Andhra Pradesh High Court – Amravati
Kmv Projects Limited vs The Andhra Pradesh Micro And Small … on 24 January, 2025
1
APHC010586152023
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3310]
(Special Original Jurisdiction)
FRIDAY ,THE TWENTY FOURTH DAY OF JANUARY
TWO THOUSAND AND TWENTY FIVE
PRESENT
THE HONOURABLE DR JUSTICE K MANMADHA RAO
WRIT PETITION NO: 30293/2023
Between:
Kmv Projects Limited ...PETITIONER
AND
The Andhra Pradesh Micro And Small Enterprises ...RESPONDENT(S)
Facilitation Council and Others
Counsel for the Petitioner:
1. PRAHASTHA M
Counsel for the Respondent(S):
1. NOMOS VISTAS THE LAWYERS
2. GP FOR INDUSTRIES COMMERCE
The Court made the following:
ORDER :
This writ petition is filed under Article 226 of the Constitution of India for
the following relief:
“….to issue to issue a Writ of Mandamus or any other appropriate Writ or Writs Order or
Direction declaring the Respondents minutes of the meeting dated 20.09.2023 in the proceedings
vide reference no 21C/IFC/2023/2741 as arbitrary and illegal being inter alia in violation of the
provisions of the Medium Enterprises Developmen
Developmentt Act 2006 and the Andhra Pradesh Micro
Small and Medium Enterprises Facilitation Council Rules 2007 in addition to being in
contravention of the principles of natural justice and consequently terminate the proceedings
nd
before the Respondent in 21C/IFC/2023
21C/IFC/2023/2741 between the 2 Respondent and the Petitioner as
being without jurisdiction and pass…”
pass
2
2. Brief facts of the case are that the petitioner is a company
incorporated under the provisions of the Companies Act, 1956 and is
engaged in the execution of several large-scale infrastructure projects
across the country. In the instant case, the Petitioner was awarded the
work of construction of a bridge near Chamanur village in the Kalaburgi
district of Karnataka. The Petitioner and the 2nd Respondent (a partnership
concern) executed the Sub- Contract dated 22.08.2018. whereby, the 2 nd
Respondent was responsible for executing the entire works on a back-to-
back basis. Under the Sub-Contract, the 2nd Respondent is, inter alia,
responsible for planning, procuring, supplying, execution and installation,
testing, quality and quantity checking for compliance and commissioning,
and operation and maintenance of the above-noted bridge up to the defect
liability period. The 2nd Respondent’s Reference relates to its purported
claims under this Sub-Contract. It is further stated that several clauses of
the Sub-Contract, including the recitals, make it clear that the 2nd
Respondent had undertaken the entire responsibility for the works. The 2 nd
respondent initiated a reference before the 1st respondent by filing its
reference, which is in the form of a statement of claim, the 2nd respondent
has advanced several claims against the petitioner allegedly arising under
the Sub-Contract. The 2nd respondent’s alleged claims aggregate to a
principal claim amount of Rs.17,00,45,429/- and interest of
Rs.14,45,40,417/-. It is further stated that, on 22.08.2023, the Petitioner
received a “Notice Calling for Statement of Defence” from the 1st
3
Respondent under Rule 8(1) of the AP MSEFC Rules. In this notice, the 1st
Respondent called upon the Petitioner to submit its statement of defence
within 15 (fifteen) days of receiving the instant notice. In addition, the
Petitioner was directed to pay an advance for costs referred to in Section
31 (8) of the Arbitration and Conciliation Act, 1996 (for short “Arbitration
Act“). Further, in the notice, the 1 Respondent has further stated that the
2nd Respondent has made the Reference to it to act as an “Arbitrator”
regarding the 2nd Respondent’s claims against the Petitioner. the
petitioner has sent a letter to the 1st respondent on 4.9.2023 stating that it
required further time to collate the necessary documents and therefore
requested an enlargement of time. Again on 5.9.2023 the petitioner
received another “Notice Calling for Statement of Defence” from the 1 st
respondent, which does not appear to have considered the petitioner’s
request. Thereafter, without calling for any response from the petitioner,
the 1st respondent sent a notice dated 8.9.2023 informing that, a meeting
will be held on 20.9.2023 for conciliation in terms of Section 18(2) of MSME
Act. Objecting the same, the petitioner submitted a detailed Memo. After
filing the Memo before the 1st respondent during the meeting on 20.9.2023
the 1st respondent shared a copy of a circular dated 4.1.2023 issued by the
Ministry of Micro, Small and Medium Enterprises Government of India (for
short “the Circular”). Relying on the above Circular, the 1st respondent
believed that the claims being agitated by the 2nd respondent were within
its jurisdiction and asked the petitioner to file its statement of defence.
4
However a reading of the circular makes it clear that it is wholly
inapplicable to the petitioner’s jurisdictional objections and the 1st
respondent has misdirected itself, in relying on the same. in any event,
having not had the opportunity to review the contents of the Circular, the
petitioner did not admit to the relevance of the circular during the meeting
on 20.09.2023. The petitioner received a copy of Impugned Minutes which
is in the nature of a non-speaking order, nearly four weeks after the
meeting held on 20.09.2023. Questioning the same, the present writ
petition came to be filed.
3. The counter affidavit has been filed by the respondent No.2.
While denying all the allegations made in the petition, inter alia, contended
that, the petitioner and this respondent have entered into a sub contract
agreement dated 22.08.2018 for execution of the work of construction of a
bridge near Chamanurvilalge in Kalaburgi District of Karnataka State,
which is being sanctioned to the petitioner by the Chief Engineer, National
Highways, public Works, Ports and Inland water transport Department
Bengaluru vide Main contract Tender agreement No.ENH/KLB/TND/10 for
2017-18. In spite of execution of works the petitioner company has not
released the payments to the 2nd respondent firm to the tune of
Rs.31,45,85,846/-. Further, though the 2nd respondent firm has submitted
several letters to the petitioner company for releasing of delayed payments,
the petitioner company has not taken any steps so far. As such, the 2 nd
respondent being MSME has availed the remedy under the MSME Act
5
2006 and has made a reference with the 1st respondent Facilitation council
for entering into reference under Section 18of MSME Act 2006 claiming an
amount of Rs.17,00,45,429/- and interest amount of Rs.14,45,40,417/-
from the petitioner company. Accordingly the 1st respondent entered into
reference vide Ref No.21C/ FC/2023/2741 and issued notice dated
14.08.2023 calling upon the petitioner company to furnish its statement of
defence as per rule 8(1) of the Andhra Pradesh Micro & Small Enterprises
Facilitation Council Rules 2007. In pursuance of the same, the petitioner
company sent a letter dated 4.9.2023 requesting time for filing the
statement of defence. It is further stated that, as scheduled on 20.9.2023 a
conciliation meeting was held by respondent No.1 council, to which the
representatives of both the petitioner’s company as well as 1st respondent
have attended. Thereafter, the petitioner company filed a Memo dated
20.09.2023 objecting for the jurisdiction of the 1st respondent council in
entering into reference made by 2nd respondent, on the erroneous
presumption that MSMEF council 1st respondent cannot enter a reference
with respect to work contracts and the Act takes its fold only manufacturing
activities and Service activity. It is further stated that the petitioner
company was provided with a copy of the circular and was informed and
clarified by the 1st respondent Facilitation Council that its jurisdiction and
the representatives of the petitioner company have also accepted the
same. It is not in dispute that a conciliation meeting under Section 18 (2)
was held on 20.09.2023 which was attended by representatives of both
6
petitioner company and also 2nd respondent firm. Upon raising preliminary
objection with respect to the jurisdiction of the 1st respondent council the
1st respondent council furnished a copy of the Circular dated 4.1.2023 and
upon receiving the same the petitioner company consented with the
contents of the circular and sought time for filing statement of defence. As
such the present writ petition is liable to be dismissed.
4. Heard Sri Prahstha.M., learned counsel appearing for the
petitioner; learned Government Pleader for Industries and learned counsel
representing M/s Momos Vistas the Layers.
5. On hearing, learned counsel for the petitioner while reiterating the
averments made in the petition, submits that, it is clear from a plain reading
of Section 18 of MSME Act that only those disputes that arise concerning
any amount due under Section 17 from a buyer of any goods supplied or
services rendered by a supplier registered under the MSME Act are
susceptible to the 1st respondent’s adjudicatory jurisdiction under the
MSME Act. Section 17, in turn, states that the buyer is liable to pay the
amount due for any goods supplied or services rendered together with
interest thereon. He further submits that, the term ‘buyer’ as per Section
17 is defined under Section 2(d) of the MSME Act as “whoever buys any
goods or receives any services from a supplier for consideration” Section
2(n)(iii) defines “supplier” to mean a Micro or Small Enterprise that has filed
a Memorandum with the authority referred to in sub section (1) of section 8
and includes “any company, co-operative society, trust or a body, by
7
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 such enterprises provide”.
6. Learned counsel for the petitioner has relied upon a decision of
Hon’ble Supreme Court in a case of Larsen and toubro Limited and
others v. State of Karnataka and others 1, and submits that a “works
contract” is not a contract for supply of goods or provision of services. A
“works Contract” is identifiable by law as a separate specie of contract, and
includes within its purview works in addition to simply supplying goods or
rendering related services. As such an enterprises registered under the
MSME Act can be engaged in activities other than the supply of goods or
services. However, the benefit of the MSME act will not be available those
activities of the enterprise that do not fall within either of these categories.
7. Learned counsel for the petitioner further submits that, in the
present case, the disputes submitted by the 2 nd respondent in reference to
the 1st respondent relate to the Sub Contract. The various clauses of the
Sub Contract make it clear that the sub contract is a ‘works contract’ and
not a simpliciter contract for the supply of goods or provision of services.
Therefore, the MSME Act’s provisions cannot apply to the 2 nd respondent
reference which is liable to be rejected. He further submits that, it cannot
be disputed that the petitioner appeared before the 1st respondent under
protest, having filed its jurisdictional objections by the Memo dated
1
(2014) 1 SCC 708
8
20.09.2023. The petitioner cannot be said to have submitted to the 1st
respondent’s jurisdiction. In any event, it is trite law that the parties’
consent cannot confer jurisdiction on an authority that inherently lacks
jurisdiction to adjudicate a given dispute or proceedings. Therefore, even if
the statement recorded in the Impugned Minutes to the effect that the
Petitioner accepted the Circular is taken at face value, the Petitioner could
not have waived statutory provisions and conferred jurisdiction on the 1 st
Respondent. Further, it was nonetheless incumbent on the 1 st Respondent
to have deliberated upon the Petitioner’s jurisdictional objections, which
were of such a nature as to go to the root of the matter.
8. To support his contentions, learned counsel for the petitioner has
relied upon a decision of Hon’ble Supreme Court reported in Rajasthan
State Electricity Board, Jaipur vs. Mohan Lal and Ors.2 , wherein the
Apex Court held that :
….” in our opinion, the High Courts fell into an error in applying the principle of ejusdem
generis when interpreting the expression ” other authorities” in Art. 12 of the Constitution, as
they overlooked the basic principle of interpretation that, to invoke the application of ejusdem
generis rule, there must be a distinct genus or -category running through the bodies already
named. Craies on ,Statute Law summarises the principle as follows :-
“The ejusdem generis rule is one to be applied with caution and not pushed too far…. To
invoke the, application of the ejusdem generis rule there must be a distinct genus or category.
The specific words must apply not to different objects of a widely differing character but to
something which can be called a class or kind of objects. Where this is lacking, the rule
cannot apply, but the mention of a single species does not con- stitute a genus.”
2
MANU/SC/0360/1967
9
(ii) In another case reported in Commissioner of Central Excise,
Bolpur vs. Ratan Melting and Wire Industries3, wherein the HE Apex
Court held that:
Circulars and instructions issued by the Board are no doubt binding in law on the
authorities under the respective statutes, but when the Supreme Court or the High Court
declares the law on the question arising for consideration, it would not be appropriate for the
Court to direct that the circular should be given effect to and not the view expressed in a
decision of this Court or the High Court. So far as the clarifications/circulars issued by the
Central Government and of the State Government are concerned they represent merely their
understanding of the statutory provisions. They are not binding upon the court. It is for the
Court to declare what the particular provision of statute says and it is not for the Executive.
Looked at from another angle, a circular which is contrary to the statutory provisions has really
no existence in law.
(iii) In another case reported in Rashtriya Ispat Nigam Limited vs.
The Union of India and Ors. 4 , wherein the high Court of Andhra
Pradesh at Amaravati, held that :
In addition, in the opinion of this Court, the following definitions of Act 27 of 2006 are also important:
2 (d) ―buyer‖ means whoever buys any goods or receives any services from a supplier for
consideration;
(e) ―enterprise‖ means an industrial undertaking or a business concern or any other establishment, by
whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to
any industry specified in the First Schedule to the Industries (Development and Regulation) Act,
1951 (55 of 1951) or engaged in providing or rendering of any service or services;
(n) ―supplier‖ means a micro or small enterprise, which has filed a memorandum with the authority
referred to in sub-section (1) of section 8, and includes,–
(i)…
(ii)…
(iii) any company, co-operative 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;
….
…
The second and equally important issue raised is about the filing of the memorandum under section 8 of
the Act 27 of 2006 and the invocation of the jurisdiction of the facilitation council. This Court finds that
the definition of supplier in section 2(n) of the Act 27 of 206 is as follows:
3
MANU/SC/4587/2008
4
MANU/AP/2696/2022
102 (n) ―supplier‖ means a micro or small enterprise, which has filed a memorandum with the authority
referred to in sub-section (1) of section 8, and includes,–
In addition, the decision of the Hon’ble Supreme Court in Silpi Industries etc., (5 supra) supports this
view. In para 25 of the said decision, the Hon’ble Supreme Court noted all the dates. It was found that
bids were invited on 25.02.2010; bid was submitted on 17.05.2010; work was awarded on 21.09.2010
and contract was signed on 29.07.2011. The section 8 memorandum was applied for by the appellant on
25.03.2015. Thereafter, in para 26, the following was decided among other things:
―………………..In our view, to seek the benefit of provisions under MSMED Act, the seller should have
registered under the provisions of the Act, as on the date of entering into the contract. In any event, for
the supplies pursuant to the contract made before the registration of the unit under provisions of
the MSMED Act, no benefit can be sought by such entity, as contemplated under MSMED Act.
………………… The appellant cannot become micro or small enterprise or supplier, to claim the benefits
within the meaning of MSMED Act 2006, by submitting a memorandum to obtain registration subsequent
to entering into the contract and supply of goods and services. If any registration is obtained, same will
be prospective and applies for supply of goods and services subsequent to registration but cannot
operate retrospectively. Any other interpretation of the provision would lead to absurdity and confer
unwarranted benefit in favour of a party not intended by legislation
(iv) In a case of National Textile Corporation Ltd., vs. Elixir
Engineering Pvt. Ltd., and Ors5, wherein the High Court of Bombay
held that:
It was further submitted that the Facilitation Council had no jurisdiction to enter into reference for
arbitration in the facts of the present case, because a perusal of the contracts/work orders would show
that they were nothing but works contracts. By relying upon judgment of this Court in the case of M/s. P.
L. Adke Vs. Wardha Municipal Corporation/Council (judgment and order dated 01st March, 2021,
passed in Arbitration Appeal (St) No. 30508 of 2019 in Arbitration Application (Commercial) No. 7 of
2019), it was submitted that the impugned awards deserve to be set aside. It was submitted that in the
said judgment, this Court had specifically held that a works contract would not be amenable to the
provisions of the MSMED Act and that therefore, the impugned awards in the present case also were
clearly without jurisdiction. It was brought to the notice of this Court that the aforementioned judgment in
the case of M/s. P. L. Adke Vs. Wardha Municipal Corporation/Council (supra) was followed by the
Andra Pradesh High Court in the case of Rashtriya Ispat Nigam Ltd. vs. Union of
India(MANU/AP/0689/2022,…”
9. Learned counsel for the petitioner while relying on the above
decisions, prayed to allow the writ petition.
10. Whereas, learned Government Pleader opposed for allowing the
writ petition and prayed to dismiss the same.
11. On the other hand, learned counsel appearing for the 2 nd
respondent while reiterating the contents made in the counter affidavit,
submits that, the meeting was held on 20-09-2023 and as per Rule 8 of
5
MANU/MH/1047/2023
11
APMSME Rules 2007 the Facilitation council is empowered to direct
Petitioner Company to file Statement of Defence. As such the objection of
petitioner’s company with respect to the same is incorrect. He further
submits that the present interpretation and application of MSME Act, 2006
is in the nature of adopting an inclusive approach of including the claims of
all MSME’s regulated under the Act to make the Act efficacious and
implementing effectively the machinery provided to expedite the claims of
MSME’s and to conduct the process in furtherance of promotion of objects
and application of the Act. He further submits that, any narrow hyper
technical interpretation devised to deny the relief of a forum and machinery
under the Act of 2006 to any registered MSME of reference before MSME
facilitation council would be contrary to the very object, and intent of the Act
and defeat its purpose as laid down by this Hon’ble High Court and other
High Courts.
12. Learned counsel for the 2nd respondent reiterated that the issue
in adjudication before Supreme Court of India in the rulings cited by
petitioner company is not whether a claim from a works contract can be
adjudicated by an MSME Facilitation Council or not but the Supreme Court
was examining the legal position as to the modalities of imposition of sales
tax on works contracts prior to the insertion of the clause 29-A of Article
366 of Constitution of India and hence the question was in relation to
Article 366 (29-A) of Constitution of India and its interpretation. As such
there is no authoritative precedent lying down that MSME Facilitation
12
council is not entitled for resolution of claims under the Act in work
contracts except claims relating to the manufacturing activity and services
only. Such narrow interpretation would make the beneficial legislation
ineffective defeating its very object. Therefore, learned counsel for the 2 nd
respondent prayed to dismiss the writ petition.
13. To support his contentions, learned counsel appearing for the 2 nd
respondent has placed reliance on a decision reported in Jaiprakash
Associates Limited versus Micro and Small Enterprises Facilitation
Council and another6, wherein the High Court of Delhi held that :
In a nutshell, going by the facts and legal issues involved, there are primarily two short issues
for consideration before this Court, namely [i] whether the reference orders under the MSME
Act are tenable or not, and, if so, [ii] whether the reference orders for work contracts could be
collectively referred for arbitration before the same learned Arbitrator.
15. While considering the first issue, this Court finds on the facts disclosed that even though
KBPL was registered under the MSME Act on 07.09.2019, it had been raising bills qua work
contracts/agreements on JAL since before and furthermore the supplies took place post
registration of KBPL as an MSME. As per the settled legal position laid down by the learned
Single Judge in Chief General Manager (Contracts) (supra) which has been upheld by a
Division Bench of this Court vide judgment dated 29.01.2020 in LPA 688/2019 and against
which SLP(C) No. 9268/2020 has been dismissed by the Hon’ble Supreme Court vide order
dated 22.09.2020, and also the judgment in GE T&D India Limited (supra), the aforesaid facts
of work going on is sufficient for the reference by MSEFC to be legally tenable. In fact, it is an
admitted position of the appellant that one of the invoices under the work
contracts/agreements is indeed post registration of KBPL as a MSME. Thus, this Court is of
the opinion that the MSEFC was well within its powers to refer the matter to arbitration and
there was no error of any kind.
16. In the opinion of this Court, the contention of learned counsel for the appellant that the
work contracts/agreements involved were composite indivisible contracts for different works
itself ousts the jurisdiction of the MSEFC, cannot be accepted as the mere nomenclature used
therein is not enough to determine the nature thereof. The learned Single Judge in the first
impugned order has not gone into the determination of the subject work contracts/agreements
as such and has rightly left the issue, as to whether the work contracts/agreements were in
fact work contracts which are indivisible contracts including the ‘supply of goods’ and which
‘render a service’ open to be adjudicated by the learned Arbitrator. As such, this Court cannot
go into the said determination.
17. In any event, the contentions raised as to the lack of inherent jurisdiction of the MSEFC
and that the agreements involved are work contracts, have been raised to enlarge the scope
of the appeal which is not permissible in law. In the garb of an appeal, the appellant cannot6
2023 SCC OnLine Del 4601
13raise new and fresh grounds not raised before the learned Single Judge, and this
Court cannot consider these fresh grounds.
(ii) In another case reported in M/s. Dalapathi Constructions versus
The State of Andhra Pradesh and others7, wherein the High Court of
Andhra Pradesh held that:
16. Section 7 of the Arbitration and Conciliation Act, 1996 requires an arbitral agreement in
writing to be available before any dispute can be referred to arbitration. In the present case
such an arbitral agreement is available in Clause-38 of the agreement dated 14.06.2018.
However, Section 18 (3) of the Act provides that the arbitration conducted by the Facilitation
Council shall be treated as arbitration, as if the said dispute was referred under an arbitration
agreement referred to in sub- section (1) of Section 7 of the Arbitration and Conciliation Act,
1996. Further, Section 18(4), which starts with a non-obstante clause states that 9 RRR,J the
Facilitation Council shall have jurisdiction to act as arbitrator in any dispute between a supplier
located with its jurisdiction and buyer located anywhere in India.
In Shah & Parikh, Engineers & Contractors vs. Urmi Trenchless Technology Pvt. Ltd., and
Ors., the learned Single Judge while dealing with a similar issue, at paragraph-22 had held as
follows:
AIR 2004 SC 1766 10 RRR,J “22. As regards the other defence is concerned, defendant no. 1
is admittedly a small enterprise registered under the MSME Act. The registration certificate is
annexed at Exhibit „1‟ to the affidavit in support of notice of motion (L) no. 2266 of 2018 filed
by defendant no. 1 under Section 8 of the Arbitration Act. The Registration Certificate is for
“horizontal boring”, which is nothing but drilling activity. Plaintiff in the course of arguments did
not dispute that defendant no. 1 was registered under the MSME Act, but merely sought to
contend that the work forming the subject matter of the contract between the parties was not
the same activity for which defendant no. 1 had been registered. However, as stated above,
this is misconceived as “horizontal boring” is in fact a drilling activity. Further, there is nothing
in the MSME Act which provides that the registration for a particular activity will render an
enterprise liable not to be regarded as a micro, small or medium enterprise for any other
activity.
(iii) In another case reported in Shah & Parikh versus Urmi
Trenchless Technology Pvt. Ltd. and another 8, wherein the High Court
of Bombay held that:
21 Section 18 (3) of the MSME Act contemplates a reference to arbitration and there is a
deeming provision that the arbitration should be deemed to have been instituted pursuant to
an arbitration agreement under Section 7 of the Arbitration Act. As held by the Hon’ble
Supreme Court in the context of the predecessor Act to the MSME Act [Secur Industries
Limited (supra)], there is an incorporation of the Arbitration Act into the MSME Act by virtue
of Section 18 (3) of the MSME Act. Section 18 (3) of the MSME Act clearly provides that
the Arbitration Act shall apply to the disputes as if the arbitration was in pursuance of an7
2022 AIR (Andhra Pradesh) 150
8
2019 SCC OnLine Bom 340
14agreement referred to in Section 7 of the Arbitration Act. 22 If the Arbitration Act is held to
apply, then the provisions of the Arbitration Act including Section 23, which deals with Counter
Claims/set off, is incorporated in the MSME Act and plaintiff herein would be at liberty to raise
its counter claim before the Facilitation Council. This would be in consonance with justice and
would avoid multiplicity of proceedings as also the unsatisfactory possibility of different fora
taking different views on the same subject matter.
(iv) In another case reported in Hindustan Petroleum Corporation
Limited and another versus West Bengal State Micro, Small
Enterprises, Facilitation Council and others9, wherein the High Court of
Calcutta held that :
58. Again, a learned Single Judge of the Andhra Pradesh High Court, in Rashtriya Ispat
Nigam (supra) applied the proposition of Kone /Elevator (supra) erroneously to the MSME Act,
which was followed by two other Single Judge decisions of the Bombay High Court in PP.L.
Adke (Supra) and National Textile Corporation (supra).
59. As opposed to the said judgments cited by the petitioner, a rather correct approach, in
the humble opinion of this Court, was adopted by a learned Single Judge of this Court and
another learned Single Judge of the Andhra Pradesh High Court, respectively in Marine Craft
Engineers (supra) and Dalapathi Constructions (supra). Althought eh judgment of this Court
was not exactly in the context of a works contract, it was rightly observed that if a registration
is obtained by a micro and small enterprise under Section 8(1) of theAct, the supplier fulfils the
necessary conditions and comes within the purview of Section 18of the MSME Act. The
Andhra Pradesh High Court also clearly recorded that there is nothing in the MSME Act which
provides that the registration for a particular activity will render an enterprise liable not to be
regarded as a micro, small or medium enterprise for any other activity. Once registered, the
status of the enterprise is that of a registered enterprise under the MSME Act and all the
provisions of the said Act apply with full force.
60. Thus, in the context of the above discussion, the principle of Kone Elevator (supra)
was erroneously applied by several High Courts in the judgments cited by the petitioner, as
discussed above, the correct proposition of law, in my humble opinion, is that once an
enterprise, otherwise coming within the contemplation of the Act is registered under section
18(1) the same has to attract the provisions of the MSME Act, including Section 18 of the
same, vesting authority on the Council to resolve disputes in that regard.
(iv) In another case reported in Marine Craft Engineers Private
Limited Versus Garden Reach Shipbuilders and Engineers Limited 10,
wherein the High Court of Calcutta held that :
In light of the above discussion, the conclusion of this Court is as follows. The date of
execution of a contract between a buyer and a supplier under the MSMED Act is irrelevant for
the application of the provisions of the MSMED Act provided the supplier claims recovery of9
2023 SCC OnLine Cal 1700
10
2023 SCC OnLine Cal807
15the amount due under section 17 for goods supplied or services rendered after the date of
registration. In other words, whether the supplier was registered as an MSME on the date of
the contract would not disqualify the supplier from making reference to the Micro and Small
Enterprises Facilitation Council under section 18 for recovery of outstanding amounts as long
as the amounts claimed are relatable to goods supplied or services rendered after the date of
registration of the supplier as a micro, small or medium enterprise under section 8(1) of the
Act. If the supplier fulfils the aforesaid condition and makes a reference to the Facilitation
Council under section 18, the Council steps in as the only – and exclusive forum – to decide
the reference under the provisions of the MSMED Act, 2006.
24. The exclusivity of the jurisdiction of the Facilitation Council to decide on the reference is
clearly spelt out by the sub-sections to section 18 including the non obstante clause which is a
precursor to the sub-sections. Section 18(1) begins with “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.”
To return to the present dispute, the unilateral act of the respondent in invoking the
contractual arbitration clause and appointing the learned Sole Arbitrator on 23.9.2016 after the
petitioner made a reference to the Facilitation Council is thus patently contrary to the
provisions of the MSMED Act. Moreover, the respondent invoked the arbitration clause and
proceeded with the arbitration and made a reference before the Arbitrator appointed by it
being fully aware that the reference before the Facilitation Council under the MSME Act was
pending as on the date of the appointment of the Arbitrator. The impugned Award dated
23.9.2018 by which the claim of the respondent (which was the claimant in the arbitration
proceedings) of Rs. 30,24,849/- was allowed in full is hence in the form of a face-off with the
provisions of the MSMED Act so to speak.
14. Perused the material on record.
15. On perusing the material on record and on hearing the
submission of both the learned counsels, it is observed that the meeting
was held by the 1st respondent on 20.09.2023. It is not in dispute that a
conciliation meeting under Section 18(2) was held on 20.09.2023 which
was attended by representatives of both the Petitioner Company and also
respondent No.2 firm. It is further observed that, upon raising preliminary
objection with respect to the jurisdiction of the 1st respondent council, it has
furnished a copy of Circular dated 04.01.2023.
16. On a perusal of the above Circular, it is observed that the
Circular does not interpret or consider the scope of Section 17and 18 of the
16
MSME Act, which are the only provision under the MSME Act from which
the 1st respondent would derive its authority. The Circular also does not
consider or to take note of the above decisions relied upon by the
petitioner. As such the Circular only concerns itself with the online
registration portal and there is no clarification, express or implied, relating
to jurisdiction of the 1st respondent to adjudicate dispute arising from works
contracts. It is also not in dispute that the petitioner appeared before the
1st respondent under protest, having filed its jurisdictional objections by the
Memo dated 20.09.2023. The petitioner cannot be said to have submitted
to the 1st respondent’s jurisdiction.
17. Viewed from any angle, it is trite law that he parties consent
cannot confer jurisdiction on an authority that inherently lacks jurisdiction to
adjudicate a given dispute or proceedings. Therefore, even if the
statement recorded in the impugned Minutes to the effect that the petitioner
accepted the Circular is taken at face value, the petitioner could not have
waived statutory provisions and conferred jurisdiction on the 1st
respondent. Further, the express and unconditional legal proscription
clarifies that the 1st respondent is not empowered to adjudicate the
disputes referred to it vide the 2nd respondent’s reference since the dispute
arises from a “works contract”.
18. Therefore, the 1st respondent failed to adhere to the principles of
natural justice. Further, the 1st respondent issued the Circular, without
giving any opportunity to the petitioner to make any submissions
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concerning the applicability of the Circular. It was incumbent on the 1st
respondent, a quasi judicial authority, to have followed the principles of
natural justice before ruling on the petitioner’s Memo and that the 1st
respondent appears pre-determined to reject the petitioner’s jurisdictional
objections. Therefore, the impugned Minutes are liable to be set aside.
19. Accordingly, the Writ Petition is allowed. The impugned Minutes
of the Meeting dated 20.09.2023 is hereby set aside and the proceedings
vide reference No.21C/IFC/2023/2741 of the 1 st respondent, which is in
between the petitioner and the 2nd respondent are herby terminated being
without jurisdiction. No costs.
20. As a sequel, all the pending miscellaneous applications shall stand
closed.
_________________________
DR. K. MANMADHA RAO, J.
Date : 24-01-2025 Gvl 18 HON'BLE DR. JUSTICE K. MANMADHA RAO WRIT PETITON No.30293 of 2023 Date : 24.01.2025 Gvl
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