Point of Law : Section 18 of Act 2006 provides jurisdiction only to Facilitation Council situated in place where supplier is located.

JUDGMENT :

The above writ petition is filed challenging Ext.P1 intimation issued by the 1st respondent. Petitioner is a partnership firm dealing with the marketing and distribution of various branded products. Petitioner received Ext.P1 intimation dated 21.05.2021 issued by the 1st respondent, the Facilitation Council established by the Karnataka State Government as per Section 21 of the Micro, Small and Medium Enterprises Development Act, 2006 (in short, “Act 2006”). The allegation in Ext.P1 is that the petitioner has failed to make payment of an amount of Rs.77,21,127/- due to the 2nd respondent towards the materials supplied, despite the demand being made. Ext.P1 has been issued based on an application preferred by the 2nd respondent and by Ext P1, petitioner was intimated to pay the amount due to the 2nd respondent, who is the supplier of goods. Earlier, the 2nd respondent has sent Ext.P2 lawyer notice demanding the said amount, to which Ext.P3 reply notice was sent by the petitioner refuting the demand and claim, and making a counter demand for an amount of Rs.1,38,50,972/- which is the amount due from the 2nd respondent. Later, Ext.P4 demand notice was also sent by the petitioner to the 2nd respondent. Petitioner submits that Ext.P1 has been styled as an intimation which is not contemplated as per the provisions of the Act 2006. Petitioner relying on Ext.P5, Rules framed by the Government of Karnataka invoking powers under Section 30 read with Sub-section (3) of Section 21 of the Act 2006, especially Rule 4(5), contended that each reference or application made by the aggrieved person (in this case the 2nd respondent) to the Facilitation Council shall also be simultaneously sent to the buyer or buyers against whom the reference is directed. Going by Section 4(6), the Chairperson of the Council, on receipt of such reference or application, shall cause the buyer to furnish his detailed response to the reference within 15 days of the receipt of the reference by the buyer and only after examining the reference and the buyer's response and on being satisfied prima facie that it is a case of delayed payment, place the matter before the Council for the next meeting. It is thereafter that the Council shall conduct conciliation. Petitioner would contend that none of these procedures as contemplated in Ext.P5 rules have been followed in as much as before issuance of Ext.P1, no copy of the reference or application submitted by the 2nd respondent was served on the petitioner nor the response from the petitioner on the reference or application was sought by the Chairman of the 1st respondent Council. Therefore, there is serious procedure lapse in the matter of the issuance of Ext.P1, is the contention of the petitioner.

2. When the matter came up for consideration before this Court on earlier occasion, all further proceedings based on Ext.P1 was stayed as per the order dated 09.02.2021. The 2nd respondent has filed a petition as I.A.No.1 of 2023 seeking to vacate the interim order granted by this Court in which a specific contention has been taken that this Court has no jurisdiction to entertain the above writ petition in as much as only the High Court of Karnataka has territorial jurisdiction to entertain a challenge against Ext.P1 intimation. Further, a detailed counter affidavit was also filed by the 2nd respondent in which it is contended that as per the provisions of the Act 2006, the first step on a reference of a dispute between the supplier and buyer is to undertake a conciliation effort by the Facilitation Council and that is what is done by the Council by the issuance of Ext.P1 intimation. The learned counsel appearing for the 2nd respondent would further contend that Ext.P1 is only an advice given by the 1st respondent Facilitation Council to the parties to conciliate and settle the dispute for their mutual benefit and satisfaction, before proceeding any further and that Ext.P1 cannot be challenged either in law or on facts.

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