Initiation of conciliation does not prejudge a time-barred claim's validity under the MSME Act; parties may assert defenses during the process while preserving their legal rights.

JUDGMENT

Prathiba M. Singh, J. (Oral)--This hearing has been done by video conferencing.

2. The Petitioner has impugned letter dated 31st December, 2020 issued by the Micro and Small Enterprises Facilitation Council (hereinafter, `Facilitation Council') by which the Petitioner has been called to participate in the conciliation process and also file a reply.

3. The impugned communication issued by the Facilitation Council dated 31st December, 2020 reads as under:

"The MSEF Council, Delhi is in receipt of a reference filed u/s 18(1) of the MSMED Act, 2006 by the Claimant M/s Sharp Travels (India) Ltd., Application/Temp No. DL08E0001555/S/00122 against the outstanding dues of Rs.308307 which is to be paid by you to the Claimant.

I am directed to inform you that the MSEF Council, Delhi has decided that the conciliation process should be taken up first before release of outstanding dues to the Claimant, failing which a Notice to personally appear before the Council will be served to you for taking further necessary action in the matter.

Further, I am to inform you that as per Section 16 of the MSMED Act, 2006 the Respondent will be liable to pay the compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.

It is therefore requested to file the reply of outcome of the conciliation process held between both of you within 30 days."

4. Ld. counsel for the Petitioner emphasizes on the words "decided that" to argue that the Facilitation Council has taken a decision in the matter that the Petitioner ought to release the outstanding dues. According to the Petitioner, since the claim is time barred, such a decision could not have been taken without hearing the Petitioner.

5. The submission of Mr. Nikilesh R., ld. counsel appearing for the Petitioner is that the claim of Respondent No.2 is time barred and before embarking on the conciliation process, the question as to whether the claim is even maintainable should be considered by the Facilitation Council. Without doing the same, deciding that the conciliation process should be initiated would be premature.

6. Mr. Ramesh Singh, ld. counsel, on the other hand, submits that the Facilitation Council has merely called the parties for exploring conciliation in terms of Sections 18 (1) and 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter, `MSME Act'). If the conciliation process fails then the remedies of the Petitioners are available in terms of Sections 18 (3) and (4) of the MSME Act. The conciliation process is meant to resolve the disputes between the parties in an amicable manner.

7. The apprehension of the Petitioner is that the Petitioner may be forced to enter into a settlement with Respondent No.2 though, according to the Petitioner, the claim is time-barred.

8. The scheme of the MSME Act has been discussed in detail in the judgment of a ld. Single Judge of this Court in BHEL vs. The Micro and Small Enterprises Facilitation Centre & Anr., [W.P.(C) 10886/2016, decided on 18th September, 2017]. The Court observed therein as under:

"9. At the outset, it is relevant to observe that the Act was enacted with the object of facilitating the promotion, development and enhancing the competitiveness of small and medium enterprises...

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10. Section 18 (1) of the Act contains a non obstante clause and enables any party to a dispute to make a reference to the Micro and Small Enterprises Facilitation Council (MSEFC). ......

14. A plain reading of Section 18 (2) of the Act indicates that on receipt of a