J.Krishna Kumar v. The Chairman

IN THE HIGH COURT AT CALCUTTA

CONSTITUTIONAL WRIT JURISDICTION APPELLATE SIDE [ CIRCUIT BENCH AT PORT BLAIR ] *** PRESENT: THE HON'BLE JUSTICE AMRITA SINHA WPA/634/2023 J. KRISHNA KUMAR ... PETITIONER Vs.

THE CHAIRMAN, ANDAMAN AND NICOBAR MICRO AND SMALL ENTERPRISE FACILITATION COUNCIL ... RESPONDENT For the petitioner :

Mr. Asim Malik Mr. K.M.Sheheer For the respondent :

Mr. Shatadru Chakraborty Mr. Dibesh Dwivedi Heard on :

18th August, 2023 Judgment on :

24th August, 2023 AMRITA SINHA, J.

The petitioner is registered as a 'Micro Enterprise' under the Micro, Small and Medium Enterprises Development Act, 2006. The facts giving rise to the instant writ petition are succinctly mentioned in the order dated 05th June, 2014 passed by the Hon'ble Division Bench of this Court in MA No. 018 of 2014 (Shri J. Krishna Kumar vs. The Andaman and Nicobar

Administration and others). The same is, accordingly, not repeated herein.

The Court directed the respondent authority to reexamine the issue and find out what would be the actual amount payable to the appellant. The admitted amount was directed to be paid and the appellant was at liberty to accept the same without prejudice to his rights and contention and claim the balance sum in an appropriate proceeding.

In compliance of the said direction the admitted amount has been released by the respondent and received by the petitioner. The present case relates to the disputed amount. The reasoned order/the minutes of the meeting dated 07th November, 2022 passed by the A & N MSE Facilitation Council communicated to the petitioner vide communication dated 05th December, 2022 relegating the parties to take up the issue for resolution of the dispute as per clause 61 of the agreement dated 28th October, 2011 is impugned in the present writ petition. Clause 61 of the agreement dated 28th October, 2011 between the parties mentions that any dispute or difference arising on account of breach or observance or compliance of any of the terms and conditions of the contract shall be referred to the sole arbitrator to be appointed by the Lieutenant Governor (Administrator) for arbitration under the Arbitration and Conciliation Act, 1996 and the decision of the Sole Arbitrator shall

be final and binding on both the parties. The arbitration proceedings shall be held at Port Blair.

According to the petitioner, the respondent authority instead of relegating the parties to approach the Lieutenant Governor for appointment of Sole Arbitrator, ought to have taken up the dispute for arbitration itself or referred the dispute to any institution or center providing alternate disputes resolution services for such arbitration.

It has been argued that the dispute ought to have been resolved in accordance with the provisions laid down in Sections 15 to 18 of the Micro, Small and Medium Enterprises Development Act, 2006, hereinafter referred to as 'the Act of 2006'.

The petitioner refers to the preamble of the Act of 2006 and submits that the same is a special Act meant for facilitation, promotion, development and enhancing the competitiveness of Micro, Small and Medium Enterprises and as such the respondent authority ought to have resolved the issue in accordance with the dispute redressal mechanism as laid down in the said Act. In support of the aforesaid contention the petitioner relies upon the ratio laid down by the Hon'ble Supreme Court in the matter of Modern Industries vs. Steel Authority of Indian Limited reported in (2010) 5 SCC 44 and Gujarat State Civil Supplies Corporation Limited vs. Mahakali Foods Pvt. Ltd

(Unit-2) and another reported in (2023) 6 SCC 401: AIR 2022 SC 5545.

Prayer has been made for setting aside the resolution of the impugned meeting with further direction upon the respondent to resolve the dispute in accordance with Section 18(3) of the Act of 2006.

Learned advocate representing the respondent opposes the prayer of the petitioner. It has been submitted that the petitioner is not entitled to the benefits under the Act of 2006 as the petitioner was not registered with the MSME on the date the dispute arose.

The respondent contends that the petitioner, for obtaining benefit under the Act of 2006, should have been registered as MSME and till such time the registration is complete, the petitioner will not be entitled to the relief as claimed for. In support of the aforesaid submission the respondent relies on the judgment delivered by the Hon'ble Supreme Court in the matter of Silpi Industries Etc. Vs Kerala State Road Transport Corporation and another reported in 2021 SCC Online SC 439.

The second objection raised by the respondent is that Sections 15 to 18 of the Act of 2006 relates to delayed payment to Micro and Small Enterprises. The respondent contends that the

aforesaid provisions presuppose that the payment in question is a crystallized amount.

Benefit under the aforesaid provisions can be availed of only if the amount in question is quantified and assessed properly. The Council does not have the expertise or the ability to adjudicate the quantum or amount that is allegedly due and payable to the petitioner. As the amount is yet to be assessed, accordingly, the petitioner cannot avail the benefit of the aforesaid provisions. It has been argued that as there is a specific clause mentioned in the agreement entered in between the parties and the parties should ideally take steps in accordance with the said clause.

It has been submitted that the claim of the parties can be effectively adjudicated in the arbitration proceedings under the sole arbitrator to be appointed by the Lieutenant Governor. The respondent prays for dismissal of the writ petition. I have heard and considered the submissions made on behalf of both the parties.

It is admitted that there is a clause incorporated in the agreement entered in between the parties for resolution of disputes arising out of the said contract. It is also a fact that the petitioner is registered as a Micro Enterprise with the Ministry of Micro, Small and Medium Enterprises and a definite Udyam Registration Number was allotted to him on 01st March, 2021. The

date of commencement of the petitioner's enterprise is 15th September, 2011 as would be evident from the registration certificate issued by the Ministry of Micro, Small and Medium Enterprises annexed at page 11 of the affidavit in reply filed by the petitioner. The submission of the respondent that the petitioner was not registered as MSME on the date the dispute arose, does not hold any water as the same is factually incorrect. According to Section (1) of the Act of 2006, notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under Section 17 make a reference to the Micro and Small Enterprises Facilitation Council.

Section 18 (2) of the Act of 2006 lays down that on receipt of reference under sub section (1) the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or center providing alternate dispute resolution services by making a reference to such an institution or center for conducting conciliation and the provisions of the Arbitration and Conciliation Act, 1996 shall apply in such disputes. Section 18 (3) of the Act of 2006 stipulates that where the conciliation initiated under sub section (2) is not successful and stands terminated without any settlement, the Council shall either itself take up the dispute for arbitration or refer it to any institution or center providing alternate dispute resolution

services for arbitration in accordance with the Arbitration and Conciliation Act, 1996.

Section 15 of the Act of 2006 mentions that where any supplier supplies any goods or renders any services, the buyer shall make payment there for on or before the date agreed upon or where there is no agreement, before the appointed day. Sections 16 and 17 mention that delayed payments shall be made along with compound interest.

The aforesaid provisions relate to 'any amount' which, according to the seller, is due and payable. There is no separate provision in the Act of 2006 to settle dispute relating to payment of any amount that may be disputed by the buyer. Chapter V of the Act of 2006 deals with delayed payments which will certainly include the amount which is disputed by the buyer. There is no bar in the Act of 2006 to entertain disputes where the money due is not quantified.

It is not necessary that all claims of the seller will be accepted or admitted by the buyer. There may be dispute with regard to the figures involved in a financial transaction. The same does not debar the claimant to avail the benefit of the Act of 2006. In fact, it appears that, the said Act was framed to settle such type of disputes, out of Court, under the alternative disputes redressal mechanism. Accordingly, the submission of the respondent that as the amount due is yet to be quantified,

accordingly, the Facilitation Council will not be the appropriate authority to decide the issue, cannot be accepted by the Court. In commercial transaction delay in making payment may be on account of various reasons. Not admitting the claim put forth by the seller may be one of the reasons for delay in making payment of the goods supplied or services rendered. There is no plausible reason as to why dispute arising because of the delay in making payment on account of disputed claims, cannot be resolved as per the provisions of the Act of 2006. The dispute resolution clause indicated in the agreement in question mentions of appointment of Sole Arbitrator by the Lieutenant Governor.

The Act of 2006 mentions about arbitration proceedings for settlement of dispute either by the Council or any institution or center providing alternate dispute resolution services, on reference by the Council. The manner in which the dispute is to be resolved will be guided in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The Hon'ble Supreme Court in the matter of Silpi Industries (supra) clearly laid down that the Act of 2006 being a special Statute, will have an overriding effect vis-à-vis the Arbitration and Conciliation Act, 1996 which is a general Act. Even if there is an agreement between the parties for resolution of disputes by arbitration, if a seller is covered by the Act of 2006, the seller can certainly approach the competent authority to make his claim.

any agreement between the parties is there, the same is to be ignored in view of the statutory obligations and mechanisms provided under the 2006 Act.

Gujarat State Civil Supplies Corporation Limited (supra) supports the above contentions. It further lays down that private agreement between the parties cannot obliterate the statutory provisions. Once the statutory mechanism under sub section (1) of Section 18 is triggered by any party, it would override any other agreement independently entered into between the parties in view of the non-obstante clauses contained in sub section (1) and sub section (4) of Section 18.

The provisions of Sections 15 to 23 have overriding effect as contemplated in Section 24 of the Act of 2006. The Court reiterates the principle that if two interpretation is possible, the one which enhances the object of the Act should be preferred than the one which would frustrate the object of the Act. If the submission of the respondent that the petitioner cannot avail the remedy available under the Act of 2006 as an independent arbitration agreement exists in between the parties is accepted, the very purpose of the Act of 2006 would be frustrated. The Court emphasized that the Act of 2006 has been created for ensuring timely and smooth payment to the suppliers who are the Micro and Small enterprises and to provide a legal framework for resolving the dispute with regard to the recovery of

dues between the parties under the Act and also for providing overriding effect to any other law for the time being in force. Any interpretation in derogation thereof would frustrate the very purpose of the Act.

The Court clarified that sub section (1) of Section 18 of the Act of 2006 is an enabling provision which give the parties to a dispute covered under Section 17 thereof, a choice to approach the Facilitation Council, despite an arbitration agreement existing in between them.

In the instant case the petitioner, being covered under the Act of 2006, approached the Facilitation Council for resolution of the dispute and the Council in the impugned resolution admits that a dispute exists between the buyer and the seller for the balance payment towards services provided by the seller. The dispute is pending for quite some time. If the Council is unable to adjudicate the dispute itself, it can always refer the same for adjudication to any institution or center proving alternate dispute resolution services for arbitration of the dispute. The Council erroneously referred the parties to take steps in accordance with the dispute resolution clause mentioned in the agreement. The same is impermissible in terms of the Act of 2006 and also as per the law laid down by the Hon'ble Supreme Court in the matters referred to herein above.

The impugned resolution is, as such, liable to be set aside and is accordingly set aside.

The Council is directed to either take up the dispute for arbitration itself or refer the same to any institution or center providing alternate dispute resolution services for arbitration of the dispute. The provisions of the Arbitration and Conciliation Act, 1996 shall be applicable.

It goes without saying that the petitioner shall be entitled to avail all benefits of the Act of 2006 including the provision for claiming interest on account of the delayed payment of his dues. The writ petition stands disposed of.

No order as to costs.

Urgent certified photocopy of this judgment, if applied for, be supplied to the parties expeditiously on compliance of usual legal formalities.

( Amrita Sinha, J. )