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2017 (2) TMI 1533 - HC - Indian LawsSeeking waiver of the deposit as required in terms of Section 19 of the MSMED Act - Validity of Arbitral Award - competency of FC was to act as an Arbitral Tribunal (AT) notwithstanding the arbitration clause in the contract between the parties - liability of Alstom to pay REPM - liability to pay interest under Section 16 of the MSMED Act. HELD THAT - Section 8 of the MSMED Act envisages two possible situations; one is where a unit which has not yet come into existence, and the second is where the unit is in existence. Where a unit is yet to be established, Section 8(1) requires filing of the memorandum in the manner specified by the State or the Central Government, as the case may be. Where a unit has already been established prior to the commencement of the MSMED Act, then the proviso applies and the memorandum has to be applied within 180 days from the date of commencement - It, however, does not mean that a third category i.e., a unit that is established after the commencement of the Act cannot seek registration as a supplier. That could never have been the intention of the legislature as is evident from the Statement of Objects and Reasons of the MSMED Act. The case on hand falls in the third category where a supplier is already in existence at the time of commencement of the Act but has not obtained any registration till then. It is registered as a supplier beyond 180 days from the date of the commencement of the Act i.e., after 180 days from 2nd October, 2006. Clearly, such a unit can also seek registration as a supplier. That is precisely what has happened in the present case. The certificate issued to the REPM is dated 4th April, 2012, but importantly, it notifies that the date of commencement of the activities as 1st February, 2009. Whether having been registered on 4th April, 2012, can REPM take advantage of the MSMED Act? - HELD THAT - The supplies made by REPM to Alstom in terms of the PO dated 8th September, 2009 continued even after REPM's registration as supplier as is evident from the two MoMs dated 1st May, 2013 and 28th December, 2013. The result is that REPM can seek the application of the beneficial provisions of MSMED Act as far as its claims against Alstom arising from the said First PO are concerned. In the present case, therefore, the Court is satisfied that the MSMED Act to the extent it provides for a special forum for adjudication of the disputes involving a 'supplier' registered thereunder, overrides the Act i.e., the Arbitration and Conciliation Act 1996. The following observations in Snehadeep Structures Pvt. Ltd. v Maharashtra Small Scale Industries Development Corporation Ltd. 2010 (1) TMI 1223 - SUPREME COURT which dealt with the statute of 1993 preceding the MSMED Act equally applies to the MSMED Act. It was held that the legislative intent behind Section 7 was to target buyers, who, only with the end of pushing off the ultimate event of payment to the small-scale industry undertaking, institute challenges against the award/decree/order passed against them. Such buyers cannot be allowed to challenge arbitral awards indiscriminately, especially when the section requires predeposit of 75% interest even when appeal is preferred against an award, as distinguished from an order or decree. Likewise, in Edukanti Kistamma (Dead) through LRs. v. S. Venkatareddy (dead) through LRs 2009 (12) TMI 1050 - SUPREME COURT , the Supreme Court explained that a special statute would be preferred over a general one where it is beneficial. It was explained that the purport and object of the Act must be given its full effect by applying the principles of purposive construction. The question whether the dispute resolution mechanism under Section 18 of the MSMED Act overrides the arbitration clause under the contract has to be answered in the affirmative. Thus, the Court negates the plea of the Petitioner that the MSMED Act does not apply. Consequently, the question of the Petitioner seeking a waiver of the requirement of depositing 75% of the amount in terms of Section 19 of the MSMED Act does not arise. Whether, in terms of the provisions of Section 19 of the MSMED Act, the Court can set any reasonable terms for the deposit to be made? - HELD THAT - Considering the amount involved, the Court directs that 75% of the amount awarded by the FC in favour of the Respondent should be deposited by the Petitioner in this Court, in four equal instalments with each instalment being deposited before the 10th of every succeeding month hereafter. The amount as and when deposited by the Petitioner shall be kept by the Registry in a fixed deposit initially for a period of six months and kept renewed during the pendency of the petition. The hearing of the main petition will be subject to compliance with the above direction. Application disposed off.
Issues Involved:
1. Competence of the Facilitation Council as an Arbitral Tribunal. 2. Liability of Alstom to pay REPM under the Purchase Orders. 3. Applicability of the MSMED Act and the requirement for pre-deposit under Section 19 of the MSMED Act. Issue-wise Detailed Analysis: 1. Competence of the Facilitation Council as an Arbitral Tribunal: The Facilitation Council (FC) was deemed competent to act as an Arbitral Tribunal (AT) despite the arbitration clause in the contract between the parties. It was noted that Alstom had not invoked the arbitration clause, thereby allowing the FC to proceed with the arbitration. 2. Liability of Alstom to Pay REPM: The FC found Alstom liable to pay REPM Rs. 1,38,52,500 based on the Minutes of Meetings (MoMs) dated 1st May 2013 and 28th December 2013, which were considered the backbone of the dispute. Alstom's representative was present at the meeting when the MoMs were executed, thereby validating the claim. Additionally, the FC required Alstom to pay Rs. 26,29,375 for "excess digging work" and Rs. 2,24,23,454 towards interest under Section 16 of the MSMED Act. 3. Applicability of the MSMED Act and Pre-deposit Requirement: The court focused on whether the MSMED Act applied to REPM, which registered as a "supplier" under the Act on 4th April 2012, while the Purchase Order (PO) was issued on 8th September 2009. The court concluded that REPM could benefit from the MSMED Act as the supplies continued beyond the registration date. The MSMED Act, being a special statute, overrides the Arbitration and Conciliation Act, 1996, providing a special forum for adjudication of disputes involving a "supplier" registered under it. Consequently, Alstom's plea for waiver of the 75% deposit under Section 19 of the MSMED Act was rejected. The court directed Alstom to deposit 75% of the awarded amount in four equal installments, with each installment being deposited before the 10th of every succeeding month. Conclusion: The court upheld the competence of the FC as an Arbitral Tribunal and affirmed Alstom's liability to pay REPM under the POs. The MSMED Act was applicable, and Alstom was required to comply with the pre-deposit requirement under Section 19 of the Act. The court's decision emphasized the overriding nature of the MSMED Act over other arbitration agreements.
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