2023 (4) TMI 1374 - HC - Indian Laws

Maintainability of petition - Seeking quashing of an arbitration case registered by the respondent no. 1, West Bengal Micro Small Enterprise Facilitation Council (Council) against the petitioners - setting aside of all proceedings initiated or being conducted by the Facilitation Council - HELD THAT - The alternative statutory remedy in the present case is not only sufficient and effective but also multi-layered. The petitioners can seek recourse through any of the remedies available under the 1996 Act; the petitioners have instead chosen to approach the Writ Court and invoke its extraordinary powers under Article 226 of the Constitution. The petitioner s contention with regard to the Facilitation Council not having jurisdiction for lack of registration of the respondent no. 2 as an MSME Unit should next be dealt with. Section 2(n) of the MSMED Act defines a supplier as a micro or small enterprise which has filed a memorandum with the authority referred to in section 8(1) of the Act. The petitioners objection to the respondent no. 2 being a supplier would appear from an affidavit filed by the petitioners where it has been stated that the respondent no. 2 applied for Udyog Aadhar registration on 22.11.2017 which is 4 years after the transaction - The District Industries Center, Directorate of Cottage and Small Scale Industries was the notified authority in the State at the relevant point of time. Even otherwise, according to learned counsel for the parties, the admitted fact is that the petitioners have already made part payment to the respondent no. 2 of about Rs. 36 lakhs and approximately Rs. 50 lakhs stands outstanding as on date as submitted by counsel. In MARINE CRAFT ENGINEERS PRIVATE LIMITED VERSUS GARDEN REACH SHIPBUILDERS AND ENGINEERS LIMITED 2023 (4) TMI 1372 - CALCUTTA HIGH COURT it was held that the date of execution of a contract between a buyer and a supplier under the MSMED Act loses relevance for the application of the said Act provided the supplier claims recovery of the amount due under section 17 for goods supplied after the date of registration. The Court also held that the supplier would not be disqualified from making a reference to the Facilitation Council only on the basis of whether the supplier was registered as an MSME Unit on the date of the contract. The above facts persuade the Court to hold that the respondent no. 2 was statutorily-entitled to make a reference to the Council for adjudication of the disputes. The point of maintainability is accordingly answered in favour of the respondent no. 2 and against the petitioners - The Court is not willing to set aside or interfere with the ongoing arbitration proceedings before the Facilitation Council - Petition dismissed.

Summary

Issues:
Quashing of arbitration case by Facilitation Council, maintainability of writ petition seeking mandamus, jurisdiction of Facilitation Council, alternative statutory remedies under The Arbitration and Conciliation Act, 1996, exclusive powers of Facilitation Council under MSMED Act, registration of respondent as MSME supplier, relevance of registration date for supplier under MSMED Act.

Analysis:

The judgment involves a petition seeking the quashing of an arbitration case initiated by the Facilitation Council against the petitioners. The petitioners, a buyer, and a supplier entered into transactions in 2013, with the respondent being registered under the MSMED Act. The main issue raised was the maintainability of the writ petition seeking mandamus to quash the arbitration proceedings before the Council, considering the availability of alternative statutory remedies under The Arbitration and Conciliation Act, 1996. The respondent argued that the Council had exclusive powers under the MSMED Act to decide disputes under the 1996 Act after failed conciliation. The Court examined the statutory provisions and concluded that the Council had jurisdiction to initiate arbitration after conciliation termination.

The Court emphasized the availability of multiple effective alternative statutory remedies under the 1996 Act and highlighted the exclusive powers granted to the Facilitation Council under the MSMED Act. It was noted that the Council proceeded with arbitration only after conciliation failure, as evidenced by official letters to both parties. The judgment cited various decisions of the Supreme Court and High Courts, emphasizing the importance of exhausting alternative remedies before seeking extraordinary relief through a writ petition. The Court highlighted the self-imposed restraint in interfering with ongoing arbitration proceedings where an adequate alternative remedy exists.

Furthermore, the Court addressed the issue of the respondent's registration as an MSME supplier, emphasizing the statutory definition of a "supplier" under the MSMED Act. The respondent's registration under the Udyam Scheme and application before the District Industries Center before the transaction supported their entitlement to refer the dispute to the Council. Citing precedent, the Court held that the date of contract execution loses relevance for MSMED Act application, provided the supplier claims recovery for goods supplied after registration.

Ultimately, the Court ruled in favor of the respondent, dismissing the writ petition as not maintainable. The judgment highlighted the lack of compelling grounds for interference, the importance of exhausting statutory remedies, and the respondent's statutory entitlement to refer the dispute to the Council. The Court declined to set aside or interfere with the ongoing arbitration proceedings before the Facilitation Council, emphasizing the need to await the Council's decision before seeking further recourse under the 1996 Act.