Delhi High Court - Orders
Glimpse Electronics Private Limited vs Vector Project India Private Limited & ... on 23 July, 2020
Author: Najmi Waziri
Bench: Najmi Waziri
$~9
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO 138/2020
GLIMPSE ELECTRONICS PRIVATE LIMITED .....Appellant
Through: Mr. Ashish Dawar, Advocate.
versus
VECTOR PROJECT INDIA PRIVATE LIMITED & ANR.
..... Respondents
Through: Mr. Prashant Kumar, Advocate for R-
2.
CORAM:
HON'BLE MR. JUSTICE NAJMI WAZIRI
ORDER
% 23.07.2020
1. The hearing was conducted through video conferencing. CM APPL. 14605/2020 (exemption)
2. Allowed, subject to all just exceptions.
3. The application stands disposed-off. CM APPL. 14606/2020 (exemption Court Fees)
4. Exemption allowed, subject to the condition that the appellant will file the duly sworn/attested affidavit and the requisite Court fee within 72 hours from the date of resumption of the regular functioning of this Court.
5. The application stands disposed-off.
FAO 138/20206. Issue notice.
7. The learned counsel named above accepts notice on behalf of respondent no. 2.
8. Notice be issued to respondent no. 1 through SMS, WhatsApp, E-mail and such other electronic modes, as may be viable, through counsel as well returnable before the next date.
9. The petitioner is aggrieved by the order of the learned Commercial Court, dismissing its plea for recognition jurisdiction of Delhi Courts for arbitration and for grant of interim relief. It is the appellant's case that it, being an MSME, is entitled to the special benefits and pretention under The Micro, Small and Medium Enterprises Development Act, 2006 ('MSMED Act'), in particular under section 18 (4), which reads as under:
"....
18. Reference to Micro and Small Enterprises Facilitation Council --
....
(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.
..."
10.The appellant states that it has applied to the Micro & Small Enterprises Facilitation Council (MSEFC) for arbitration proceedings but the said Council has not responded thus far. It contends that nevertheless, once having invoked the provisions of the MSMED Act, it would be entitled to the protection to small enterprises under the said Act; that the moment an application is made, the jurisdiction of courts would be of the place where the supplier is located. The appellant/supplier is located in Delhi. Therefore, it asserts the jurisdiction of courts in Delhi and not in Mumbai, as was agreed between the parties. It says so because the said arbitral clause refers to the Arbitration and Conciliation Act, 1996, whereas if one of the parties is an MSME, then the MSMED Act, 2006, would override the provisions of the Arbitration and Conciliation Act, 1996, as has been held by this Court in Bharat Heavy Electricals Limited vs. The Micro and Small Enterprises Facilitations Centre and Ors., W.P.(C) 10886/2016, decided on 18.09.2017. The said judgment held, inter alia, as under:
"....
6. Mr. Siddharth Dutta, learned counsel appearing for MSEFC countered the aforesaid submissions and relied on the decision of the Punjab & Haryana High Court in Welspun Corp. Ltd. v. The Micro and Small, Medium Enterprises Facilitation Council, Punjab and others : CWP No. 23016/2011 decided on 13.12.2011, whereby the single Judge of the Punjab and Haryana High Court had taken a view contrary to that of the Bombay High Court in M/s. Steel Authority of India v. The Micro, Small Enterprise Facilitation Council (supra). He also relied on the decision of the Madras High Court in M/s. Refex Energy Limited v. Union of India and Another : MANU/TN/1198/2016 : AIR 2016 Mad 139.
7. Mr. Vikram Nandrajog, learned counsel appearing for DRIPLEX supported the contentions advanced on behalf of MSEFC. He further contended that there was a clear conflict between the provisions of Section 18(3) of the Act and the arbitration agreement between BHEL and DRIPLEX (Clause 30 of the GCC) and, therefore, the provisions of the Act would necessarily prevail. He relied on the decision of the Division Bench of Allahabad High Court in BHEL v. State of U.P. and Others : W.P. (C) 11535/2014 decided on 24.02.2014; the decision of the Punjab and Haryana High Court in The Chief Administrator Officer, COFMOW v. MSEFC of Haryana & Ors.:
CWP 277/2015 decided on 09.01.2015; the decision of the Calcutta High Court in NPCC Limited and another v. West Bengal State MSEFC & Ors.: GA No. 304/2017 W.P. 294/2016 decided on 16.02.2017; and the decision of a coordinate bench of this Court in GE T & D India Ltd. v. Reliable Engineering Projects and Marketing : OMP (Comm.) No. 76/2016 decided on 15.02.2017, in support of his aforesaid contention. He also referred to the decisions of the Supreme Court in Fair Air Engineers Pvt. Ltd. & Anr. v. N.K. Modi :
MANU/SC/0141/1997 : (1996) 6 SCC 385 and National Seeds Corporation Ltd. v. M. Madhusudhan Reddy & Anr. : MANU/SC/0038/2012 : (2012) 2 SCC 506 and on the strength of the said decisions contended that the Act being a Special Act would override the provisions of Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act').
8. Mr. Nandrajog also contended that BHEL, in its reply filed before MSEFC, had not raised any objection as to jurisdiction of MSEFC and, therefore, was estopped from raising such objections at this stage. He referred to paragraph 3 of the replies filed on behalf of BHEL wherein BHEL had reserved its rights to urge further grounds in case the matter was referred to arbitration under the Act.
9. At the outset, it is relevant to observe that the Act was enacted with the object of facilitating the promotion, development and enhancing the competitiveness of small and medium enterprises.
Chapter V of the said Act (funiculus of sections 15 to
24) contains provisions to address the issue of delayed payment to Micro and Small Enterprises. Section 15 of the Act mandates that where any supplier supplies any goods or renders any services to any buyer, the buyer would make the payment for the same on or before the date agreed, which in any case could not exceed 45 days from the date of acceptance/deemed acceptance. Section 16 of the Act provides for payment of interest. Section 17 of the Act mandates that the buyer would be liable to pay the amount for the goods supplied or services rendered along with interest as provided under Section 16 of the Act.
10. Section 18(1) of the Act contains a non obstante clause and enables any party to a dispute to make a reference to the Micro and Small Enterprises Facilitation Council (MSEFC). Section 18 of the Act is relevant and is set out below:-
"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 (26 of 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 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 subsection (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."
.....
27. This court, respectfully, is unable to concur with the view of the Bombay High Court in M/s. Steel Authority of India v. The Micro, Small Enterprise Facilitation Council (supra). In that case, the Court had reasoned that Section 24 of the Act, which was enacted to give an overriding effect to provisions of Section 15 to 23 of the Act would override only such provisions which were inconsistent with Section 15 to 23 of the Act. And, since the Court was of the view that there was no inconsistency between the provisions of Section 18 (3) of the Act and the agreement between the parties to refer the disputes to arbitration under the 'A&C Act', it held that the arbitration agreement between the parties could not be rendered ineffective.
28. This Court - for the reasons as stated hereinbefore - is unable to subscribe to the view that there is no inconsistency between the arbitration agreement and section 18(3) of the Act; Section 18(3) contemplates only an institutional arbitration and not an ad hoc arbitration. In the present case, the provision that only BHEL would appoint the arbitrator, plainly, runs contrary to the mechanism under section 18(3) of the Act. Further, in terms of Section 19 of the Act, the award rendered pursuant to an arbitration under Section 18(3) of the Act cannot be assailed by the party (other than the supplier), without depositing seventy-five percent of the amount awarded. Concededly, Section 19 would be inapplicable to an award, which is rendered pursuant to an arbitration that is not conducted in terms of Section 18(3) of the Act.
....
31. It is apparent from the above that BHEL had proceeded on the basis that if the conciliation proceedings failed, the disputes would be referred to arbitration under the Act and, thus, they cannot be permitted to assail the orders passed by MSEFC under Section 18(3) of the Act. It was not BHEL's case, as is apparent from its replies filed before MSRFC, that reference to arbitration would necessarily have to be as per the agreement between the parties and not under the Act. Thus, they cannot be permitted to agitate this issue in these proceedings. ...."
11.The learned counsel for respondent no. 2 submits that the amount of Rs.1,73,76,000/- is lying with the respondent Bank in the name of respondent no. 1. Of this, the appellant claims an amount of Rs.1,20,45,603/-. However, Rs.85,93,325/- of the Rs. 1,73,76,000/-, is already the subject matter of injunction in another case titled Harcomp Airflex Pvt. Ltd. vs. Vector Project (I) Pvt. Ltd. & Anr., in proceedings pending before the Saket Court, New Delhi. In effect, only about Rs. 87,83,000/- lacs remains.
12.In view of the above, the remaining amount of Rs.87,83,000/- be not disbursed to respondent no.1 or any other party, till the next date of hearing.
13.The learned counsel for respondent no.2 submits that the said monies are lying in a Current Account and not fetching any interest, therefore it would be worthwhile to put the monies in an interest-bearing FDR. The suggestion is prudent and is accepted. Let the entire aforesaid amount be kept in an interest-bearing FDR, so that the interests of the parties are secure.
14.List on 05.08.2020.
15.The order be uploaded on the website forthwith. Copy of the order be also forwarded to the counsels through email.
NAJMI WAZIRI, J JULY 23, 2020 AB