Delhi High Court - Orders
Nbcc (India) Ltd vs Micro And Small Enterprises ... on 16 March, 2023
Author: Prathiba M. Singh
Bench: Prathiba M. Singh
$~24
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 16942/2022, CM APPL. 53675/2022
NBCC (INDIA) LTD. ..... Petitioner
Through: Mr. Vikas Mishra, Ms. Prakriti Joshi
& Mr. Krishna Dev Yadav Advs.
(8920738666)
versus
MICRO AND SMALL ENTERPRISES FACILITATION
COUNCIL (SOUTH-EAST), GOVERNMENT OF NCT
OF DELHI & ANR. ..... Respondents
Through: Mr. Avishkar Singhvi, Mr. Naved
Ahmed and Mr. Vivek Kumar,
Advs. (8586915499) for MSEFC.
` Ms. Krishna Parkhani, Adv. for R-2
(7709872128)
CORAM:
JUSTICE PRATHIBA M. SINGH
ORDER
% 16.03.2023
1. This hearing has been done through hybrid mode.
2. The Petitioner - NBCC (India) Ltd. (NBCC) has filed the present petition challenging the impugned reference order dated 29th April, 2022.
3. In the present case, certain disputes arose between NBCC and Respondent No.2 - Promark Safety India Pvt. Ltd. (hereinafter, "Promark").
4. By letter of award dated 28th August, 2017, Promark was awarded a contract for carrying out miscellaneous interior works and supply of furniture at the NIA headquarters, office building at CGO Complex, Delhi. In respect of this letter of award, an invoice was raised by Promark on 29th June, 2018, which according to Promark has not been paid by NBCC.
5. On 1st July, 2019, Promark obtained its registration under the Micro, W.P.(C) 16942/2022 Page 1 of 5 Signature Not Verified Digitally Signed By:DHIRENDER KUMAR Signing Date:18.03.2023 12:02:22 Small and Medium Enterprises Development Act, 2006 (MSME Act). A claim was filed by Promark on 4th September, 2019 in respect of which the impugned reference was made by the MSEFC. It is admitted by both ld. Counsel for the parties that the registration of Promark under the MSME Act was subsequent to the conclusion and completion of the work itself.
6. In the judgements of M/s Shilpi Industries vs. Kerala State Road Transport Corporation, (2021 SCC Online SC 439) and Gujarat State Civil Supplies Corporation ltd. v. Mahakali Foods Pvt. Ltd. (unit 2) & Anr. (2022 SCC Online SC 1492) the Supreme Court has held as under:
"M/s Shilpi Industries vs. Kerala State Road Transport Corporation, (2021 SCC Online SC 439) "26. Though the appellant claims the benefit of provisions under MSMED Act, on the ground that the appellant was also supplying as on the date of making the claim, as provided under Section 8 of the MSMED Act, but same is not based on any acceptable material. The appellant, in support of its case placed reliance on a judgment of the Delhi High Court in the case of GE T&D India Ltd. v. Reliable Engineering Projects and Marketing , but the said case is clearly distinguishable on facts as much as in the said case, the supplies continued even after registration of entity under Section 8 of the Act. In the present case, undisputed position is that the supplies were concluded prior to registration of supplier. The said judgment of Delhi High Court relied on by the appellant also would not render any assistance in support of the case of the appellant. In our view, to seek the benefit of provisions under MSMED Act, the seller should have registered under the provisions of the Act, as on the date of entering into the contract. In any event, for the supplies pursuant to the contract made before the registration of the unit under provisions of the MSMED Act, no benefit can be sought by such entity, as contemplated under MSMED Act. While interpreting the provisions of Interest on Delayed Payments to Small Scale and Ancillary W.P.(C) 16942/2022 Page 2 of 5 Signature Not Verified Digitally Signed By:DHIRENDER KUMAR Signing Date:18.03.2023 12:02:22 Industrial Undertakings Act, 1993, this Court, in the judgment in the case of Shanti Conductors Pvt. Ltd. & Anr. etc. v. Assam State Electricity Board & Ors. etc. has held that date of supply of goods/services can be taken as the relevant date, as opposed to date on which contract for supply was entered, for applicability of the aforesaid Act. Even applying the said ratio also, the appellant is not entitled to seek the benefit of the Act. There is no acceptable material to show that, supply of goods has taken place or any services were rendered, subsequent to registration of appellant as the unit under MSMED Act, 2006. By taking recourse to filing memorandum under sub-section (1) of Section 8 of the Act, subsequent to entering into contract and supply of goods and services, one cannot assume the legal status of being classified under MSMED Act, 2006, as an enterprise, to claim the benefit retrospectively from the date on which appellant entered into contract with the respondent. The appellant cannot become micro or small enterprise or supplier, to claim the benefits within the meaning of MSMED Act 2006, by submitting a memorandum to obtain registration subsequent to entering into the contract and supply of goods and services. If any registration is obtained, same will be prospective and applies for supply of goods and services subsequent to registration but cannot operate retrospectively. Any other interpretation of the provision would lead to absurdity and confer unwarranted benefit in favour of a party not intended by legislation.
Gujarat State Civil Supplies Corporation ltd. v. Mahakali Foods Pvt. Ltd. (unit 2) & Anr. (2022 SCC Online SC 1492) "33. Following the above-stated ratio, it is held that a party who was not the "supplier" as per Section 2 (n) of the MSMED Act, 2006 on the date of entering into the contract, could not seek any benefit as a supplier under the MSMED Act, 2006. A party cannot become a micro or small enterprise or a supplier to claim the benefit under the MSMED Act, 2006 by submitting a memorandum to obtain registration subsequent to entering into the W.P.(C) 16942/2022 Page 3 of 5 Signature Not Verified Digitally Signed By:DHIRENDER KUMAR Signing Date:18.03.2023 12:02:22 contract and supply of goods or rendering services. If any registration, is obtained subsequently, the same would have the effect prospectively and would apply for the supply of goods and rendering services subsequent to the registration. The same cannot operate retrospectively.
However, such issue being jurisdictional issue, if raised could also be decided by the Facilitation Council/Institute/Centre acting as an arbitral tribunal under the MSMED Act, 2006.
34. The upshot of the above is that:
(i) Chapter-V of the MSMED Act, 2006 would override the provisions of the Arbitration Act, 1996.
(ii) No party to a dispute with regard to any amount due under Section 17 of the MSMED Act, 2006 would be precluded from making a reference to the Micro and Small Enterprises Facilitation Council, though an independent arbitration agreement exists between the parties.
(iii) The Facilitation Council, which had initiated the Conciliation proceedings under Section 18(2) of the MSMED Act, 2006 would be entitled to act as an arbitrator despite the bar contained in Section 80 of the Arbitration Act.
(iv) The proceedings before the Facilitation Council/institute/centre acting as an arbitrator/arbitration tribunal under Section 18(3) of MSMED Act, 2006 would be governed by the Arbitration Act, 1996.
(v) The Facilitation Council/institute/centre acting as an arbitral tribunal by virtue of Section 18(3) of the MSMED Act, 2006 would be competent to rule on its own jurisdiction as also the other issues in view of Section 16 of the Arbitration Act, 1996.
(vi) A party who was not the 'supplier' as per the definition contained in Section 2(n) of the MSMED Act, 2006 on the date of entering into contract cannot seek any benefit as the 'supplier' under the MSMED Act, 2006. If any registration is obtained subsequently the same would have an effect prospectively and would apply to the supply W.P.(C) 16942/2022 Page 4 of 5 Signature Not Verified Digitally Signed By:DHIRENDER KUMAR Signing Date:18.03.2023 12:02:22 of goods and rendering services subsequent to the registration."
7. In view of above two judgments, it is clear that if the registration under the MSME Act, is subsequent to the completion of the works, the MSME Act would not be applicable.
8. Accordingly, the impugned reference order dated 29th April, 2022 is quashed.
9. Promark is however permitted to avail of its remedies in accordance with law.
10. If it chooses to avail of its remedies within two weeks, the period from 4th September, 2019 till 31st March, 2023 shall stand excluded for the purposes of calculation of limitation and the benefit of Section 14 of the Limitation Act, 1963 shall be given.
11. The fee paid by Promark to DIAC shall also be refunded to Promark after deducting administrative charges, if any.
12. With these observations, the present petition, along with all pending applications, are disposed of.
PRATHIBA M. SINGH, J.
MARCH 16, 2023 dj/kt W.P.(C) 16942/2022 Page 5 of 5 Signature Not Verified Digitally Signed By:DHIRENDER KUMAR Signing Date:18.03.2023 12:02:22