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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
UJJAL BHUYAN, MADHAV J. JAMDAR, JJ.
JSW Steel Ltd. - Petitioner
Versus
Kamlakar V. Salvi & Ors. - Respondents
Writ Petition No.12897 of 2016 With Civil Application No.268 of 2018 With Civil Application No.935 of 2018
Decided On : 04-10-2021
Constitution of India, 1950 - Articles 226 and 227 - Micro, Small and Medium Enterprises Development Act, 2006 - Sections 2(n), 16 and 18(3) - Arbitration and Conciliation Act, 1996 - Quashing of orders - Alleged non-payment of contractual dues and interest - Whether provisions of the Indian Limitation Act, 1963 are applicable to arbitration proceedings initiated under section 18(3) of MSMED Act - Whether counter claim is maintainable in such arbitration proceedings - Petitioner’s predecessor in interest had awarded two contracts to respondent No.1. One contract was for manufacture/fabrication and supply of fire fighting and security systems - Second contract was for erecting, testing and commissioning of such systems - It is stated that respondent No.1 had to complete two contracts on or before but respondent No.1 failed to complete contract works whereafter works had to be completed by petitioner - Petitioner to pay principal amount together with interest as per section 16 of Micro, Small and Medium Enterprises Development Act, 2006 within a period of one month from the date of receipt of the said order - Petitioner’s predecessor in interest had awarded two contracts to respondent No.1. One contract was for manufacture/fabrication and supply of fire fighting and security systems. The second contract was for erecting, testing and commissioning of such systems.
Finding of the Court: Section 24 of the MSMED Act provides that provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. In other words, section 24 makes it clear that sections 15 to 23 of the MSMED Act shall have overriding effect - Respondent No.1 cannot avail benefits of MSMED Act for contracts executed and supplies made prior to registration under section 8(1) of the MSMED Act - As held by Supreme Court provision is prospective and cannot be applied retrospectively there was no relationship of buyer and seller between petitioner and respondent No.1 either under 1993 Act or under MSMED Act - Respondent No.2 could not have proceeded under section 18(3) of the MSMED Act and could not have passed impugned order - Order or award passed by an authority which is rendered coram non judice is a nullity and can certainly be interfered with by High Court under Article 226 of Constitution of India - Reverting back to our discussions made in paragraph 37 of this judgment, from an analysis of judgments of Supreme Court - High Court in exercise of its jurisdiction under Article 226 of Constitution of India would not entertain any and every order passed by an Arbitral Tribunal.
Result: Writ petition is allowed.
JUDGMENT :
Ujjal Bhuyan, J.
Heard Mr. Janak Dwarkadas, learned senior counsel for the petitioner and Mr. R. A. Thorat, learned senior counsel for respondent No.1. We have also heard Mr. Aditya Thakkar alongwith Mr. D. P. Singh, learned counsel for respondent No.3 – Union of India.
2. By filing this petition under Articles 226 and 227 of the Constitution of India, petitioner initially sought for quashing of orders dated 08.05.2015 passed by respondent No.2 as well as order dated 05.09.2015 passed by the said respondent. Certain incidental prayers were also made, such as, for quashing of registration of respondent No.1 under the Micro, Small and Medium Enterprises Development Act, 2006 as well as Darkhast No.188 of 2016 on the files of the Court of District Judge at Alibaug.
3. By the order (award) dated 08.05.2015, the Micro and Small Enterprises Facilitation Council, Konkan Region, Thane in Application No.39 of 2011 filed by respondent No.1 directed the petitioner to pay principal amount of Rs.54,16,462.00 together with interest as per section 16 of the Micro, Small and Medium Enterprises Development Act, 2006 within a period of one month from the date of receipt of the said order. By the second order dated 05.09.2015, it was held that the order (award) dated 08.05.2015 was a valid one and that there was no question of rehearing the matter. Consequently, notices for rehearing were withdrawn.
4. The writ petition was subsequently amended and post amendment, an additional prayer was made to declare section 16 of the Micro, Small and Medium Enterprises Development Act, 2006 to be ultra vires the Constitution of India.
5. At the outset, we may set out the relevant facts as pleaded.
6. On 06.11.1999, petitioner’s predecessor in interest had awarded two contracts to respondent No.1. One contract was for manufacture/fabrication and supply of fire fighting and security systems. The second contract was for erecting, testing and commissioning of such systems. It is stated that respondent No.1 had to complete the two contracts on or before 06.03.2000 but respondent No.1 failed to complete the contract works whereafter the works had to be completed by the petitioner.
7. Aggregate value of the two contracts was Rs.1,15,41,839.00, out of which petitioner paid respondent No.1 Rs.94,83,693.00. According to the petitioner, no further payments were due by the petitioner to respondent No.1, as respondent No.1 had failed to complete the contract works. Rather, it was respondent No.1 who was liable to compensate the petitioner for the cost and expenses incurred in completing the contract works.
8. It is stated that the Micro, Small and Medium Enterprises Development Act, 2006 (briefly “the MSMED Act” hereinafter) came into effect on and from 02.10.2006. “Supplier” has been defined under section 2(n) of the MSMED Act which basically means a micro or small enterprise which has filed a memorandum with the authority referred to in sub section (1) of section 8. Section 8 provides for registration of a micro or small or medium enterprise which is intended to be set up. As per the proviso, such an existing enterprise may also register under the MSMED Act within 180 days from the date of commencement of the said statute.
9. As per section 16, if a buyer fails to make payment of the amount to the supplier, then the buyer would be liable to pay compound interest with monthly rests to the supplier at three times of the bank rate notified by the Reserve Bank of India. Under section 18, either the supplier or the buyer may make a reference to the Micro and Small Enterprises Facilitation Council (briefly “the Council” hereinafter), which is respondent No.2 in the present proceeding, and on such reference being made the Council shall conduct conciliation. If the conciliation is unsuccessful, then the Council either by itself or through an institution or centre resolve the dispute by way of arbitration, in which event provisions of the Arbitration and Conciliation Act, 199
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