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IN THE HIGH COURT OF DELHI AT NEW DELHI
Subramonium Prasad, J.
The Executive Engineer & Ors. - Appellants
Versus
M/s Bholasingh Jaiprakash Construction Ltd. & Anr. - Respondents
W.P.(C) 14378 of 2023 & & CM APPL. 56974 of 2023
Decided On : 16-02-2024
MSMED Act - Works Contract - 2006 Act, Section 18, Section 34 - The court discussed the applicability of the MSMED Act to works contracts, the jurisdiction of the Arbitral Tribunal, and the remedies available under the Arbitration Act. Key legal provisions such as Section 18 and Section 34 of the MSMED Act were interpreted in the context of the petitioner's challenge to the proceedings and the award.
Fact of the Case:
The petitioner sought to quash proceedings initiated under the MSMED Act and challenge the final award passed by the Arbitral Tribunal. The dispute arose from a works contract for the construction of a barrage, and the petitioner contested the applicability of the MSMED Act and the jurisdiction of the Arbitral Tribunal.
Finding of the Court:
The court found that the petitioner had failed to challenge the proceedings and the award within the prescribed time under the Arbitration Act. It held that Article 226 of the Constitution of India cannot be invoked when other remedies available under the law have not been pursued.
Issues: The issues included the applicability of the MSMED Act to works contracts, the petitioner's inaction in challenging the proceedings and the award, and the invocation of Article 226 of the Constitution of India as an equitable remedy.
Ratio Decidendi: The court emphasized that the MSMED Act aims to protect micro, small, and medium enterprises from delayed payments and that the petitioner, being aware of the dispute and the proceedings, had failed to avail of the remedies under the Arbitration Act.
Final Decision: The Writ Petition was dismissed, and pending applications, if any, were also dismissed.
JUDGMENT
1. By way of the present Writ Petition, the Petitioner seeks to quash the proceedings initiated by the Respondent No.2/Micro and Small Enterprises Facilitation Council under the Micro, Small and Medium Enterprise Development Act, 2006 (hereinafter referred to as "the MSMED Act") referring the dispute between the Petitioners and the Respondent No.1 to the Micro, Small and Medium Enterprise (MSME) Arbitral Tribunal and setting aside of Final Award dated 26.12.2022 and 02.01.2023, passed by the Arbitral Tribunal in MSME CASE/REF. ID: DL/10/S/SWC/00931/2022.
2. The facts, in brief, as stated by the Petitioner in the present Writ Petition, are as under:
a. The Petitioner herein invited bids for construction of Barrage on River Adwa in District Mirzapur, Uttar Pradesh. Respondent No.1 herein applied for the contract and was declared as a successful bidder and was subsequently awarded the tender vide Letter of Award dated 20.08.2005. It is stated that a formal agreement was entered into between the Petitioner and the Respondent No.1 on 27.08.2005 and as per the agreement, the work was to be completed within 18 months from the order of commencement of works. The Order of commencement of Works was communicated to the Petitioner on 01.08.2006. Time for construction of the Barrage in question was extended from 27.06.2008 to 31.07.2008. It is stated that some more works were added to the original scope of work and further time was extended from time to time. The last extension was granted on 31.07.2017 vide which the work was to be completed by 15.09.2017. The work of the Barrage in question was finally completed on 15.09.2017.
b. It is stated that the Respondent No.1 raised a bill of Rs.19,39,57,014.80/- on the Petitioner which was disputed by the Petitioners.
c. It is stated that the Respondent No.1 approached Respondent No.2 for seeking conciliation. However, since conciliation proceedings failed, the matter was referred to the sole arbitrator.
d. Respondent No.1 filed its statement of claim and the Petitioners were called to filed their reply and the Award was passed on 02.01.2023.
e. Petitioner has, thereafter, approached this Court stating that since the contract entered into between the Petitioner and the Respondent No.1 was a works contract, the same was outside the scope of the MSMED Act. It is also contended that since the Respondent No.1 was registered as MSME on 20.05.2017, the Respondent No.1 is not entitled to invoke the provisions of the MSMED Act as the date of registration is prior to the date of contract.
3. Learned Counsel for the Petitioner contends that since the provisions of the MSMED Act could not be invoked, the proceedings under the MSMED Act, including the reference to the Arbitral Tribunal, ought to be set aside. Learned Counsel for the Petitioner places reliance on (a) Shree Gee Enterprise v. Union of India, 2015 SCC OnLine Del 13169; (b) Sterling & Wilson (P) Ltd. v. Union of India, 2017 SCC OnLine Bom 6829 & (c) Tata Power Company Limited v. Genesis Engineering Company, 2023:DHC:2649; to contend that only contracts relating to goods or services are covered by the MSMED Act and the works contract are not covered under the MSMED Act. He also places reliance on (d) Silpi Industries v. Kerala State Road Transport Corporation, 2021 SCC OnLine SC 439; (e) Gujarat State Civil Supplies Corporation v. Mahakali Foods Pvt. Ltd., (2023) 6 SCC 401; to substantiate that MSMED Act is no applicable to contracts executed prior to the registration of the company under the MSMED Act. He also places reliance on (f) JSW Steel Ltd. v. Kamlakar V. Salvi and Ors., 2021:BHC-AS:13934-DB, (g) Whirlpool Corporation v. Registrar of Trademarks, (1998) 8 SCC 1; (h) Kiran Sing v. Chaman Paswan, AIR 1954 SC 340; (i) Embassy Property Development Pvt. Ltd. v. State of Karnataka, (2020) 13 SCC 308 and (j) Arun Kumar v. Union of India, (2007) 1 SCC 732, to contend that a Writ Petition against an award under the MSMED Act is maintainable when t
AI
The judgment establishes that Article 226 of the Constitution of India cannot be invoked when other legal remedies have not been pursued, and it underscores the importance of timely recourse to avail....
The MSMED Act, 2006 provides a specific dispute resolution mechanism that overrides private arbitration agreements, making writ petitions not maintainable when an alternative remedy exists.
The mandatory nature of the pre-deposit requirement under Section 19 of the MSMED Act and the discretion of the court to permit the buyer to remit the amount in installments.
The appellant should await the passing of the final award and take recourse under Section 34 of the Act of 1996, and no writ petition can be maintained against the in-between orders of the Arbitral T....
Orders passed by Micro and Small Enterprises Facilitation Councils are subject to the challenge mechanism under Section 34 of the Arbitration and Conciliation Act, 1996, and are not maintainable via ....
Important Point : The court established that statutory remedies must be exhausted before invoking writ jurisdiction against awards under the MSMED Act.
If any registration under the MSMED Act is obtained, the same will be prospective and would apply to supply of goods and services subsequent to registration but cannot operate retrospectively. Accord....
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