Back
IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
D.V.S.S. Somayajulu, J.
Rashtriya Ispat Nigam Limited - Petitioner
Versus
The Union of India Rep by Secretary, the Ministry of Micro Small and Medium Enterprises, Udyog Bhawan Rafi Marg, New Delhi - Respondents
W.P.Nos. 27670, 27673, 27691, 27693, 27826, 27829, 28010, 28034 of 2021 and 4721, 6249 and 7616 of 2022
Decided On : 26-04-2022
Constitution of India,1950 - Articles 226, 366(29-A)(b) , 366 and 227 - Micro Small and Medium Enterprises Development Act, 2006 - Sections 8, 18 , 2(e), 2(n) and 2(d) - Arbitration Act, 1996 - Sections 16 and 5 - Industries (Development and Regulation) Act, 1951 - Sections 11B and 29B - Works contract - Civil construction/erection’ - Power of High court to issue writs - Contention of the learned senior counsel in essence is that all though there is an element of supply in certain aspects of the contract, the essential work that is being executed by the contractor-respondent is ‘civil construction/erection’ etc., or what is termed as a works contract. He points out that these contracts are not a standalone supply contracts or service contracts. Therefore, learned senior counsel states that Act, 27 of 2006 will not apply. He also points out that the requisite memorandum under Section 8 of the Act is also not filed and therefore it is alleged that the respondent-contractors cannot take the benefit of Act 27 of 2006 - whether the contractors who were the successful tenderers for certain works awarded by the petitioner can invoke the provisions of Act 27 of 2006 for redressal of their grievances - Whether such contracts can be called ‘service’ contracts under Act 27 of 2006 - Held, Court is conscious of its very limited jurisdiction in view of these judgments but the question is when this Court holds that there is a patent lack of jurisdiction as the mandate of Silpi Industries (supra), is not followed and the provisions of Act, 27 of 2006 are not applicable to works contract - should this Court be a silent spectator and allow the issue to go to the Facilitation Council - then the challenge to the Award under section 34 of Arbitration Act; the appeals etc., thereon before the issue is settled or should the Court express its opinion now itself? This case in the opinion of this Court falls within the ‘exceptional circumstances’ -s Court therefore is of the opinion that it must interfere at this stage itself. Hence, this objection is also overruled - Writ petitions allowed.
ORDER :
1. With the consent of the learned counsel appearing for the respective parties, the writ petitions were taken up for hearing and disposal.
2. For the petitioners, learned senior counsel Sri V.Ravinder Rao advanced his arguments and for the main contesting respondent (the contractor), Sri C.V.Mohan Reddy, learned senior counsel has advanced his arguments followed by Sri Ramachandra Rao Gurram.
3. The question in these cases is about the applicability of the Micro Small and Medium Enterprises Development Act, 2006 (Act 27 of 2006) (for short ‘the Act’) to the contracts entered into by the contractors with the petitioners’-Steel plant and the consequences there of.
For Petitioner:
4. For the Steel Plant, learned senior counsel argues that Act 27 of 2006 applies only to contracts of supply of goods and the rendering of services thereunder, but will not apply to the civil construction contracts. Learned senior counsel has filed a list of the works in each of the cases which are being dealt with and the same is reproduced here under:
| Writ Petition Number | Description of work contract |
| 28010 of 2021 | Relocation of new steel yard-civil and associated works in Visakhapatnam steel Plant-civil and structural works as per BOQ part-A of Section 1& II |
| 27670 of 2021 | Miscellaneous structural steel work-RMHP (zone-1) wherein the scope of work is mainly supply, fabrication and erection of mild steel-tubular handrails, supply of high tension bolts; fabrication and erection of structure after collecting raw steel from respondent; collection of fabricated/semi fabricated structures from respondent and directing the same after taking up necessary modifications; and application of painting on all structural steel works in RMHP (zone-1) |
| 27673 of 2021 | Design, Indianisation of Soviet materials, preparation of manufacturing drawings for purchase/consultant approval, fabrication/manufacture, supply erection, painting, testing after erection at site and commissioning of tanks in condensation pumphouse for COB-4 |
| 27691 of 2021 | Structural steel works of coal handling plant, phase-II facilities for COB-4 |
| 27693 of 2021 | Structural work, sheeting supply work and sheeting erection work for cable gallery in ASUV area under VSP-V project |
| 27829 of 2021 | Indianization of Soviet materials, procurement of new materials, preparation of manufacturing drawings for purchase/consultant approval, fabrication manufacture, testing at works, painting, packing, forwarding, supply FOR-VSP stores/site, transportation of materials from store to election site of fluidised bed dryer and storage, testing before erection at site, grouting, erection, testing after direction at site painting, commissioning and trial run, guarantee for workmanship and performance of fluidised bed dryer for ammonia sulphate plant of COB-4. |
| 27826 of 2021 | Structural steel works for power plant phase-Il facilities for COB-4 |
| 28034 of 2021 | Design, engineering, supply, erection, testing commissioning and performance guarantee tests of the plant including supervision of all site services and insurance and training of VSP personnel for indoor LBDS, HVLC and interplant cabling |
| 4721 of 2022 | Design, engineering and supply of equipment, erection, testing and commissioning including commissioning spares and insurance, space for indoor LBDS for structural mill |
| 6249 of 2022 | Structural steel and cladding works for raw material handling system (zone-1, area-3) conveyor system for feeding raw material to new BF, SP, SMS and CRMP. |
| 7616 of 2022 | Structural steel work for Madharam Mines (Specification No.VSP-6.3-11-STF-001) |
5. The contention of the learned senior counsel in essence is that all though there is an element of supply in certain
The Act does not apply to works contracts with an element of supply and not mere supply and service contracts. The contractors must file the memorandum under section 8 of the Act to claim the benefit....
The MSEFC lacks jurisdiction to adjudicate disputes arising from works contracts, which necessitate arbitration under traditional frameworks, not the MSMED Act.
Works contracts cannot invoke the jurisdiction of MSEFC under the MSMED Act, necessitating arbitration under the Arbitration and Conciliation Act, thereby rendering MSEFC proceedings void.
The jurisdiction of the Micro Small and Medium Enterprises Facilitation Council is determined by the supplier's registered office location, overriding any contractual jurisdiction clauses.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
