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TMI Blog2024 (11) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... d by respondent no.1, i.e., Micro and Small Enterprises Facilitation Council [hereafter referred to as the "Council"] where by, disputes obtaining between MRPL and respondent no.2, i.e., Driplex Water Engineering Ltd. [hereafter referred to as "Driplex"] were referred to an arbitral tribunal which would operate under the aegis of the Delhi International Arbitration Centre [DIAC]. 1.2 The learned Single Judge, for reasons given in the impugned judgment, dismissed the writ action preferred by MRPL. Being aggrieved, MRPL has filed the instant appeal. 2. In the course of hearing of the appeal, the following two issues were raised on behalf of MRPL: 2.1 First, the Council lacked the jurisdiction to refer the purported disputes obtaining between MRPL and Driplex for adjudication via arbitration since Driplex had obtained registration under Section 8 of the Micro and Small Enterprises and Development Act, 2006 [hereafter referred to as the "2006 Act"] after the disputants, i.e., MRPL and Driplex had entered into a contract. 2.2 In other words, according to MRPL, the provisions of the 2006 Act could not operate retrospectively. In support of this plea, reference was made to the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the broad contours of the case to gain a better perspective of the issues at hand. 5. Driplex registered itself as a small-scale industrial unit, albeit with the Department of Industries, Haryana, as far back as on 08.05.1981. 5.1 With the advent of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 [hereafter referred to as the "1993 Act"], on 07.12.2000, Driplex registered itself as a small-scale enterprise with the District Industries Centre, Gautam Budh Nagar (UP). 5.2 On 08.07.2009, MRPL invited bids for supply and services, which comprised, amongst other things, design, engineering, supply, civil works, erection, testing, etcetera, of DM water and CPU plant package for its Phase-III Refinery Project. Since the bid submitted by Driplex was the lowest, MRPL accepted it. Accordingly, on 01.12.2009, a Letter of Acceptance [hereafter referred to as "LoA"] was issued in favour of Driplex by MRPL. As per the LoA, the contract was priced at Rs. 51 crores. Driplex submitted its acceptance of the offer made by MRPL. 5.3 The LoA accorded eighteen (18) months to Driplex to complete the awarded work. However, 1st two "trains" of the DM Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of MRPL stood discharged due to accord and satisfaction. (iii) Driplex was not a small-scale enterprise as contemplated under Section 7 or 8 of the 2006 Act. 7. As noted right at the outset, except for the aspect concerning Driplex's issuance of NOC, the other two issues, which had been raised before the learned Single Judge, were not pressed before us on behalf of MRPL. The two issues that were pressed before us, including the aspect concerning NOC, were noted right at the beginning of our discussion. 8. Suffice it to say, the learned Single Judge rejected the contention advanced on behalf of MRPL vis-à-vis all three issues raised before him. Submissions by counsel: 9. It is against this backdrop that Mr Gopal Jain, Senior Advocate, advanced the arguments on behalf of MRPL, while submissions on behalf of the Council were made by Mr Santosh K. Tripathi, Advocate. Insofar as Driplex was concerned, arguments were advanced by Mr Ritin Rai, Senior Advocate. 10. Mr Gopal Jain's submissions can broadly be paraphrased as follows: (i) To avail the benefits of the provisions of the 2006 Act, the persons/entity concerned was mandatorily required to register itself in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2 has to be contextualised. The definition could not be applied to the provisions of Sections 16 to 18 of the 2006 Act without regard to its scheme and the purpose for which the Legislature enacted it. 12.2 In this context, it was pointed out that while the definition of 'supplier' provided in Section 2(n) was confined to a micro or small enterprise, Section 8 was concerned with micro, small and medium enterprises [hereafter referred to as "MSMEs"]. 12.3 Furthermore, while discretion had been given to micro and small enterprises to register themselves with the designated authority, no such discretion was available to medium enterprises, who were engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, under Section 8(1)(c) of the 2006 Act. 12.4 Besides this, sub-clause (b) of clause 1 of Section 8 also gave the discretion to register to those medium enterprises engaged not in manufacture or production but involved in providing or rendering services. 13. In a nutshell, Mr Tripathi attempted to highlight the dissonance that would creep in if the expressions &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment/ the concerned State Government, as well as for effective discharge of functions by the National Board for MSMEs [hereafter referred to as "National Board"] and the Advisory Committee constituted by the Central Government as per Sections 5 and 7 of the said Act. (ii) To protect and safeguard the interest of the buyer in relation to the provisions of Sections 22 and 23 of the 2006 Act. The obligation and the disincentive provided in Sections 22 and 23 of the 2006 Act would apply to only those buyers who purchased goods or received services from a 'supplier' as defined in Section 2(n) of the 2006 Act. The definition of 'supplier' as contained in Section 2(n) is relatable to the provisions of Sections 22 and 23 and not to the remaining provisions, i.e., Sections 15 to 18, which also fall in Chapter V of the 2006 Act. 17. The registration under Section 8 of the 2006 Act with the District Industries Centre is to enable the concerned authority to take measures for the promotion, development and enhancement of competitiveness of MSMEs as provided in Chapter IV (Sections 9 to 14) of the 2006 Act. This aspect would emerge upon perusal of the prescribed format, as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urbanchal Cables and Conductors Private Limited v. Assam State Electricity Board and Anr. (2012) 7 SCC 462; Modern Industries v. Steel Authority of India, (2010) 5 SCC 44; Indur District Cooperative Marketing Society v. Microplex, 2015 SCC OnLine Hyd 494; Hameed Leather Finishers v. Associated Chemical Industries, 2013 SCC OnLine All 9058; Nitesh Estates Ltd. v. MSEFC Haryana and Ors.; P. Anand Gajapathi Raju & Ors. v. V. PVG Raju & Ors., (2000) 4 SCC 539. 22. Mr Rai, in rebuttal, on behalf of respondent no.2, made the following broad submissions: 22.1 Regarding the first issue, it was submitted, as indicated above, that MRPL ought not to be allowed to raise it before this court as it had failed to do so before the learned Single Judge. The contention raised by MRPL before the Single Judge was that Driplex has failed to meet the criteria of a small enterprise as provided in Section(s) 7/8 of the 2006 Act. [See paragraph 6 of the impugned judgment.] 22.2 This contention was squarely dealt with by the learned Single Judge in paragraphs 12 to 16 of the impugned judgment. MRPL had not advanced any submission with regard to applicability of the 2006 Act because the agreement between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Manager (Contracts) Neyveli Lignite Corporation Ltd. v. Driplex Water Engineering Ltd. and Anr., 2020 SCC OnLine Delhi 2228 preferred by NLC was dismissed by a coordinate bench of this court via judgment dated 29.01.2020. The Special Leave Petition, i.e. SLP (C) No.9268/2020, preferred against the Division Bench judgement, was dismissed by a three-judge bench via order dated 22.09.2020. 23.1 The issue raised by MRPL is, thus, no longer res integra and, therefore, this appeal ought to be dismissed. 24. Mr Rai further submitted that as regards the issue concerning NOC, the arbitral tribunal has dealt explicitly with it, noting that the appellant failed to make any submission, either oral or written, concerning the same. Since the appellant failed to raise the issue, despite expressly having been allowed the liberty in terms of the impugned order, the appellant should not be allowed to raise the same at the present stage. Analysis and reasons: Issue no.(i) 25. Before we proceed further, it may be relevant to note that we had indicated to Mr Jain that since the issue concerning the applicability of the 2006 Act had been agitated before the arbitral tribunal, which had rendered an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two (02) provisions, i.e., Sections 7 and 8. Section 7 deals with classification of enterprises and the power of the Central Government to constitute an Advisory Committee and its functions, while Section 8 concerns submission of memorandum with the authority designated by the Central or State Government. As noticed above, while the micro and small enterprises as well as the medium enterprises (engaged in providing or rendering services) have been given discretion regarding submission of the memorandum, i.e., registration under Section 8, the medium enterprises which are engaged in manufacturing are mandatorily required to register themselves. [See Section 8(1) of the 2006 Act.] The existing small-scale industries were required to do so within 180 days of the commencement of the 2006 Act. The memorandum is to be filed as per the format provided in Schedule II appended to the 2006 Act. 27.3 Chapter IV contains six (06) provisions i.e., Section 9 to 14. Broadly, these sections provide for measures that the Central Government may take from time to time for promotion and development, credit facilities, procurement preference policy, constitution of funds, grants that the Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed as a deduction under the Income Tax Act, 1961. (vii) The overriding effect of the provisions made in Sections 15 to 23 is captured in Section 24 of the 2006 Act. (viii) Section 25 of the 2006 Act authorises the Central Government to notify a scheme to facilitate the closure of MSMEs not registered as companies. 27.5 The last chapter, i.e., Chapter VI, contains miscellaneous provisions regarding officers and other employees that the Central Government or State Government may appoint for administering the Act, penalties for contravention of the provisions of Section 8, Section 22 or Section 26 of the 2006 Act and lastly, provides under Section 28 that no court inferior to that of a Metropolitan Magistrate or Magistrate of First Class would try offences punishable under the 2006 Act. 28. Therefore, what comes through upon perusal of the scheme of the 2006 Act is that the definition provisions i.e., Section 2(d) and (n) of the said Act, concerning 'buyer' and 'supplier', respectively, have to be contextualised. This is evident upon reading the opening words of Section 2 of the 2006 Act, which states, "In this Act, unless context otherwise requires....". 28. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 2006 Act. 31. In this context, it is required to be noticed that the argument advanced on behalf of MRPL that there was no material on record to conclude that execution of work continued post registration under Section 8 of the 2006 Act is untenable given the following finding of fact returned in paragraph 7.11 of the arbitral award dated 27.11.2021. "7.11 It is a matter of record that the Claimant had been registered as a small-scale industry under the earlier Act. The present Act was enacted in the year 2006. No doubt, the Claimant did not apply for registration under this Act immediately, but was registered as such in the year 2011 on the issuance of registration by the Commissioner of Industries, New Delhi on 09.12.2011. More importantly, the disputes relate to the period after the registration. The factum of registration was communicated to the Respondent. Work finished, thereafter, monies/amounts which have claimed by the Claimant became due only after the registration, i.e., in the year 2016. The tribunal, therefore, holds that it has the jurisdiction to entertain the present claims. Issue No. 1 is decided accordingly in the affirmative" 32. This finding given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue though raised. Thus, the tribunal would discuss the claims on merits" 38. Therefore, we need not delve into this area since a petition preferred by MRPL under Section 34 of the Arbitration Act is pending adjudication. 39. Accordingly, O.M.P. (COMM.) 235/2022 will be placed before the learned Single Judge, as per the roster, on 19.07.2024. 40. Needless to add, disposal of the above-captioned appeal will not come in the way of the concerned court dealing with this issue on merits in the pending action preferred under Section 34 of the Arbitration Act. 41. The appeal is disposed of in the aforesaid terms. However, there will be no order as to costs. FOOT NOTE :- 1. Section 2- In this Act, unless the context otherwise requires,-- Xxx xxx xxx (n) - "supplier" means a micro or small enterprise, which has filed a memorandum with the authority referred to in sub-section (1) of section 8, and includes, (i) the National Small Industries Corporation, being a company, registered under the Companies Act, 1956 (1 of 1956); (ii) the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance. Section 16 - Date from which and rate at which interest is payable. Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank. Section 17 - Recovery of amount due. For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16. 5. Section 22 - Requirement to specify unpaid amount with interest in the annual statement of accounts. Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. (5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference. 7. 61. We have noticed above that the incidence of applicability of the liability under the Act is supply of goods or rendering of service. In event the supply of goods and rendering of services is subsequent to Act, can liability to pay interest on delayed payment be denied on the ground that agreement in pursuance of which supplies were made were entered prior to enforcement of the Act? Entering into an agreement being not expressly or impliedly referred to in the statutory scheme as an incident for fastening of the liability, making the date of agreement as date for imposition of liability does not conform to the statutory scheme. This can be illustrated by taking an example. There are two small scale industries who received orders for supply of materials. 'A& ..... X X X X Extracts X X X X X X X X Extracts X X X X
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