The court affirmed that initial letters from the petitioner constituted valid invocation of arbitration, and the claims were not barred by limitation due to prior proceedings under the MSME Act.

Prathiba M. Singh, J.

1. This hearing has been done through hybrid mode.

Background

2. The present petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter, ‘the Arbitration Act’) by the Petitioner -M/s. Advance Stimul, a consortium of M/s. PKP Stimul as the leader and M/s. Advance Steel Tubes Ltd. as its member. The Petitioner and Respondent - GAIL (India) Limited, had entered into an agreement dated 14th October, 2011 for pipeline laying and associated works for Lingala - Kaikaluru isolated field grid with KG-Basin Pipeline network from Hanuman Junction to VCL Project (hereinafter, ‘subject work’). The Petitioner emerged as the lowest bidder and the contract was executed on 17th November, 2011.

The Letter of Acceptance dated 9th February, 2012 in favour of the Petitioner was issued by the Respondent, for the subject work estimated at contract value of Rs. 13,84,14,983/-. The agreed date of completion for the subject work was 13th April, 2012. However, further extensions were sought and subsequently provided, due to delays. Eventually, the subject work is stated to have been concluded sometime in March 2016.

3. During the execution of the subject work, as per the Petitioner various amounts became due and payable, as set out below:

• • Rs. 1,71,13,848/- on account of extra work, • Rs. 4,80,00,000/- as Extended Stay Compensation, • Rs. 5,00,00,000/- for extra costs incurred due to the Respondent’s failure to obtain necessary permissions timely, and • Rs. 20,68,250/- as financial costs resulting from extensions of the Bank Guarantee.

4. The case of the Petitioner is that it sent a letter in which it raised a grievance that the Respondent was illegally withholding the Bank guarantee, given as a performance guarantee in favour of Respondent under the contract.

However, the Respondent-GAIL refused to release the bank guarantee, which led the Petitioner to invoke the jurisdiction of the Micro and Small Enterprises Facilitation Council (hereinafter ‘MSEFC’) under the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter, ‘the MSME Act’).

5. The Petitioner vide communication dated 20th November, 2018, had served upon GAIL a claim petition and the same was filed before the MSEFC vide letter dated 21st November, 2018. In the said letter, the stand taken by the Petitioner was that due to registration under the MSME Act, it is entitled to invoke the dispute resolution mechanism under the MSME Act.

6. As per Section 18 of the MSME Act, every reference made to MSEFC is to be completed within 90 days of commencement of such proceedings.

However, when the conciliation proceedings seemed unfruitful, repeated letters had to be written by the Petitioner for the reference to DIAC on 6th March, 2019, 8th June, 2020, 26th December, 2020, 5th February, 2021 and 29th November, 2021. In each of these letters, the Petitioner sought reference to arbitration. On 4th March, 2022 again, the Petitioner stated that despite four meetings, there has been no conciliation and sought reference to arbitration once more.

7. The MSEFC maintained a stoic silence during this entire period, in clear contravention of the timelines provided under the Arbitration Act. The MSEFC, then held conciliation proceedings between the parties on 10th January, 2020, 9th April, 2021 and 4th March, 2022, however, no conciliation could be arrived at. When conciliation proceedings failed, the Petitioner prayed that the matter be referred to the Delhi International Arbitration Centre (hereinafter, ‘DIAC’). Finally, on 17th November, 2022, the MSEFC referred the matter to arbitration through DIAC.

8. The DIAC issued its notice on 23rd March, 2023 and 25th August, 2023 calling upon the Petitioner to file its statement of claims.

9. On 15th September, 2023, the Petitioner sought further time to file the statement of claims, in view of the judgement of Supreme Court in Gujarat State Civil Supplies Corporation Ltd vs M