M/S.Rajkham Builders Private Limited v. M/S.Padmaja Systems And Services Private Limited

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED : 30.10.2023

CORAM

THE HON'BLE MR. JUSTICE P.D. AUDIKESAVALU and W.M.P. No. 10767 of 2023 M/s. Rajkham Builders Private Limited, Rajkham Srishti Level 2, New No. 105, Arcot Road, Kodambakkam, Chennai - 600024.

Represented by its Managing Director Mr. Arumugam.

... Petitioner -vs1. M/s. Padmaja Systems and Services Pvt Ltd., 71-C, New Avadi Road, Kilpauk, Chennai - 600010.

2. MSE Facilitation Council, Chennai Region, Regional Joint Director of Industries and Commerce, Guindy, Chennai - 600032.

Represented by its Secretary.

... Respondents 1/16

Prayer:- Writ Petition filed under Article 226 of the Constitution of India, 1950, praying to issue a Writ of Certiorari calling for the records of the Second Respondent herein leading to issuance of impugned order dated 28.10.2022 vide MSEFC/CR/355/2021 and quash the same.

For Petitioner : Mr. S.Sathiyanarayanan For Respondents : Mr. R.Subramanian (for R1) Mr. S.Yashwanth, Additional Government Pleader (for R2)

O R D E R

Heard Mr. S.Sathiyanarayanan, Learned Counsel for the Petitioner, Mr. R.Subramanian, Learned Counsel for the First Respondent and Mr. S.Yashwanth, Learned Additional Government Pleader appearing for the Second Respondent and perused the materials placed on record, apart from the pleadings of the parties.

2.

The First Respondent made a claim in Case No. MSEFC/CR/355/2021 before the Second Respondent under Section 18(1) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as 'the MSMED Act' for short), for payment of Rs. 5,28,176/- from the Petitioner towards the amount due for the works carried out with calculation in terms of 2/16

the MSMED Act, along with compound interest in which an order dated 28.10.2022 was passed holding that the Petitioner was liable to pay the sum of Rs. 5,28,176/- together with compounded interest with monthly rests at three times of the Bank rate notified by the Reserve Bank of India as stipulated in the MSMED Act for the invoices during the period from 31.05.2018 to 05.09.2019 till the date of realization of dues, which is assailed in this Writ Petition. 3.

Learned Counsel for the First Respondent has raised preliminary objection regarding the maintainability of the Writ Petition by contending that if the Petitioner is aggrieved by the impugned order, it has only to resort to filing of an application under Section 34 read with Section 2(4) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the A & C Act' for short), to have it set aside as an arbitral award, and that in any event, a Writ Petition to set aside an arbitral award cannot be prosecuted without complying with the requirement of pre-deposit of 75% of the amount involved in terms of Section 19 of the MSMED Act.

4.

In response, Learned Counsel for the Petitioner placing reliance on the decision of the Hon'ble Supreme Court of India in Jharkhand Urja Vikas Nigam Limited -vs- State of Rajasthan (Order dated 15.12.2021 in Civil 3/16

Appeal No. 2899 of 2021) and this Court in M/s. Ramesh Conductors P. Limited -vs- M & SE Facilitation Council (Micro & Small Enterprises) [(2016) 1 CTC 403] and Union of India -vs- Chairman, State Micro & Small Enterprises Facilitation Council, Uttar Pradesh (Order dated 07.09.2021 in W.P. (MD)No. 13870 of 2021), contends that the mandatory provisions of the A & C Act had not been followed as neither any statements of claim and defence had been received from the contesting parties, nor they were called upon to adduce evidence in proof of their respective cases. It is not possible to countenance the said submission in this case inasmuch as it is apparent on a perusal of the impugned order of the Second Respondent that the Second Respondent had during the joint sitting for conciliation on 19.10.2022 recorded that the conciliation has failed and the Petitioner had thereafter filed its CounterStatement during the sitting on 28.10.2022 and the contents of which have been duly considered by the Second Respondent in the impugned order. 5.

At this juncture, it must be noticed that Section 34(2)(v) of the A & C Act provides that an arbitral award may be set aside by the jurisdictional Court on an application made by the aggrieved party when the arbitral procedure is not in accordance with the provisions of that Act. It must, at once, be emphasized that the Hon'ble Supreme Court of India in Assistant Collector of Central Excise 4/16

-vs- Dunlop India Limited [(1985) 1 SCC 260] has precisely explained the legal position relating to the exercise of discretionary powers under writ jurisdiction when an alternative remedy exists, in the following words:- "3.

Article 226 is not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution. But then the Court must have good and sufficient reason to by-pass the alternative remedy provided by statute. Surely matters involving the revenue where statutory remedies are available are not such matters. We can also take judicial notice of the fact that the vast majority of the petitions under Article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged."

5/16

In Nivedita Sharma -vs- Cellular Operators Association of India [(2011) 14 SCC 337], adverting to the the previous decisions with regard to the rule of selfrestraint when an alternative remedy is available to the aggrieved person, the Hon'ble Supreme Court of India has emphasized that when a statutory forum is created by law for redressal of grievance, a writ petition should not be ordinarily entertained ignoring that statutory dispensation. Further, the law has been restated by the Hon'ble Supreme Court of India in Radha Krishan Industries -vs- State of Himachal Pradesh [(2021) 6 SCC 771] as extracted below:- "27.1.

The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well. 27.2.

The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person.

27.3.

Exceptions to the rule of alternate remedy arise where : (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) 6/16

the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged.

27.4.

An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law.

27.5.

When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion. 27.6.

In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with." Learned Counsel for the Petitioner has not been able to demonstrate from the 7/16

facts of this case as to how it would fall under any of the exceptional circumstances mentioned therein or that the Petitioner has been impeded from canvassing what is sought to be agitated in this Writ Petition in an application to set aside the arbitral award under Section 34 of the A & C Act, and the affidavit filed in support of the Writ Petition is also bereft of any details in that regard.

6.

Coming to the requirement of making pre-deposit of 75% of the amount involved, it would be necessary to refer to Section 19 of the MSMED Act, which reads as follows:- "19. Application for setting aside decree, award or order:- No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent. of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court: 8/16

Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose." The clear language of the aforesaid provision makes its compliance mandatory though the Court has discretion to permit the buyer to remit the amount in installments as it may deem fit as held by the Hon'ble Supreme Court of India in Gujarat State Disaster Management Authority -vs- Aska Equipments Limited [(2022) 1 SCC 61] in the following words:- "13.

On a plain/fair reading of Section 19 of the MSME Act, 2006, reproduced hereinabove, at the time/before entertaining the application for setting aside the award made under Section 34 of the Arbitration and Conciliation Act, the appellantapplicant has to deposit 75% of the amount in terms of the award as a pre-deposit. The requirement of deposit of 75% of the amount in terms of the award as a pre-deposit is mandatory.

be projected before the appellate court and if the appellate court is satisfied that there shall be undue hardship caused to the appellant-applicant to deposit 75% of the awarded amount as a pre-deposit at a time, the court may allow the pre-deposit to be made in instalments."

The same view has been taken by the Hon'ble Supreme Court of India in the decisions in Goodyear India Limited -vs- Norton Intech Rubbers Private Limited [(2012) 6 SCC 345] and Tirupati Steels -vs- Shubh Industrial Component [(2022) 7 SCC 429]. In the absence of any restriction of the applicability of Section 19 of the MSMED Act only to proceedings under Section 34 of the A & C Act and having due regard to the doctrine of purposive construction to achieve the objects of an enactment, it is not possible to exclude Writ Petitions under Article 226 of the Constitution from the ambit of the phrase 'application to set aside any award' in that legal provision. The Seven Judges Bench of the Hon'ble Supreme Court of India in Mafatlal Industries Ltd. -vs- Union of India [(1997) 5 SCC 536] while explicating that the High Court in exercise of powers under Article 226 of the Constitution of India can neither ignore the law nor it can override it, has observed as follows:- "77. .... So far as the jurisdiction of the High Court under 10/16

Article 226 - or for that matter, the jurisdiction of this Court under Article 32 - is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however, equally obvious that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment."

The Division Bench of this Court in M/s. Eden Exports Company -vs- Union of India [(2013) 1 MLJ 445] has declined to entertain Writ Petitions challenging the orders passed by the Micro and Small Enterprises Facilitation Council when 75% of the amount involved as required under Section 19 of the MSMED Act has not been deposited before the matter is taken up for hearing. Viewed from that perspective, it would not be possible to entertain the Writ Petition in the absence of the Petitioner complying with the statutory requirement of pre-deposit in this case.

7.

It would assume significance here that there is nothing to infer from the facts reflected in the decision of the Hon'ble Supreme Court of India in 11/16

Jharkhand Urja Vikas Nigam Limited -vs- State of Rajasthan (Order dated 15.12.2021 in Civil Appeal No. 2899 of 2021) relied by Learned Counsel for the Petitioner that the requirement of pre-deposit of 75% of the amount involved as stipulated in Section 19 of the MSMED Act, had been brought to the notice of the Court in those cases. In this backdrop, it must be recapitulated that the Hon'ble Supreme Court of India in Regional Manager -vs- Pawan Kumar Dubey [(1976) 3 SCC 334] has highlighted that it is the rule deducible from the application of law to the facts and circumstances of a case which constitutes its ratio decidendi and not some conclusion based upon facts which may appear to be similar.

One additional or different fact can make a world of difference between conclusions in two cases even when the same principles are applied in each case to similar facts. The Constitution Bench of the Hon'ble Supreme Court of India in Padma Sundara Rao (Dead) -vs- State of Tamil Nadu [(2002) 3 SCC 533] has aptly ruled in this regard as follows:- "Courts should not place reliance on decisions without discussing as to how the factual situations fits in with the fact situation of the decision on which reliance is placed.

remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington Vs. British Railways Board (1972) 2 WLR 537. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases." 8.

That apart, it is settled position of law that discretionary relief under Article 226 of the Constitution ought not to be exercised in favour of a person merely because it may be lawful to do so and it would follow as its corollary that it is incumbent upon the Petitioner to establish that prejudice has been caused by the impugned order. It is also relevant to point out here that Sections 15 to 25 of the MSMED Act provides for an expeditious mechanism for recovery of delayed payments to micro and small industries arising out of goods supplied and services extended, in which a claim would have to be supported by invoices with proof of delivery. Once such claim is made by the supplier with that requisite evidence, the burden shifts on the buyer to plead and prove his defences. The Second Respondent has given details of the claim made by the First Respondent specifying 5 invoices with amount due for goods supplied and services extended and after deducting payments received, has mentioned the amount of Rs. 5,28,176/- as remaining to be recovered in the impugned order. 13/16

The mandate for granting interest for delayed payment has been stipulated in the MSMED Act itself for which there is no discretion either to reduce or waive the same. After discussing the controversy involved, the Second Respondent has given cogent reasons for arriving at the conclusion in rejecting the contentions of the Petitioner and granting the relief claimed by the First Respondent. 9.

In the result, the Writ Petition, which is devoid of merits, is dismissed. Consequently, the connected Miscellaneous Petition is closed. No costs. 30.10.2023 kv Index: Yes/No NCC: Yes/No Note: Issue order copy by 08.01.2024.

To The Secretary, MSE Facilitation Council, Chennai Region, Regional Joint Director of Industries and Commerce, Guindy, Chennai - 600032.

14/16

15/16

P.D. AUDIKESAVALU, J.

kv 30.10.2023 16/16