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IN THE HIGH COURT OF ORISSA : CUTTACK
VINEET SARAN, J.
M/s. Shri Mahavir Ferro Alloys Pvt. Ltd. – Petitioner
Versus
M/s. Passary Minerals Ltd. - Opp. Party
ARBP No. 39 of 2017
Decided On : 09-03-2018
Arbitration - Dispute Resolution - MSME Act 2006, Arbitration and Conciliation Act 1996, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act 1993 - Section 18 of MSME Act 2006, Clause 19 of Purchase Order, Section 6 of 1993 Act - The court discussed the applicability of the arbitration clause in the purchase order and the jurisdiction of the Micro and Small Enterprises Facilitation Council (MSEFC) under the MSME Act 2006. It emphasized that the claim before the MSEFC could only be with regard to any amount due under Section 17 of the MSME Act 2006, and not the claim of any buyer for liquidated damages or otherwise against the supplier. The court held that an arbitrator is required to be appointed to resolve the dispute between the parties with regard to the claim of the petitioner in terms of the arbitration clause and the Arbitration Act, 1996.
Fact of the Case:
The petitioner placed a purchase order for supply of refractory materials, and a dispute arose regarding the quality of the materials and non-payment. The opposite party raised a claim with the MSEFC under the MSME Act 2006, which was allowed, leading to a writ petition by the petitioner challenging the MSEFC's order.
Finding of the Court:
The court found that the claim before the MSEFC could only be with regard to any amount due under Section 17 of the MSME Act 2006, and not the claim of any buyer for liquidated damages or otherwise against the supplier. It held that an arbitrator is required to be appointed to resolve the dispute between the parties with regard to the claim of the petitioner in terms of the arbitration clause and the Arbitration Act, 1996.
Issues: The main issue was the jurisdiction of the MSEFC under the MSME Act 2006 and the applicability of the arbitration clause in the purchase order.
Ratio Decidendi: The court emphasized that the claim before the MSEFC could only be with regard to any amount due under Section 17 of the MSME Act 2006, and not the claim of any buyer for liquidated damages or otherwise against the supplier. It held that an arbitrator is required to be appointed to resolve the dispute between the parties with regard to the claim of the petitioner in terms of the arbitration clause and the Arbitration Act, 1996.
Final Decision: The petition was allowed, and the court directed the appointment of an arbitrator to resolve the dispute between the parties.
JUDGMENT :
Vineet Saran, J.
On 09.04.2015, the petitioner had placed purchase order with the opposite party for supply of refractory materials. After the supply was made, the opposite party raised certain claim with the petitioner-company, which was refuted by the petitioner by its reply dated 12.01.2016. The opposite party then, for its claim/recovery of amount due for the goods supplied by it to the petitioner, made a reference to the Micro, Small Enterprises Facilitation Council, Cuttack (for short, ‘MSEFC’) under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (for short, “MSME Act 2006”). The MSEFC thereafter allowed the claim of the opposite party on 07.02.2017 and directed the petitioner to pay a sum of Rs.35,36,683 along with interest. The said order of the MSEFC has been challenged by the petitioner by filing a writ petition bearing W.P.(C)No.10685 of 2017, wherein an order of stay has been passed. The petitioner thereafter on 19.04.2017 wrote to the opposite party, pointing out that the plant operations of the petitioner-company have been affected due to sub-standard materials supplied by the opposite party and thus raised a demand, clearly stating that if the demand was not met, the petitioner would be constrained to invoke Arbitration clause under the agreement/purchase order dated 09.04.2015.
2. Since there was no response to the said communication, invoking the Arbitration clause under the agreement/purchase order, on 13.05.2017 the petitioner suggested the name of an arbitrator to decide the dispute between the parties relating to the claim of the petitioner. The opposite party sent a reply dated 12.06.2017, stating therein that the opposite party does not agree for appointment of any arbitrator and that the dispute has already been settled by the MSEFC, in which the petitioner has raised its counter claim and thus the question of reference of any further dispute to the arbitrator under the provisions of the agreement/purchase order would not arise.
3. It is in this background that the petitioner has approached this Court under Section 11(5) of the Arbitration and Conciliation Act, 1996 praying for appointment of an arbitrator under the relevant clause of the agreement/purchase order.
4. I have heard Shri T. Mishra, learned counsel for the petitioner as well as Shri P.C. Mishra, learned counsel for the opposite party and perused the record. Pleadings between the parties have been exchanged and with consent of learned counsel for the parties, this petition is being disposed of at this stage.
5. The purchase order dated 09.04.2015, in terms of which the supply had been made by the opposite party to the petitioner, is not in dispute. Clause-19 of the same reads as under:
“19. Arbitration & jurisdiction :
All disputes arising out of this contract shall be resolved through arbitration as per the provisions of the Indian Arbitration and Reconciliation Act, 1996 and rules thereunder to be read with all statutory amendments and modification of the said Act and will be subject to the jurisdiction of the Law Courts of Rourkela, Odisha. The place of arbitration will be Rourkela, Odisha”
The other relevant Clause-12 relating to liquidated damage is also reproduced below :
“Liquidated Damage will be applicable if the there is a delay beyond the scheduled delivery period as per the annexed bar chart and shall entitle SMFAPL to deduct LD @ 0.5% of total basic Purchase order value per week or part thereof delay subject to a maximum of 5% of the total basic Purchase Order value. LD shall be deducted from any amount payable to the seller.
Liquidated Damage will be applicable if there is a delay beyond the application schedule as per the annexed bar chart and shall entitle SMFAPL to deduct LD @ 0.5% of total application value per week or part thereof delay subject to a maximum of 5% of the total value. LD shall be deducted from any amount payable to the Seller.
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