Calcutta High Court
Dhananjai Lifestyle Limited vs Sanvie Retail Private Limited on 20 May, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISON
Before:
The Hon'ble Justice Shampa Sarkar
AP-COM/980/2024
Dhananjai Lifestyle Limited
vs.
Sanvie Retail Private Limited
For the Petitioner : Mr. Jishnu Saha, Sr. Adv.
Mr. Aniruddha Mitra, Sr. Adv.
Mr. Debraj Sahu, Adv.
Mr. Hareram Singh, Adv.
Ms. Antara Biswas, Adv.
Mr. Bhaskar Dwivedi, Adv.
For the Respondent : Mr. Rishabh Karnani, Adv.
Mr. Anurag Bagaria, Adv.
Hearing concluded on : 30.04.2025
Judgment on : 20.05.2025
Shampa Sarkar, J.:-
1. This is an application under Section 9 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the A&C Act).
2. The facts run by the petitioner were that the petitioner was engaged in
the business of textiles and manufacture of apparels. The petitioner was a
registered manufacturing enterprise under the provisions of the Micro,
Small and Medium Enterprise Development Act, 2006 (in short MSME Act).
The respondent approached the petitioner through its directors for
2
manufacture of apparels and clothing of various kinds and for supply
thereof.
3. The parties allegedly entered into an oral agreement. The
understanding was that the respondent would issue purchase orders to the
petitioner. On the basis of the purchase orders, the petitioner would
manufacture the apparels, supply the same to the respondent and raise
invoices. Several purchase orders were placed from time to time by the
respondent and the petitioner manufactured and supplied the products.
Accordingly, the petitioner raised invoices. The respondents received the
said products without any objection as to the quality or quantity of the
goods sold and delivered. Payments fell due. A miniscule payment was
made, thereby, leaving a sum of Rs.49,00,101/- due and payable as on
October 31, 2024.
4. Despite several requests, the respondent did not liquidate the dues.
The respondent requested the petitioner to settle the claim at a lesser
amount. The parties decided that the dues would be settled at
Rs.51,84,208/-on account of principal along with accrued interest. An
account payee cheque was issued by the respondent. The petitioner
presented the cheque for encashment, but the same was dishonoured and
returned with the endorsement (insufficient funds).
5. Under such circumstances, the petitioner caused an Advocate's notice
to be served upon the respondent on September 23, 2024, under Section
138(b) of the Negotiable Instruments Act, 1881. According to the petitioner,
the principal and interest at a compounding rate came to more than
Rs.1,36,45,143/-. The interest payable was calculated as per the provisions
3
of the MSME Act, i.e., compound interest at three times the bank rate
notified by the Reserve Bank of India.
6. In view of the above, the petitioner apprehended that the respondent
would alienate its assets and properties and remove the money lying in its
bank accounts. It was urged that the dishonour of the cheque, was
indicative of the fact that the respondent was siphoning off the funds. The
rightful claims of the petitioner would be defeated, even if the petitioner was
successful in obtaining an award.
7. It was contended that the respondent was trying to defraud the
petitioner and necessary orders of injunction should be passed by freezing
the bank accounts and by appointing a receiver over the movable and
immovable properties of the respondent. The details of such assets were
mentioned in paragraphs 31 and 32 and Schedules X and Y of the said
application.
8. On the first occasion, this Court had denied the prayer for an ad-
interim order. The Court was not, prima facie, satisfied that Section 9 of the
A & C Act, could not be availed of by the petitioner, in the absence of an
arbitration agreement between the parties. The court opined that only a
party to an arbitration agreement could pray for an order of injunction or for
other interim measures under Section 9 of the Arbitration and Conciliation
Act. The matter came up for final hearing after exchange of affidavits. The
the issue of maintainability of the said application was kept open.
9. Mr. Karnani, learned Advocate for the respondent, raised an objection
with regard to the maintainability of the application. Mr. Karnani submitted
that there was no arbitration agreement between the parties. The
4
conciliation proceeding had been initiated by the petitioner before the MSME
Facilitation Council on November 25, 2024, under the provisions of the
MSME Act. Such fact was brought on record by way of a supplementary
affidavit. During the pendency of such conciliation, the application for
interim protections was filed. Section 18(3) of the MSME Act, provided that
in the event of failure of conciliation under Section 18(2) of the MSME Act,
the Council would either take up the dispute for arbitration or refer the
dispute to any other institution providing alternate dispute resolution
services. The provisions of the A & C Act, were made applicable from that
stage. Section 18(2) of the MSME Act, provided that Sections 65 to 81 of the
Arbitration and Conciliation Act would apply during conciliation. Section 77
of the A&C Act, operated as a bar to initiation of any arbitral or judicial
proceeding during the course of conciliation. The applicable law prohibited a
party from resorting to an arbitral or judicial proceeding during conciliation,
unless such proceeding was necessary for preserving the rights of the said
party.
10. Mr. Karnani urged that, in the absence of an arbitration agreement
between the parties, the petitioner could initiate a judicial proceeding for
preservation of its rights, under very exceptional circumstances. The
expression "shall then apply" in Section 18(3) was incorporated with a
definite purpose. The legislative intent was to make the A & C Act, 1996
applicable, only after conciliation failed and the dispute was either taken up
for arbitration by the Council or referred by the Council to an institute or
centre providing such dispute redressal mechanism. From that stage, the
proceeding would be treated as an arbitration conducted in pursuance of an
5
arbitration agreement within the meaning of sub-section (1) of Section 7 of
the Act. All remedies available under the A & C Act, would then be available
to the petitioner and not before.
11. Mr. Karnani relied on the following decisions:- i) Sri Ram Saha vs.
State of W.B. & ors. reported in (2004) 11 SCC 497, ii) Rananjaya Singh
vs. Baijnath Singh & ors. reported in (1954) 2 SCC 314.
12. Mr. Jishnu Saha, learned Senior Advocate appeared on behalf of the
petitioner and submitted that, as an MSME enterprise, the petitioner was
entitled to all the benefits under the MSME Act. The protections under the A
& C Act, should be read into the MSME Act. An arbitral proceeding had been
contemplated under the MSME Act, as well.
13. Learned Advocate submitted that the legislature had consciously
permitted an MSME enterprise to seek adjudication of the disputes arising
out of goods sold and delivered, by resorting to arbitration, even in the
absence of an arbitration agreement. However, before an arbitration
proceeding could be initiated, conciliation by the Facilitation Council was
mandatory. Upon failure of conciliation, arbitration would follow. The
disputes were then to be arbitrated upon, as if there existed an arbitration
agreement, as per the definition of the said expression under sub-section (1)
of Section 7 of the A & C Act. Mr. Saha urged that Section 9 of the said Act
provided that, a party to an arbitration agreement, either before, during or
after the award had been passed, but before enforcing the award, could avail
of the protection under Section 9 of the said Act. Thus, a harmonious
construction of the provisions of sections 18(2) and 18(3) of the MSME Act,
and Section 9 of the said Act, should lead this court to the inevitable
6
conclusion that, before the arbitration commenced under Section 18 (3) of
the MSME Act, the provision of Section 9 of the A & C Act, could be made
applicable. The petitioner would become a party to an arbitration agreement
as soon as the conciliation failed, but it could seek protection under Section
9 of the A & C Act, even before arbitral proceedings commenced. The
provision of Section 9 of the A & C Act, should be read into the statute along
with Section 77 of the A & C Act, and interim protections during the
pendency of a conciliation under Section 18 (2) of the MSME Act, should be
passed.
14. It was submitted that, the law had conferred a right upon the MSME
enterprises to proceed under the MSME Act, for payment of the sum due
upon goods delivered and sold. Such beneficial legislation, could not limit
the right of an enterprise to seek interim protections during the conciliation
proceeding. The denial of the right to interim protection would defeat the
very purpose of the MSME Act. By the time the conciliation was terminated,
the party who owed the money to the supplier, could easily siphon off the
funds, alienate the assets, or remove the assets from the jurisdiction of the
Council. As a result of which, the situation would become irreversible.
15. Strong reliance was placed on the objects and reasons behind the
promulgation of the MSME Act, 2006, in support of the contention that, the
government and various experts had felt the need for a comprehensive
central enactment to provide an appropriate legal framework for the small,
scale sector and facilitate its growth and development. The concerns of the
entire small and medium sector were sought to be addressed. In order to
facilitate their promotion and development and to enhance the
7
competitiveness amongst the small and medium enterprises, the bill was
introduced in the parliament. In most developed and developing countries,
and in India too, there were serious concerns about the small and medium
enterprise sector. It was urged by Mr. Saha that, when the aims and objects
of the MSME Act were to promote, develop and enhance the competitiveness
of the MSME enterprises, such goal could be achieved only if special
protections were given to the MSMEs. This Court should give a purposive
reading to the provisions of Sections 18(2) and 18(3) and hold that the
legislature had, upon deliberating the grave need to facilitate the promotion
and development of these enterprises, intended to protect, promote and
preserve the enterprises. Interim protections available under Section 9 of the
A & C Act should be available to these enterprises, in view of the legislative
intent. Provisions of Section 77 of the A & C, Act were also applicable to
conciliations under the MSME Act. The section permitted an arbitral
proceeding to be initiated for an urgent need to preserve the rights of a
party, even if a conciliation proceeding was pending. The intention of the
legislature was to provide all kinds of protections to the MSME enterprises,
which were also available under the A & C Act, including an interim
protection during the period of conciliation. The provisions of Sections 18(2),
18(3), and 77 of the A & C Act, should be read in harmony. The object of
Section 77 was clear. It sought to interdict any attempt to derail a
conciliation proceeding, by commencing a judicial or arbitral proceeding.
However, an exception had been carved out, permitting the parties to a
conciliation proceeding to take recourse to an arbitral or judicial proceeding,
for preservation of their rights.
8
16. According to Mr. Saha, once such exception under Section 77 of the
said Act was provided by the legislature, there could not be a total
restriction on the right of the petitioner to seek interim protection under
Section 9 of the said Act. An arbitral proceeding was also a judicial
proceeding. The expression, "shall then apply" as used in Section 18(3), was
not incorporated with the object to deprive a party of its right to seek interim
protection in the course of conciliation. Such resrictive interpretation would
be in complete contradiction to the purpose behind the legislation and in
conflict with the aims and objects thereof. The expression, "shall then apply"
could not be read in a restrictive manner and such interpretation would be
contrary to the very object of MSME Act. In this context, Mr. Saha relied on
the decision of Lalit Kumar Modi vs. Board of Control for Cricket in
India and ors. reported in (2011) 10 SCC 106.
17. Mr. Saha contended that the restrictive meaning, as given by Mr.
Karnani, would result in depriving the petitioner from a protection, merely
because an MSME enterprise had approached the Facilitation Council,
under Section 18, for redressal of its grievances and settlement of dispute.
The law could not be interpreted in a way which would militate against the
jurisprudential doctrine:- "where there was a right, there was a remedy". The
petitioner had approached the Council for redressal of its grievances in
compliance of the law which mandated an attempt at conciliation. That
could not be a ground for keeping the petitioner without the remedy of
interim protections. In this context, Mr. Saha relied on the decision of
Dhannalal vs. Kalawatibai and ors. reported in (2002) 6 SCC 16.
According to Mr. Saha, a welfare legislation must be liberally construed. The
9
decision ofJoginder Pal vs. Naval Kishore Behalreported in (2002) 5 SCC
379, was also relied upon.
18. On the proposition that a purposive interpretation of the statute
should lead this Court to hold that the petitioner was entitled to seek
interim orders under Section 9 of the said Act, reference was made to the
following decisions:-i) National Textile Corporation Limited vs. Sitaram
Mills Limited and ors. reported in (1986) Supp SCC 117; ii) Ramesh
Kymal vs. Siemens Gamesa Renewable Power Private Limited reported
in (2021) 3 SCC 224; and iii) Union of India vs. Rajiv Kumar reported in
(2003) 6 SCC 516.
19. Distinguishing the decisions cited by Mr. Karnani, it was submitted by
Mr. Saha that, this was not a case of casus omissus. The legislature had not
consciously omitted the applicability of Section 9 of the A & C Act or any
analogous section. The legislature never intended to prohibit the parties
undergoing a conciliation process, from availing of interim reliefs and
protections.
20. Upon hearing the learned Advocates for the respective parties, this
Court deems it fit to discuss the relevant laws. Section 9 of the A & C Act
reads as follows:-
"9. Interim measures, etc., by Court.--1 [(1)]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--
(i) for the appointment of a guardian for a minor or person of
unsound mind for the purposes of arbitral proceedings; or
(ii) (ii) for an interim measure of protection in respect of any of the
following matters, namely:--
10
(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 subjectmatter 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.]".
21. The section provides that a party may, before or during an arbitral
proceeding 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 for interim
measures.
22. The crucial expression here is "party". Party has been defined under
Section 2(h) of the A & C Act. The section is quoted below:-
"2. (h) "party" means a party to an arbitration agreement."
23. In the case in hand, there is no arbitration agreement. Thus, the
petitioner is not a party who can take recourse to Section 9 of the A & C Act.
24. Section 18 of the MSME Act is quoted below:-
"18. Reference to Micro and small Enterprises Facilitation
Council.-
11
(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 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."
25. Section 18(1) provides that notwithstanding anything contained in any
other law for the time in force, in case of a dispute with regard to any
amount due under Section 17, a party may make a reference to the MSME
Council. On receipt of the reference, the council shall either conduct
conciliation or seek assistance of an institution providing alternative dispute
redressal services for conducting such conciliation. The expression party,
has not been defined under the MSME Act, but the statute refers to 'buyer'
'supplier', and 'enterprise'. These are the entities recognized by the MSME
Act. Thus, irrespective of the fact whether there was an arbitration
12
agreement or not, the petitioner, being an MSME enterprise and a 'supplier',
could approach the Facilitation Council with the dispute of non-payment of
dues. The law provides that the Council shall either conduct the conciliation
itself, or seek assistance from any institution or centre to conduct such
conciliation. Thus, the process of conciliation is binding as per the legislative
mandate. During such process of conciliation, the provisions of Section 65
to 81 of the said Act have been made applicable. Sections 65 to 81 of the
said Act deal with matters relating to submission of statements to
conciliator, role of conciliator, the laws which would not bind the
conciliators, administrative assistance available to the conciliators,
communication between the conciliator and the parties, disclosure of
information, cooperation of parties with conciliator, suggestions by parties
for settlement of dispute, the settlement agreement to be arrived at upon
conciliation being successful, status and effect of a settlement agreement,
confidentiality, termination of conciliation proceedings, resort to arbitral or
judicial proceeding, costs, deposits, role of conciliator in other proceedings
and admissibility of evidence from other proceedings. Section 77 is quoted
below:
"77. Resort to arbitral or judicial proceedings.--The parties shall not
initiate, during the conciliation proceedings, any arbitral or judicial
proceedings in respect of a dispute that is the subject matter of the
conciliation proceedings except that a party may initiate arbitral or
judicial proceedings where, in his opinion, such proceedings are
necessary for preserving his rights."
26. Section 77 operates as a statutory bar upon the parties who have
submitted to conciliation, from initiating any arbitral or judicial proceeding
in respect of the dispute which was already the subject matter of
13
conciliation. In effect, the said provision creates an embargo upon the
parties who are in the midst of a conciliation, from availing of any further
remedy by way of an arbitral or judicial proceeding. Such prohibition is to
ensure that conflicts do not arise when the conciliation is going on.
However, a very small window has been kept open by providing an
exception. A party may refer the dispute to arbitration or initiate a judicial
proceeding, if in its opinion, such proceeding is necessary for preserving its
rights. In very exceptional cases, such remedy can be resorted to. Thus, the
legislative intent is to encourage alternative, non-adversarial resolution of
disputes between the parties. The petitioner has already taken steps under
the Negotiable Instruments Act, by issuing a notice after the cheque was
dishonoured.
27. In my opinion, an arbitral proceeding can be initiated under Section
77, only if there is a subsisting arbitration clause. The petitioner is not
without any remedy. Section 77 also provides that judicial proceedings can
be initiated. Black's law dictionary (Ninth Edition) defines judicial
proceedings as follows :-
"judicial proceeding- Any court proceeding; any proceeding initiated
to procure an order or decree, whether in law or in equity."
The intention of the legislature is very clear from a reading of the provisions
of Sections 18(2) and 18(3). Section 18(3) of the MSME Act, specifically
provides the stage from which all the provisions of the Arbitration and
Conciliation Act, is applicable. The petitioner and respondent become
signatories to an arbitration agreement from that stage. Under the MSME
Act, resolution of a dispute by arbitration has been incorporated by statute.
14
The definition of party under the A & C Act, will include the petitioner, from
the stage mentioned under Section 18(3) of the MSME Act. Here, the
intention of the legislature is paramount and significant. Until conciliation
fails, the settlement of dispute by arbitration cannot be resorted to.
Whereas, arbitration contemplated under the A & C Act, is by agreement
between the parties. Such parties to an arbitration agreement can pray for
interim measures under Section 9 of the A & C Act. In this context, upon
termination of the conciliation, arbitration shall commence and the
proceeding shall be governed by the provisions of the A & C Act, 1996 as if
there is an arbitration agreement between the parties as contemplated
under the A & C Act. Thereafter, Section 9 of the said Act becomes
applicable. Only upon the council recording termination of conciliation and
upon reference of the dispute to arbitration unto itself or to an institution or
centre, the A & C Act, can be applied. There is no ambiguity in the legislative
intent. There is no vacuum left for the court to fill up, by giving a purposive
interpretation and making Section 9 of the A & C Act applicable at the stage
of conciliation. This is not a case where right to interim protection at the
stage of conciliation exists under the MSME Act, but the interpretation
thereof needs a clarification by the Court. Only if a literal interpretation
leads to an absurd consequence, such interpretation should be avoided and
a purposive interpretation should be supplied. A proceeding under Section
18 of the MSME Act, can be initiated notwithstanding anything contained in
any other law for the time being in force. Thus, the petitioner can take
recourse to a judicial proceeding and pray for an injunction under
exceptional circumstances and still approach the Council under Section 18
15
of the MSME Act. Section 77 of the A & C Act, puts a limit to such right to
approach the court. Section 77 of the A & C Act, ensures that while
conciliation is ongoing, parties do not engage in adversarial litigation and
the spirit of good faith and co-operation is maintained for a successful
settlement. The said provision is in the nature of a statutory stay on
litigation and has been consciously made applicable to conciliation under
the MSME Act.
28. The A & C Act, is applicable only when the conciliation is not
successful and stands terminated. If a party refers a dispute to the council,
compulsory conciliation has to be initiated at first. Upon failure of such
conciliation and upon termination thereof, arbitration shall commence and
all the provisions of the A & C Act, become applicable. Thereafter, the
petitioner can seek all reliefs permitted by the A & C Act.
29. The decisions relied upon by Mr. Saha are not squarely applicable to
the case in hand, insofar as, the legal propositions laid down therein, are
concerned. The decision in Lalit Kumar Modi (supra), was on the
proposition when, "shall" must be read as "may". If the word "shall" is used
in a statute, generally it is taken to be mandatory, but that does not
necessarily mean that in every case, it shall have the same effect. In the
given context, if the expression 'shall then apply' is read as "may then
apply", the provision of Section 18(3) is rendered meaningless. Under
Section 18 (3) of the MSME Act, only if the dispute goes to arbitration, upon
failure of conciliation, the A & C Act, has been made applicable. Similarly,
the expression 'shall' in the opening sentence of section 18(2) cannot be
interpreted as 'may'. Such interpretation will be contrary to the legislative
16
intent. Conciliation is mandated by statute and the statute specifically
provides the stage from which arbitration commences.
30. Dhannalal (supra), is a decision on judicial activism and
interpretation of ambiguous statutes. It was held that the courts must be
guided by sound logic, rational thinking, common sense and the urge to act
for the public good. In case of ambiguity regarding a forum selection, the
courts must identify it. Procedural law could not be allowed to betray
substantive law, by subordinating it to unnecessary complexity and
technicalities. This judgment was cited, in support of the contention that,
when a right was available to the petitioner to seek redressal of the dispute
before the Council, the remedy of interim protections must be read into the
provisions of Sections 18(2) and 18(3) of the MSMSE Act. The right to file an
application under Section 9 of the said Act, should be upheld by the court,
upon giving a purposive interpretation. The Court does not agree. The
petitioner becomes a party to an arbitration proceeding once the conciliation
fails, termination is recorded and arbitration commences, but not before
that. The petitioner is not remediless. The decision is not applicable for the
reason that, the provisions of Sections 18(2) and 18(3) are not ambiguous.
Applicability of Section 77 of the said Act in the conciliation proceeding is
provided by the statute. Section 77 of the said Act prohibits initiation of
either arbitral or judicial proceedings, except for preservation of the right of
a party during the conciliation process. The petitioner has a remedy before
a court of law, under exceptional circumstances. Joginder Pal (supra), has
been referred, in order to substantiate that rules of construction must agree
with justice and reason. In determining the general object of the legislation
17
or the meaning of its language in any particular provision, the obvious
interpretation would be the one which is convenient, reasonable, justifiable
and legally sound.
31. This Court has already discussed in the foregoing paragraphs why the
interpretation provided by Mr. Saha cannot be treated to be legally sound.
The rules of construction laid down in the cited decisions will be applicable
when the natural and ordinary meaning of the piece of legislation i.e., MSME
Act, results in a vacuum. The decision also laid down that, a statute must
be read with its true content and colour, in its widest sense and the
preamble must also be read into the statute.
32. The preamble of the MSME Act provides as follows:-
"An Act to provide for facilitating the promotion and development and
enhancing the competitiveness of micro, small and medium enterprises
and for matters connected therewith or incidental thereto.
WHEREAs a declaration as to expediency of control of certain
industries by the Union was made under section 2 of the Industries
(Development and Regulation)
Act, 1951;
AND WHEREAs it is expedient to provide for facilitating the promotion
and development and enhancing the competitiveness of micro, small
and medium enterprises and for matters connected therewith or
incidental thereto;
Be it enacted by Parliament in the Fifty-seventh Year of the Republic
of India as follows:--"
33. There is no quarrel with the proposition that the statute is a beneficial
legislation, which was enacted to provide a legal framework for promotion,
development and enhancement of competitiveness of MSME enterprises. The
preamble, read in the context of Section 18, persuades this Court to hold
that the intent of the legislature was to ensure an attempt at settlement by
conciliation. The law makes conciliation compulsory at the first instance.
Only upon failure thereof and recording termination of conciliation,
18
arbitration will follow. Section 77 of the said Act should be read in such
context, to be a bar to initiation of any arbitral or judicial proceeding, so
that the conciliation process is not derailed. Only in very exceptional cases,
a judicial proceeding can be initiated.
34. Thus, the legislature, in order to protect the MSME enterprises from
being entangled in a time consuming, adversarial and expensive dispute
redressal mechanism (Arbitration or Suit), permits a party to refer the
dispute to the council. Once referred, conciliation is mandatory. The object
is to minimise judicial intervention at the stage of conciliation. If this Court
holds that even at the stage of mandatory conciliation, the protections
envisaged under section 9 of A & C Act can be granted by entertaining this
application, it will amount to the Court legislating, by incorporating
equitable principles, which is not the intention of the legislature.
35. Sitaram Mills Limited (supra), Ramesh Kymal (supra) and Rajiv
Kumar (supra) have been cited in support of the contention that Courts
should be slow to infer casus omissus in a statute and the Court could
neither read anything into the statutory provision nor rewrite a provision
which was otherwise plain and unambiguous. It was held that, the intention
of the legislature was of primary importance and attention should be paid to
what the statute said and intended to do. Two rules of construction were
discussed.
36. In the case in hand, I hold that Sections 18(2) and 18(3) of the MSME
Act, has left no ambiguity. The sections can be given their plain meaning.
Here, the legislature did intend to make the provisions of the A & C Act
applicable at the stage of section 18(2) of the MSME Act. It is not a case
19
that the legislature missed out inserting a provision for interim protection as
contemplated under Section 9 of the said Act, although it had intended to do
so. Section 9 of the A & C Act, need not be read into the provisions of
Sections 18(2) and 18(3) of the MSME Act. The exception provided in Section
77 of the said Act, allowing a party to initiate a judicial or arbitral
proceeding under special situations, does not leave the petitioner without a
remedy. The general intention of the legislature was to first explore the
possibility of resolution in a non-adversarial manner, through conciliation,
so that the parties could voluntarily arrive at a settlement with the help of
conciliators.
37. In this case, a plain reading of the statute does not lead to any
ambiguity. The intention of the legislature is crystal clear. A reading of the
provisions of section 18, as has been enacted, does not defeat the purpose
behind such enactment. Similarly, the applicability of the A & C Act, and the
use of the expression "shall then apply" cannot be treated as either
superfluous or redundant. There is a definite purpose behind it. A liberal
approach cannot extend the scope of the statute beyond the legislative
intent.
38. In Sri Ram Saha (supra), the Hon'ble Apex Court held as follows:
"19. It is well-settled principle of interpretation that a statute is to be
interpreted on its plain reading; in the absence of any doubt or
difficulty arising out of such reading of a statute defeating or
frustrating the object and purpose of an enactment, it must be read
and understood by its plain reading. However, in case of any difficulty
or doubt arising in interpreting a provision of an enactment, courts
will interpret such a provision keeping in mind the objects sought to
be achieved and the purpose intended to be served by such a
provision so as to advance the cause for which the enactment is
brought into force. If two interpretations are possible, the one which
promotes or favours the object of the Act and purpose it serves, is to
20
be preferred. At any rate, in the guise of purposive interpretation, the
courts cannot rewrite a statute. A purposive interpretation may permit
a reading of the provision consistent with the purpose and object of
the Act but the courts cannot legislate and enact the provision either
creating or taking away substantial rights by stretching or straining a
piece of legislation.
20. This Court in CST v. Parson Tools and Plants [(1975) 4 SCC 22 :
1975 SCC (Tax) 185] has taken the view that if the legislature did not,
after due application of mind, incorporate a particular provision, it
cannot be imported into it by analogy, observing that: (SCC p. 27,
para 15)
"An enactment being the will of the legislature, the paramount rule of
interpretation, which overrides all others, is that a statute is to be
expounded 'according to the intent of them that made it."
22. Further para 23 of the same judgment reads: (SCC p. 29)
"23. We have said enough and we may say it again that where the
legislature clearly declares its intent in the scheme and language of a
statute, it is the duty of the court to give full effect to the same
without scanning its wisdom or policy, and without engrafting, adding
or implying anything which is not congenial to or consistent with such
expressed intent of the lawgiver;"
23. In Sankar Ram & Co. v. Kasi Naicker [(2003) 11 SCC 699] this
Court in para 7 has stated thus: (SCC pp. 704-05)
"7. It is a cardinal rule of construction that normally no word or
provision should be considered redundant or superfluous in
interpreting the provisions of a statute. In the field of interpretation of
statutes, the courts always presume that the legislature inserted every
part thereof with a purpose and the legislative intention is that every
part of the statute should have effect. It may not be correct to say that
a word or words used in a statute are either unnecessary or without
any purpose to serve, unless there are compelling reasons to say so
looking to the scheme of the statute and having regard to the object
and purpose sought to be achieved by it."
24. Thus, in the light of the legal position explained in various
decisions, the High Court was not right in expanding the scope and
application of Section 4-A so as to apply it to the areas in the State of
West Bengal other than the area specified in three subdivisions of
Darjeeling district. When the intention of the legislature is clear to
confine its application to the limited area, the court could not ignore
it. The High Court was also not right in reading something more in
Sections 4-B and 4-C in regard to the felling of trees in the absence of
any such legislative intention expressed in these provisions. The Court
could not have added something more to these sections."
39. In Shailesh Dhairyawan v. Mohan Balkrishna Lulla, reported in
(2016) 3 SCC 619, the Hon'ble Apex Court held that the principle of
21
"purposive interpretation" or "purposive construction" was based on the
understanding that the Courts were supposed to supply such meaning to
the provisions, which served the "purpose" behind the provision. The
relevant paragraph is quoted below:-
"31. ..The principle of "purposive interpretation" or "purposive
construction" is based on the understanding that the court is
supposed to attach that meaning to the provisions which serve the
"purpose" behind such a provision. The basic approach is to ascertain
what is it designed to accomplish? To put it otherwise, by
interpretative process the court is supposed to realise the goal that
the legal text is designed to realise. As Aharon Barak puts it:
"Purposive interpretation is based on three components: language,
purpose, and discretion. Language shapes the range of semantic
possibilities within which the interpreter acts as a linguist. Once the
interpreter defines the range, he or she chooses the legal meaning of
the text from among the (express or implied) semantic possibilities.
The semantic component thus sets the limits of interpretation by
restricting the interpreter to a legal meaning that the text can bear in
its (public or private) language." [Aharon Barak, Purposive
Interpretation in Law (Princeton University Press, 2005).]
32. Of the aforesaid three components, namely, language, purpose
and discretion "of the court", insofar as purposive component is
concerned, this is the ratio juris, the purpose at the core of the text.
This purpose is the values, goals, interests, policies and aims that the
text is designed to actualise. It is the function that the text is designed
to fulfil.
33. We may also emphasise that the statutory interpretation of a
provision is never static but is always dynamic. Though the literal rule
of interpretation, till some time ago, was treated as the "golden rule",
it is now the doctrine of purposive interpretation which is
predominant, particularly in those cases where literal interpretation
may not serve the purpose or may lead to absurdity. If it brings about
an end which is at variance with the purpose of statute, that cannot
be countenanced. Not only legal process thinkers such as Hart and
Sacks rejected intentionalism as a grand strategy for statutory
interpretation, and in its place they offered purposivism, this principle
is now widely applied by the courts not only in this country but in
many other legal systems as well."
40. In State of U.P. vs. Dr. Vijay Anand Maharaj, reported in AIR 1963
SC 946 the Hon'ble Apex court observed as follows:-
22
"8. .... But it is said, relying upon certain passsages in Maxwell on the
Interpretation of Statutes, at p. 68, and in Crawford on "Statutory
Construction" at p. 492, that it is the duty of the Judge "to make such
construction of a statute as shall suppress the mischief and advance
the remedy", and for that purpose the more extended meaning could
be attributed to the words so as to bring all matters fairly within the
scope of such a statute even though outside the letter, if within its
spirit or reason. But both Maxwell and Crawford administered a
caution in resorting to such a construction. Maxwell says at p. 68 of
his book: "The construction must not, of course, be strained to
include cases plainly omitted from the natural meaning of the words."
Crawford says that a liberal construction does not justify an extension
of the statute's scope beyond the contemplation of the legislature. The
fundamental and elementary rule of construction is that the words
and phrases used by the legislature shall be given their ordinary
meaning and shall be construed according to the rules of grammar.
When a language is plain and unambiguous and admits of only one
meaning, no question of construction of a statute arises, for the Act
speaks for itself. It is a well-recognized rule of construction that the
meaning must be collected from the expressed intention of the
legislature."
41. In New India Assurance Co. Ltd., v. Nusli Neville Wadia & Anr.
reported in (2008) 3 SCC 279, the Hon'ble Apex Court held as follows:-
"51. .....With a view to read the provisions of the Act in a proper and
effective manner, we are of the opinion that literal interpretation, if
given, may give rise to an anomaly or absurdity which must be
avoided. So as to enable a superior court to interpret a statute in a
reasonable manner, the court must place itself in the chair of a
reasonable legislator/author. So done, the rules of purposive
construction have to be resorted to which would require the
construction of the Act in such a manner so as to see that the object
of the Act is fulfilled, which in turn would lead the beneficiary under
the statutory scheme to fulfil its constitutional obligations as held by
the Court inter alia in Ashoka Marketing Ltd. [(1990) 4 SCC 406]".
42. In the decision of Nathi Devi v. Radha Devi Gupta, reported in
(2005) 2 SCC 271, the Hon'ble Apex Court held as follows:-
"13. The interpretative function of the court is to discover the true
legislative intent. It is trite that in interpreting a statute the court
must, if the words are clear, plain, unambiguous and reasonably
susceptible to only one meaning, give to the words that meaning,
irrespective of the consequences. Those words must be expounded in
their natural and ordinary sense. When the language is plain and
23
unambiguous and admits of only one meaning, no question of
construction of statute arises, for the Act speaks for itself. Courts are
not concerned with the policy involved or that the results are injurious
or otherwise, which may follow from giving effect to the language used.
If the words used are capable of one construction only then it would
not be open to the courts to adopt any other hypothetical construction
on the ground that such construction is more consistent with the
alleged object and policy of the Act. In considering whether there is
ambiguity, the court must look at the statute as a whole and consider
the appropriateness of the meaning in a particular context avoiding
absurdity and inconsistencies or unreasonableness which may render
the statute unconstitutional.
14. It is equally well settled that in interpreting a statute, effort
should be made to give effect to each and every word used by the
legislature. The courts always presume that the legislature inserted
every part thereof for a purpose and the legislative intention is that
every part of the statute should have effect. A construction which
attributes redundancy to the legislature will not be accepted except for
compelling reasons such as obvious drafting errors. (See State of
U.P. v. Dr. Vijay Anand Maharaj [AIR 1963 SC 946 : (1963) 1 SCR 1]
, Rananjaya Singh v. Baijnath Singh [AIR 1954 SC 749 : (1955) 1 SCR
671] , Kanai Lal Sur v. Paramnidhi Sadhukhan [AIR 1957 SC 907 :
1958 SCR 360] , Nyadar Singh v. Union of India [(1988) 4 SCC 170 :
1988 SCC (L&S) 934 : (1988) 8 ATC 226 : AIR 1988 SC 1979] , J.K.
Cotton Spg. and Wvg. Mills Co. Ltd. v. State of U.P. [AIR 1961 SC 1170]
and Ghanshyamdas v. CST [AIR 1964 SC 766 : (1964) 4 SCR 436] .)
15. It is well settled that literal interpretation should be given to a
statute if the same does not lead to an absurdity.
43. In the matter of Urmila Dixit vs Sunil Sharan Dixit & Ors. reported
in 2025 INSC 20, the Hon'ble Apex Court held as follows:-
"9. This Court in K.H. Nazar v. Mathew K. Jacob reported in 2019
INSC 1100, reiterated the above expositions and stated that:
"11. Provisions of a beneficial legislation have to be construed with a
purpose-oriented approach. [Kerala Fishermen's Welfare Fund Board
v. Fancy Food, (1995) 4 SCC 341] The Act should receive a liberal
construction to promote its objects. [Bombay Anand Bhavan
Restaurant v. ESI Corpn., (2009) 9 SCC 61 : (2009) 2 SCC (L&S) 573
and Union of India v. Prabhakaran Vijaya Kumar, (2008) 9 SCC 527 :
(2008) 3 SCC (Cri) 813] Also, literal construction of the provisions of a
beneficial legislation has to be avoided. It is the Court's duty to
discern the intention of the legislature in making the law. Once such
an intention is ascertained, the statute should receive 1 (2021) 6 SCC
512 2 (2020) 14 SCC 126 a purposeful or functional interpretation
[Bharat Singh v. New Delhi Tuberculosis Centre, (1986) 2 SCC 614 :
1986 SCC (L&S) 335] ...
24
44. In the matter of Independent Sugar Corporation Ltd. vs Girish
Sriram Juneja & Ors. reported in 2025 INSC 124, the Hon'ble Apex Court
held as follows:-
"41. In Corp of the City of Victoria vs. Bishop of Vancouver
Island, reported in (1921) AC 2 384, the celebrated judgment, Lord
Atkinson stated: "In the construction of statutes, their words must be
interpreted in their ordinary grammatical sense, unless there be
something in the context, or in the object of the statute in which they
occur, or in the circumstances in which they are used, to show that
they were used in a special sense different from their ordinary
grammatical sense. The literal interpretation leads to hardship,
inconsistency or obstruct the accomplishment of the object of the
statute steps in. In other words, the doctrine of purposive
interpretation is taken recourse to for the purpose of giving full effect
to the statutory provisions and the Courts must state what meaning
the statute should bear rather than rendering the statute in nullity. A
statute must be construed in such a manner as to make it workable.
42. In a few cases, the Courts have declined to be bound by the letter
when the letter frustrates the patent purposes of the statute. Ld.
Justice J.C. Shah in New India Sugar Mills Ltd. v. Commissioner of
Sales Tax, Bihar,7 noted that "it is a recognized rule of interpretation
of statutes that the expressions used therein should ordinarily be
understood in a sense in which they best harmonise with the object of
the statute, and which effectuate the object of the Legislature". The
limitation of the purposive role of construction is that the
interpretation shall not result in legislation by the Court. Hardship,
inconvenience, injustice, absurdity and anomalous results are avoided
while construing the statute they need be. 43. Lord Shaw in Shannon
Realities Ltd. v. St. Michel (Ville De), 8 notes that "[w]here words of a
statute are clear, they must, of course, be followed but in their
Lordships' opinion, where alternative constructions are equally open
that alternative is to be chosen which will be consistent with the
smooth working of the system which the statute purports to be
regulating; and that alternative is to be rejected which will introduce
uncertainty, friction or confusion into the working of the system".
44. T. L. Venkatarama Aiyyar, J in Tirath Singh vs. Bachittar Singh, 9
stated that "where the language of a statute, in its ordinary meaning
and grammatical construction, leads to a manifest contradiction of the
apparent purpose of the enactment, or to some inconvenience or
absurdity, hardship or injustice, presumably not intended, a
construction may be put upon it which modifies the meaning of the
words, and even the structure of the sentence". The literal and
purposive rules of interpretation, as well as their scope, obligation,
and limitations, are prefaced for further discussion. The right
consideration of issues on hand is achieved by not referring to the
precedents on literal or purposive interpretation. It is axiomatic that
25
the precedents on interpretation are specific to the statute, language
and case. The Court, in a given case before it, goes by the first
principles of the respective tools of interpretation."
45. In the matter of Dr. Jaishri Laxmanrao Patil vs The Chief Minister
& Ors. decided in Civil Appeal No. 3123 of 2020, the Hon'ble Apex Court
laid down the rules of interpretation:-
"8. It is a cardinal principle applicable to all kinds of statutes that you
may not for any reason attach to a statutory provision a meaning
which the words of that provision cannot reasonably bear. If they are
capable of more than one meaning, then you can choose between
these meanings, but beyond that the Court must not go.15 Lord
Parker, CJ observed in R. v. Oakes reported in [1959] 2 Q.B. 350 there
is no ground for reading in words according to what may be 'the
supposed intention of Parliament
***
18. Craies culled out the following principles of interpretation of legislation: -
1. Legislation is always to be understood first in accordance with its plain meaning.
2. Where the plain meaning is in doubt, the Courts will start the process of construction by attempting to discover, from the provisions enacted, to the broad purpose of the legislation.
3. Where a particular reading would advance the purpose identified, and would do no violence to the plain meaning of the provisions enacted, the Courts will be prepared to adopt that reading.
4. Where a particular reading would advance the purpose identified but would strain the plain meaning of the provisions enacted, the result will depend on the context and, in particular, on a balance of the clarity of the purpose identified and the degree of strain on the language.
5. Where the Courts concluded that the underlined purpose of the legislation is insufficiently plain, or cannot be advanced without an unacceptable degree of violence to the language used, they will be obligated, however regretfully in the circumstances of the particular case, to leave to the legislature the task of extending or modifying the legislation.'
46. In this case, what the legislature intended, can be legitimately ascertained from what it had chosen to enact in express words. A construction which furthers the purpose or object of an enactment, is 26 described as purposive construction. A purposive construction of an enactment is one which gives effect to the legislative purpose by (a) following the literal meaning of the enactment where that meaning is in accordance with the legislative purpose or (b) applying a strained meaning where the literal meaning is not in accordance with the legislative purpose. The case in hand, falls under situation (a). The legislature mandates conciliation, only to reduce chances of adversarial litigation amongst the buyer and supplier or service provider. The intention is to protect and promote MSMEs from a prolonged and costly litigation or arbitration. Thus, the provision of Section 9 of the said Act cannot be read into the statute at the stage of conciliation, when the legislature had reserved the applicability of the A & C Act, to a stage when conciliation fails and is terminated.
47. Accordingly, it is held that the application is not maintainable.
48. The application is thus disposed of.
(SHAMPA SARKAR, J.)