Orissa High Court
M/S Gayatri Agency vs Micro And Small Enterprise …. … on 27 March, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.28880 of 2024
M/s Gayatri Agency, Khurda .... Petitioner(s)
Represented By
Mr. Satya Smruti Mohanty, Adv.
-versus-
Micro and Small Enterprise .... Opposite Party(s)
Facilitation Council, Cuttack
& Ors.
Represented By
Mr. Bibhu Prasad Mohanty (for MSMEC)
CORAM:
DR. JUSTICE S.K. PANIGRAHI
Order ORDER
No. 27.03.2025
04.
1.
This matter is taken up through hybrid arrangement.
2. In this Writ Petition, the Petitioner challenges the order dated 29.08.2024
passed by the Micro and Small Enterprises Facilitation Council, Cuttack
(hereinafter referred to as ”MSEFC’) in MSEFC Case No.30 of 2023
dismissing the case of the Petitioner stating that it has no jurisdiction.
The said order is arbitrary and against the provision of Micro Small and
Medium Enterprises Development Act, 2006 (hereinafter referred to as
“MSMED Act“)
3. Heard learned counsel for the Parties and perused the materials placed
on record.
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Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
4. The brief facts of the case, as outlined in the Writ Petition, are that the
Petitioner is a proprietorship concern engaged in Electrical Engineering
for HT & LT line off Construction, Erection, and Transmission of line
duly registered as a Small Scale Enterprises in the State of Odisha. It is a
service provider within the meaning of Section 2 (n) of the MSMED, Act
having Udyam Aadhar Number (UAM) UDYAM-OD- 07-0001962 and
Udyam Aadhar Memorandum (UAM) UDYAM07E0009355.
5. During the course of business activities, the Petitioner was awarded
with a work order for Rs.1,51,65,395.00 (One Crore Fifty-One Lacs Sixty-
Five Thousand Three Hundred Ninety-Five Only) vide
No.TCPL/C/WO/Proj/3600 dated 17.04.2019 and, subsequent,
amendment order vide No.TCPL/C/W0/Proj/3600AA dated 23.05.2019
for Construction of 5.7 K.M. 33KV line from Choudwar Sub-Station to
the Factory of Toshali Cements Private Limited/ Opposite Party No. 2, at
in village Indranipatna, Tangi- Choudwar Tahasil, Cuttack District,
Odisha.
6. As per the work order, the Petitioner duly supplied and executed the
works as specified in the work order issued by the Opposite Party No.2.
But, some portion of the work remained incomplete due to failure on the
part of the Opposite Party No.2 in obtaining NHAI clearance for
conductor stringing across Kalinga Chhak market portion. In the
meantime, the Petitioner raised running bills against each of the
completed portions of work and got the entire payment except 10%
retention amount of Rs.16,02,409.00 (Sixteen Lacs Two Thousand Four
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Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
Hundred Nine Only). The Opposite Party No.2 received the goods and
services from the Petitioner for which the bills were approved and
cleared.
7. The Petitioner made several requests through mail for payment of the
aforesaid retention amount. But, the Opposite Party No.2 gave a deaf ear
to the same. The Petitioner firm being a registered small-scale unit is
facing difficulty due to withholding of the retention amount by the
Opposite Party No.2.
8. Owing to such nonchalant behaviour of the Opposite Party No.2, the
Petitioner filed a complaint on 14.12.2022 in “MSME SAMADHAN”.
Though the hearing was held on 05.04.2023 through VC, but the
Opposite Party No.2 did not appear.
9. Further, the Petitioner filed a case under Section 18 of the MSMED, Act
bearing MSEFC Case No.30 of 2023 on 10.07.2023 before the Micro and
Small Enterprises Facilitation Council, Odisha, Cuttack. The Council
initiated conciliation proceeding under Section 18(2), whereby both the
parties made their submissions on several occasions. The Petitioner in its
claim statement prayed for a direction to the Opposite Party No.2 to
make payment of the principal amount of Rs.16,02,409.00 (Sixteen Lacs
Two Thousand Four Hundred Nine Only) along with interest for
delayed payment of Rs.7,30,098.00 (Rupees Seven Lacs Thirty Thousand
Ninety-Eight only) calculated up to 30.06.2023 amounting to
Rs.23,32,507.00 (Rupees Twenty-Three Lacs Thirty-Two Thousand Five
Hundred Seven Only) to the Petitioner. Further, the Petitioner also
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Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
sought for a direction to the Opposite Party No.2 to make payment of
the pendente lite and future interest at the rate of 3 times of the Bank
rate as notified by RBI from 01.07.2023 till the date of payment
10. Subsequently, the Opposite Party No.2 entered appearance and filed its
counter affidavit denying the claims made by the Petitioner, on the
ground that the entire scope of the work under the work order is still
incomplete. Hence, the Petitioner is not entitled to the retention amount.
Thereafter, the Petitioner filed its rejoinder reiterating that the work
could not be completed due to failure on the part of the Opposite Party
No.2 in obtaining clearance from NHAI
11. Thereafter, on 29.08.2024, during the 113th Sitting of the Micro Small and
Medium Enterprise Council, Cuttack, the Petitioner produced a
statutory letter of Special Notice served on it as Creditors by the
Opposite Party No. 2, in pursuance of Rule 30(5)(b) of the Companies
Rules, 2014 on account of proposed shifting of Registered Office of the
Opposite Party No.2 from the State of Andhra Pradesh to the State of
Uttar Pradesh. The Petitioner stated that in the said letter the Opposite
Party No.2 has clearly admitted that it owes a debt of Rs.10,57,539/-
(Rupees Ten lacs Fifty-seven Five Hundred Thirty-Nine Only) after
deduction of GST.
12. However, the MSEFC has passed the order dated 29.08.2024 dismissing
the case of the Petitioner on the basis of submission of the Opposite
Party No.2, that the amount stated by the Opposite Party No.2 in its
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Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
Special Notice to Creditor is the cost of the work which has not been
executed. Hence, this Writ Petition.
13. Learned counsel for the Petitioner submits that the Claimant- Petitioner,
in its claim statement had sought only for the payment of the amount
which is due against the completed work and not against the work that
could not be completed. He further submits that the claim of the
Petitioner is limited to the retention amount of 10% of the total value
amounting to Rs.16,02,409.10 which was withheld against the work
already completed and the bills were raised.
14. It is further submitted that out of the said amount of Rs.16,02,409.10/-,
10% of the total value towards retention i.e. an amount of
Rs.5,44,869.00/- was deducted by the Opposite Party No.2 towards
compensation for delay in filing of GST returns by the Petitioner.
Therefore, after considering all such deductions the total amount that is
due and payable by the Opposite Party No.2 to the Petitioner is
Rs.10,57,539/- (Rs. 16,02,409.10/- Rs. 5,44,869.00/-).
15. It is further reiterated that the amount due and payable by the Opposite
Party No.2 to the Petitioner as stated in the calculation above was
admitted by the Opposite Party No.2 in the statutory letter issued under
Rule 30(5)(b) of the Companies Rules, 2014.
16. Therefore, the MSEFC has erred in dismissing the case of the Petitioner
under the misconception that the amount claimed by the Petitioner was
for the work is yet to be completed, which is violative of Section 18(4) of
the MSMED Act, 2006. Moreover, the MSEFC did not carry out the
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Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
conciliation proceeding in an appropriate manner and hurriedly
dismissed the case without proper application of mind and under gross
misconception of the factual position. Moreover, the learned MSEFC was
wrong in law by dismissing the case of the Petitioner and the same is
violative of Section 18(3) of the MSMED, Act 2006 as the Council neither
took up the matter for arbitration by itself nor did it refer it to any other
institution for arbitration. In order to substantiate his contention, learned
counsel for the Petitioner relies upon a judgment of the Supreme Court
in the case of Vijetha Construction v. Indus Smelters Ltd.1.
17. Therefore, it is contended that the impugned order dated 29.08.2024
passed by the ‘MSEFC in MSEFC Case No.30 of 2023 may be set aside
and the prayer of the Petitioner may be allowed.
18.Learned counsel for the Opposite Party No.2 submits that there is no
cause of action to file the present proceeding and for suppressing the
material facts, the present Writ Petition deserves to be dismissed. He
further submits that it is equally important to bring certain facts into
record for effective adjudication of the matter which are as follows:
(i) It is the case of the Opposite Party No.2 that in order to sort out
uninterrupted power supply to its plant and to operate the
plant continuously, it invited quotation from different agencies
for construction of 5.7 km 33 kv line from Choudwar substation
to its plant (M/s Toshali Cements Pvt. Ltd.) At- Village-
1
2021 SCC OnLine SC 3436
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Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
Indranipatna , Tangi- Choudwdar, P.O-Chasapada , Dist.
Cuttack -754027) .
(ii) Pursuant to the said invitation, the Petitioner submitted its
quotation by GA/2019-20/01 dated 01.04.2019 and also
submitted its quotation through Email dated 10.04.2019 and
12.04.2019.
(iii) After scrutinizing the proposal, the Opposite Party No.2
finalized the quotation of the present Petitioner i.e. M/s.
Gayatri Agency and, accordingly, issued work order for
construction of 5.7 km 33 kv line from Choudwar substation to
its plant (M/s Toshali Cements Pvt. Ltd.) on the terms and
conditions as fixed in the work order dated 17.04.2019. The
principal work order as proposed by the Petitioner was further
amended on 14.05.2019 and 23.05.2019.
(iv) As per the terms and conditions of the principal work order,
the deadline for execution and completion of the work was
within 6 months from the date of issuance of the work order i.e.
17.04.219 and in case of delay beyond 6 months for the same,
there shall be liquidated damages that is to be paid up to 5 %, @
0.5% per week of the total contract value from the date of
receipt of work order.
(v) The original work order for execution of the work was issued
for an amount of Rs.97,29,688/- which was enhanced from time
to time to the tune of Rs.1,51,65,395/- and out of the same, the
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Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
claimant already received the payment raised against the
running bills against each completed portion of work to the
tune of Rs.1,44,69,768/- till 30/03/2021.
(vi) However in spite of receipt of the considerable amount (the
above-said amount) , the Petitioner failed to execute the work
within the time stipulated in the work order or even beyond
the same and till date construction of 5.7 km 33 kv line from
Choudwar substation to its plant (M/s Toshali Cements Pvt
Ltd) is incomplete.
(vii) The Petitioner after the stipulated period, by taking different
pleas, left the work unattended and due to non-completion of
the work, the Opposite Parties have not only failed to get
uninterrupted power supply to their plant but many of its
electric poles, cables, conductors are found missing and stolen.
As a result, the Opposite Parties sustained the entire loss of the
work order.
(viii) In spite of all request to supply line from Choudwar substation
to its plant (M/s Toshali Cements Pvt. Ltd.) made by the
Opposite Party No.2 on the condition to clear all their
outstanding dues once the power supply will be done the same
is still in-complete till date and the Petitioner has no intention
to complete the work order.
(ix) If the execution of the work was completed within the
stipulated time, the subsequent development such as road
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Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
expansion, NHI permission, theft of electric poles, cables,
conductors would not have arisen at all.
(x) However, the Petitioner filed MSEFC Case No.30 of 2023
under Section 18 of the Act, before the Micro and Small
Enterprise Facilitation Council, Cuttack (Opp. Party No-1) by
suppressing the material facts.
(xi) In pursuance to the notice issued by the Opposite Party No.1
in the aforesaid proceeding i.e. MSEFC Case No.30 of 2023, the
Opposite Party No.2 entered appearance through its Advocate
and filed reply along with all the connected documents on
04.01.2024 before the Opposite Party No.1.
(xii) The Opposite Party No.1 has given ample opportunity of
hearing to both the parties to settle the dispute. But, as the
Petitioner having no intention to execute the work order, the
Chairman, Micro and Small Enterprises Facilitation Council,
Cuttack (MSEFC) vide order dated 12.08.2024 holding that “xx
xx the dispute is on execution of work and since the work has not been
executed, Council has no jurisdiction to interfere with” has
dismissed the aforesaid case.
(xiii) It is submitted that Section 15 of the MSMED Act, 2006
described about DELAYED PAYMENTS TO MICRO AND
SMALL ENTERPRISES:
Where any supplier supplies any goods or renders any
services to any buyer, the buyer shall make payment
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Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16therefore on or before the date agreed upon between him
and the supplier in writing or, where there is no agreement
on this behalf, before the appointed day: 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.
(xiv) But in the instant case, the Petitioner failed to execute the work
within the time stipulated in the work order or even beyond
the same and till date the construction of 5.7 km 33 kv line from
Choudwar substation to its plant (M/s Toshall Cements Pvt.
Ltd.) is incomplete. Therefore, the above proceeding before the
Chairman, Micro and Small Enterprises Facilitation Council,
Cuttack (MSEFC) was not at all primarily maintainable. In view
of the same, the Opposite Party No.1 has rightly dismissed the
MSEFC Case No.30 of 2023 by holding “xx xx the dispute is on
execution of work and since the work has not been executed, Council
has no jurisdiction to interfere with”
(xv) So far as the judgment of the Apex Court i.e. Vijetha
Construction (supra) relied upon by the Petitioner, it is
contended that the said judgment is completely different from
the instant case. In the said case the Apex Court held that “as
per the scheme of the MSMED Act, the facilitation council has a dual
role to play, one as a conciliator as per Section (2) of Section 18 and,
thereafter, in case the conciliation is unsuccessful as an Arbitrator as
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Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16per Sub-section (3) of Section 18“. But in the present case, the
Petitioner failed to execute the work within the time stipulated
in the work order, and till date the construction of 5.7 km 33 kv
line from Choudwar substation to its plant (M/s Toshali
Cements Pvt. Ltd.) is incomplete, and the Petitioner raised the
running bills against each completed portion of work and got
the entire payment to the tune of Rs.1,44,69,768/- till 30.03.2021,
except Rs.16,02,409.00 towards 10% retention value. So, the
proceeding of the Petitioner was dismissed by the Opposite
Party No.1. Hence, the ratio decided by the Supreme Court in
Vijetha Construction (supra) is not at all applicable to the
present case.
19.Therefore, it is submitted that this Writ Petition filed by the Petitioner is
liable to be dismissed.
20. Considering the submissions made by the learned counsel for the
Parties and upon bare perusal of the materials available on record
especially the impugned order dated 29.08.2024 passed by the Micro and
Small Enterprises Facilitation Council, Cuttack in MSEFC Case No.30 of
2023, this Court is of the view that the dispute involved in this case
relates to an arbitrable matter. Hence, this matter is required to be
remitted back to the Micro and Small Enterprises Facilitation Council,
Cuttack, as any dispute arising out of non-payment has to be referred to
the Micro and Small Enterprises Facilitation Council. Accordingly, the
impugned order dated 29.08.2024 passed by the Micro and Small
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Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 07-Apr-2025 15:00:16
Enterprises Facilitation Council, Cuttack in MSEFC Case No.30 of 2023 is
set aside and the matter is remitted back to the Micro and Small
Enterprises Facilitation Council, Cuttack for consideration afresh.
21. Accordingly, this Writ Petition is disposed of.
22. Interim order, if any, passed earlier stands vacated.
( Dr. S.K. Panigrahi)
Judge
B. Jhankar
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