Tata Steel Limited (Tsl) vs Micro And Small Enterprises ... on 6 November, 2020

[Cites 8, Cited by 2]

Gujarat High Court

Tata Steel Limited (Tsl) vs Micro And Small Enterprises ... on 6 November, 2020

Bench: N.V.Anjaria

             C/SCA/14249/2020                                        ORDER



                  IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
                    R/SPECIAL CIVIL APPLICATION NO. 14249 of 2020
                                         With
                     R/SPECIAL CIVIL APPLICATION NO. 14261 of 2020
                                         With
                     R/SPECIAL CIVIL APPLICATION NO. 14265 of 2020
==========================================================
                                TATA STEEL LIMITED (TSL)
                                         Versus
          MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL, GUJARAT
==========================================================
Appearance:
MR MIHIR JOSHI, SR. ADVOCATE WITH MS MINOO A SHAH(774) for the Petitioner(s) No. 1
for the Respondent(s) No. 1,2,4
MR SHALIN MEHTA, SR. ADVOCATE WITH MR ARJUN R SHETH(7589) for the Respondent(s)
No. 3
==========================================================

     CORAM: HONOURABLE MR. JUSTICE N.V.ANJARIA

                                  Date : 06/11/2020
                                  COMMON ORAL ORDER

Heard learned senior advocate Mr.Mihir Joshi assisted by learned advocate Ms.Minoo Shah for the petitioners and learned senior advocate Mr.Shalin Mehta with learned advocate Mr.Arjun Sheth for respondent Nos.3 and 4 in each of the three petitions.

2. The respondent company herein approached respondent No.1-Micro and Small Enterprises Facilitation Council for recovery of amount in respect of delayed payment alleged to be due from the petitioner pursuant to disputes arising under the contracts between the parties. Under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED Act)the matter was dealt with by respondent No.1 Council. It appears that conciliation proceedings were sought to be undertaken which however failed. The respondents-claimants requested by letter dated 21st September, 2020 that the conciliation proceeding under Section 18(2) of the Page 1 of 5 Downloaded on : Sat Nov 07 04:01:22 IST 2020 C/SCA/14249/2020 ORDER Act has failed and then requested the Council to start arbitration proceedings under Section 18(3) of the said MSMRD Act, 2006.

2.1 On the other hand, the case of the petitioner company has been that the respective contracts entered into between the parties, contain an arbitration clause which stands incorporated as part of agreed terms of the contract. The petitioner company has activated itself to invoke the arbitration clause in the contract to commence the private arbitration. The arbitration clause is invoked by petitioner on 10th August, 2020.

3. On 06th October, 2020, the Facilitation Council was requested by the petitioner company that since it has already invoked the arbitration clause and taken out proceedings for appointment of arbitrator, second arbitration under Section 18(3), MSMED Act, 2006, could not be initiated.

3.1 The Facilitation Council passed order dated 08th October, 2020 rejecting the request of the petitioner company, deciding to proceed under Section 18(3) of the Act of 2006. It is this order which is impugned in the respective petitions.

4. It is the contention on behalf of the petitioners inter alia that the arbitration clause between the parties agreed upon and incorporated in the contract shall not lose its efficacy in law notwithstanding the arbitration sought for by the Page 2 of 5 Downloaded on : Sat Nov 07 04:01:22 IST 2020 C/SCA/14249/2020 ORDER respondent company under Section 18(3) of the MSMED Act and that the private arbitration as per the arbitration clause agreed upon will have to proceed to reach to its logical end under the provisions of the Arbitration and Conciliation Act, 1996.

4.1 In support of this submission, learned senior advocate relied on decision of the Division Bench of this Court in Saryu Plastics Private Limited v. Gujarat Water Supply and Sewerage Board [AIR 2018 Gujarat 57]. Next pressed into service was the decision of the Nagpur Bench of the Bombay High Court in M/s.Steel Authority of India Ltd. v. Micro and Small Enterprises Facilitation Council [AIR 2012 Bombay 178].

4.2 On the other hand, learned senior counsel for the private respondents submitted that the Division Bench of this Court in Principal Chief Engineer v. Manibhai and Brothers [AIR 2016 Gujarat 151] has charted a discordant note. He further relied on yet another decision of this Court in Letters Patent Appeal No.1667 of 2019 to submit on the basis of certain observations therein that provision of Section 18 of 2006 Act would prevail in their operation. He also relied on language of the Section.

5. A crisp question of law arises for consideration as to whether the existence of arbitration clause in a private contract between the parties would automatically stand displaced for its operation and would be divested of its efficacy in Page 3 of 5 Downloaded on : Sat Nov 07 04:01:22 IST 2020 C/SCA/14249/2020 ORDER law in the event of one of the parties approaches under the MSMED Act, 2006 before the Facilitation Council and the provision of Section 18 of the said Act is sought to be invoked. The issue being a question of law, has to be considered and decided in light of the decisions cited by learned counsel of both the sides by examining them for their ratio and applicability thereof to the facts involved in the present case.

5.1 Therefore, Notice, returnable on 07th December, 2020.

6. Pressing for interim relief, it was submitted by learned senior advocate for the petitioner that in the institutional arbitration sought to be continued by the respondent No.1 Council, the respondent company-the claimants are yet to submit the statement of claim. In support of his plea that the arbitration under the Arbitration Act, 1996 should be allowed, he further submitted that the petitioner company has counterclaims to be agitated under the independent contracts as well which are not subject matter in proceeding before respondent No.1 Council which insists to act under Sec. 18(3) of the Act, 2006 disallowing request of the petitioner to the private arbitration under the Arbitration Act, 1996. Learned senior advocate had its own reservations whether such claim could be subject matter under the proceedings of Section 18 of the 2006 Act.

Page 4 of 5 Downloaded on : Sat Nov 07 04:01:22 IST 2020 C/SCA/14249/2020 ORDER

6.1 On the other hand, learned senior advocate for the respondent company objected to grant of any interim prayer stating that they have prayed for extension of time for filing statement of claim and the proceedings may not be stayed.

7. The statement of claim has yet not been filed before the Facilitation Council by the respondents claimants. The proceedings before the Council are at a very initial stage. Having regard to the necessity to examine the question of law by elaborate consideration of the controversy and when the present petition is pending, it is considered expedient that any further proceeding does not take place before the Council which may otherwise create claiming of rights and equities by the parties. Therefore, without prejudice to the rights and contentions of both the sides and without any reflection on the final merits of the case to be determined in the petition, it is directed by way of ad-interim relief that respondent No.1 Facilitation Council shall forbear itself from proceedings further in any manner under section 18(3) of the MSMED Act, 2006, to conduct the institutional arbitration, till the next date.

Learned advocate Mr.Arjun Sheth waives service of notice on behalf of respondent Nos.3 and 4. Direct service is permitted for rest of the respondents.

(N.V.ANJARIA, J) MARY VADAKKAN/Anup Page 5 of 5 Downloaded on : Sat Nov 07 04:01:22 IST 2020

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