A Bharat Trading Company v. Kanpur Steel and Engineering Works
2023-09-21
PARTH PRATEEM SAHU
body2023
DigiLaw.ai
ORDER : 1. Petitioner has filed this writ petition challenging the order dated 29.11.2022 passed by the Micro and Small Enterprises Facilitation Council (hereafter referred to as “Facilitation Council”). 2. The facts relevant for disposal of this writ petition are that respondent No.1 submitted an application under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “MSME Act”) pleading therein that the firm is Micro/Small Unit as per provision of MSME Act. Respondent No.1 supplied goods to the petitioner but petitioner has not paid the value of the goods supplied as per provision under Section 15 of the MSME Act. Balance of principal amount of which is pleaded as Rs.24,82,101/- and interest on it of Rs.2,44,248.39/-. Upon receiving application /reference under Section 18 of the MSME Act, notice was issued to petitioner and after failing of conciliation, proceedings under Section 18 (3) of the MSME Act was initiated, passed award fixing liability upon the petitioner for payment of Rs.24,82,101/- as balance amount towards supply of MS round in Coil and have further awarded interest three time of the actual interest to the tun of Rs.10,04,404/- and thereby fixed total liability for payment of Rs.34,86,505/- within the period of 30 days. 3. Learned counsel for the petitioner submits that the Facilitation Council erred in drawing proceeding under Section 18 of the MSME Act. Preliminary objection raised by the petitioner with regard to maintainability of the application under Section 18 of the MSME Act, was not decided at the first instance and the same was considered only while passing the final award. Referring to Section 16 (2) of the Arbitration and Reconciliation Act, 1996 (for short “Arbitration Act”), it is submitted that the plea of jurisdiction has to be decided at the first instance. In support of his contention, he placed reliance upon the decision of Hon’ble Supreme Court in the case of Mcdermott International INC Vs. Burn Standard Co. Ltd. & Ors. (2006) 11 SCC 181 as also decision in the case of Surender Kumar Singhal and Ors. vs. Arun Kumar Bhalotia & Ors. 2021 SCC Online Del 3708. It is further contention of learned counsel for the petitioner that respondent No.1 got registered as Small Scale Enterprise only in the year 2021 (24.02.2021) i.e. after the date of entering into the contract.
vs. Arun Kumar Bhalotia & Ors. 2021 SCC Online Del 3708. It is further contention of learned counsel for the petitioner that respondent No.1 got registered as Small Scale Enterprise only in the year 2021 (24.02.2021) i.e. after the date of entering into the contract. As on the date of entering into contract, respondent No.1 was not registered as Small Scale Enterprise, provision of MSME Act will not be applicable to respondent No.1 and he cannot take any benefit of provision mentioned therein. As on the date of entering into the contract, respondent No.1 being not registered enterprise under the MSME Act, respondent No.1 cannot be treated to be supplier under the provision of MSME Act and therefore application under Section 18 of the MSME Act on behalf of respondent No.1 was not maintainable and the Facilitation Council was not having jurisdiction to entertain an application submitted by such enterprise. In support of this contention, he placed reliance upon the decisions in the case of Silpi Industries etc. Vs. Kerala State Road Transport Corporation and Anr. 2021 SCC OnLine SC 439), Vaishno Enterprise Vs. Hamilton Medical AG & Anr. 2022 SCC OnLine SC 355, Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods Pvt. Limited [2022 LiveLaw (SC) 893 equivalent citation in (2023) 6 SCC 401 ]. 4. Learned counsel for respondent No.1 vehemently opposes the submission of learned counsel for the petitioner and would submit that the petitioner is registered as Small Scale Industry since its inception. Respondent no.1 also got it registered with the Govt. of India as MSME by submitting application on 15.09.2015. He placed before this Court the copy of Udyog Aadhar Memorandum in support of this contention for perusal. It is next contended that the objection raised by counsel for petitioner with regard to error committed by the Facilitation Council in not considering objection at the first instance is incorrect. The petitioner has not submitted any objection after receipt of notice under Section 18 (3) of the MSME Act. After recording conciliation proceeding failed, proceeding under Section 18 (3) of the MSME Act was initiated, asking petitioner to submit reply, which was also not submitted within the time and thereafter petitioner was provided last opportunity for submission of reply. Along with reply, objection is raised and accordingly Facilitation Council have considered and decided the objection as also merits of claim vide impugned order.
Along with reply, objection is raised and accordingly Facilitation Council have considered and decided the objection as also merits of claim vide impugned order. No procedural error is committed by the Facilitation Council. In support of his contention, he placed reliance upon the cases of Bhaven Construction through authorized signatory Premjibhai K. Shah Vs. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. and Anr. 2022 (1) SCC 75 , Punjab State Power Corporation Ltd. Vs. Emta Coal Ltd. and Anr. (2020) 17 SCC 93 , Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods Pvt. Limited (Unit-2) & Anr. AIR 2022 SC 5545 . 5. I have heard learned counsel for the parties and also perused the documents annexed along with writ petition. 6. Documents available in the writ petition would show that petitioner has submitted an application under Section 18 of the MSME Act before the Facilitation Council on 11.03.2021 along with Schedule-I. Pleading is that respondent supplied goods and balance of the amount due towards same remained unpaid. Payable amount with interest was valued at Rs.27,26,349.39. Petitioner has placed on record the copy of order sheet/proceedings of Facilitation Council. After satisfying with the proceedings and documents placed, application was registered and accordingly the applicant and non-applicant therein were noticed. Next proceeding shows for the meeting on 09.11.2021 and the said proceedings would show that applicant and non-applicant were present and the proceedings of conciliation failed and it was terminated. Thereafter, proceedings under Section 18 (3) of MSME Act for arbitration was started by the Facilitation Council itself and time to file reply/written statement was granted. On 29.11.2022, non-applicant therein/petitioner was granted last opportunity to submit written statement. After submission of written statement, on the next date, the petitioner/non applicant submitted preliminary objection on 14.12.2022 and thereafter on 10.01.2023, case was reserved for orders. 7. Micro, Small and Medium Enterprises Development Bill 2005 was tabled for achieving the objects as mentioned below:- “STATEMENT OF OBJECTS AND REASONS x x x 2. — (a) provide for statutory definitions of “small enterprise” and “medium enterprise”. (b) provide for the establishment of a National Small and Medium Enterprises Board, a high-level forum consisting of stakeholders for participative review of and making recommendations on the policies and programmes for the development of small and medium enterprises.
— (a) provide for statutory definitions of “small enterprise” and “medium enterprise”. (b) provide for the establishment of a National Small and Medium Enterprises Board, a high-level forum consisting of stakeholders for participative review of and making recommendations on the policies and programmes for the development of small and medium enterprises. (c) provide for classification of small and medium enterprises on the basis of investment in plant and machinery, or equipment and establishment of an Advisory Committee to recommend on the related matter. (d) empower the Central Government to notify programmes, guidelines or instructions for facilitating the promotion and development and enhancing the competitiveness of small and medium enterprises. (e) empower the State Governments to specify, by notification, that provisions of the labour laws specified in clause 9 (2) will not apply to small and medium enterprises employing up to fifty employees with a view to facilitating the graduation of small enterprises to medium enterprises; (f) make provisions for ensuring timely and smooth flow of credit to small and medium enterprises to minimise the incidence of sickness among and enhancing the competitiveness of such enterprises, in accordance with the guidelines or instructions of the Reserve Bank of India. (g) empower the Central and State Governments to notify preference policies in respect of procurement of goods and services, produced and provided by small enterprises, by the Ministries, departments and public sector enterprises. (h) empowering the Central Government to create a Fund or Funds for facilitating promotion and development and enhancing the competitiveness of small enterprises and medium enterprises. (i) empower to prescribe harmonised, simpler and streamlined procedures for inspection of small and medium enterprises under the labour laws enumerated in clause 15, having regard to the need to promote self-regulation or self-certification by such enterprises. (j) prescribe for maintenance of records and filing of returns by small and medium enterprises with a view to reduce the multiplicity of often-overlapping types of returns to be filed; (k) Make further improvements in the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 and making that enactment a part of the proposed legislation and to repeal that enactment.” 8.
From perusal of the aforementioned object sought to be achieved under the MSME Act, it is clear that it provides classification, notifying progress, guideline or instructions for facilitating promotion and development and enhancing competitiveness of small and medium enterprises to make provision for ensuring timely and smooth flow of credit as to small and medium enterprise to minimum the incidence of sickness among enhancing boundary of such enterprise. 9. To appreciate submission of learned counsel for the respective parties, I find it appropriate to extract provision under Section 18 of the MSME Act:- “18. Reference to Micro and Small Enterprises Facilitation Council.— (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 section 17, make a reference to the Micro and Small Enterprises Facilitation Council. (2) On receipt of a reference under sub-section (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 sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 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 subsection (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 to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in subsection (1) of section 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) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.” 10.
(5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.” 10. Section 7 of the MSME Act deals with Classification of Enterprises wherein it is mentioned that the investment in plant and machinery not exceeding Rs.25 lakh to be a Micro Enterprise, investment in Plant and machinery in between Rs.25 lakh and not exceeding Rs.5 crores to be Small Enterprise and investment more than Rs.5 crores but not exceeding Rs.10 crores to be Medium Enterprise. Section 8 deals with Memorandum of Micro, Small and Medium Enterprise. 11. The Facilitation Council has considered that the Udyog Aadhar No. CG 05 D0001863 was of 15.09.2015, issued notice under the MSME Act and the initial registration of respondent as Small Scale Industry with District Industries Centre, Durg dated 03.07.1984. 12. So far as submission of learned counsel for the petitioner with regard to not deciding the preliminary objection separately prior to consideration of claim on merits as provided under Section 16 (2) of the Arbitration Act is concerned, the provision is extracted below for ready reference :- “16. Competence of arbitral tribunal to rule on its jurisdiction- (1) x x x (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.” 13. Sub-Section (2) talks of raising objection with regard to jurisdiction of the Arbitral Tribunal at the earliest. Under Section 16 of the Arbitration Act, it does not mention that jurisdictional objection raised is mandatory to be decided at the first instance before dealing the case on merits. Hon’ble Supreme Court in the case of Mcdermott International INC (supra) has observed that jurisdictional question to be decided as preliminary ground as the objection to jurisdiction if allowed would be subject matter of appeal under Section 37 of the Arbitration Act, whereas the award is to be challenged under Section 34 of the Arbitration Act.
Hon’ble Supreme Court in the case of Mcdermott International INC (supra) has observed that jurisdictional question to be decided as preliminary ground as the objection to jurisdiction if allowed would be subject matter of appeal under Section 37 of the Arbitration Act, whereas the award is to be challenged under Section 34 of the Arbitration Act. Merely not deciding the question of jurisdiction as preliminary issue will not vitiate the entire proceeding of Facilitation Council in passing of the award in accordance with the provision under the MSME Act when the objection raised along with reply is considered and decided in accordance with law while passing the award. 14. So far as another contention raised by learned counsel for the petitioner with regard to non-registration of respondent No.1/applicant as MSME under the MSME Act is concerned, Facilitation Council while considering the records and material available before it had recorded that respondent is having Udyog Aadhar registration No. CG 05 D 0001863 since 15.09.2015. Respondent during the course of argument has also placed before this Court document obtained online of registration of respondent as Udyog Aadhar Memorandum bearing Udyog Aadhar No.CG05 D-0001863. 15. Udyog Aadhar is a twelve digit unique identification number provided by the Indian Ministry of Micro, Small and Medium Enterprises beginning in September 2015. It was launched by Ministry of Micro, Small and Medium Enterprises, India. It is also known as Aadhar for business whereas udyog registration is new process for registering MSME launched by Ministry of MSME, India on 01.07.2020. It is a substitute to the earlier method of Udyog Aadar to make it easier for MSMEs to register with Govt. portal. 16. As discussed above, the Facilitation Council has clearly taken note of the fact that the respondent was having the registration with Ministry of MSME India since 15.09.2015. 17. The decision in case of Silpi Industries (supra), Vaishno Enterprise (supra) are not applicable to the facts of the case as these are distinguishable on facts. In the above cases, supplier was not registered as MSME Enterprise on the date of entering into contract and supplying goods. 18. As per provision under Section 18 (3) of the MSME Act, dispute when taken for arbitration, provision of the Arbitration Act shall then apply.
In the above cases, supplier was not registered as MSME Enterprise on the date of entering into contract and supplying goods. 18. As per provision under Section 18 (3) of the MSME Act, dispute when taken for arbitration, provision of the Arbitration Act shall then apply. Hon'ble Supreme Court in the case of Mahakali Foods Pvt. Ltd. (supra) has held that the proceeding before the Facilitation Council acting as an Arbitrator will be governed by the Arbitration and Conciliation Act, 1996. 19. In the aforementioned facts of the case, in the opinion of this Court, it cannot be said that on the date of entering into the contract and supply of goods, respondent No.1 was not registered as Micro and Small Enterprise. The Facilitation Council while exercising the power under Section 18 of the MSME Act recording that the conciliation proceedings to be terminated had decided to take up the dispute for arbitration under Section 18 (3) of the MSME Act passed an award. The provision of Arbitration Act applies to the same. Petitioner is having the remedy as provided under the Arbitration Act to challenge the impugned award and therefore I am not inclined to entertain this writ petition. 20. Accordingly, writ petition is dismissed at the admission stage itself.