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3.4 Aggrieved by the same, Driplex filed an application dated 29.10.2013 with MSEF Council, claiming an amount of ₹34.80 Crores, including interest of an amount of ₹20.15 Crores.

3.5 Neyveli filed its reply to the aforementioned application on 28.12.2015. It, inter alia, contended that the MSEF Council lacked the jurisdiction to entertain the reference as Driplex had registered with the Commissioner of Industries on 09.12.2011, which was after the parties had entered into the Contract. Neyveli claimed that Driplex was not a small enterprise because the value of the Contract was ₹63 Crores and in order to qualify as a 'small enterprise' under the MSMED Act, its investment in equipment was required to be more than ₹10 Lakhs but less than ₹2 Crores. According to Neyveli, Driplex could not be classified as a 'small enterprise' as it did not satisfy the criteria as set out in Section 7(1)(b)(ii) of the MSMED Act.

Submissions

4. Mr Anil Nag, learned counsel appearing for Neyveli advanced submissions on three fronts. First, he contended that the MSMED Act was enacted in the year 2006, which was after the parties had entered into a contract. He submitted that the MSMED Act created a liability to pay compound interest on the amount payable to a supplier and the imposition of such liability could only be prospective. He contended that the same would not be applicable for contracts entered into prior to the MSMED Act coming into force. Second, he submitted that Driplex had claimed that it had a turnover of over ₹20 crores and therefore, it did not stand to reason that Driplex's investment in equipment was less than ₹2 crores. He submitted that at the time of filing the Memorandum under Section 8 of the MSMED Act, Driplex was executing several contracts, including the Contract of a value of ₹63 crores awarded by Neyveli. In view of the above, it is not possible to accept that Driplex was a small enterprise. In addition, he also submitted that the schedule to the final accounts for the financial years ending 31.03.2010 and 31.03.2011, indicated that its investment in equipment was ₹2.61 crores, which was beyond the limit as specified under Sub-Section(1)(b)(iii) of Section 7 of the MSMED Act. Lastly, he submitted that MSEF Council had failed to consider the contentions advanced by Neyveli and thus, the impugned order is liable to be set aside.

Reasons and Conclusion

6. At the outset, it is relevant to note that there is no dispute that Driplex had filed a Memorandum under Section 8 of the MSMED Act and an acknowledgement, in the prescribed form, was issued to Driplex by the Commissioner of Industries, Government of NCT of Delhi. The said Memorandum had also noted that Driplex had commenced providing services on 27.08.1974. Its investment in plant and machinery was noted at ₹86 lakhs. It is relevant to note that Neyveli has not challenged the said Memorandum filed by Driplex in any proceedings.

7. Before MSEF Council Neyveli had, essentially, raised five preliminary objections. First, it had claimed that MSEF Council lacked the jurisdiction to entertain the reference as the Contract (Letter of Award) was issued to Driplex on 29.12.2005 and Driplex had claimed registration as "Small Scale Unit w.e.f. 09.12.2011". Second, that Driplex was not conferred the status of a Small Scale Industry/Enterprise as there is no order of a competent authority in this regard. It was contended that merely filing a Memorandum was not sufficient for establishing such a claim. Third, that Driplex was not a small enterprise since its turn over was more than ₹11 crores in the year 2005 and it did not stand to reason that its investment in equipment did not exceed ₹2 crores. Neyveli contended that such an enterprise could not handle a contract worth ₹63 crores as awarded to it. Fourth, it was stated that the reference was contrary to the terms of the Contract which required Driplex to, in the first instance, refer the disputes to Neyveli for resolution within a period of thirty days. Neyveli stated that the reference made by Driplex to MSEF Council was contrary to the terms of the Contract. Fifth, it submitted that since Driplex was not a small enterprise, it was required to file a claim before a Civil Court.