Madhya Pradesh High Court
Gannon Dunkerley And Co. Limited ... vs Micro And Small Enterprises ... on 2 September, 2024
Author: Vivek Rusia
Bench: Vivek Rusia
NEUTRAL CITATION NO. 2024:MPHC-IND:25449
-1- WA-478-2024 & WA-477/2024
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE BINOD KUMAR DWIVEDI
ON THE 2nd OF SEPTEMBER, 2024
WRIT APPEAL No. 478 of 2024
GANNON DUNKERLEY AND CO. LIMITED THROUGH
AUTHORIZED SIGNATORY RAMESH MISHRA
Versus
MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL
AND OTHERS
Appearance:
Shri Amit Agrawal, learned Senior Advocate along with Shri
Lokendra Joshi, learned counsel for the appellant.
Shri Manoj Munshi, learned counsel for respondent No.2.
WITH
WRIT APPEAL No. 477 of 2024
GANNON DUNKERLEY AND CO. LIMITED
Versus
MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL
AND OTHERS
Appearance:
Shri Vivek Dalal learned counsel for the appellant.
Shri Manoj Munshi, learned counsel for respondent No.2.
ORDER
Per: Justice Vivek Rusia Since the controversy involved in these cases is identical in Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 06-09-2024 13:52:50 NEUTRAL CITATION NO. 2024:MPHC-IND:25449
-2- WA-478-2024 & WA-477/2024 nature, therefore, with the joint request of the parties, these appeals are finally heard and decided by this common order. For the sake of convenience, facts of Writ Appeal No.478 of 2024 are being taken for disposal of both these writ appeals.
02. Appellant/petitioner has filed this writ appeal challenging the order dated 09.01.2024, whereby the Writ Court has dismissed the Writ Petition No.30511 of 2023.
03. The writ petitioner/appellant is a Public Limited Company registered under the Companies Act engaged in the business of civil construction, mechanical and electrical work in all the major industries, building sector, infrastructure, sector in highways, railways, bridges/flyovers, water treatment etc.
04. The petitioner/appellant was awarded the work of construction of formation, bridges, buildings, two level crossings on existing tracks, supply of ballast along with associated signaling and general electrical works for the 3rd BG Railway Line between Barkheda (excluding) and Budhni (excluding) stations on Bhopal - Itarsi section in Bhopal Division of West Central Railway by Rail Vikas Nigam Limited. The work order for execution of the aforesaid construction was issued on 11.07.2018. Respondent No.2 is also a construction company engaged in the erection of Pre-engineered buildings, civil construction, false ceilings, fireproofing, hot and cold insulation and roads. Respondent No.2, is a registered enterprise under the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as "MSME Act")
05. The petitioner/ appellant awarded a sub-contract to respondent No.2 in relation to the work of Midghat to Choka. The petitioner/appellant issued a letter of intent dated 21.12.2018 to Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 06-09-2024 13:52:50 NEUTRAL CITATION NO. 2024:MPHC-IND:25449
-3- WA-478-2024 & WA-477/2024 respondent No.2 and thereafter, a contract dated 21.12.2018 was executed.
06. Respondent No.2 approached the Facilitation Council established under the MSME Act claiming inter alia sum of Rs.4,30,31,721/- along with interest under the head of non-payment of RA Bills, non-payment of retention money and interest from the petitioner/appellant. The petitioner/appellant appeared before the Facilitation Council objecting to the aforesaid claim on the ground that the contract in question is a work contract which does not clarify the contract for the sale and purchase or supply of goods or supply service, therefore, the provisions of the MSME Act do not attract. Learned Facilitation Council rejected the aforesaid objection and passed an award dated 07.07.2023 in favour of respondent No.2.
05. Being aggrieved by the aforesaid order, the appellant/writ petitioner preferred a writ petition before this Court. Respondent No.2 appeared in the writ petition objecting to the maintainability of the writ petition. Vide order dated 09.01.2024, the Writ Court dismissed the writ petition as not maintainable for want of remedy under Section 19 of the MSME Act read with Section 34 of the Arbitration and Conciliation Act, 1996. Hence, this writ appeal before the Court.
06. Shri Amit Agrawal, learned senior counsel appearing for the appellant has argued at length to satisfy us that the MSME lacks jurisdiction to entertain another claim in respect of the works contract. Shri Agrawal learned senior counsel has pointed out certain conditions of the sub-contract awarded to respondent No.2 according to which no goods were supplied to appellant. Therefore, the petitioner does not come under the definition of a buyer.
07. Shri Agrawal learned senior counsel further submits that in Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 06-09-2024 13:52:50 NEUTRAL CITATION NO. 2024:MPHC-IND:25449
-4- WA-478-2024 & WA-477/2024 similar facts and circumstances High Court of Bombay in the case of Sterling and Wilson Private Limited and another V/s Union of India and others, 2017 SCC OnLine Bom 6829 has set aside the award passed by the MSME. He has also placed reliance on the judgments passed by the Apex Court in the cases of (i) Executive Engineer, Southern Electricity Supply Company of Orissa Limited (Southco) and another V/s Sri Seetaram Rice Mill, (2012) 2 Supreme Court Cases 108 and (ii) Larsen and Toubro Limited and another V/s State of Karnataka and another, (2014) 1 Supreme Court Cases 708 and the judgment passed by the Bombay High Court in case of Jsw Steel Limited V/s Kamlakar V. Salvi and others, 2021 SCC OnLine Bom 3113.
08. So far as the judgment passed in the case of Larsen and Toubro Limited and another (supra) is concerned, that was passed under the provisions of Sales Tax / VAT about the assessment of Financial Year 1995-96, at that time, the GST as well as MSME Act, 2006 were not in force.
09. It is to be seen that Section 17 of the MSME Act specifically provides that 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, therefore, the provisions of the MSME Act apply not only in case of supply of goods, but in case of services rendered by the supplier also. The MSME Act has been engaged with the aim of facilitating, promoting developing and enhancing the competitiveness of the small and medium enterprises. It has been enacted with the intention of ensuring a timely and smooth flow of credit to small and medium enterprises, therefore, wherever the issue comes with respect to recovery of money by the Micro, Small and Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 06-09-2024 13:52:50 NEUTRAL CITATION NO. 2024:MPHC-IND:25449
-5- WA-478-2024 & WA-477/2024 Medium Enterprises in respect of goods supplied or services rendered, the remedy is available under Section 17 of MSME Act.
10. Shri Manoj Munshi, learned counsel appearing for the respondent submits that the petitioner has already challenged the award passed by the Facilitation Council before the Commercial Court by filing an application under Section 19 of MSME Act read with Section 34 of the Arbitration and Conciliation Act, 1996 on 20.06.2024. Shri Amit Agrawal learned senior counsel without disputing this fact submitted that the application has been filed within limitation in order to save from heavy interest being accrued on principal amount.
11. In the case of M/s India Glycols Limited and another Versus Micro and Small Enterprises Facilitation [Civil Appeal No 7491 of 2023, dated 6.11.2023] the Apex court has held as under:-
10. In terms of Section 19, an application for setting aside an award of the Facilitation Council cannot be entertained by any court unless the appellant has deposited seventy-five per cent of the amount in terms of the award. In view of the provisions of Section 18(4), where the Facilitation Council proceeds to arbitrate upon a dispute, the provisions of the Act of 1996 are to apply to the dispute as if it is in pursuance of an arbitration agreement under sub-
section (1) of Section 7 of that Act. Hence, the remedy which is provided under Section 34 of the Act of 1996 would govern an award of the Facilitation Council. However, there is a super added condition which is imposed by Section 19 of MSMED Act 2006 to the effect that an application for setting aside an award can be entertained only upon the appellant depositing with the Council seventy-five per cent of the amount in terms of the award. Section 19 has been introduced as a measure of security for enterprises for whom a special provision is made in the MSMED Act by Parliament. In view of the provisions of Section 18(4), the appellant had a remedy under Section 34 of the Act of 1996 to challenge the award which it failed to pursue.
11. In the judgment of this Court in Gujarat State Civil Supplies Corporation Limited (supra), a two-Judge Bench of the Court has observed, in the course of drawing its conclusions, that:
"The proceedings before the Facilitation
Council/institute/centre acting as an arbitrator/Arbitral
Tribunal under Section 18(3) of the MSMED Act 2006 would be governed by the Arbitration Act, 1996."
12. The appellant failed to avail of the remedy under Section 34. If it were to do so, it would have been required to deposit seventy-
Signature Not Verified Signed by: DIVYANSH SHUKLA Signing time: 06-09-2024 13:52:50NEUTRAL CITATION NO. 2024:MPHC-IND:25449
-6- WA-478-2024 & WA-477/2024 five per cent of the decretal amount. This obligation under the statute was sought to be obviated by taking recourse to the jurisdiction under Articles 226/227 of the Constitution. This was clearly impermissible.
13. For the above reasons, we are in agreement with the view of the Division Bench of the High Court that the writ petition which was instituted by the appellant was not maintainable.
12. In view of the above, when the petitioner has already resorted to the remedy available under the MSME Act, 2006 and the Arbitration and Conciliation Act, 1996, the petitioner cannot be permitted to avail this parallel remedy before the High Court. The Writ Court has not committed any error while dismissing the writ petition as not maintainable.
13. Accordingly, both these appeals i.e. Writ Appeal No.478 of 2024 and Writ Appeal No.477 of 2024 are dismissed.
14. Let a photocopy of this order be kept in connected Writ Appeal No.477 of 2024.
(VIVEK RUSIA) (BINOD KUMAR DWIVEDI)
JUDGE JUDGE
Divyansh
Signature Not Verified
Signed by: DIVYANSH
SHUKLA
Signing time: 06-09-2024
13:52:50