Himachal Pradesh High Court
The Bihar Medical Services And ... vs The Himachal Pradesh Micro And Small ... on 26 August, 2019
Author: Ajay Mohan Goel
Bench: Ajay Mohan Goel
1
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
CWP No.: 1865 of 2018
.
Date of Decision: 26.08.2019
______________________________________________________________________
The Bihar Medical Services and Infrastructure Corporation Limited
....Petitioner.
Vs.
The Himachal Pradesh Micro and Small Enterprises Facilitation Council,
Shimla1 and others
.....Respondents.
Coram:
The Hon'ble Mr. Justice Ajay Mohan Goel, Judge
Whether approved for reporting?1 Yes.
For the petitioner: Mr. Ramakant Sharma, Senior Advocate,
with M/s Devyani Sharma and Dinesh
Bhatia, Advocates.
For the respondents: Mr. Dinesh Thakur, Additional Advocate
General, with M/s Amit Kumar Dhumal
and Divya Sood, Deputy Advocate
Generals and Mr. Sunny Dhatwalia,
Assistant Advocate General, for
respondent No. 1.
None for respondent No. 2.
M/s Atul Jhingan and Ashwani Negi,
Advocates, for respondent No. 3.
Mr. Umesh Gupta, Director of M/s
Medipol Pharmaceutical India Private
Limited and Sh. Chaman Dhiman,
Authorized Signatory of respondent No. 3
are present in person.
1Whether the reporters of the local papers may be allowed to see the Judgment?
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2
Ajay Mohan Goel, Judge (Oral):
By way of this petition, the petitioners have, inter alia, .
prayed for the following reliefs:
"(I) That a writ in the nature of certiorari may be issued thereby quashing and setting aside proceedings of 37th meeting dated 08.05.2018 by respondent No. 1 and order dated 28.05.2018 (Annexure P1) issued by respondent No. 1 referring the matter for arbitration may be quashed and set aside being contrary to law.
(II) That the impugned notice dated 23.06.2018 Annexure P27 issued by respondent No. 2 may also be quashed and set aside.
(III) That the reference moved by respondent No. 3 may be held not to be maintainable and same may be quashed and set aside."
2. Facts necessary for the adjudication of the present petition are that an agreement, dated 04.10.2013 (Annexure P2) was entered into between the petitioner and respondent No. 3Company for supply of 41 items of drugs. Respondent No.3Company has its manufacturing unit in Baddi, District Solan, Himachal Pradesh.
Disputes have arisen between the petitioner and respondent No. 3 with regard to the supply of said drugs. Whereas according to the petitioner, one of the drugs supplied by respondent No. 3 was not of standard quality, which led to the subsequent blacklisting of respondent No. 3 Company, which order was set aside on technicalities by the High Court of Patana and the dispute is still alive between the parties, as per ::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 3 respondent No. 3, despite supply of drugs to the petitioner by it, its payments have not been released. As the disputes are still continuing .
between the parties, this Court refrains from making any further observation in this regard.
3. Two more facts necessary for the adjudication of the present petition are as under:
A. There exists a Clause in agreement Annexure P2 to the effect that in the event of any dispute between the petitioner and respondent No. 3 arising out of the said agreement, the dispute would be subject to the jurisdiction of Court of Bihar or High Court of Bihar; and B. Feeling aggrieved by the factum of alleged delay in payments purportedly due to respondent No. 3 from the petitionerCompany, respondent No. 3 filed a Reference under Section 18 of Micro, Small & Medium Enterprise Development Act, 2006 and Rule 4(6) of Himachal Pradesh Micro & Small Enterprises Facilitation Council Rules, 2007, claiming an amount of Rs. 29,83,80,909.00/ from the petitioner (Annexure P20).
It is in this background that the present petition has been filed by the petitionerCompany.
4. Learned Senior Counsel for the petitioner has made two fold arguments. His first contention is that the appointment of the Arbitrator by the respondentCouncil on the Reference made to it under Section 18 of the Micro, Small and Medium Enterprises Development Act, ::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 4 2006 (hereinafter referred to as 'the 2006 Act') by respondent No. 3 is prima facie bad in law as while dealing with the Reference so filed by .
respondent No. 3, respondent No. 1Council has violated the provisions of Rule 4(6) of the Himachal Pradesh Micro & Small Enterprises Facilitation Council Rules, 2007 (hereinafter referred to as 'the 2007 Rules') with impunity. The second contention of learned Senior Counsel is that in view of Clause26 of Annexure P2 that in the event of any dispute between the parties, the dispute would be subject to the jurisdiction of the Court of Bihar or the High Court of Bihar, the initiation of Reference proceedings under the 2006 Act by respondent No. 3, is not sustainable in law.
5. I have heard learned counsel for the parties and have also gone through the record appended with the petition as well as original record of respondent No. 1 pertaining to the case in issue.
6. A perusal of the record of respondent No. 1 pertaining to the Reference filed under Section 18 of the 2006 Act before it by respondent No. 3 demonstrates that after receipt of the Reference made to it by respondent No. 3, which was received on 26 th October, 2017, a Notice was issued to the petitionerCompany on 27 th November, 2017, relevant portion whereof reads as under:
"Subject: Notice for calling response to the reference filed by M/s Medipol Pharmaceutical Pvt. Ltd., 1199/3, Bhud, Baddi, Distt. Solan H.P. (Supplier/applicant) V/s Managing Director, Bihar Medical Services & Infrastructure Corporation Ltd., Patna, Bihar (Buyer/Respondent).::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 5
1. Whereas M/s Medipol Pharmaceutical Pvt. Ltd., 1199/3, Bhud, Baddi, Distt. Solan H.P. (Supplier/applicant) has filed a reference before .
H.P. Micro & Small Enterprises Facilitation Council {constituted by the Government of H.P. in accordance to the powers conferred under Section 20 of MSMED Act, 2006} for the recovery of Rs.298380909/ (Pl+Interest) for the product manufactured & supplied to Managing Director, Bihar Medical Services & Infrastructure Corporation Ltd., Patna, Bihar (Buyer/Respondent) as per the provisions made under sub section (1) of Section 18 of MSMED Act, 2006.
2. Whereas M/s Medipol Pharmaceutical Pvt. Ltd., 1199/3, Bhud, Baddi, Distt. Solan H.P. (Supplier/applicant) has supplied a copy of reference to Managing Director, Bihar Medical Services & Infrastructure Corporation Ltd., Patna, Bihar (Buyer/Respondent).
3. Managing Director, Bihar Medical Services & Infrastructure Corporation Ltd., Patna, Bihar (Buyer/Respondent) is hereby called upon to furnish a detailed response/reply to this reference to H.P. Micro & Small Enterprises Facilitation Council within 15 days from the receipt of this notice with such documents and facts in support of its defence bearing on the matter under reference...."::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 6
7. Record further demonstrates that simultaneously vide communication, dated 30.11.2017, respondent No. 1 directed the .
petitionerCompany to attend the meeting of Himachal Pradesh Micro Small Enterprises Facilitation Council scheduled for 12.12.2017.
Contents of the said communication are as under:
"Subject: Regarding 33rd meeting of HP Micro Small Enterprises Facilitation Council.
In continuation of this office letter of even No. dated 18.10.2017, it is intimated that the next meeting of H.P. Micro Small Facilitation Council is scheduled to be held on 12.12.2017 at 11:00 A.M. in the Conference Hall of Directorate of Industries, Himachal Pradesh Udyog Bhawan, Bamloe, Shimla171001.
In this context, you are advised to attend this meeting on the scheduled date, time and place. Further, take notice that in default of your appearance on the day, time & place mentioned above, the reference will be heard and decided exparte."
8. Record further demonstrates that on 12.12.2017, though none appeared on behalf of respondent No. 3, there was a representation on behalf of the petitioner and respondent No. 1Council observed that as the Reference was listed for the first time before the Council, therefore, one more chance be given to the parties and the case was listed in the next meeting of the Council fixed for 18.01.2018. Record ::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 7 further demonstrates that no meeting was held on 18.01.2018 and the same was postponed for 30.01.2018.
.
9. Record further demonstrates that in the 34th meeting of the Council held on 30.01.2018, the Reference was ordered to be listed on 28.02.2018, as response of the petitioner was not yet filed. In the meanwhile, petitionerCompany submitted its reply to the Notice issued to it by respondent No. 1, dated 27.11.2017. Thereafter, the matter was put up before the Council in subsequent meetings and finally the Council in its 37th meeting held on 08.05.2018, decided to refer the Reference to the Arbitrator and the same was referred to Shri L.R. Sharma, District & Sessions Judge (Retd.). This led to the filing of present petition.
10. The chronological events narrated hereinabove demonstrate that after receipt of the Reference, a Notice was issued by the Chairman of the Council to the petitioner on 27.11.2017 and thereafter the matter was listed before the Council itself in its 33 rd meeting, 34th meeting, 35th meeting, 36th meeting and 37th meeting, in which, the matter was referred to the learned Arbitrator.
11. There is on record Annexure R3, appended with the reply of respondent No. 1, i.e., copy of the Himachal Pradesh Micro and Small Enterprises Facilitation Council Rules, 2007. These Rules have been framed by the Government of Himachal Pradesh in exercise of powers conferred by Section 30 read with Subsection (3) of Section 21 of the Micro, Small and Medium Enterprises Development Act, 2006. Sub rule (7) of Rule 4 of the said Rules reads as under:
::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 8"4. (7). On receipt of a reference under Section 18 of the Act, the Chairperson of the Council shall cause the reference and the .
buyers response thereto to be examined and, on being satisfied with the reference making a prima facie case of delayed payment, cause the reference to be placed before the Council at its next meeting for consideration. The Chairperson shall also ensure that each reference received within two weeks of the date of the last preceding meeting of the Council is examined and, if found in order, is placed for consideration of the Council at its next meeting."
12. A perusal of the said Subrule demonstrates that the procedure which has to be followed by the Chairperson of the Council after receipt of Reference under Section 18 of the 2006 Act, is that the Chairperson of the Council shall cause the reference and the buyers response thereto to be examined and on being satisfied with the reference making a prima facie case of delayed payment, cause the reference to be placed before the Council in its next meeting for consideration. In other words, after a Reference under Section 18 of the Act is received, the same is not to be placed by the Chairperson before the Council in a routine manner. As per the abovestated Subrule, response to the said Reference has to be sought by the Chairperson from the buyers and on being satisfied after perusal of the said response, after having the same ::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 9 examined, that the supplier has been able to make out a case of delayed payment, the matter has to be placed before the Council.
.
13. In the present case, the procedure envisaged in Sub rule (7) (supra) has not been followed by the Chairperson at all. After receipt of the Reference, in a routine manner, a Notice was issued by the Chairperson to the buyer calling for the reply and the matter was also placed before Council before the reply from the buyer stood received by the Chairperson. Record does not demonstrates that any satisfaction was recorded by the Chairperson after perusing the reply so submitted by the buyer that a prima facie case of delayed payment was made out in favour of the supplier and against the buyer. Whereas it is apparent from the record that no such exercise was undertaken by the Chairperson, as is envisaged in Subrule (7) (supra), the factum of the matter having been placed before the Council as a routine manner is further proved from the fact that record demonstrates that in the 34 th meeting of the Council held on 30.01.2018, it was duly recorded that buyer had not filed reply to the Reference listed before the Council. The proceedings of 34 th meeting held on 30.01.2018 in Reference, subject matter of the present petition, reads as under:
"Udyog Bhawan, Dated:______________Shimla 171001.
Order passed by the H.P. Micro and Small Enterprises Facilitation Council (hereinafter referred as Council) in its 34 meeting held on 30.01.2018 in Reference No. 49/2017 titled M/s ::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 10 Medipol Pharmaceutical Pvt. Ltd., 1199/3, Bhud, Baddi, Distt. Solan H.P. (Supplier/applicant) V/s Managing Director, Bihar Medical Services & .
Infrastructure, Gandhi Maidan, Patna, Bihar (Buyer/defendant): Appeared for the Supplier/applicant Sh. Chaman Dhiman, representative Appeared for the Buyer/Respondent Sh. Avinash Jaryal, Advocate The case/reference was called. Sh.
Chaman Dhiman, representative appeared on behalf of supplier. Sh. Avinash Jarayal, Advocate appeared on behalf of buyer. Council observed that the buyer has not filed the reply to the reference listed before the Council. Council took note of the same and directed the buyer to submit the reply within 5 days and also inform the Council about the same. Thereafter, Council ordered to list this reference in the next meeting of the Council 28.02.2018.
Sd Chairman, H.P. Micro & Small Facilitation Council."
[
14. Therefore, as the Reference was placed before the Council in violation of the procedure prescribed in Subrule (7) of Rule 4 of the 2007 Rules, the subsequent action taken upon the said Reference by the Council is non est, so is the appointment of the Arbitrator in its 37th meeting held on 08.05.2018.
::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 1115. Accordingly, this petition is partly allowed by setting aside the order passed by the Council in its 37th meeting held on .
08.05.2018, vide which the Reference filed before it by respondent No. 3 under Section 18 of the Micro, Small & Medium Enterprise Development Act, 2006 stood referred for arbitration. The matter is remanded back to the Chairperson of respondent No. 1Council, with the direction that he shall proceed with the matter in terms of the provisions of Subrule (7) of Rule 4 of the 2007 Rules, as envisaged after receipt of the response of the buyer. It is directed that the said procedure has to be strictly followed by the Chairperson, because the Rules are statutory Rules and have the force of law and also because any decision of the Chairperson whether or not to place the matter before the Council and whether a case of a delayed payment is made out, shall have civil consequences as far as either of the parties is concerned. The decision in this regard shall be a reasoned and speaking one.
However, it is made clear that as far as the merit of the Reference made before the Council by respondent No. 3 is concerned, this Court is not making any observation upon the same and the same shall be dealt with by the Chairperson independently, uninfluenced by any observation of this Court in this judgment. In view of the above discussion, the second contention raised by learned Senior Counsel with regard to the maintainability of the Reference is not being adjudicated upon in terms of Clause26 of the agreement entered into between the parties (Annexure P2). This Court hopes and expects that the ::: Downloaded on - 29/09/2019 02:35:37 :::HCHP 12 Chairperson of the Council shall deal with the issue as expeditiously as possible.
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The petition stands disposed of in above terms, so also pending miscellaneous application, if any.
(Ajay Mohan Goel)
Judge
August 26, 2019
(bhupender)
r to
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