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IN THE HIGH COURT OF ORISSA AT CUTTACK
SANJEEB K PANIGRAHI, J.
Indian Oil Corporation Ltd. Anr. - Petitioners
Versus
M/s. Adarsh Nobel Corporation Ltd. - Respondent
W.P.(C) No.30966 of 2024
Decided On : 20-09-2025
| Table of Content |
|---|
| 1. facts of the case and parties involved. (Para 2 , 3) |
| 2. arguments related to jurisdiction and applicability of the msmed act. (Para 4 , 5 , 6) |
| 3. interpretation of jurisdiction based on the msmed act's provisions. (Para 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16) |
| 4. legal characterization and treatment of works contracts under msmed act. (Para 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 30 , 31 , 32 , 33) |
| 5. distinction between inherent jurisdiction and procedural impropriety in writ petitions. (Para 37 , 38 , 39 , 40 , 41) |
| 6. conclusion to set aside the impugned award. (Para 43 , 44 , 45) |
JUDGMENT :
Sanjeeb K Panigrahi, J.
1. The present Writ Petition has been preferred seeking setting aside of the award dated 10.07.2023, passed by the Facilitation Council, Cuttack in MSEFC Case No. 56 of 2022.
I. FACTUAL MATRIX OF THE CASE:
2. The brief facts of the case are as follows:
(i) The Petitioner has filed the present Petition to correct a jurisdictional error committed by the MSEF Council, vide its Award dated 10.7.2023 and has challenged the impugned order on the ground of lack of inherent jurisdiction by the Council.
(j) The Petitioner awarded the work of "Provision of Additional VR Tank at Paradip Refinery” to the Opposite Party vide Letter of Award(LOA) dated 29.11.2017 for a contract value of Rs.20,86,26,058.50/-, which was to be completed within a period of 18 months from the date of the LOA.
(k)However, on 11.6.2018, the Opposite Party stopped work on the site. Despite multiple correspondence dated 29.6.2018, 23.7.2018 and 11.8.2018, work did not resume and thereafter it is alleged that the present Petitioner terminated the contract with the Opposite Party on 13.12.2018.
(l) A word order was issued to another contractor on 9.4.2019 for completion of the balance work.
(m) As the matter remained thus, the present Opposite Party obtained it’s registration as an MSME on 28.1.2021. The following year, on 12.8.2022, the Opposite Party filed MSEFC Case No. 56 of 2022 under Section 18 of the MSMED Act, 2006 seeking Rs. 6,65,97,975/- towards principal amount and interest calculated up to 18.5.2022 for alleged illegal termination of the contract.
(n) On 18.11.2022, the present Petitioner issued an email to block payments towards the Opposite Party on account of risk and cost recovery from the Opposite Party. The Opposite Party filed an interim application for staying the operation of the email dated 18.11.2022 before the MSEFC.
(o)While the I.A. was pending, the new contractor completed the work and a letter regarding the recovery amount was issued by the Petitioner to the Opposite Party on 22.3.2023.
(p)The operation of the email dated 18.11.2022 was stayed by the MSEFC on 2.5.2023. On 10.7.2023, MSEF Council passed the impugned final order directing the Petitioner - IOCL to pay a sum of Rs.2,43,14,318.00/- to the Opposite Party -ANCL along with future interest (compounded interest with monthly rests payable at the rate of 3 times of the bank rate as notified by the Reserve Bank of India from time to time). IOCL was further directed to release the bank guarantee and not to block vendor’s account code and vendor purchase code.
(q)On 20.12.2023, the Opposite Party filed Enforcement Petition being EXP. No. 585 of 2023 before the Senior Civil Judge, Commercial Court, Bhubaneshwar seeking enforcement of the impugned final order.
(r) The Senior Civil Judge, Commercial Court, Bhubaneswar issued ex- parte ad-interim direction on 22.3.2024 to the Petitioner not to lake any coercive action in respect of Vendor Payment Status Report till the next date. The said interim order continues till date.
(s)On 28.3.2024, the Petitioner filed an application under Section 34 of the Arbitration & Conciliation Act, 1996 challenging the award and final order dated 10.7.2023. However, the same was withdrawn on 21.10.2024. Thereafter, the present Petition was filed by the Petitioner.
(t) Now that the facts leading up to the instant Appeal has been lai
The MSEFC lacks jurisdiction to adjudicate disputes arising from works contracts, which necessitate arbitration under traditional frameworks, not the MSMED Act.
Works contracts cannot invoke the jurisdiction of MSEFC under the MSMED Act, necessitating arbitration under the Arbitration and Conciliation Act, thereby rendering MSEFC proceedings void.
The Facilitation Council lacks jurisdiction over disputes arising from works contracts under the MSME Act, and principles of natural justice must be adhered to in adjudicatory processes.
The court upheld that statutory remedies under the MSMED Act take precedence over private arbitration agreements, affirming the Facilitation Council’s jurisdiction in disputes involving MSMEs.
The MSMED Act operates as a special beneficial legislation, overriding the Arbitration Act in cases involving registered MSMEs, emphasizing exclusive jurisdiction of MSEFC for dispute resolution.
The Act does not apply to works contracts with an element of supply and not mere supply and service contracts. The contractors must file the memorandum under section 8 of the Act to claim the benefit....
The court ruled that a party to a dispute cannot waive the mandatory conciliation requirement under Section 18(2) of the MSMED Act, validating subsequent arbitration proceedings.
The Council has jurisdiction to adjudicate disputes in cases of works contracts, even if there is an arbitration clause in the contract.
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