Case Note & Summary
The writ petition arose from a contractual dispute between JSW Steel Ltd. (formerly Ispat Metallics India Ltd.) as petitioner and Kamlakar V. Salvi, proprietor of M/s. Krunal Engineering Works, as respondent No.1, with the Micro and Small Enterprises Facilitation Council, Konkan Region, Thane and Union of India as respondents. In 1999, petitioner's predecessor awarded two contracts to respondent No.1 for manufacture/fabrication and supply of fire fighting and security systems, and for erecting, testing and commissioning of those systems. The contracts were to be completed by 06.03.2000, but respondent No.1 allegedly failed to complete, forcing petitioner to complete the works. The aggregate contract value was Rs.1,15,41,839.00, of which petitioner paid Rs.94,83,693.00. Petitioner contended no further payment was due. The Micro, Small and Medium Enterprises Development Act, 2006 came into force on 02.10.2006. Respondent No.1, which had commenced production in 1996, applied for registration under the Act only in 2010, beyond the 180-day window provided in the proviso to section 8, and received registration certificate on 14.12.2010. In 2011, respondent No.1 made a reference to the Facilitation Council claiming Rs.54,16,462.00 as principal and Rs.97,49,629.00 as interest, total Rs.1,51,66,091.00. Conciliation failed and the matter was referred to arbitration. Petitioner challenged jurisdiction and maintainability. On 08.05.2015 the Council passed an award directing petitioner to pay principal with interest under section 16 within one month. Later, because the award was not signed by the Chairman, a rehearing was notified, but on 05.09.2015 the Council held the award valid as majority members had signed and the Chairman was transferred, and withdrew rehearing notices. Respondent No.1 then filed execution proceedings before District Judge Alibaug, which petitioner resisted, but the objection was dismissed on 06.06.2017. The petitioner filed the present writ petition under Articles 226 and 227 of the Constitution seeking quashing of the Council's orders, quashing of respondent No.1's registration, and later amended to declare section 16 of MSMED Act ultra vires. On 22.02.2018, the High Court directed petitioner to deposit Rs.5,00,00,000.00 and stayed execution. Respondent No.1 raised preliminary objections that the writ petition was not maintainable in view of SBP & Co v. Patel Engineering, and that petitioner had statutory remedy under section 34 of Arbitration Act subject to deposit of 75% under section 19 of MSMED Act. The text of the judgment is truncated and does not include the court's final analysis or decision.
Issue of Consideration
Whether writ petition under Articles 226/227 maintainable against award of Micro and Small Enterprises Facilitation Council given remedy under Section 34 of Arbitration and Conciliation Act and Section 19 of MSMED Act; Whether Section 16 of MSMED Act is ultra vires the Constitution; Whether order/award dated 08.05.2015 is valid despite not being signed by Chairman of Council; Whether registration of respondent No.1 under MSMED Act is valid given belated application beyond 180 days; Whether claim of respondent No.1 is barred by limitation
Law Points
- Section 2(n) MSMED Act defines supplier
- Section 8 registration requirement
- Section 16 compound interest at three times bank rate
- Section 18 conciliation and arbitration
- Section 19 deposit of 75% for setting aside award
- Article 226/227 not available to correct arbitral awards per SBP & Co
- majority signatures sufficient under Section 31(1)(2) Arbitration Act
Case Details
2021 LawText (BOM) (10) 35
Writ Petition No.12897 of 2016 with Civil Application No.268 of 2018 and Civil Application No.935 of 2018
Ujjal Bhuyan, Madhav J. Jamdar
Petitioner: Janak Dwarkadas, Rishika Harish, M. P. Bharucha, Sneha Jaisingh, Manan Shah, Aniruddha Banerji; Respondent No.1: R. A. Thorat, Gauri Jadhav, Pratibha Shelke, Suryajeet P. Chavan; Respondent No.3: Aditya Thakkar, D. P. Singh
JSW Steel Ltd. (formerly known as Ispat Metallics India Ltd.)
1. Kamlakar V. Salvi, 2. Micro and Small Enterprises Facilitation Council, Konkan Region, Thane, 3. Union of India
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Nature of Litigation
Challenge under Articles 226/227 to orders/award passed by Micro and Small Enterprises Facilitation Council under MSMED Act and constitutional challenge to Section 16 of MSMED Act.
Remedy Sought
Petitioner sought quashing of Council orders dated 08.05.2015 and 05.09.2015, quashing of respondent No.1's MSMED registration and Darkhast No.188 of 2016, and declaration that Section 16 of MSMED Act is ultra vires the Constitution.
Filing Reason
Petitioner contended that Council lacked jurisdiction, claim was barred by limitation, award invalid due to missing Chairman's signature, and Section 16 unconstitutional.
Previous Decisions
Council passed award dated 08.05.2015 directing payment of Rs.54,16,462 plus interest under Section 16; subsequent order dated 05.09.2015 upheld validity of award and withdrew rehearing notices; District Judge Alibaug dismissed petitioner's objection to execution on 06.06.2017.
Issues
Whether writ petition under Articles 226/227 maintainable against award of Micro and Small Enterprises Facilitation Council given remedy under Section 34 of Arbitration and Conciliation Act and Section 19 of MSMED Act.
Whether Section 16 of MSMED Act is ultra vires the Constitution.
Whether order/award dated 08.05.2015 is valid despite not being signed by Chairman of Council.
Whether registration of respondent No.1 under MSMED Act is valid given belated application beyond 180 days.
Whether claim of respondent No.1 is barred by limitation.
Submissions/Arguments
Petitioner: Council lacked jurisdiction, application not maintainable, claim barred by limitation, award invalid due to missing signature, Section 16 unconstitutional.
Respondent: Writ petition not maintainable due to SBP & Co; statutory remedy under Section 34; Section 19 requires 75% deposit; challenge to vires is attempt to circumvent.
Judgment Excerpts
By filing this petition under Articles 226 and 227 of the Constitution of India, petitioner initially sought for quashing of orders dated 08.05.2015 passed by respondent No.2 as well as order dated 05.09.2015 passed by the said respondent.
As per section 16, if a buyer fails to make payment of the amount to the supplier, then the buyer would be liable to pay compound interest with monthly rests to the supplier at three times of the bank rate notified by the Reserve Bank of India.
Respondent No.1 has also questioned the motive of the petitioner to challenge the vires of section 16 as being an attempt to circumvent section 34(1) of the Arbitration and Conciliation Act, 1996.
Procedural History
06.11.1999 contracts awarded to respondent No.1; 02.10.2006 MSMED Act commenced; 2010 respondent applied for registration, certificate issued 14.12.2010; 13.09.2011 reference filed before Council, Application No.39 of 2011; Conciliation failed, referred to arbitration; 15.11.2014 hearing before Council, petitioner appeared, respondent absent; 08.05.2015 Council passed award; 24.08.2015 Council informed rehearing due to missing Chairman's signature; 05.09.2015 Council upheld validity of award and withdrew rehearing notices; 2016 Darkhast No.188 of 2016 filed before District Judge Alibaug; 06.06.2017 District Judge dismissed petitioner's objection and rejected stay application; 22.02.2018 Bombay High Court directed deposit of Rs.5,00,00,000.00 and stayed execution; Writ petition amended to challenge Section 16 vires; 2021 judgment reserved on 02.09.2021, pronounced 04.10.2021.
Acts & Sections
- Micro, Small and Medium Enterprises Development Act, 2006: Section 2(n), Section 8, Section 16, Section 18, Section 19
- Arbitration and Conciliation Act, 1996: Section 31(1)(2), Section 34(1)
- Constitution of India: Article 226, Article 227
