1996 but not invoked by the petitioner. 9. In that view of the matter, I am of the considered opinion that, the writ petitions are not maintainable under law justifying interference in the awards passed by the Arbitration Council under Act, 2006. The writ petitions fail, accordingly they are dismissed.