Telangana High Court
M/S V K A Constructions vs The State Of Telangana on 9 June, 2025
Author: K. Lakshman
Bench: K. Lakshman
1
IN THE HIGH COURT FOR THE STATE OF TELANGANA
AT: HYDERABAD
CORAM:
* HON'BLE SRI JUSTICE K. LAKSHMAN
+ WRIT PETITION No.956 OF 2025
% Delivered on: 09-06-2025
Between:
# M/s. V.K.S. Constructions .. Petitioner
Vs.
$ The State of Telangana and others .. Respondents
! For Petitioner : Mr. K.R.Kaushal Karan,
Party in person
For Respondents : Mr. G.Madhusudhan Rao,
Ld.St.Counsel for R.3
Ld. Asst.Govt.Pleader for
Industries and Commerce
Gist :
> Head Note :
? Cases Referred :
1
2023 SCC OnLine Cal 1700.
2
2021 SCC OnLine Bom 13986.
3
2015 SCC OnLine Del 13169.
4
(2007) 4 SCC 451.
5
2021 SCC OnLine SC 884.
6
(2000) 6 SCC 293.
7
(2022) 1 SCC 75.
2
HON'BLE SRI JUSTICE K. LAKSHMAN
WRIT PETITION No. 956 OF 2025
ORDER
Heard Mr. K.R. Kaushal Karan, appearing as party-in-person,
representing the Petitioner, Mr. G. Madhusudhan Rao, learned
standing counsel appearing for Respondent No. 3 and learned
Asst.Govt.Pleader for Industries and Commerce, appearing for
respondent Nos.1 and 2.
2. This writ petition is filed to declare the order dated
21.12.2024 passed in Case No.1292/MSEFC/2021 by 2nd respondent
as non-arbitrable and illegal and to direct the Respondent No.2 to
dispose of the case of the petitioner in accordance with the provisions
of Micro, Small and Medium Enterprises Development Act, 2006
(hereinafter referred to as ‘the MSME Act‘).
3. The present case involves a question whether a writ petition
is maintainable against an order passed by the MSME Facilitation
Council (Respondent No. 2 herein) under Section 16 of the Arbitration
& Conciliation Act, 1996 (hereinafter ‘the Act, 1996’) holding that no
jurisdiction to arbitrate exists.
3
4. Before deciding the issue under consideration, the relevant
facts need to be stated. The Petitioner, a partnership firm, registered
itself under the MSME Act. It had participated in the tender conducted
by the Greater Hyderabad Municipal Corporation – respondent No. 3
for executing work relating to the ‘Improvement of Nanakramguda
Expressway Junction to Phoenix Info City via Nanakramguda village,
Hyderabad’. The Petitioner was selected for quoting the lowest work
expenditure. Accordingly, an agreement dated 25.06.2013 and a
contract deed dated 25.06.2013 was entered into between the
Petitioner and Respondent No. 3.
5. The Petitioner claims to have executed the work as per the
work order dated 25.06.2013 issued by Respondent No. 3. The
Petitioner raised an invoice dated 10.05.2016 seeking payment of Rs.
25,11,618/- As Respondent No. 3 failed to discharge its liability under
Section 15 of the MSME Act, the Petitioner filed an online application
dated 14.04.2020 through the Samadhan Portal for resolution of the
dispute by the MSME Facilitation Council (hereinafter ‘Council’).
6. The Council had issued notice on three occasions i.e., on
05.11.2021, 22.03.2022, and 31.03.2023 directing Respondent No. 3
4
to appear for the conciliation meeting. Noting the failure of
Respondent No. 3 in participating in the conciliation proceedings, the
Council referred the matter to arbitration under Section 18 of the
MSME Act. Accordingly, an arbitration notice dated 05.05.2023 was
issued to Respondent No. 3.
7. During the arbitral proceedings, Respondent No. 3 objected
to the jurisdiction of the Council on the ground that disputes arising
out of works contracts cannot be adjudicated by the Council. They
contended that the work order dated 25.06.2013 was in the nature of a
works contract.
8. After hearing both the Petitioner and Respondent No. 3, the
Council vide impugned order dated 21.12.2024 held that they have no
jurisdiction to arbitrate the dispute. The said order was passed under
Section 16 of the Act, 1996 holding that the MSME Act does not
cover ‘works contracts’.
9. The concluding portion of the impugned order is extracted
below:
“D. DECISION OF THE COUNCIL ON WORKS
CONTRACT ISSUE:
The Council has unanimously decided that MSEFC
Ranga Reddy Region has no Jurisdiction for
5arbitrating the subject matter of case falling under
WORKS CONTRACTS and thus the claim is rejected
as NON ARBITRABLE and the following order is
issued:
ORDER
The Council unanimously decides that it has no
jurisdiction to arbitrate the claim No.
1292/MSEFC/2021 Claimant M/s VKA Constructions,
H. No. 11-13-1056/2, Road No. 9, Vasavai Colony, R
K Puram – 500035 and Respondent M/s. O/o.
Executive Engineer, PD-WZ, GHMC, Hyderabad, 7th
floor, Abids Parking Complex, Hyderabad, Telangana
– 500001.
The claim is deemed as Non-Arbitrable and hence
dismissed.”
10. The Petitioner challenges the impugned order dated
21.12.2024 mainly on the ground that it indulges in the activity of
‘quarrying of stone and construction of roads.’ The said activity,
according to the Petitioner, is classified as a manufacturing activity as
per the National Classification Code. Therefore, the Petitioner
contended that the work order dated 25.06.2013 is not a works
contract. Further, it was contended that by virtue of registration under
the MSME Act, the Petitioner is entitled for dispute resolution under
Section 18. Likewise, reliance was placed on Hindustan Petroleum
Corpn. Ltd. v. W.B. State Micro, Small Enterprises Facilitation
6
Council1, to contend that the Council can adjudicate disputes arising
out of a works contract.
11. Respondent Nos. 2 and 3 supported the findings of the
Council in the impugned order. Further, 3rd respondent, in its counter
affidavit, relied on the judgment passed by the Bombay High Court in
P.L. Adke v. Wardha Municipal Corpn./Council 2 and Shree Gee
Enterprises v. Union of India 3, to contend that it cannot adjudicate
disputes arising out of a works contract.
12. This Court need not go into the merits of the case dealing
with the nature and interpretation of the contract in question as the
present writ petition cannot be entertained. There is an efficacious and
alternative remedy under Section 37 (2) of the Act, 1996. It is
pertinent to note that the impugned order was passed under Section 16
of the Act, 1996. Against an order passed under Section 16 of the Act,
1996, a direct appeal is provided for under Section 37 of the Act,
1996. For the sake of convenience, both Section 16 and 37 of the Act,
1996 are extracted below:
1
2023 SCC OnLine Cal 1700.
2
2021 SCC OnLine Bom 13986.
3
2015 SCC OnLine Del 13169.
7
16. Competence of arbitral tribunal to rule on its
jurisdiction.–(1) The arbitral tribunal may rule on its
own jurisdiction, including ruling on any objections
with respect to the existence or validity of the
arbitration agreement, and for that purpose,–
(a) an arbitration clause which forms part of a contract
shall be treated as an agreement independent of the
other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract
is null and void shall not entail ipso jure the invalidity
of the arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the
submission of the statement of defence; however, a
party shall not be precluded from raising such a
plea merely because that he has appointed, or
participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the
scope of its authority shall be raised as soon as the
matter alleged to be beyond the scope of its
authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases
referred to in sub-section (2) or sub-section (3), admit
a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred
to in sub-section (2) or sub-section (3) and, where the
arbitral tribunal takes a decision rejecting the plea,
continue with the arbitral proceedings and make an
arbitral award.
(6) A party aggrieved by such an arbitral award may
make an application for setting aside such an arbitral
award in accordance with Section 34.
37. Appealable orders.–(1) [Notwithstanding
anything contained in any other law for the time being
in force, an appeal] shall lie from the following orders
(and from no others) to the Court authorised by law to
8
hear appeals from original decrees of the Court
passing the order, namely:–
[(a) refusing to refer the parties to arbitration under
Section 8;
(b) granting or refusing to grant any measure under
Section 9;
(c) setting aside or refusing to set aside an arbitral
award under Section 34.]
(2) Appeal shall also lie to a court from an order of
the arbitral tribunal–
(a) accepting the plea referred to in sub-section (2)
or sub-section (3) of Section 16; or
(b) granting or refusing to grant an interim measure
under Section 17.
(3) No second appeal shall lie from an order passed in
appeal under this section, but nothing in this section
shall affect or take away any right to appeal to the
Supreme Court.
13. As can be seen from the above provisions, if the arbitral
tribunal decides its jurisdiction under Section 16 and holds that it has
no jurisdiction, then such order is appealable. In this regard, reference
may be made to the following paragraphs of the Supreme Court’s
decision in National Thermal Power Corpn. Ltd. v. Siemens
Atkeingesellschaft 4:
18. The expression “jurisdiction” is a word of
many hues. Its colour is to be discerned from the
setting in which it is used. When we look at Section
4
(2007) 4 SCC 451.
9
16 of the Act, we find that the said provision is one,
which deals with the competence of the Arbitral
Tribunal to rule on its own jurisdiction. SBP &
Co. v. Patel Engg. Ltd. [(2005) 8 SCC 618] in a sense
confined the operation of Section 16 to cases where
the Arbitral Tribunal was constituted at the instance of
the parties to the contract without reference to the
Chief Justice under Section 11(6) of the Act. In a case
where the parties had thus constituted the Arbitral
Tribunal without recourse to Section 11(6) of the Act,
they still have the right to question the jurisdiction of
the Arbitral Tribunal including the right to invite a
ruling on any objection with respect to the existence or
validity of the arbitration agreement. It could therefore
rule that there existed no arbitration agreement, that
the arbitration agreement was not valid, or that the
arbitration agreement did not confer jurisdiction on the
Tribunal to adjudicate upon the particular claim that is
put forward before it. Under sub-section (5), it has the
obligation to decide the plea and where it rejects the
plea, it could continue with the arbitral proceedings
and make the award. Under sub-section (6), a party
aggrieved by such an arbitral award may make an
application for setting aside such arbitral award in
accordance with Section 34. In other words, in the
challenge to the award, the party aggrieved could raise
the contention that the Tribunal had no jurisdiction to
pass it or that it had exceeded its authority, in passing
it. This happens when the Tribunal proceeds to pass an
10
award. It is in the context of the various sub-sections
of Section 16 that one has to understand the content of
the expression “jurisdiction” and the scope of the
appeal provision. In a case where the Arbitral Tribunal
proceeds to pass an award after overruling the
objection relating to jurisdiction, it is clear from sub-
section (6) of Section 16 that the parties have to resort
to Section 34 of the Act to get rid of that award, if
possible. But, if the Tribunal declines jurisdiction
or declines to pass an award and dismisses the
arbitral proceedings, the party aggrieved is not
without a remedy. Section 37(2) deals with such a
situation. Where the plea of absence of jurisdiction
or a claim being in excess of jurisdiction is accepted
by the Arbitral Tribunal and it refuses to go into
the merits of the claim by declining jurisdiction, a
direct appeal is provided. In the context of Section
16 and the specific wording of Section 37(2)(a) of
the Act, it would be appropriate to hold that what
is made directly appealable by Section 37(2)(a) of
the Act is only an acceptance of a plea of absence of
jurisdiction, or of excessive exercise of jurisdiction
and the refusal to proceed further either wholly or
partly.
(emphasis supplied)
14. It is trite that existence of an alternative remedy is not
always a bar to maintain a writ petition. However, exercise of power
11
under Article 226, when an alternative remedy is available, shall be in
exceptional cases. In Assistant Commissioner of State Tax v.
Commercial Steel Limited 5, the Supreme Court has held as follows:
11. The respondent had a statutory remedy under section
107. Instead of availing of the remedy, the respondent
instituted a petition under Article 226. The existence of an
alternate remedy is not an absolute bar to the
maintainability of a writ petition under Article 226 of
the Constitution. But a writ petition can be entertained
in exceptional circumstances where there is:
(i) a breach of fundamental rights;
(ii) a violation of the principles of natural justice;
(iii) an excess of jurisdiction; or
(iv) a challenge to the vires of the statute or delegated
legislation.
(emphasis supplied)
15. In the present case, the Petitioner failed to show any
infraction of his fundamental rights or violation of principles of
natural justice or excessive exercise of jurisdiction. Moreover, the
dispute between the Petitioner and Respondent No. 3 is in the realm of
contracts. On numerous occasions, the Supreme Court has reiterated
5
2021 SCC OnLine SC 884.
12
that contractual disputes involving interpretation of contracts cannot
be entertained under Article 226.
16. In Kerala SEB v. Kurien E. Kalathil6, the Supreme Court
has held as follows:
11. A statute may expressly or impliedly confer power on a
statutory body to enter into contracts in order to enable it to
discharge its functions. Dispute arising out of the terms of
such contracts or alleged breaches have to be settled by the
ordinary principles of law of contract. The fact that one of
the parties to the agreement is a statutory or public body
will not by itself affect the principles to be applied. The
disputes about the meaning of a covenant in a contract or
its enforceability have to be determined according to the
usual principles of the Contract Act. Every act of a
statutory body need not necessarily involve an exercise of
statutory power. Statutory bodies, like private parties, have
power to contract or deal with property. Such activities
may not raise any issue of public law. In the present case, it
has not been shown how the contract is statutory. The
contract between the parties is in the realm of private
law. It is not a statutory contract. The disputes relating
to interpretation of the terms and conditions of such a
contract could not have been agitated in a petition
under Article 226 of the Constitution of India. That is a
matter for adjudication by a civil court or in
arbitration if provided for in the contract. Whether any6
(2000) 6 SCC 293.
13
amount is due and if so, how much and refusal of the
appellant to pay it is justified or not, are not the
matters which could have been agitated and decided in
a writ petition. The contractor should have relegated to
other remedies.
(emphasis supplied)
17. In Bhaven Construction v. Sardar Sarovar Narmada
Nigam Ltd. 7, the Supreme Court has held that an order passed under
Section 16 of the Act, 1996 cannot be challenged under Article 226 of
the Constitution of India. Further, the Apex Court held that the
question whether a particular contract is a works contract or not
cannot be decided under writ jurisdiction. The relevant paragraph of
the said judgments is extracted below:
25. The Gujarat Act was enacted in 1992 with the object
to provide for the constitution of a tribunal to arbitrate
disputes particularly arising from works contract to which
the State Government or a public undertaking is a party. A
works contract is defined under Section 2(k) of the Gujarat
Act. The definition includes within itself a contract for
supply of goods relating to the execution of any of the
works specified under the section. However, a plain
reading of the contract between the parties indicates that it
was for both manufacturing as well as supply of bricks.
7
(2022) 1 SCC 75.
14
Importantly, a contract for manufacture simpliciter is not a
works contract under the definition provided under Section
2(k). The pertinent question therefore is whether the
present contract, which is composite in nature, falls
within the ambit of a works contract under Section 2(k)
of the Gujarat Act. This is a question that requires
contractual interpretation, and is a matter of evidence,
especially when both parties have taken contradictory
stands regarding this issue. It is a settled law that the
interpretation of contracts in such cases shall generally
not be done in the writ jurisdiction. Further, the mere
fact that the Gujarat Act might apply may not be
sufficient for the writ courts to entertain the plea of
Respondent 1 to challenge the ruling of the arbitrator
under Section 16 of the Arbitration Act.
(emphasis supplied)
18. In light of the aforesaid discussion, this Court holds as
follows:
i. The writ petition is dismissed as not maintainable;
ii. The Petitioner is at liberty to avail the alternative remedy of
appeal under Section 37 (2) of the Arbitration & Conciliation
Act, 1996;
iii. In the event, the Petitioner opts to not challenge the
impugned order dated 21.12.2024, the remedy of filing a
recovery suit or any such other remedy will remain open.
15
As a sequel thereto, miscellaneous applications, if any, pending
in the Arbitration Application shall stand closed.
_________________
K. LAKSHMAN, J
Date: 09th June, 2025Note: L.R.copy to be marked.
b/o. vvr.