The Council has jurisdiction to adjudicate disputes in cases of works contracts, even if there is an arbitration clause in the contract.

JUDGMENT :

1. Shorn of unnecessary details, the respondent no.3 is a Micro, Small and Medium Enterprise (MSME). A contract was entered into between the petitioner no.1 and respondent no.3 by virtue of which the respondent no.3 is to supply the components and erect pipeline and accessories at the Hazaribag LPG Plant of the petitioner no.1.

2. There arising a dispute between the parties regarding such transaction, the respondent no.3 approached before the West Bengal State Micro, Small Enterprises Facilitation Council (hereinafter referred to as “the Council”) under Section 18 of the Micro, Small and edium Enterprises Development Act, 2006 (for short, “the MSME Act”) for resolution.

3. A question as to maintainability of the said proceeding was raised by the petitioner no.1. Initially, the Council proceeded to decide the matter without deciding the question of maintainability. As such, the petitioners moved a writ petition wherein a co-ordinated Bench directed that the matter may be heard afresh on the question of maintainability. In compliance with such direction, the Council passed a reasoned order dated October 14, 2022, holding that the Council does have jurisdiction to adjudicate the matter in case of contract between the parties having Arbitration Clause as well as in case of Works Contracts.

4. The moot questions which have arisen herein are whether the transaction-in-question is a “Works Contract” and whether the Council has jurisdiction to take up the dispute between the parties under Section 18 of the MSME Act.

5. Both sides have cited several judgments, which will be presently discussed.

6. Learned senior counsel appearing for the petitioner has primarily argued, by placing reliance on certain definitions in Section 2 of the MSME Act, that the present case does not fall within the ambit of the said Act.

7. In Section 2(d), “buyer” means whoever buys any goods or receives any services from a supplier for consideration.

8. In Clause (f) of Section 2, “goods” means every kind of movable property other than actionable claims and money.

9. Clause (n), sub-clause (iii) stipulates that “supplier” means a micro or small enterprise, which has filed a memorandum with the authority referred to in sub-section (1) of Section 8, and includes any company, co-operative society, trust or a body, by whatever name called, registered or constituted under any law for the time being in force and engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises.

10. Learned senior counsel contends that in terms of the decision of the Supreme Court in Kone Elevator India Private Limited Vs. State of Tamil Nadu, reported at (2014) 7 SCC 1, rendered by a five-Judge Bench, it was held that after the amendment in the Constitution and Introduction of Article 366(29-A), the question as to whether a Works Contract falls within the category of an agreement for sale of goods has been settled. In paragraph 46 of the said judgment, the Supreme Court stipulated the various components which are culled out from the discussion therein, which bring the term “Works Contract” within the sweep of all genres of Works Contract, not to be narrowly construed to cover one species of contract to provide for labour and service alone.

11. It was further observed that the Works Contract is an indivisible contract but, by legal fiction, is divided into two parts, one for sale of goods, and the other for supply of labour and services. The concept of “dominant nature test” or “degree of intention test” or “overwhelming component test” for treating a contract as a Works Contract is not applicable, it was held. The Supreme Court further observed that once the characteristics of works contract are met in a contract entered into between the parties, any additional obligation incorporated in the contract would not change the nature of the contract.

12. The contract as to installation of a lift and consequential supply of its part