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IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, J.
Malani Construction Company – Appellant
Versus
Delhi International Arbitration Centre & Ors. – Respondents
W.P.(C) 9608 of 2022, CM APPL. 28679 of 2022 and W.P.(C) 9609 of 2022, CM APPL. 28681 of 2022
Decided On : 16-03-2023
MSMED Act - Arbitration Reference - Silpi Industries Etc. v. Kerala State Road Transport Corporation & Anr., 2021 SCC OnLine SC 439, Gujarat State Civil Supplies Corporation Ltd. vs. Mahakali Foods Pvt. Ltd.(Unit 2) & Anr., (2022 SCC Online SC 1492)
Fact of the Case:
The petitions challenge the reference made by the MSEFC in relation to disputes between the Petitioner and Respondent No. 3 to arbitration before the DIAC. The Petitioner contests the applicability of the MSMED Act and the jurisdiction of the MSEFC.
Finding of the Court:
The court found that the registration under the MSMED Act was obtained subsequently to the last invoice raised by the Respondent, and the benefits under the Act would not apply. The court set aside the reference to the DIAC and permitted the Respondent to avail of its remedies in accordance with the law.
Issues: Applicability of the MSMED Act, jurisdiction of the MSEFC, and the issue of limitation.
Ratio Decidendi: The benefits under the MSMED Act do not apply if the registration was obtained subsequently to the last invoice raised by the supplier. The issue of limitation and the expeditious disposal of references by the MSEFC were left open to be adjudicated by the competent forum.
Final Decision: The petitions, along with all pending applications, are disposed of.
JUDGMENT
Prathiba M. Singh, J. (Oral)
1. This hearing has been done through hybrid mode.
2. The present petitions challenge the reference made by the Micro & Small Enterprises Facilitation Council (hereinafter 'MSEFC'), vide its order dated 27th January, 2022. The said reference was in relation to disputes between the Petitioner-M/s Malani Construction Company and Respondent No. 3-M/s LSR Medical Private Limited (hereinafter 'LSR') to arbitration before the Delhi International Arbitration Centre (hereinafter 'DIAC') in MSEFC Case No. 75/2018 and MSEFC Case No. 76/2018.
3. In MSEFC Case No. 75/2018- the case of the Petitioner is that Respondent No.3/LSR had made certain supplies of goods/ services to the Petitioner through various invoices for the period 4th July 2012 to 5th March 2015. Subsequently, on 26th May, 2017, Respondent No. 3/LSR submitted a memorandum under the Micro Small and Medium Enterprises Development Act ( hereinafter 'MSMED Act') and got registered as a Micro enterprise. On 15th October 2018, Respondent no. 3/LSR caused a legal notice to be served upon the Petitioner, demanding a sum of Rs. 1,75,06,370/- towards supply of goods/services to the Petitioner along with interest under the MSMED Act. On 22nd November, 2018, Respondent No. 3/LSR filed an application before the MSEFC for the recovery of the outstanding amount along with interest.
4. In MSEFC Case No.76/2018- the case of the Petitioner is that Respondent No. 3/LSR had made certain supply of goods/ services to the Petitioner through various invoices for the period 5th November 2012 to 24th February 2015. Subsequently, on 26th May 2017, Respondent No. 3/LSR submitted a Memorandum to obtain registration under the MSMED Act and got registered as a Micro enterprise. On 10th October 2018, Respondent No.3 /LSR caused a legal notice to be served upon the Petitioner, demanding a sum of Rs. 1,92,34,367/-towards supply of goods/services to the Petitioner along with interest under the MSMED Act. Thereafter, on 22nd November 2018, Respondent No. 3/LSR filed an application before the MSEFC for the recovery of the outstanding amount along with interest.
5. After the application was filed before the MSEFC on 22nd November, 2018,in both cases, the first hearing was held on 10th January, 2020. The reference, in both cases, was forwarded for arbitration on 27th January, 2022 by the MSEFC.
6. The DIAC issued notices dated 8th March, 2022,in both cases i.e.in MSEFC Case No.75/2018 and MSEFC Case No. 76/2018, calling upon the parties to deposit the fee with respect to the arbitration proceedings. On 1st June 2022, the DIAC, via e-mail, informed the parties about the appointment of a Sole Arbitrator in both cases, at which stage, the present writ petitions were filed challenging the jurisdiction of the MSEFC and the applicability of the MSMED Act itself. Vide order dated 13th July, 2022, the references were stayed and the matter has been taken up for hearing.
7. The submissions of Mr. Gupta, ld. Counsel appearing for the Petitioner are three fold.
AI
The registration under the MSMED Act, 2006 applies prospectively and not retrospectively, and the benefits of the Act do not apply if the registration is obtained subsequently to the agreement and th....
The main legal point established in the judgment is the determination of the applicability of the MSMED Act, 2006 to a dispute involving a Medium Enterprise, based on the definitions of enterprise an....
The applicability of the MSME Act to disputes arising from work contracts/agreements and the need for a sole arbitrator to adjudicate disputes arising from interlinked agreements related to the same ....
The MSMED Act operates as a special beneficial legislation, overriding the Arbitration Act in cases involving registered MSMEs, emphasizing exclusive jurisdiction of MSEFC for dispute resolution.
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