Strides Pharma Science Limited ... vs Panexcell Clinical Lab Pvt. Ltd. And Anr on 21 September, 2021

[Cites 14, Cited by 0]

Bombay High Court

Strides Pharma Science Limited ... vs Panexcell Clinical Lab Pvt. Ltd. And Anr on 21 September, 2021

Bench: B.P.Colabawalla

                                                                         16-CARAP-96-21.doc
GANESH
SUBHASH
LOKHANDE
Digitally signed by
GANESH SUBHASH
LOKHANDE                          IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Date: 2021.09.23
12:46:07 +0530
                                        ORDINARY ORIGINAL CIVIL JURISDICTION
                                              IN ITS COMMERCIAL DIVISION

                            COMMERCIAL ARBITRATION APPLICATION NO. 117 OF 2021

                      Strides Pharma Science Limited                         .. Applicant
                                  Vs.
                      Panexcell Clinical Lab Pvt. Ltd. & Ors.                .. Respondents


                      Mr.Kunjal Patil i/b. Kings Stubb & Kasiva for the Applicant.
                      Mr.Adhiraj Malhotra a/w. Pranangana Barua i/b. Bharucha & Partners
                      for the Respondent.


                                                    CORAM :- B.P.COLABAWALLA, J.

                                                    DATE     :- 21st SEPTEMBER, 2021.



                      P. C.:

1. The above Arbitration Application is filed under Section 11 of the Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act") seeking the appointment of a Sole Arbitrator to resolve the disputes and differences arising out of "Master Services Agreement"

dated 28th June, 2018. (Exhibit "A" to the Application).

2. The learned advocate appearing on behalf of Respondent Ganesh Lokhande 1/6 16-CARAP-96-21.doc No.1 raised a preliminary objection to the maintainability of the present Application. He submitted that admittedly, Respondent No.1 is a Small Scale Enterprise registered under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (for short "the said Act") on 11th April, 2014. He submitted that under the said Act, there is a statutory Arbitration contemplated (under Sections 18 read with Section 17 of the said Act). This Arbitration is held by the Micro and Small Enterprises Facilitation Council itself or it may refer the dispute to any Institution and/or Center providing Alternate Dispute Resolution services for Arbitration. He submitted that Respondent No.1 has already approached the said Facilitation Council by filing a reference before it, bearing No. UDYAM-MH-33-0025263/S/00001 on 19 th August, 2021.

In this factual scenario, the learned advocate appearing on behalf of Respondent No.1 submitted that whatever claim the Applicant may have against Respondent No.1, it can agitate the same before the Facilitation Council by filing a counter claim, if required.

3. In support of his submissions, the learned advocate appearing on behalf of Respondent No.1 relied upon a decision of Supreme Court in the case of Silpi Industries Etc. V/s. Kerala State Road Transport Corporation and Another [2021 SCC Online SC 439], and more particularly paragraphs 21, 22, 23 & 24 thereof, which read thus:

Ganesh Lokhande 2/6

16-CARAP-96-21.doc "21. It is also further to be noted that if we do not allow the counter-

claim made by the buyer in the proceedings arising out of claims made by the seller, it may lead to parallel proceedings before the various fora. On one hand, in view of beneficial legislation, seller may approach the Facilitation Council for claims, in the event of failure of payment by the buyer under provisions of 2006 Act, at the same time, if there is no separate agreement between the parties for any arbitration in a given case, buyer may approach the civil court for making claims against the seller, or else if there is an agreement between the parties for arbitration in the event of dispute between the parties, parties may seek appointment of arbitrator. At the same time if the seller is covered by definition under micro, small and medium enterprises, seller may approach the Facilitation Council for making claims under the provisions of Micro, Small and Medium Enterprise Development Act, 2006. In such event, it may result in conflicting findings, by various forums.

22. In second set of cases it is clear that when the seller approached the Facilitation Council making certain claims against the buyer, buyer after his appearance, has approached the High Court under Section 11(6) of the 1996 Act for appointment of arbitrator on the ground that there is an agreement between the parties for arbitration. Though it was pleaded before the High Court by the appellant that it has already approached the Facilitation Council and proceedings are pending, the respondent as well contest the proceedings and also lay its counter-claim, the High Court has rejected such plea on the ground that the 2006 Act primarily deals with the claims of the seller only. The High Court has held that as the buyer cannot make counter-claim, the proceedings cannot be proceeded with before the Council under 2006 Act and accordingly ordered by appointing second arbitrator.

23. The obligations of the buyer to make payment, and award of interest at three times of the bank rate notified by Reserve Bank in the event of delay by the buyer and the mechanism for recovery and reference to Micro and Small Enterprises Facilitation Council and further remedies under the 2006 Act for the party aggrieved by the awards, are covered by Chapter V of the 2006 Act. The provisions of Sections 15 to 23 of the Act are given overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. From the Statement of Objects and Reasons also it is clear that it is a beneficial legislation to the small, medium and micro sector.

Ganesh Lokhande 3/6

16-CARAP-96-21.doc The Arbitration and Conciliation Act, 1996 is a general law whereas the Micro, Small and Medium Enterprises Development Act, 2006 is a special beneficial legislation which is intended to benefit micro, small and medium enterprises covered by the said Act. The Act of 2006 contemplates a statutory arbitration when conciliation fails. A party which is covered by the provisions of 2006 Act allows a party to apply to the Council constituted under the Act to first conciliate and then arbitrate on the dispute between it and other parties. There are fundamental differences in the settlement mechanism under the 2006 Act and the 1996 Act. The first difference is, the Council constituted under the 2006 Act to undertake mandatory conciliation before the arbitration which is not so under the 1996 Act. Secondly, in the event of failure of conciliation under the 2006 Act, the Council or the centre or institution is identified by it for arbitration. The 1996 Act allows resolution of disputes by agreed forum. The third difference is that, in the event of award in favour of seller and if the same is to be challenged, there is a condition for pre- deposit of 75% of the amount awarded. Such is not the case in the 1996 Act. When such beneficial provisions are there in the special enactment, such benefits cannot be denied on the ground that counter-claim is not maintainable before the Council. In any case, whenever buyer wish to avoid the jurisdiction of the Council, the buyer can do on the spacious plea of counter-claim, without responding to the claims of the seller. When the provisions of Sections 15 to 23 are given overriding effect under Section 24 of the Act and further the 2006 Act is a beneficial legislation, we are of the view that even the buyer, if any claim is there, can very well subject to the jurisdiction before the Council and make its claim/ counter claim as otherwise it will defeat the very objects of the Act which is a beneficial legislation to micro, small and medium enterprises. Even in cases where there is no agreement for resolution of disputes by way of arbitration, if the seller is a party covered by Micro, Small and Medium Enterprises Development Act, 2006, if such party approaches the Council for resolution of dispute, other party may approach the civil court or any other forum making claims on the same issue.If two parallel proceedings are allowed, it may result in conflicting findings. At this stage, it is relevant to notice the judgment of this Court in the case of Edukanti Kistamma (Dead) through LRs. v. S. Venkatareddy (Dead) through LRs. & Ors.4 where this Court has held that a special Statute would be preferred over general one where it is beneficial one. It was explained that the purport and object of the Act Ganesh Lokhande 4/6 16-CARAP-96-21.doc must be given its full effect by applying the principles of purposive construction. Thus, it is clear that out of the two legislations, the provisions of MSMED Act will prevail, especially when it has overriding provision under Section 24 thereof. Thus, we hold that MSMED Act, being a special Statute, will have an overriding effect vis-à-vis Arbitration and Conciliation Act, 1996, which is a general Act. Even if there is an agreement between the parties for resolution of disputes by arbitration, if a seller is covered by Micro, Small and Medium Enterprises Development Act, 2006, the seller can certainly approach the competent authority to make its claim. If any agreement between the parties is there, same is to be ignored in view of the statutory obligations and mechanism provided under the 2006 Act. Further, apart from the provision under Section 23(2A) of the 1996 Act, it is to be noticed that if counter-claim is not permitted, buyer can get over the legal obligation of compound interest at 3 times of the bank rate and the "75% pre- deposit" contemplated under Sections 16 and 19 of the MSMED Act.

24. For the aforesaid reasons and on a harmonious construction of Section 18(3) of the 2006 Act and Section 7(1) and Section 23 (2A) of the 1996 Act, we are of the view that counter-claim is maintainable before the statutory authorities under MSMED Act."

4. Considering the aforesaid situation, and after perusing the Supreme Court Judgment, the learned advocate appearing on behalf of the Applicant stated that the Applicant would like to withdraw the above Application with liberty to file its claim/counter claim before the Facilitation Council in case No. UDYAM-MH-33-0025263/S/00001 102 dated 19th August, 2021.

5. In these circumstances, the Arbitration Application is dismissed as withdrawn with liberty as prayed.

Ganesh Lokhande 5/6

16-CARAP-96-21.doc

6. It is needless to clarify that all contentions of all parties are expressly kept open to be agitated before the Facilitation Council.

7. All parties to act on an authenticated copy of this order digitally signed by the Personal Assistant /Private Secretary/Associate of this Court.

(B. P. COLABAWALLA, J.) Ganesh Lokhande 6/6

Unlock Advanced Research with PRISMAI

Bombay High Court