Allahabad High Court
Chhattisgarh Railway Corporation ... vs Micro And Small Enterprises ... on 13 December, 2022
Author: Manoj Misra
Bench: Manoj Misra
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR RESERVED Court No. - 29 Case :- WRIT - C No. - 32955 of 2022 Petitioner :- Chhattisgarh Railway Corporation Limited(Crcl) Respondent :- Micro And Small Enterprises Facilitation Council(Msefc) And Another Counsel for Petitioner :- Kamal Krishna Roy Hon'ble Manoj Misra,J.
Hon'ble Vikas Budhwar,J.
(Delivered by Manoj Misra, J.)
1. This writ petition seeks quashing of the award dated 07.06.2022 passed by the Micro and Small Enterprises Facilitation Council, Kanpur (for short Facilitation Council) in Claim Petition No. 270 of 2020 filed by the second respondent against the petitioner and to declare the entire proceeding in Claim Petition No. 270 of 2020 as void.
2. Briefly stated the facts giving rise to the writ petition are as follows:-
3. The second respondent claiming itself to be registered with the Directorate of Industries as a Small Enterprise under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (for short MSMED Act, 2006) with a valid registration No. UP50E0002921 filed a claim petition before the Facilitation Council for recovery of Rs. 35,03,998.03/- in respect of delayed payment of its dues claiming, inter alia, (i) that the opposite party (i.e. the writ petitioner herein) invited tenders for the work of Geotechnical Investigation in Reach 2 and Reach 3; (ii) pursuant to which, the claimants offer was accepted and both parties entered into a contract subject to the standard general terms and conditions; (iii) that the original work was to carry out Geotechnical Investigation on 25 bridges sites; (iv) that the scope of Geotechnical Investigation included drilling of soil and rock at bridge sites, collecting the soil/rock samples, testing them in the laboratory, followed by preparation and submission of detailed report to the buyer (the petitioner herein); and (v) that the work was executed as per directions and a completion certificate was also issued in which the performance of the claimants was found satisfactory. By claiming that only part payment was made and the remaining was withheld without justification, and similar work carried out by other company was fully paid off, the claim petition was filed for recovery of the balance amount with interest thereupon.
4. On the claim petition, the Facilitation Council, on 03.12.2020, gave 20 days time to the parties for conciliation and required them to submit their respective papers. The parties thereafter exchanged their objections/counter objections. A preliminary objection was also taken with regard to maintainability of the proceedings before the Facilitation Council on the ground that the contract between the parties provided for an alternate dispute redressal mechanism, vide clause 63 and 64 of the contract, including resolution of dispute through an arbitration therefore, there was no justification for the claimants to invoke the provisions of MSMED Act, 2006. It was also claimed that the provisions of section 18 of the MSMED Act, 2006 would get attracted only for recovery of the amount due in respect of any supply of goods or services rendered by the supplier but not for recovery of dues under a works contract of which breach is alleged.
5. As no conciliation could be arrived at, conciliation proceeding was terminated and the matter was taken up for arbitral proceeding.
6. In the arbitral proceeding, after hearing both sides, the impugned award was passed on 07.06.2022. Questioning the award of the Facilitation Council, this writ petition has been filed.
7. We have heard Sri Aagney Sail along with Sri K.K. Roy for the petitioner.
8. At the outset, we required the learned counsel for the petitioner to address the Court as to why this petition be not dismissed on the ground that there exists an alternative remedy, inasmuch as the petitioner could challenge the award of the Facilitation Council by taking recourse to the remedy under Section 34 of the Arbitration and Conciliation Act, 1996 in light of the provisions of section 18(3) read with Section 19 of MSMED Act, 2006.
9. Sri Aagney Sail, learned counsel for the petitioner, submitted that existence of an alternative statutory remedy is not an absolute bar for the writ court to entertain a challenge against the award of the Facilitation Council, particularly where the Facilitation Council held no jurisdiction to enter upon the reference and decide the claim of the second respondent. According to him, the Facilitation Council held no jurisdiction to deal with the claim of the second respondent for the following reasons:-
(i) A claim under Chapter V of MSMED Act, 2006 by a supplier against the buyer is maintainable only for recovery of the dues which are payable by the buyer to the supplier for the supply of any goods or services rendered to the buyer. In the instant case, the contract between the parties from its very nature was a works contract and not a contract in respect of supply of goods or for rendering service therefore, the claim was not sustainable under the provisions of the MSMED Act, 2006;
(ii) In the objection taken by the petitioner it was specifically stated that the supplier (i.e. the second respondent herein) had employed huge machines which were not permissible therefore, it committed breach of the contract. For redressal of grievances arising therefrom, there was an alternate dispute resolution mechanism available in the contract including an arbitration clause. Consequently, the provisions of MSMED Act, 2006 could not have been invoked more so because the Facilitation Council is not empowered to decide questions arising from a breach of contract. In support of the above submission, the learned counsel for the petitioner placed reliance on a Division Bench decision of this Court in Rahul Singh v. Union of India and others reported in 2017 SCC Online ALL 3579.
10. We have considered the submissions of the learned counsel for the petitioner and have perused the record.
11. A perusal of the record would reveal that the Facilitation Council in the arbitral proceeding had examined the question of jurisdiction of the Facilitation Council while writing the award. The said issue has been addressed as Issue no.1. The Facilitation Council has also taken notice of the decision of this Court in Rahul Singh v. Union of India (supra) on which the petitioner has placed reliance. The Facilitation Council noticed that the contract between the supplier and the buyer was in the nature of a service contract; the claimant/supplier is a registered MSMED providing services of architecture and engineering activities, testing and analysis etc; that there was a delay in the payment, therefore it held jurisdiction. The Facilitation Council distinguished the decision of this Court in Rahul Singh's case (supra) on the ground that there was no concluded contract between the parties and that the writ petitioner in that matter was a person whose tender came to be rejected on the ground of failure on his part to deposit the tender cost as well as the earnest money.
12. Before we proceed to address the submissions made, we must make it clear that we do not propose to examine the merits of the award unless we come to the conclusion that the petition is not liable to be dismissed on the ground of alternative remedy, which, admittedly, is available under Section 34 of the Arbitration and Conciliation Act, 1996 read with Section 19 of the MSMED Act, 2006. No doubt, it is well settled that the existence of an alternative remedy is not an absolute bar for a writ court to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India, rather is a self-imposed restriction, but, ordinarily, the existence of alternative remedy in commercial matters is not to be ignored while entertaining a petition under Article 226 of the Constitution of India save in the following three contingencies:
(i) Where the writ petition has been filed for the enforcement of any of the Fundamental rights;
(ii) Where there has been a violation of the principle of natural justice; or
(iii) Where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.
(Vide Whirlpool Corporation v. Registrar of Trademarks, Mumbai and others, (1998) 8 SCC 1; U.P. Power Transmission Corporation Ltd and another v. CG Power and Industrial Solutions Ltd and another (2021) 6 SCC 15; and Delhi Dayalbagh House Building Society v. Registrar, Cooperative Societies and another, 2019 (4) SCC 429).
13. In the context of the submissions made, the issue that arises for our consideration is whether the award passed by the Facilitation Council is ex facie without jurisdiction as to enable the writ petitioner to question it directly by invoking the powers of this Court available under Article 226 of the Constitution. In Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Food Pvt. Ltd. (Unit 2) and another, 2022 SCC Online 1492, the following questions of law came up for consideration by the Supreme Court, namely, :
(i) Whether the provisions of Chapter-V of the MSMED Act, 2006 would have an effect overriding the provisions of the Arbitration Act, 1996?
(ii) Whether any 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 under sub-section (1) of Section 18 of the said Act, if an independent arbitration agreement existed between the parties as contemplated in Section 7 of the Arbitration Act, 1996?
(iii) Whether the Micro and Small Enterprises Facilitation Council, itself could take up the dispute for arbitration and act as an arbitrator, when the council itself had conducted the conciliation proceedings under sub-section (2) of the Section 18 of the MSMED Act, 2006 in view of the bar contained in Section 80 of the Arbitration Act,1996?
14. The Supreme Court after examining all the relevant provisions of the MSMED Act, 2006 and the Arbitration and Conciliation Act, 1996, in paragraph 34, decided the said issues as under:-
(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 of goods and rendering services subsequent to the registration.
15. From the decision of the Apex Court noticed above, it is clear that, firstly, notwithstanding existence of an arbitration clause in the contract between the supplier and the buyer, the supplier can invoke the provisions of section 18 of the MSMED Act, 2006 and, secondly, if any dispute is raised with regard to the jurisdiction of the Facilitation Council, it would be competent to rule on its own jurisdiction as also the other issues in view of section 16 of the Arbitration Act, 1996.
16. In the instant case, there is no dispute that the petitioner had a right to challenge the award by taking recourse to the provisions of section 34 of the Arbitration and Conciliation Act, 1996, rather, the argument on behalf of the petitioner is that why should the petitioner be relegated to the alternative remedy, particularly when it carries an onerous condition of pre-deposit of 75 percent of the decretal amount as per the provisions of section 19 of the MSMED Act, 2006 and the award in question is ex facie without jurisdiction.
17. In so far as the requirement of deposit of 75 percent of the awarded amount under Section 19 of the MSMED Act, 2006 is concerned, that has been held to be mandatory (vide Goodyear India Ltd. v. Norton Intech Rubbers (P) Ltd., (2012) 6 SCC 345; Gujarat State Disaster Management Authority vs. Aska Equipments Limited; (2022) 1 SCC 61; and Tirupati Steels v. Shubh Industrial Component, (2022) 7 SCC 429). As regards jurisdiction of the Facilitation Council, it is well settled that ordinarily the jurisdiction of a Court or Tribunal to proceed further is determined on the basis of averments made in the plaint or claim petition. In the instant case, the averments made in the claim petition, prima facie, make out a case for examination by the Facilitation Council. Interestingly, in the writ petition there is no specific challenge to the claim of the second respondent (the claimant/supplier) that it is registered with the Directorate of Industries as Small Enterprises under the provisions of MSMED Act, 2006 and is allotted UP50E0002921 as its registration number which was valid till the date of filing of reference. The challenge in the petition is with regard to the nature of the contract. According to the writ petitioner, the contract was not with regard to supply of goods or rendering of services, rather it was a works contract and thus, out of the purview of sections 15, 16, 17 and 18 of the MSMED Act, 2006. This aspect of the matter no doubt raises a jurisdictional issue but this jurisdictional issue has been decided by the arbitrator against the writ petitioner. The arbitrator under Section 16 of the Arbitration and Conciliation Act, 1996 is empowered to decide the issue raised in respect of its own jurisdiction. This aspect has been affirmed by the Apex Court in the case of Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Food Pvt. Ltd. (Unit 2) and another (supra), as we have noticed above. In such circumstances, it cannot be said that the Facilitation Council, ex facie, held no jurisdiction to entertain and decide the claim of the second respondent.
18. For the reasons above, without entering into the merits of the award, we decline to entertain the writ petition of the petitioner directly against the award of the Facilitation Council, particularly, when the petitioner could have availed the alternative remedy available to him. The petition is therefore, dismissed on ground of alternative remedy.
19. It is made clear that we have not expressed any opinion on the merits of the award or the decision taken by the Facilitation Council with regards to its own jurisdiction.
Order Date :- 13.12.2022 Sunil Kr Tiwari