Gujarat High Court
Spunpipe & Construction Company ... vs State Of Gujarat - Through Executive ... on 20 October, 2022
Author: Umesh A. Trivedi
Bench: Umesh A. Trivedi
C/SCA/8109/2013 ORDER DATED: 20/10/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8109 of 2013
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SPUNPIPE & CONSTRUCTION COMPANY (BARODA) PRIVATE LIMITED &
1 other(s)
Versus
STATE OF GUJARAT - THROUGH EXECUTIVE ENGINEER & 2 other(s)
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Appearance:
MR BS PATEL(602) for the Petitioner(s) No. 2
MR CHIRAG B PATEL(3679) for the Petitioner(s) No. 1
MR AKASH CHHAYA AGP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE UMESH A. TRIVEDI
Date : 20/10/2022
ORAL ORDER
1. This petition is filed under Article 226 of the Constitution of India praying for writ of certiorari or any other appropriate writ, order or direction quashing and setting aside order dated 4.3.2013 passed below Exh.56 in Civil Misc. Application No.148 of 2002 by 2 nd Additional District Judge, Vadodara, whereby application given by the petitioner for rejection of the application of the respondent herein for non compliance of pre-deposit of 75% of the amount of award, for filing such application praying for setting aside award passed by the Arbitral Page 1 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 Tribunal in view of provisions of Micro, Small, and Medium Enterprises Development Act, 2006 (herein after referred to as 'MSME Act'), which came to be rejected by the concerned Court.
2. Assailing the impugned order, Mr.B.S.Patel, Senior Advocate, learned counsel assisted by Mr.Umang Oza, learned advocate for the petitioner submitted that in view of the provision made in Section 19 of the 'MSME Act', no any application for setting aside the award passed by Arbitral Tribunal under Section 34 of the Arbitration and Conciliation Act, 1996 (herein after referred to as 'the Act, 1996') be entertained without ensuring deposit of 75% of the amount awarded. Drawing attention of the Court to the certificate issued by the District Industry Center, Vadodara permanently registering the petitioner as S.S.I.Unit, it is submitted that the petitioner is supposed to have all the benefits under the 'MSME Act' including that of objecting to maintainability of an application filed under Section 34 of 'the Act, 1996' in Page 2 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 absence of deposit of 75% of the amount in terms of the award and therefore, he has submitted that the impugned order passed by the learned Judge is erroneous and requires to be interfered with.
3. Relying on a decision in the case of M/S.Sri Parvathi Parameshwara Cables and other v. Andhra Pradesh Transmission Corpn. Ltd. & Anr. reported in (2013) 10 SCC 693 wherein earlier decision of the Supreme Court in the case of Snehadeep Structures (P) Limited Vs Maharashtra Small Scale Industries Development Corporation Limited reported in (2010) 3 SCC 34 agreeing with the proposition that 75% of the awarded amount was required to be deposited before the application under Section 34 of 'the Act, 1996' could be entertained, ultimately held that the term 'Appeal' appearing in Section 7 of Interest On Delayed Payments To Small Scale And Ancillary Industrial Undertakings Act, 1993 (herein after referred to as 'the Interest Act, 1993') would include an application under Section 34 of 'the Act, Page 3 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 1996' as well.
4. He has further relied on two latest decisions of the Supreme Court in the case of Gujarat State Disaster Management Authority Vs. Aska Equipments Limited reported in (2022) 1 SCC 61 as also in the case of M/s.Tirupati Steels V/s. M/s. Shubh Industrial Component & Anr. reported in (2022) 7 SCC 429 and submitted that Court has no discretion to deviate from condition of 75% of the awarded amount as a deposit except in a case of hardship being shown and Court being satisfied it may allow the deposit be made in installments. However, it is submitted that as a matter of principle, there is no discretion left to the Court once an award passed by the Arbitral Tribunal and it is challenged by way of application under Section 34 of 'the Act, 1996' to make deposit as provided under Section 19 of 'the MSME Act'.
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5. He has further submitted that it is for the Court not to entertain such application without compliance of requirements of the deposit. It is further submitted that Court should not wait till the application is preferred by the respondent requesting the Court to direct the deposit be made.
6. He has further submitted that despite 'MSME Act' came into existence in the year 2006 it repealed as provided under Section 32 of 'MSME Act', 'the Interest Act 1993'. Therefore, according to his submission, when the proceedings in the nature of application under Section 34 of 'the Act, 1996' is filed, 'the interest Act, 1993' was in existence and there also, similar provision is made in Section 7 of 'the Interest Act, 1993'. Therefore, according to his submission, even if 'MSME Act' is not applicable till it came into existence, 'the Interest Act 1993' was in existence and applicable to the case on hand. Therefore, according to his submission, application made could not have been rejected by the learned Judge. Page 5 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022
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7. On all foregoing submissions and relying on the precedents, it is submitted that this petition be allowed.
8. As against that, Mr.Akash Chhaya, learned AGP submitted that since the application under Section 34 of 'the Act, 1996' filed on 14.8.2002 and notice therein is served to the petitioner, he had not requested the Court to invoke either the provision of Section 19 of the 'MSME Act' or provisions of Section 7 of 'the Interest Act, 1993'. Therefore, he has submitted that the said requirement if presumed to oblige the respondent herein to follow, it can be said to have been waived by the petitioner herein and once it is waived for a pretty long time of 10 years, at- least, no such belated application should have been entertained by the Court and therefore, it is rightly rejected. He has further submitted that they have not made known to any of the authority including Arbitral Tribunal and the Court that they are or they were registered under the 'MSME Act' and therefore, they are not entitled to file such application before the Court Page 6 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 requesting for direction to the respondent herein to deposit 75% of the amount awarded, as a precondition to filing of the application. He has further submitted that since 'MSME Act' is promulgated in the year 2006 with effect from 16.6.2006 and the work order in the present case as also the application under Section 34 of 'the Act, 1996' came to be filed prior thereto, there was no question of deposit as claimed by the petitioner vide an application Exh.56. He has further submitted that since the award is not passed by the Council, any Institution or Center providing alternative dispute resolution services under the 'MSME Act', there is no question of invoking Section 19 of the 'MSME Act'.
9. On the aforesaid submissions made by learned advocate for the appearing parties as also considering the documents annexed with the petition, it emerges that despite an application under Section 34 of 'the Act, 1996' was filed in the year 2002 praying for setting aside the arbitral award and 10 years having elapsed after service Page 7 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 of the notice therein, the petitioner has never disclosed to the Court that it is a permanently registered SSI Unit under the provisions of the 'MSME Act' or under 'the Interest Act, 1993'. It further emerges that before the Arbitral Tribunal also, no such discloser is made by the petitioner.
10. As such, filing of an application Exh.56 under the provisions of the 'MSME Act' is misconceived as not only the arbitral award but an application for setting aside the arbitral award came to be passed and filed much prior to the 'MSME Act' came into force. If such application is to be treated as an application filed under the provisions of the 'MSME Act' putting forward of the embargo under Section 19 of the 'MSME Act' requiring deposit of 75% of the amount awarded, the petitioner was supposed to prima-facie show and establish that it is a Micro, Small and Medium enterprises which has filed a memorandum with the Authority under the 'MSME Act' referred to in sub-section (1) of Section 8 of the 'MSME Act'. According Page 8 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 to the 'MSME Act', the Small Scale Industry obtained a Registration Certificate existing before the commencement of the 'MSME Act', where also it supposed to file the memorandum in accordance with the provisions of the 'MSME Act'. As such, from the documents annexed with the petition, which was never produced before the Court concerned, it is not clear whether the petitioner has filed a memorandum with the Authority referred to in sub-section (1) of Section 8 of the 'MSME Act' before satisfying the definition of term 'supplier' so as to entitle the benefit of deposit as provided under Section 19 of the 'MSME Act'.
11. The day on which an application Exh.56 came to be filed, 'the Interest Act, 1993' was not in existence at all as it had been repealed as provided under sub-section (1) of Section 32 of the 'MSME Act'. However, in view of sub- section (2) of Section 32 of the 'MSME Act' anything done or action taken under 'the Interest Act, 1993' it shall be deemed to have been done or taken under the Page 9 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 corresponding provisions of this Act means the 'MSME Act'. Therefore, the day on which the arbitral award was passed as also the application under Section 34 of 'the Act, 1996' is filed praying for setting aside the arbitral award, 'the Interest Act, 1993' was in existence. At that time, as it was not brought to the notice of the Court concerned with regard to the provisions made in Section 7 of 'the Interest Act, 1993' which requires deposit of 75% of the amount awarded, therefore, there is no question of passing such order at the time of filing of the said application. As such, under 'the Interest Act, 1993' as also under the 'MSME Act' to have the benefit of enhanced rate of interest as enumrated in both the Acts, it is a prerequisite that petitioner should satisfy the definition of 'supplier' as defined in Section 2(f) of 'the Interest Act, 1993' as also definition of 'supplier' under Section 2(n) of the 'MSME Act'. Unless and until, the requirement mentioned in the definition of both the Acts are brought to the notice of the Court concerned, it cannot suo-motu require the applicant before it to make Page 10 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 deposit as provided under both the Acts.
12. As such, till 'the Interest Act, 1993' is repealed, no action is taken by the petitioner to show that he satisfies and fulfills the definition 'supplier' under 'the Interest Act, 1993' so as to have the interest on delayed payment as provided under 'the Interest Act, 1993' requiring even deposit as provided under Section 7 of 'the Interest Act, 1993'. However, in view of sub-section (2) of Section 32 of the 'MSME Act' notwithstanding such repeal anything done or any action taken under the Act so repealed, shall be deemed to have been done or taken under the corresponding provisions of this Act means 'MSME Act'.
13. Even if presuming that Section 7 of 'the Interest Act, 1993' has to be followed by the Court suo-motu unless and until, it is expressed in the award itself that the petitioner is holding a permanent registration certificate issued by the Directorate of Industries of State and Union Territory or it has been brought to the notice of the Court Page 11 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 concerned by the petitioner himself, there is no question of directing the applicant concerned to fulfill the requirement of deposit of 75% of the awarded amount. Since the day on which the application is preferred by the petitioner, 'the Interest Act, 1993' was already repealed and if the action of the petitioner requesting Court requiring the respondent to deposit 75% of the awarded amount as per the corresponding provision into the 'MSME Act', it would be under Section 19 of the 'MSME Act'.
14. At this stage, Mr. Patel, Senior Advocate, learned counsel invited attention of the Court to Section 19 of the 'MSME Act' and submitted that the application of Section 19 is not restricted to any award or other order or a decree passed either by the facilitation Council or any Institution or Center providing alternate disputes resolution services to which reference is made by the Council. In support of his submission, he relied on a decision in the case of Messrs JMC Projects (India) Ltd. Page 12 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022
C/SCA/8109/2013 ORDER DATED: 20/10/2022 V/s Mechtech Enginers Vadodara and Another reported in 2011 (1) GLR 675 more particularly para 14 and 15 thereof to submit that Section 19 would apply not only to the award passed by the Council or any Institution or Center to which the reference is made by the Council but to all proceedings in the form of any appeal or application praying for setting aside any decree, award or other order made. If restricted meaning to the award and other order made by the Council or on the reference of the Council is given the word 'decree' mentioned in Section 19 would be rendered nugatory as neither the Council nor any Institution or Center would be passing a decree in any proceedings.
15. Having given anxious consideration, keeping in mind sub-section (2) of Section 32 of 'MSME Act' corresponding provision to 'the Interest Act, 1993' invoked would be Section 19 in a proceedings filed under Section 34 of 'the Act, 1996' by the respondent herein. Therefore, when an application made before the Court Page 13 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 before the learned Judge vide Exh.56 claiming that the petitioner herein is registered under the 'MSME Act' producing copy of certificate of registration and praying for rejection of original proceedings filed before it for non compliance of provisions made under Section 19 of the 'MSME Act' would be as per the right existing corresponding to Section 7 of 'the Interest Act, 1993'. Though, claim is made with regard to Registration Certificate under 'MSME Act' before this Court a memorandum for setting of Micro, Small and Medium Enterprise as required under Section 8 of the 'MSME Act' is produced, may be subsequent to the date of filing application Exh.56, as aforesaid, petitioner claims that he has filed memorandum as required under Section 8 of the 'MSME Act' with the Authority, that too, within limitation as prescribed, to fulfill the definition of 'supplier' under Section 2(n) of the 'MSME Act', on coming into force of it.
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16. In the aforesaid decision in the case of Messrs JMC Projects (India) Ltd. (Supra) even after considering Section 18 of the 'MSME Act', the coordinate Bench of this Court interpreted Section 19 and clearly held that Section 19 would not apply only in case of award passed by the Council or any Institution or Center to which the reference is made by the Council. Stating further therein if such an interpretation is accepted, the term 'Decree' in Section 19 would be rendered redundant since neither the Council nor any Institution or Centre to which reference would be made by the council would be passing a decree. While holding so, the exercise undertaken by the Council on a reference to it is with regard to procedure for conciliation or arbitration to be undertaken by it or by Centre or Institution to which reference may be made by the Council.
17. Following the decision of the Supreme Court in the case of Snehadeep Structures (P) Limited (Supra) which held that word 'appeal' used in Section 7 of the 'Interest Page 15 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 Act, 1993' includes even an application for setting aside an arbitral award under Section 34 of "the Act, 1996"
observing that legislative intent behind Section 7 was to target buyers, who, not only with the end of pushing off the ultimate event of payment to the small scale industry undertaking, institute challnges against the award/ decree / order passed against them and such buyers cannot be allowed to challenge arbitral awards, indiscriminately, especially when the Section requires pre-deposit of 75% of the amount awarded even when the appeal preferred against the award, as distinguished from an order or decree.
18. The provisions made under Section 7 of 'the Interest Act, 1993' as also Section 19 of 'MSME Act', have already been interpreted by the Supreme Court and reiterated again and again that the word 'appeal' mentioned in Section 7 of 'the Interest Act, 1993' is interpreted to be including any application made challenging any decree, award or any other order as also Page 16 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 word 'application' used in Section 19 may equally include even any appeal challenging any decree, award or other order made, which requires pre-deposit of 75% of the amount awarded as a condition precedent for hearing the appeal.
19. In view thereof, there is no escape from conclusion that respondent herein is required to deposit 75% of the amount awarded by the Arbitral Tribunal, which is challenged by way of Civil Misc. Application No.148 of 2002 before the District Judge, Vadodara under Section 34 of 'the Act 1996'. It is submitted that in view of pecuniary jurisdiction, the said application has now been entrusted to Commercial Court concerned. Be that as it may, the impugned order passed below Exh.56 by 2 nd Additional District Judge, Vadodara dated 04.03.2013 is required to be quashed and set aside and the application made by the petitioner requesting Court to direct the respondent herein to deposit 75% of the amount awarded by the Arbitral Tribunal is required to be allowed. The Page 17 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022 C/SCA/8109/2013 ORDER DATED: 20/10/2022 respondent herein is, therefore, directed to deposit 75% of the amount awarded by the Arbitral Tribunal before the Court concerned within a period of 6 (six) weeks from today. However, after deposit of the amount, it shall not be disbursed to the petitioner till the conclusion of the proceedings before the concerned Court.
(UMESH A. TRIVEDI, J) ASHISH M. GADHIYA Page 18 of 18 Downloaded on : Thu Oct 20 21:13:28 IST 2022