The MSMED Act, 2006 applies only to delayed payments to Micro and Small Enterprises, and it does not contemplate an independent claim by the Buyer against the Supplier.

JUDGMENT

Prathiba M. Singh, J. This hearing has been done through hybrid mode.

2. This petition raises important issues arising out of the Micro Small and Medium Enterprises Development Act, 2006 (hereinafter `MSMED Act, 2006') and has been from heard time to time by this Court.

3. The question raised in the present petition is-

Under the MSMED Act, 2006 whether an independent claim can be entertained by the MSEFC at the instance of the BUYER?

4. The issue is to be adjudicated in the background facts wherein, the Respondent no.2 who is the buyer sought a reference under Section 18 of the MSMED Act of its claims against the Supplier, as an independent claim. No claim was filed by the Supplier against the Buyer and thus the Buyer's claim was not filed as a counter-claim.

Brief Facts

5. The Petitioner - Uniseven Engineering and Infrastructure Pvt. Ltd. seeks quashing/setting aside of the impugned order dated 14th September, 2021 passed by Respondent No.1 - Micro and Small Enterprises Facilitation Council District (South), GNCTD (hereinafter, `MSEFC') under the MSMED Act, 2006 advising the Petitioner to pay a sum of Rs.9,59,66,352/- to Respondent No. 2 - Harji Engineering Works Pvt. Ltd. as per the agreement dated 17th October, 2019.

6. The said agreement dated 17th October, 2019 was issued to the Petitioner by Respondent No. 2 for providing Combined Station Works (CSW) including Civil, Mechanical, Electrical and Instrumentation works at Paradip and Balasore Stations in Odisha. A second agreement dated 18th October, 2019 was also placed. As per the said agreement, the Petitioner was to supply goods and services including labor, material tools etc., as also engineers and supervisors for monitoring services. Thus, the Petitioner was the `Supplier' and Respondent No.2 was the `Buyer'.

7. Certain disputes arose between the Petitioner and the Respondent No.2 regarding the payments under the agreements. On 10th July, 2021 a legal notice was issued by the Respondent No.2 to the Petitioner. Thereafter, on 12th July, 2021 the bank guarantee issued by the Petitioner under the agreement was encashed by the Respondent No.2. No dispute was raised by the Petitioner however, the Respondent, the buyer relying upon the non-performance of the Petitioner invoked the termination clause of the agreement.

8. The Respondent No.2 filed a reference petition application under Section 18 of the MSMED Act, 2006 for delayed payment. Thereafter, vide the impugned order dated 14th September 2021 passed by MSEFC, the Petitioner was advised to pay the sum of Rs.9,59,66,352/- to the Respondent No.2. The said impugned order states that the said amount is as per the legal notice dated 30th June, 2021 issued by the Respondent No.2 to the Petitioner.

9. In the present petition vide order dated 1st October, 2021 passed by this Court, notice was issued and the impugned dated 14th September, 2021 was stayed. Consequently, the MSEFC was directed to not proceed with the claim made by Respondent No.2 based on which the impugned order was issued.

Submissions

10. Mr. Ayush, ld. Counsel for the Petitioner submits as under:

(i) that the Petitioner has not received any legal notice dated 30th June, 2021 from Respondent No. 2 and the same is incorrectly stated in the impugned order;

(ii) that the MSEFC has failed to appreciate that in terms of the agreement dated 17th October 2019, the Respondent No.2 was the Buyer and not the Supplier and therefore, the Respondent No.2's claim would not fall within the ambit of Sections 17 and 18 of the MSMED Act, 2006;

(iii) that the Petitioner has not raised any claims against Respondent No.2 in terms of the two agreements;

(iv) that Respondent No.2 being the Buyer cannot invoke the jurisdiction of the MSEFC. Reliance is placed upon the provisions of the Act i.e., Sections 15 to 18 to argue that the jurisdiction of the MSEFC would not exist where there is no amount due;

(v) that as per the decisions in M/s Ramky Infrastructure Pvt. Ltd. v. Mic