Rajasthan High Court - Jaipur
Sanghi Industries Ltd And Anr vs Micro & Small Enterprises And Anr on 4 April, 2018
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Civil Writ Petition No. 988/2018
1. Sanghi Industries Limited
Having Its Registered Office At P.o. Sanghinagar, Hayat
Nagar Mandal, Rangareddy District Telangana 501511
Through Service President.
And Having Its Corporate Office At 10Th Floor, Kataria
Arcade, Off S.G. Highway, Post Makarba Ahmedabad
380051.
2. Gaurang Jayantilal Bhatt
Sr. Vice President (Corporate Affairs)
And Shareholder Sanghi Industries Limited
Having Its Registered Office At P.o. Sanghinagar, Hayat
Nagar Mandal, Rangareddy District Telangana 501511
And Having Its Corporate Office At 10Th Floor, Kataria
Arcade, Off S.g. Highway, Post Makarba Ahmedabad
380051
----Petitioners
Versus
1. Micro Small Enterprises Facilitation Council, Department
Of Industries Rajasthan, Having Its Office At Udyog
Bhawan, Tilak Marg, Jaipur. Through Sr. Manager.
2. Shree R.N. Metals (India) Pvt. Ltd., G1, 2 & 22 "Shubham
Appartments", Near Ganpati Towers, Plot No. 2, Central
Spine, Vidhyadhar Nagar, Jaiupr 302023, Rajasthan.
Through Sr. Manager.
----Respondents
For Petitioner(s) : Mr. Anuroop Singhi, Adv.
For Respondent(s) : Mr. R.K. Agrawal, Senior Advocate
with Ms. Sunita Pareek, Adv.
(2 of 15) [CW-988/2018]
HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA
Order
04/04/2018
Reportable
1. The matter comes up on an application moved under Article
226 (3) of the Constitution of India for vacating the exparte stay
order passed by this Court dated 16.01.2018 whereby the counsel
has raised objections regarding maintainability of the writ petition.
2. Learned Senior Advocate for the applicant-respondent has
taken this Court to the provisions of the Micro, Small and Medium
Enterprises Development Act, 2006 (hereinafter referred to as 'the
Act of 2006') to submit that the order passed under the said
provision is akin to arbitration proceedings as laid down under the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as
'the Act of 1996'). The Micro and Small Enterprises Facilitation
Council passes an order under Section 18 of the Act of 2006 which
would be termed as an award within the meaning of the Act of
1996 and, therefore, a challenge to the award passed by the said
council can be made in terms of Section 34 of the Act of 1996 as
there is statutory remedy provided under the Act of 1996 for
challenging the award, the impugned award passed under Section
18 of the Act of 2006 in the present writ petition could have been
challenged by the petitioners by filing objections/appeal under
Section 34 of the Act of 1996 and the present writ petition ought
to have been ousted on the ground of availability of alternative
remedy as available under the Act of 1996.
3. Learned counsel further submits that the council which has
passed the impugned order dated 26.10.2017 has, before passing
(3 of 15) [CW-988/2018]
the award, also attempted conciliation as envisaged under Section
18(2) of the Act of 2006. Thus all procedures as required have
been followed and hence there was no occasion for this Court to
have invoked jurisdiction of Article 226 and pass interim order in
relation to the impugned order dated 26.10.2017.
4. In reply to the application, learned counsel for the petitioners
submits that the order dated 26.10.2017 is not in the nature of an award as envisaged under the Act of 1996 for the reasons that council has not given any findings relating to the dispute which had arisen between the parties. The learned counsel submits that they had filed a reply to the claim set up by the respondents and had pointed out that there were genuine reasons for not making the payments. Documents in this regard and communications were also placed alongwith reply. However, council has not referred to any of the contentions raised by the petitioners while passing the impugned order and therefore it cannot be said to be an award within the meaning of Act of 1996. Learned counsel further submits that the procedure as envisaged under the Act of 1996 under Sections 23 and 24 of the Act of 1996 has to be necessarily followed before passing an award and as the same has not been adhered to, order dated 26.10.2017, cannot be said to be an award and the petitioners therefore ought not be ousted on the ground of alternative remedy available under the Act of 1996 of filing objections/appeal under Section 34 before the concerned Court.
5. Having heard both the counsels, it would be useful to quote the certain provisions of the Act of 2006:-
"15. Liability of buyer to make payment.-Where any supplier, supplies any goods or renders any (4 of 15) [CW-988/2018] services to any buyer, the buyer shall make payment therefore on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
16. Date from which and rate at which interest is payable.-Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.
17. Recovery of amount due.-For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16.
18. Reference to micro and small enterprises facilitation council.-(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer to it any institution or centre providing alternate (5 of 15) [CW-988/2018] dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act.
(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.
(5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.
19. Application for setting aside decree, award or order.-No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court:
Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose."
6. The Arbitration and Conciliation Act 1996 lays down the following provisions:-
"9. Interim measures etc. by Court.__A party may, before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court-
(6 of 15) [CW-988/2018] i. for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or ii. for an interim measure of protection in respect of any of the following matters, namely:- a. the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
b. securing the amount in dispute in the arbitration;
c. the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
d. interim injunction or the appointment of a receiver;
e. such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
[(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.] [(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub- section (1), unless the Court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious.] (7 of 15) [CW-988/2018]
23. Statements of claim and defence.___(1) Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements.
(2). The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.
[(2A) The respondent, in support of his case, may also submit a counter-claim or plead a set-off, which shall be adjudicated upon by the arbitral tribunal, if such counter-claim or set-off falls within the scope of the arbitration agreement.] (3). Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.
24. Hearings and written proceedings.__(1).Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted oil the basis of documents and other materials:
Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held.
[Provided further that the arbitral tribunal shall, as far as possible, hold oral hearings for the presentation of evidence or for oral argument on day-to-day basis, and not grant any adjournments unless sufficient cause is made out, and may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause.] (2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the (8 of 15) [CW-988/2018] arbitral tribunal for the purposes of inspection of documents, goods or other property.
(3) All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.
34. Application for setting aside arbitral award.
1. Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and subsection (3).
2. An arbitral award may be set aside by the Court only if-
a. the party making the application furnishes proof that-
i. a party was under some incapacity, or ii. the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or iii. the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or iv. the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (9 of 15) [CW-988/2018] v. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that-
i. the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or ii. the arbitral award is in conflict with the public policy of India.
Explanation 1.__For the avoidance of any doubt. It is clarfied that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice].
Explanation 2-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.] (3) An application for setting aside may not be made after three months have elapsed from the date on (10 of 15) [CW-988/2018] which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-
section (1), the Court may, where it is 16 appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
[(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.] [(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.]"
7. From the perusal of the aforesaid provisions, it is apparent that the Act of 2006 is a special Act which has been notified with effect from 16.06.2006 and has come into force on 02.10.2006, the same has been introduced with the purpose of facilitating the promotion and development of micro, small and medium enterprises as well as ensuring their competitiveness. It empowers the Central government to notify programmes, guidelines and instructions for the promotion and growth of micro, small and (11 of 15) [CW-988/2018] medium enterprises. It also aims at ensuring timely and smooth flow of credit to such enterprises as well as minimising instances of sickness among them. Under the Act, the Central Government and the State Government may construct preference policies in respect of procurement of goods and services provided by such enterprises. In brief, the basis objective is to ensure overall development of micro, small and medium enterprises. One of the objects as mentioned in the Statement of Objects and Reasons is to make provisions for ensuring timely and smooth flow of credit to small and medium enterprises to minimise the incidence of sickness among and enhancing the competitiveness of such enterprises, in accordance with the guidelines or instructions of the Reserve Bank of India.
8. The provisions contained therein as noted above show that Micro, Small and Enterprises Facilitation Council shall pass orders which would be in the nature of an award in terms of the Act of 1996. As per the Section 18(2) before the concerned council, proceeds with an arbitration, it has to first make attempts for conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services.
9. In the present case, the council has attempted to make conciliation between the parties as has been noted in the order dated 26.10.2017. However, since the same was unsuccessful, they proceeded to pass an award holding the claim of the respondent as against the petitioners. The council has also noted that the petitioners have filed a suit for seeking damages also against the respondents and noting the same, and also taking into (12 of 15) [CW-988/2018] consideration that there was no counter claim filed by the petitioners, it has proceeded to pass the award.
10. In view of Section 19, 75% of the amount has to be made as a pre-deposit before filing of an appeal or application for setting aside the award. Thus, it is the contention of the learned counsel for the respondent that in order to save themselves from depositing the said amount the present petition has been filed which of course the petitioner denies. A look at Section 9 of the Act of 1996 shows that even after making of an award, an interim application can be moved before the competent Court with regard to securing the amount in dispute or for any interim injunction.
However, this Court would refrain from making any observation as to the council to which the petitioner may adopt in terms of Section 9 or otherwise but suffices to note that under Section 34, the petitioner has all the remedies available which they have taken before this Court as regards not following the procedure laid down under Sections 23 and 24 of the Act of 1996. Section 34 allows the concerned competent court to examine all the aspects relating to the award and it is a competent statutory appellate body, the Apex Court in the case of Authorized Officer, State Bank of Travancore And Another versus Mathew K.C., (2018) 3) SCC 85 has held as under:-
"15. It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing (13 of 15) [CW-988/2018] the relevant law. In financial matters grant of ex- parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in Satyawati Tandon (supra), has also not been kept in mind before passing the impugned interim order:-
"46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, Whirlpool (14 of 15) [CW-988/2018] Corpn. v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order.
16. The writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference."
11. In view of the above and taking into consideration that there is a statutory alternative remedy available to the petitioner, this Court is of firm view that the present writ petition would not lie in view of the provisions as noted above.
12. In the circumstances, the writ petition is held to be not maintainable on account of the alternative efficacious remedy available to the petitioner. The question of interim order can also be looked into by the concerned court. It is noted that the period in filing the present writ petition may be excluded for the purpose of the limitation under Section 34 for filing of an appeal. The appeal, if any, filed by the petitioners within 15 days from receipt of a certified copy of this order, the petitioners shall be heard on merits as well as on interim prayer if so made.
(15 of 15) [CW-988/2018]
13. With the aforesaid observations, the interim order is vacated and the application filed under Section 226(3) of Constitution of India is allowed. As the writ itself has been held to be not maintainable on account of alternative remedy, the writ petition is also dismissed with the aforesaid liberty.
(SANJEEV PRAKASH SHARMA),J R.Vaishnav
68.