2018 (7) TMI 1910 - HC - Indian Laws

Principles of natural justice - whether the proceedings before the Council that culminated in making the impugned reference can be at fault as being violative of the principles of natural justice? - Held that - RIL can have no grievance of not being afforded sufficient opportunity to put forth its case. Representatives of RIL also attended the next conciliation meeting which was held on 05.04.2016. On the said occasion RIL sought further time to settle the disputes amicably. However no further progress was made and therefore on 17.10.2016 the Council decided to terminate the conciliation proceedings and refer the disputes to DIAC - RIL s contention that the impugned reference was made in violation of the principles of natural justice is wholly unmerited. Whether the impugned reference made by the Council under Section 18(3) of the Act was without jurisdiction? - scope of micro/small enterprise - Held that - There is no dispute that GCIL would fall within the definition of micro/small enterprise even at the material time when it had executed the contract with RIL. GCIL is a company and the services provided by GCIL are clearly services rendered by a micro/small enterprise and therefore GCIL being engaged in supply of services rendered by a micro/small enterprise would fall within the fourth category of entities that are included as a supplier that is a company co-operative society trust or a body engaged in selling goods produced by micro or small enterprises or rendering services provided by such enterprises. It is not necessary for such entities to have filed the Memorandum under Section 8(1) of the Act. The contention that the entities falling under Section 2(n)(iii) of the Act are only those entities that source goods/services from other micro/small enterprises is not persuasive as it is difficult to accept that an entity sourcing goods/services from a third party micro/small enterprise would be supplier but would cease to be one if it sources the same from its undertaking. The contention that the impugned reference is without jurisdiction is unmerited - petition dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Council under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006.
2. Violation of principles of natural justice in making the impugned reference.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Council under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006:

The petitioner (RIL) contended that the disputes referred to arbitration arose from transactions in 2010 when GCIL was not registered under the Act, thus disqualifying it as a 'supplier' under Section 2(n) of the Act. RIL argued that GCIL's registration on 04.07.2015 did not retroactively qualify it as a supplier for the 2010 transactions. The court examined the relevant provisions of the Act, including Sections 15, 16, 17, and 18, which outline the obligations of buyers to make timely payments and the provision for interest on delayed payments. The court emphasized that a supplier must be a micro or small enterprise that has filed a memorandum under Section 8(1) of the Act. However, the definition of 'supplier' under Section 2(n) includes entities beyond those filing the memorandum, such as the National Small Industries Corporation and other entities engaged in selling goods or rendering services provided by micro or small enterprises. The court concluded that GCIL, even at the time of executing the contract, fell within the definition of a micro/small enterprise and thus qualified as a supplier under the Act. Therefore, the Council had jurisdiction to refer the disputes to arbitration.

2. Violation of principles of natural justice in making the impugned reference:

RIL argued that the Council's decision to refer the disputes to arbitration was arbitrary and violated principles of natural justice as RIL was not given sufficient opportunity to present its case. The court reviewed the proceedings before the Council, noting that multiple notices were issued to RIL, and its representatives attended several meetings. Despite being given opportunities to file a reply and present their case, RIL failed to do so. The court found that RIL had ample opportunity to participate in the conciliation process and that the Council's decision to terminate conciliation and refer the matter to arbitration was justified. Consequently, the court held that the impugned reference was not in violation of the principles of natural justice.

Conclusion:

The court dismissed the petition, affirming the Council's jurisdiction under the Act and finding no violation of natural justice principles in the referral process. The pending application was also disposed of, with parties bearing their own costs.