Gujarat High Court
Jitf Water Infrastructure Limited vs Msme Commissionerate on 24 July, 2020
Author: Vikram Nath
Bench: Vikram Nath, Ashutosh J. Shastri
C/LPA/1667/2019 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 1667 of 2019
In R/SPECIAL CIVIL APPLICATION NO. 11169 of 2018
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2019
In R/LETTERS PATENT APPEAL NO. 1667 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATH
and
HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI
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1 Whether Reporters of Local Papers may be allowed Yes
to see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copyNo
of the judgment ?
4 Whether this case involves a substantial questionNo
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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JITF WATER INFRASTRUCTURE LIMITED
Versus
MSME COMMISSIONERATE
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Appearance:
MR HM PARIKH, SENIOR ADVOCATE ASSISTED BY MR RASESH H
PARIKH(3862) for the Appellant(s) No. 1
MR HEMANG H PARIKH(2628) for the Appellant(s) No. 1
MR GM AMIN(124) for the Respondent(s) No. 3
MR MITUL SHELAT WITH MR RUTUL P DESAI(6498) for the Respondent(s)
No. 2
MR AKASH CHHAYA, AGP (5) for the Respondent(s) No. 1
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C/LPA/1667/2019 CAV JUDGMENT
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CORAM: HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATH
and
HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI
Date : 24/07/2020
CAV JUDGMENT
(PER : HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATH) 1 The present appeal under clause 15 of the Letters Patent has been preferred assailing the correctness of the judgment and order dated 09.09.2019 passed by the learned Single Judge in Special Civil Application No.11169 of 2018 whereby the writ petition filed by the present appellant has been dismissed.
2 The present appellant viz. JITF Water Infrastructure Ltd., a company incorporated under the Companies Act, 1956, filed Special Civil Application No.11169 of 2018 praying for the following reliefs:-
"[A] Admit this writ petition;
[B] Allow this writ petition by quashing and setting aside the impugned order dated 30.06.2018 passed by the Respondent No.1 (Annexure `A');
Page 2 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT [C] Pending admission hearing and till final disposal of the present writ petition, Your Lordships may be pleased to grant stay of operation, execution and implementation of the impugned order dated 30.06.2018;"
3 Before proceedings to deal with the matter on its merits, basic facts relevant for the purpose are stated hereunder:-
3.1 The petitioner company entered into an agreement with M/s. Aquafil - Wintech JV [hereinafter referred to as `the JV'], a joint venture of M/s. Acquafil Polymers Company Private Limited (Respondent No.2) and M/s. Wintech Engineering Private Ltd. in respect of the work order dated 08.08.2014 on turnkey basis. The work related to procurement of Design, Supply, Installation and Commissioning of Intake Facilities, Transmission Mains, Water Treatment Plant and Reservoir for North Zone including 5 years of operation and Maintenance of JICA funded Guwahati Water Supply Project. The completion period of the contract for the work other than Operation and Maintenance service was 28 months from the date of Page 3 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT commencement and thereafter the JV was obliged to render Operation and Maintenance service for 5 years. The total contract value was Rs.79.47 Crores for E.P.C. and Operation and Maintenance. According to the petitioner, the JV delayed the execution and work which was duly intimated to it by the petitioner by dozens of communications right from 29.03.2017 till 22.12.2017.
When despite such notices the JV failed to rectify and to maintain the pace of work as required under the work order, the petitioner vide notice dated 08.01.2018 (sent by email on 09.01.2018) exercising the rights available under the contract, terminated the contract.
3.2 The JV thereafter vide communication dated 08.02.2018 invoked the arbitration clause as per terms of the contract contained in clause 20.3 and proposed the name of the Arbitrator also as the Sole Arbitrator to adjudicate the dispute.
3.3 In response to the invocation of the arbitration clause by the JV, the petitioner vide communication dated Page 4 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT 14.02.2018 refuted all the alleged contentions. It also stated in the above communication that, the authority to appoint the arbitrator vested in the petitioner and not the JV. Later on, the petitioner vide letter dated 26.02.2018 appointed Justice A.K.Patnaik as the Sole Arbitrator to adjudicate the dispute. The learned Arbitrator Justice A.K.Patnaik, appointed by the petitioner, vide notice dated 12.03.2018, directed the parties to appear on 30.03.2018 for preliminary hearing.
3.4 On 24.03.2018 before the first date of hearing fixed by the Arbitrator Justice Patnaik, the JV informed the petitioner that it would approach the MSME Commissionerate with respect to its claims as per the mandate of The Micro, Small and Medium Enterprises Development Act, 2006 [hereinafter referred to as, `2006 Act']. In response, the petitioner vide letter dated 30.03.2018 refuted the contentions of JV on several grounds, including the ground that as the JV is not registered as a Micro or Small or Medium Enterprise, as such it could not invoke the provisions of 2006 Act. Page 5 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT 3.5 The MSME Commissionerate vide notice dated 10.04.2018 communicated to the petitioner to submit reply within 15 days to the application filed by M/s. Acquafil Polymers Company Pvt. Ltd. (respondent No.2) under Section 18(1) of the 2006 Act seeking recovery of delayed payment of Rs.12,36,11,703/68 Ps.
3.6 The petitioner vide reply dated 23.04.2018 questioned the maintainability of the said reference under 2006 Act, as according to it, the respondent No.2 could not invoke the jurisdiction of the Micro and Small Enterprises Facilitation Council [hereinafter referred to as, `MSEFC'] under the 2006 Act as the petitioner had not executed any contract / agreement with the respondent No.2. Such objection was raised in addition to other objections / contentions of the petitioner.
3.7 The MSEFC issued notice dated 25.05.2018 fixing 31.05.2018 for preliminary meeting. The petitioner attended the preliminary meeting and sought time to file Page 6 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT detailed reply whereupon the MSEFC directed the petitioner to file reply on or before 20.06.2018 which was fixed as the next date of hearing.
3.8 On 20.06.2018 both the parties attended hearing before the MSEFC and on the same day application dated 19.06.2018 was moved by the respondent No.2 under Section 76 of The Arbitration and Conciliation Act, 1996 (hereinafter referred to as `1996 Act') for termination of conciliation.
4 By the order dated 30.06.2018 (Annexure-A to the petition), the MSEFC after having recorded that the efforts for conciliation under Section 18(2) of the 2006 Act having failed, the matter was referred to the Gujarat Chamber of Commerce & Industry (hereinafter referred to as `GCCI') for arbitral proceedings under Section 18(3) of the 2006 Act. The order dated 30.06.2018 is reproduced hereunder:
"BEFORE THE STATE LEVEL INDUSTRY FACILITATION COUNCIL Page 7 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT GANDHINAGAR, GUJARAT (Constituted under Section 21 of the Micro, Small and Medium Enterprises Development Act, 2006) D.P.NO.711 RPAD M/s. Acquafil Polymers Co. Pvt. Ltd. Ahmedabad 202, 203, Shyamak Complex, Near Kamadhenu Complex Polytechnic, Ahmedabad-15 ....Claimant versus M/s. JITF Water Infrastructure Ltd., New Delhi 281, Shivaji Marg, New Delhi-110015. ....Respondent The applicant M/s. Aquafil Polymers Co. Pvt. Ltd. Ahmedabad (hereinafter referred to as "the Claimant") has filed an application for the delayed payment before the council, under Section 18(1) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as "the Act").
The claimant has filed this application for the recovery of delayed payment of Rs.134426138/- as principle amount and Rs.18030666/- as interest thereon against M/s. JITF Water Infrastructure Ltd., New Delhi (hereinafter referred to as "the Respondent").
The application herein contents Micro category status of EM-II 24 01921 02071 which was issued on dated Page 8 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT 21/09/2012. The certificate indicates that the applicant is having Service unit.
The council, after receipt of the said application, initiated conciliation proceedings under section 18(2) of the Act.
Than after the council issued notice to the respondent to appear before the council for the hearing in 81 st MSEFC meetings held on dated 20/06/2018 respectively & the respondent herein remain present in the MSEFC Meeting held before the council. Hence, as mentioned herein above the council have made number of attempts for the conciliation of the matter under section 18(2) of the Act. However, having detailed discussion on payment issues, proceedings under section 18(2) are deemed to be unsuccessful. Hence conciliation proceedings under section 18(2) of the Act is failed in 81st MSEFC Meeting held on dated 20/06/2018 and therefore the council has left with no option but to initiate proceedings under section 18(3) of the Act and therefore, the council unanimously passed the following order.
ORDER The council has taken tireless effort for conciliation but parties are not ready for Conciliation. Hence Council after analyzing the present facts and documents reached the conclusion to fail the Conciliation proceedings u/s. 18(2) of the MSME-D Act, 2006 and pass the final order mentioned below:
FINAL ORDER With reference to the application of the claimants herein the council has ordered that the proceedings under Page 9 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT Section 18(2) is closed herewith and the council has also decide that the matter is referred to G.C.C.I. for arbitral proceedings under Section 18(3) of the Act with following directions:
1 The arbitration proceedings should be strictly followed by the provision of Arbitration and Conciliation Act, 1996.
2 The G.C.C.I. submits a report to the council within 15 days from the date of reference.
3 The Expense for the arbitration proceedings should be borne by the parties as per the provisions of Arbitration and Conciliation Act, 1996.
4 The claimant herein is directed to approach the G.C.C.I. along with all the documents and statements within 15 days from the date of this order."
4.1 It is this order, which was challenged by way of the Special Civil Application No.11169 of 2018 before the learned Single Judge.
5 The learned Single Judge, after hearing learned counsels for the parties and after dealing with various submissions and relevant case law relied upon by the respective counsels vide judgment and order dated 09.09.2019 dismissed the writ petition on the following Page 10 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT findings:-
[i] The respondent No.2 would fall within the definition of the word `supplier' as defined in clause 2(n) of the 2006 Act.
[ii] The respondent No.2 was a MSME and being supplier, the provisions of 2006 Act was rightly invoked.
[iii] That respondent No.1 was within its powers to receive the Reference under Section 18 of the 2006 Act and rightly conducted conciliation proceedings.
[iv] The MSEFC rightly arrived at the conclusion that the conciliation had failed and as such had no option but to refer the matter under Section 18(3) of the 2006 Act for arbitral proceedings.
6 Aggrieved by the judgment of the learned Single Judge referred to above, the present appeal has been preferred.Page 11 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT
7 We have heard Shri H.M.Parikh, learned Senior Advocate assisted by Shri Rasesh Parikh, learned advocate for the appellant, Shri Akash Chhaya, learned Assistant Government Pleader for the State respondent No.1, Shri Mitul Shelat along with Shri Rutul Desai, learned advocates appearing for respondent No.2 and Shri G.M.Amin, learned counsel appearing for the respondent No.3.
8 The argument advanced by Shri H.M.Parikh, learned counsel appearing for the appellant, is to the effect that a stranger to a contract cannot invoke any remedy or dispute with regard to the said contract where such stranger is not a signatory to the contract or even a party to it. The respondent No.2 - M/s. Acquafil Polymers Co. Pvt.
Ltd. as such would not be covered by the definition of the word `supplier' under Section 2(n) of the 2006 Act. The MSEFC under 2006 Act wrongly and illegally entertained the application under Section 18(1) of the 2006 Act. The MSEFC further wrongly and illegally proceeded to deliberate upon the same and lastly despite objections having been raised by the appellant at the first given opportunity Page 12 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT regarding maintainability, the MSEFC proceeded to record a finding that the conciliation had failed and thereafter referred the matter to the arbitral proceedings under Section 18(3) of 2006 Act.
8.1 In support of his submissions Shri Parikh has placed reliance upon the following judgments:-
[1] Apex Court unreported judgment dated 06.11.2019 in the case of Maharashtra State Electricity Distribution Company Limited (MSEDCL) vs. Godrej and Boyce Manufacturing Company Limited in Commercial Arbitration Petition (L) No.238 of 2019.
[2] Gammon India Limited vs. Commissioner of Customs, Mumbai reported in (2011)12 SCC 499. [3] Andhra Pradesh Tourism Development Corporation Limited & Another vs. Pampa Hotels Limited reported in (2010)5 SCC 425.
Page 13 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT [4] Oral Judgment dated 27.12.2019 delivered in Letters Patent Appeal No.619 of 2019 in the case of M/s. Nik San Engineering Co. Ltd. vs. M/s. Easun Reyroller Limited (this was placed before us on 15.06.2020 while preferring Civil Application No.1 of 2020).
9 In reply, Shri Mitul Shelat, learned counsel for the respondent No.2, the main contesting party, drew our attention to the relevant part of the judgment of the learned Single Judge to show that all the aforesaid arguments of the appellant had been dealt with in detail, considered by the learned Single Judge and a finding returned on the same, as such there was little or no scope in the present appeal for interference in view of the settled law defining the scope and extent to which the Division Bench may go in a Letters Patent Appeal.
9.1 Shri Shelat further submitted that the petitioner
- appellant only in order to delay the proceedings had Page 14 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT approached this Court by way of Special Civil Application and now by filing the Letters Patent Appeal. According to him, the objection as to whether the matter could have been entertained by the MSME and referred to the arbitral proceedings under Section 18(3) of the 2006 Act would go to the root of the appointment of Arbitrator and his jurisdiction to enter into the reference and such objection could be raised before the Arbitrator himself appointed by GCCI by invoking the provisions of Section 16 of the 1996 Act. It is also submitted by Shri Shelat that the matter has to be referred to an Arbitrator, whether appointed by the respondent No.2 or JV, or the petitioner -appellant or after reference under Section 18(3) by the institution or centre providing alternative dispute resolution service under 1996 Act. Based on the above submissions, Shri Shelat, learned counsel for the respondent No.2, submitted that the learned Single Judge has rightly dismissed the writ petition. The present appeal also being devoid of any merit is liable to be dismissed.
9.2 Shri Mitul Shelat, learned counsel for the Page 15 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT respondent No.2 placed reliance upon the following judgment:-
[1] D.P.Maheshwari vs. Delhi Administration and Others reported in [(1983)4 SCC 293].
[2] Secur Industries Ltd. vs. Godrej and Boyce Mfg. Co. Ltd. and Ors. reported in [2004(55) ALR 232].
[3] Power Grid Corporation of India Ltd. vs. Siemens Limited reported in [201(2013) DLT 313].
[4] Hameed Leather Finishers v. Associated Chemical Industries Kanpur Pvt. Ltd. and Another reported in [LawSuit (All) 2798].
[5] Management of Narendra & Company Private Limited vs. Workmen of Narendra & Company reported in [(2016)3 SCC 340].Page 16 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT
[6] Madras High Court order dated 05.07.2018 in the case of M/s. BGR Energy Systems Limited vs. P.S.Techcom Pvt. Ltd.
[7] M/s. Ramky Infrastructure Private Limited vs. Micro and Small Enterprises Facilitation Council and Anr. reported in AIR 2018 DELHI 180.
[8] Order dated 10.07.2019 passed by the Supreme Court in Civil Appeal Nos.7117-7118 of 2017 in the case of M/s. Sterling Industries vs. Jayprakash Associates Ltd.
10 We have considered the submissions advanced by the respective counsels, we have also gone through the case law relied on by the learned counsels and we have also examined the judgment of the learned Single Judge carefully.
11 In order to appreciate the rival contentions, it is necessary to see the objects of the MSMED Act. The Page 17 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT Government of India felt it necessary to extend policy support for the small enterprises so that they are enabled to grow into medium ones, adopt better and higher levels of technology and achieve higher productivity to remain competitive in a fast globalisation area. The Government of India also felt it necessary to address concerns of entire small and medium enterprises sector and the sector is provided with single legal framework. The Central Government, accordingly, enacted the MSMED 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.
12 For appreciating the controversy, we must see the provisions of Sections 15, 17, 18, 19 and 24 which read as follows :
"15. Liability of buyer to make payment.- Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day;Page 18 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
16. ....
17. Recovery of amount due.- 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.
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 it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, Page 19 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT 1996 (26 of 1996) shall then apply to the disputes 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.
19. Application for setting aside decree, award or order.- No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any Court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such Court;
Provided that pending disposal of the application to set aside the decree, award or order, the Court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose.
20. ....
Page 20 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT
21. .....
22. .....
23. .....
24. Overriding effect.- The provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force."
13 The act has enacted special provisions for preventing delayed payments to such enterprises and special procedure for recovery of the amount due towards supply is also laid down. Chapter V of the Act contains these special provisions.
14 Section 15 of the Act provides that the buyer is liable to make payment for the goods purchased from Micro and Small Enterprises on or before the date agreed upon between them and the supplier in writing or, where there is no agreement in this behalf, before the appointed date. Provided that, in no case, the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
Page 21 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT 15 Section 16 of the Act provides that notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, the buyer shall be liable to pay compound interest with monthly rests to the supplier on the amount due from the appointed day or, as the case may be, from the date immediately following the date agreed upon at three times of the bank rate notified by the Reserve Bank. 16 Section 17 of the Act provides that the buyer shall be liable to pay the entire amount i.e. price of goods with interest as contemplated under section 16. 17 Section 18 of the Act provides for making reference i.e. reference of dispute by any of the parties to the Micro and Small Enterprises Facilitation Council. 18 Section 19 of the Act provides setting aside decree, award or order made by the Council which acts like an arbitrator.
Page 22 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT 19 Section 24 of the Act gives an overriding effect to the provisions of Sections 15 to 23 which provide statutory framework for micro, small and medium enterprises to address the issues of delayed payment. Sub-section (1) of Section 18 contains non-obstante clause which enables the party to a dispute to make a reference to MSEFC. Similarly, sub-section (4) of Section 18 which also contains a nonobstante clause provides for arbitration to be conducted by MSEFC or any institution or a centre providing alternate dispute resolution services. It is thus evident that the act does not contemplate arbitration through an arbitrator appointed by the parties but provides for special forum in the form of MSEFC or under the aegis of any institution or a centre providing alternate dispute resolution services as referred by MSEFC. Furthermore, Section 19 which mandates pre-deposit of 75% of awarded amount ensures expedient recovery of the dues and thus safeguard the interest of micro, small and medium enterprises. The Arbitration Act 1996 and/or the arbitration agreement entered into by the parties does not contain such Page 23 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT provisions.
20 Thus, the MSMED Act is a special enactment, enacted with an object of facilitating the promotion and development and enhancing i.e. competitiveness of micro, small and medium enterprises, which do not command significant bargaining power. It is with this object that the Act provides for institutional arbitration. Notwithstanding the provisions of the Arbitration Act 1996 and the existence of an arbitration agreement, any party can make a reference to MSEFC with regard to the amount due under Section 17, and such council or the institution or centre identified by it, will have the jurisdiction to arbitrate such dispute. 21 Before we proceed to deal with the respective arguments, we record here below some of the basic admitted facts between the parties:
[a] M/s. Acquafil Polymers Company Private Limited (Respondent No.2) along with one M/s. Wintech Engineering Private Ltd. formed a joint venture by the name of M/s.Page 24 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT
Aquafil - Wintech JV.
[b] The petitioner - appellant viz. JITF Water Infrastructure Ltd. has entered into a contract with M/s.
Aquafil - Wintech JV.
[c] Both the components of M/s. Aquafil - Wintech JV tendered performance bank guarantee of Rs.1 crore approximately in favour of the petitioner and the said bank guarantees given by both the components were invoked by the petitioner.
[d] M/s. Acquafil Polymers Company Private Limited (Respondent No.2) has filed a memorandum under Section 8 of 2006 Act.
[e] Under the contract between the petitioner and M/s.
Aquafil - Wintech JV, the JV is the supplier and the petitioner is the buyer.
[f] Under the contract between the petitioner and the Page 25 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT M/s. Aquafil - Wintech JV there is an arbitration clause.
[g] The petitioner had terminated the contract by notice dated 08.01.2018 for the reasons recorded therein.
[h] Upon receipt of notice, M/s. Aquafil - Wintech JV vide communication dated 08.02.2018 by invoking the arbitration clause proposed the name of a Hon'ble Retired Supreme Court Judge as Sole Arbitrator.
[i] The petitioner in response took a stand that only it had the right to appoint the Arbitrator and accordingly vide letter dated 14.02.2018 appointed another Hon'ble Retired Supreme Court Judge as Arbitrator.
[j] The learned Arbitrator so appointed by the petitioner entered into reference and called upon the parties to appear for preliminary hearing. However, M/s. Acquafil Polymers Company Private Limited (Respondent No.2) intimated in writing to the Arbitrator that it was invoking the provisions of Section 18 of the 2006 Act for conciliation.Page 26 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT
[k] Upon such intimation, the learned Arbitrator stayed the arbitration proceedings till the final outcome of the conciliation proceedings under 2006 Act.
21.1 From the above admitted facts, it is evident that after the petitioner had terminated the contract, the parties were at liberty to invoke arbitration clause. M/s. Aquafil -
Wintech JV and the petitioner, both appointed their own independent Arbitrator. Thereafter, the matter was carried to the Council under 2006 Act invoking Section 18 thereof. Now, before the Council under the provisions a conciliation could have been arrived at between the parties, which would have ended the dispute and in the event of its failure, the Council would have referred the matter under Section 18(3) for arbitration to be carried out under the provisions of the 1996 Act.
22 In the present proceedings, the challenge is to the order passed by the Council recording failure of conciliation and reference to GCCI for arbitration. What has to be Page 27 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT noticed is that ultimately it is an Arbitrator under the provisions of the 1996 Act who would deal with the reference and adjudicate upon. Whether the Arbitrator is appointed directly by the parties to the contract or through an intervention of any authority, the end result would be that the Arbitrator has to proceed in accordance to the provisions contained in 1996 Act. It cannot be said that there is any difference in the approach or scope of the Arbitrator or the procedure being adopted by Arbitrator while dealing with the reference whether he is directly appointed by any of the parties or has been appointed by any of the authorities under the statutory provisions. 23 The issue raised before the learned Single Judge and also before us by Shri Parikh is to the effect that M/s. Acquafil Polymers Company Private Limited (Respondent No.2) having not entered into any contract with the petitioner could not have been termed as a supplier under the 2006 Act and as such the very reference under Section 18 of the 2006 Act was not maintainable. It is also the case of the petitioner that this objection was raised before the Page 28 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT Council, but the Council without adverting to it and without recording any finding proceeded to refer the matter under Section 18(3) of the 2006 Act. The order of the Council thus, is untenable in the eyes of law.
24 The arguments raised by Shri Parikh, learned Senior Advocate appearing for the petitioner - appellant in our considered opinion are not tenable under law. M/s. Acquafil Polymers Company Private Limited (Respondent No.2) is an integral part of M/s. Aquafil - Wintech JV. M/s. Aquafil - Wintech JV has two constituents i.e. to say two companies have joined together for this venture. Both the companies i.e. M/s. Acquafil Polymers Company Private Limited and M/s. Wintech Engineering Private Ltd. both would be an inherent and integral part of the joint venture. Any contract signed by the joint venture would be a contract for the benefit and on behalf of its constituents / components. It would thus be untenable and not acceptable to us that the component of JV could not raise a claim or would be deprived of availing its rights and obligations under law. The only rider and condition could Page 29 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT be that the component / constituent of the JV could not take a stand or raise a claim contrary to the contract entered into by the JV with the third party. It is not disputed that the JV was providing services and one of its components having filed its memorandum under Section 8 of 2006 Act rightly approached the Council under Section 18 thereof. The JV may not have filed memorandum under Section 8 of the 2006 Act, but its component having filed memorandum cannot be denied the status of supplier. The findings recorded by the learned Single Judge, therefore, is correct and does not suffer any infirmity. 25 It may also worthwhile to mention here that the arguments of the petitioner in continuation to the above argument is that non-signatory to an agreement cannot invoke arbitration clause. This argument at the face of it may appear to be of some substance, but with the changing set up of the companies, the formation of the joint ventures and they being given legal recognition, the law that has evolved over a period of time is by now well settled that even a non-signatory can be a part of arbitration proceedings and Page 30 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT in particular in cases of joint venture, their component / constitutes can invoke the arbitration clause or could be made party in arbitration proceedings.
26 We take note of the definition of "supplier" under Section 2(n) of the 2006 Act wherein it has been mentioned that "supplier" means a micro or small enterprise, which has filed a memorandum with the authority referred to in clause (a) of sub-section (1) of section 8, and includes (i)the National Small Industries Corporation, being a company, registered under the Companies Act, 1956; (ii) the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956; (iii) any company, cooperative society, society, trust or a body, by whatever name called, registered or constituted under any law for the time being in force and engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises. 27 Section 2(n) clearly proceeds to mention that an Page 31 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT incumbent who has filed a memorandum with the authority referred to in sub-section (1) of Section 8 has to be accepted as a supplier and in addition to the same the National Small Industries Corporation, being a company, registered under the Companies Act, 1956; and the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956; any company, cooperative society, society, trust or a body, by whatever name called, registered or constituted under any law for the time being in force and engaged in selling goods produced by micro or small enterprises and rendering services have also been included therein, then to say that "supplier" would bring within its hold only such micro or small enterprise, who have filed memorandum with the authority referred to in sub-section (1) of Section 8 cannot be accepted in the facts of case. By using the word "includes" the legislature clearly intended to enlarge the meaning of expression "supplier". The word "includes" is generally used as a word of extension, wherein the meaning of word and phrase is extended when it is said to include things that would not properly form within its Page 32 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT ordinary connotation, as per the Apex Court in the case of the South Gujrat Roofing Tiles Manufacturer Association Vs. State of Gujrat, AIR 1997 SC 90. The word "includes" is often issued in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of statue. When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but all those things which the interpretation clause declares that they shall include, as per the judgement of the Apex Court in the case of CIT, Andhra Pradesh Vs. M/s Taj Mahal Hotel, AIR 1972 SC 168.
28 The case laws relied upon by Shri Parikh, learned Senior Advocate are of no advantage to the appellants. We may briefly refer to these cases:-
(1) The judgment of Maharashtra State Electricity Distribution Company Limited (supra) was dealing with the challenge to an award under section 34 of the 1996 Act. The question was as to Page 33 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT whether the arbitration clause has been rightly invoked by one of the members to the joint venture.
The fact remains that it was a case after the award, was delivered. In the present case, that stage has still not come and even otherwise, the appellant has an opportunity of raising such objection regarding the appointment of arbitrator being valid or not under section 16 of the 1996 Act.
(2) The case of Gammon India Limited (supra) relates to a dispute under the Customs Act and broadly lays down that a joint venture could be treated as a legal entity with the character of a partnership. There is no issue on the said aspect. The same has no application to the present case at this stage. (3) The judgment of Andhra Pradesh Tourism Development Corporation Limited & Another (supra) was with respect to a challenge to an order passed under section 11 of the 1996 Act and the question raised was whether the party seeking arbitration, which was not in existence on the date Page 34 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT of signing of the contract, could be said to be a party to the agreement. It also does not help the appellant.
(4) In the case of M/s. Nik San Engineering Co. Ltd.
(supra), the party which was claiming benefit under section 18 of the 2006 Act was not registered by submitting a memorandum under section 8 of the 2006 Act on the date of the agreement and in such circumstances, the Division Bench of this Court had held that the benefit under the 2006 Act would not be admissible to such Company. In the present case, facts are different.
28.1 From the above, it is clear that none of the four judgments would be of any benefit to the appellant. 29 On the other hand reference may be had to the judgment of the Supreme Court in the case of Chloro Controls India Private Limited vs. Severn Trent Water Purification Inc. and Others reported in (2013)1 SCC 641 and in the case of Cheran Properties Limited vs. Page 35 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT Kasturi and Sons Limited and Others reported in (2018)16 SCC 413 on the above proposition. In the above cases, Supreme Court has held that arbitration could be possible between a signatory to an arbitration agreement and a third party specially when the claimant has succeeded by operation of law to the rights of the named party in the contract.
30 In ÇHLORO CONTROLS INDIA PVT. LTD.
(supra), in paragraph 70, the Supreme Court has held as follows which is reproduced for the facility of reference:
"70. Normally, arbitration takes place between the persons who have, from the outset, been parties to both the arbitration agreement as well as the substantive contract underlining (sic underlying) that agreement. But, it does occasionally happen that the claim is made against or by someone who is not originally named as a party. These may create some difficult situations, but certainly, they are not absolute obstructions to law/the arbitration agreement. Arbitration, thus, could be possible between a signatory to an arbitration agreement and a third party. Of course, heavy onus lies on that praty to show that, in fact and in law, it is claiming "thorugh"or under"the signatory party as contemplated under Section 45 of the 1996 Act. Just to deal with such situations Page 36 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT illustratively, reference can be made to the following examples in Law and Practice of Commercial Arbitration in England (2nd Edn.) by Sir Michael J. mustill:
1. The claimant was in reality always a party to the contract, although not named in it.
2. The claimant has succeeded by operation of law to the right of the named party.
3. The claimant has become a party to the contract in substitution for the named party by virtue of a statutory or consensual novation.
4. The original party has assigned to the claimant either the underlying contract, together with the agreement to arbitrate which it incorporates, or the benefit of a claim which has already come into existence."
31 Similar view has been taken by the Supreme Court in "CHERAN PROPERTIES LIMITED Vs. KASTURI AND SONS LIMITED AND OTHERS' (2018)16 SCC 413 and it has been held that "Group of companies doctrine' applies to cases where transactions are with a group of companies. The relationship of non-signatory to the party which is a signatory, the commonality of subject matter and composite nature of transaction are relevant considerations to adjudicate on bindingness of the agreement on a Page 37 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT non-signatory.
32 There is one more reason for dismissing the appeal i.e. Section 16 of the 1996 Act. The above provision gives ample power to the Arbitrator to decide all objections, including objections relating to its own jurisdiction. Law as by now is well settled and we need not further burden this order by referring to the case laws. The petitioner would have ample opportunity to raise all objections before the Arbitrator, if it so desires.
33 Now, we deal with the scope of the Letters Patent Appeal. In the case of the Management of Narendra & Company Private Limited (supra) it has been clearly laid down that the appellant Bench may not interfere with the findings of learned Single Judge where the learned Single Judge has dealt with in detail the arguments advanced by the counsel for the parties and also recorded finding which cannot be said to be perverse, the appellate Bench will refrain its hands from interfering with the judgment of the learned Single Judge. Relevant extract as contained in para Page 38 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT 5 of the report is reproduced below:
"5. .....Be that as it may, in an intra-court appeal, on a finding of fact, unless the Appellate Bench reaches a conclusion that the finding of the Single Bench is perverse, it shall not disturb the same. Merely because another view or a better view is possible, there should be no interference with or disturbance of the order passed by the Single Judge, unless both sides agree for a fairer approach on relief".
34 In the present case, the learned Single Judge after threadbare scrutinizing the material on record has recorded the findings holding that the respondent No.2 was `supplier', as such could apply under Section 18(1) of the 2006 Act and lastly after conciliation having failed, the Council would not have any option left but to refer it to the institution or center providing alternate dispute resolution services for carrying out matter further in accordance with the provisions of 1996 Act. We also find that the learned Single Judge in the above backdrop rightly dismissed the writ petition. We may also record that the finding recorded by the learned Single Judge can be held to be clearly a possible view. Nothing has been shown to even remotely indicate that the finding recorded by the learned Single Page 39 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020 C/LPA/1667/2019 CAV JUDGMENT Judge is either perverse in any manner or that it cannot be sustained in law. For all the reasons recorded above, we find that the present appeal lacks merit and is liable to be dismissed.
35 Consequently, Civil Application No.1 of 2019 stands disposed of.
(VIKRAM NATH, CJ) (ASHUTOSH J. SHASTRI, J) Vahid/SUBRAMANIAM/ Page 40 of 40 Downloaded on : Mon Jul 27 20:33:43 IST 2020