Bombay High Court
Marine Electricals India Ltd vs Union Of India on 13 August, 2024
Author: B. P. Colabawalla
Bench: B. P. Colabawalla
2024:BHC-OS:12196-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.3080 OF 2024.
Marine Electricals India Ltd. .. Petitioner
Versus
Union of India and Anr. .. Respondents
Mr. Rohan Kadam a/w Ms.Rucha Vaidya, Mr. Nadeem
Shama and Mr. Prashant Bothre i/b M/s. Pan India Legal
Services LLP, Advocate for the Petitioner.
Mrs. Savita Ganoo a/w Ms. Sangeeta Yadav and Mr. Umesh
Gupta, Advocate for Respondents.
CORAM : B. P. COLABAWALLA &
FIRDOSH P. POONIWALLA, JJ.
Reserved on : AUGUST 8, 2024
Pronounced on : AUGUST 13, 2024
ORAL JUDGMENT: (PER FIRDOSH P. POONIWALLA, J.)
1. Rule. Rule made returnable forthwith and heard finally by
consent of the parties.
2. The issue in the present Writ Petition is whether the
Petitioner can take advantage of the "Vivad Se Vishwas I-Relief for
MSMEs Scheme" [for short the "VSV Scheme"] floated by the
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Finance Ministry of the Government (Union of India) by an Office
Memorandum dated 11th April 2023. Under this Scheme, the
Government proposed to refund 95% of the liquidated damages
deducted under contracts entered into with the Government/PSUs on
the fulfillment of the eligibility conditions, more particularly set out in
the said Office Memorandum. It is in this context that the Petitioner,
although seeking various reliefs in the above Petition, has restricted
itself to prayer clauses (iii-a) and (iii-b) which read thus:-
"(iii-a) A writ of Certiorari and/or a Writ in the nature of
Certiorari and/or any other appropriate Writ, Order
and/or direction under Article 226, calling for the
records leading to the issuance of the decisions
communicated vide emails dated 12th March 2024 (at
Exhibit "S") and 13th March 2024 (at Exhibit "T") and
after examining the legality and propriety thereof, be
pleased to quash and set aside the same.
(iii-b) A Writ of Mandamus and/or a Writ in the nature of
Mandamus and/or any other appropriate Writ, Order
and/or direction under Article 226 directing the
Respondent to accept the Petitioner's application for
relief under the Vivad Se Vishwas I Scheme as per Office
Memorandum dated 10.04.2023 and subsequent Office
Memorandums and to process the same in accordance
with law."
3. The Petitioner is a Company engaged in rendering services
of electronic automation, information, communication, and technical
solutions, and manufacturing of Meteorological Instruments, Radar
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Equipment, GPS Devices, Search Devices, Navigators etc., to various
Government bodies and PSU undertakings carrying out shipbuilding.
4. In exercise of powers conferred by sub-section (1), read
with sub-section (9), of Section 7 and sub-section (2), read with sub-
section (3), of Section 8 of the Micro, Small and Medium Enterprise
Development Act, 2006 ("the MSME Act"), the Ministry of Micro,
Small and Medium Enterprise, on 26th June 2020, issued Notification
No.S.O.2119(E). Under this notification, the Government framed
criteria, inter alia, for classifying an Enterprise as a Micro, Small and a
Medium Enterprise under the MSME Act and also the form and
procedure for filing the Memorandum known as 'Udyam Registration',
which was to take effect from 1st July 2020. Clause 8 of the said
Notification provided for updation of information and the transition
period in classification. Clause 8(5), and which is relevant for our
purpose, stated that in case of an upward change in terms of
investment in plant and machinery or equipment, or turnover, or both,
and consequent re-classification, an Enterprise would maintain its
prevailing status till the expiry of one year from the close of the year of
registration. Thereafter, by another Notification dated 18th October
2022, Clause 8(5) [of the Notification dated 26th June 2020] was
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substituted. The substituted Clause 8(5) provided that in case of an
upward change in terms of investment in plant and machinery or
equipment, or turnover, or both, and consequent re-classification, an
Enterprise shall continue to avail of all non-tax benefits of the category
(Micro or Small or Medium) it was in before the re-classification, for a
period of three years from the date of such upward change.
5. On 10th May 2021, the Petitioner was registered as a
"Medium" Enterprise under the MSME Act and obtained an Udyam
Registration Certificate.
6. Between 19th February 2020 and 31st March 2022, the
Petitioner was unable to deliver / complete various projects contracted
with the Government / Public Sector Undertakings due to constraints
arising from the COVID-19 Lockdown. Due to these defaults, the
contracting Government undertaking / authority deducted liquidated
damages under the contracts entered into with the Petitioner.
7. Since the Government received many references from
Micro, Small and Medium Enterprises (MSMEs) regarding difficulties
faced by them due to the COVID - 19 pandemic, by an Office
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Memorandum dated 6th February 2023, the Finance Ministry framed
the VSV Scheme under which it proposed to refund 95% of the
liquidated damages deducted under contracts with Government / PSUs
inter alia on the conditions that the contractor/supplier should be
registered as a Medium, Small or Micro Enterprise with the Ministry
of MSME, as on 31st March 2022, and the original delivery
period/completion period [under the concerned contract] was between
19th February 2020 and 31st March 2022. The Government e-
Marketplace (the "GeM") was also directed to provide an online portal
for the purpose of implementing the VSV Scheme.
8. Thereafter, the Finance Ministry issued an Office
Memorandum dated 10th April 2023 whereby the eligibility conditions
for applying under the VSV Scheme were modified. It was provided
that the supplier/contractor would be eligible for the VSV Scheme if it
is registered as a Medium, Small or Micro Enterprise as per the
prevalent scheme of the Ministry of MSME on the date of the claim
made by the supplier/contractor. It was also provided that an MSME
may be registered for any category of goods and services.
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9. Subsequently, another Office Memorandum dated 11th
April 2023 was issued superseding the earlier Office Memorandums
dated 6th February 2023 and 10th April 2023. However, the eligibility
criteria mentioned in the Office Memorandum dated 10th April 2023
remained the same. Under the said Office Memorandum dated 11th
April 2023, the date for submission of claims was extended to 30th
June 2023 and which was further extended to 31st July 2023 [vide
Office Memorandum dated 2nd June 2023], and thereafter to 31st
March 2024 [vide Office Memorandum dated 22nd December 2023].
10. In the Interregnum, on 9th May 2023, the Petitioner was
upgraded/re-classified as "not an MSME". In Order to take advantage
of the VSV Scheme, in February 2024, the Petitioner tried to make a
claim on the GeM portal. However, it was not permitted to make the
claim on the ground that it was not an MSME. By an email dated 10th
February 2024, the Petitioner conveyed the same to the GeM helpdesk
informing them that it was unable to make the claim on the GeM portal
and that an error cropped up stating that it was not an MSME.
11. Further, in this regard, the Petitioner also addressed a
letter dated 13th February 2024 to the Director, Department of
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Expenditure, Ministry of Finance. By the said letter, the Petitioner
brought to the attention of the concerned authority that the GeM portal
was not facilitating the uploading of the claim. The Petitioner further
stated that while it was trying to make use of the link of the VSV
Scheme at the GeM portal, a message appeared that it was not eligible
to file the claim as it was "not an MSME". The Petitioner also pointed
out that, by virtue of Clause 8(5) of the Notification dated 26th June
2020, as substituted by the Notification dated 18th October 2022, it was
eligible to make the claim under the VSV Scheme, and, hence, it should
be permitted to upload its claim on the GeM portal. This was again
reiterated by the Petitioner vide its letter dated 15th February 2024.
12. Thereafter, the Petitioner received emails dated 12th March
2024 and 13th March 2024 from the GeM helpdesk. By the said emails,
the Petitioner was informed that it would not be able to make a claim
under the VSV Scheme as it was "not an MSME". It is in these
circumstances that the Petitioner has been constrained to file the
present Petition seeking the reliefs set out above.
13. In this factual backdrop, and which is undisputed, Mr.
Kadam, the learned counsel appearing on behalf of the Petitioner,
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submitted that by the impugned emails dated 12th March 2024 and 13th
March 2024, the Respondents have wrongfully held that the Petitioner
is not entitled to make a claim under the VSV Scheme on the ground
that the Petitioner was not a MSME. Mr. Kadam submitted that for
the Petitioner to be entitled to avail of the VSV Scheme, it had to be
registered as a Medium, Small or Micro Enterprise as per the prevalent
scheme of the Ministry of MSME on the date of making the claim. He
submitted that the Petitioner made the claim in February 2024. He
further submitted that the Petitioner was registered as a Medium
Enterprise with the MSME Ministry on 10th May 2021. He submitted
that the Petitioner was upgraded/re-classified as "not an MSME" w.e.f.
9th May 2023. However, the Udyam Registration Certificate, by which
the Petitioner was re-classified as "not an MSME", itself provided that
in case of graduation of status of an Enterprise, the benefit of
Government Schemes can be availed as per the provisions of
Notification No. S.O. 2119 (E) dated 26th June 2020.
14. Mr. Kadam submitted that Clause 8(5) of the Notification
dated 26th June 2020, as substituted by the Notification dated 18th
October 2022, clearly provided that in case of an upward change/re-
classification in terms of investment in plant and machinery or
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equipment, or turnover, or both, and consequent re-classification, an
Enterprise shall continue to avail of all non-tax benefits of the category
(micro or small or medium) it was in before the re-classification, for a
period of three years from the date of such upward change. Mr. Kadam
submitted that therefore, the Petitioner was to be considered as a
Medium Enterprise for the purpose of the VSV Scheme for a period of
three years from 9th May 2023. Consequently, in February 2024, the
Petitioner had to be considered as a Medium Enterprise for the
purpose of the VSV Scheme, and, therefore, was entitled to make a
claim thereunder.
15. Mr. Kadam submitted that if one peruses the Notification
dated 26th June 2020, as amended by the Notification dated 18th
October 2022, it creates a legal fiction of treating a Micro or Small or
Medium Enterprise as such, for a period of three years from an upward
change in its status, despite the said upward change, for the purpose of
availing of all non-tax benefits. Mr. Kadam submitted that when a
statute creates a legal fiction saying that something shall be deemed to
have been done which in fact and truth has not been done, even then,
the Court has to give full effect to such a statutory fiction after
examining and ascertaining as to for what purpose and between what
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parties such statutory fiction has been resorted to. In support of this
proposition, Mr. Kadam relied upon a decision of the Hon'ble Supreme
Court in Voltas Limited vs. Union of India1.
16. Taking all these facts and circumstances into
consideration, Mr. Kadam submitted that the Petitioner has been
wrongly denied the benefit of the VSV Scheme, and hence, it is entitled
to reliefs in terms of prayer clauses (iii-a) and (iii-b) reproduced
earlier.
17. The Respondent, through its Ministry of Finance, has filed
an Affidavit in Reply dated 5th April 2024 opposing the Petition.
18. In the said Affidavit in Reply dated 5th April 2024 the
Ministry of Finance has taken a stand that to avail of the benefit of the
VSV Scheme, an Enterprise had to be a Micro or Small or a Medium
Enterprise on the date of the claim made by it. When the Petitioner
submitted its claim in February 2024, it was admittedly not a Micro or
Small or a Medium Enterprise because w.e.f. 9th May 2023 it had been
classified as 'not an MSME'.
1 (1995) Supp (2) SCC 498
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19. The said Affidavit further stated that Clause 8(5) of the
Notification dated 26th June 2020, as substituted by Notification dated
18th October 2022, was not applicable to the VSV Scheme, because the
said Scheme inter alia stipulated that on the date of making the claim,
the said Enterprise would have to be registered as a MSME.
Admittedly, in February 2024 the Petitioner was not a MSME, and
hence, could not avail of the VSV Scheme. The said Affidavit then
stated that an upward re-classification/change as contemplated under
Clause 8(5) of the Notification dated 26th June 2020, as substituted by
Notification dated 18th October 2022, could never apply where, by
virtue of the upward change, the MSME ceases to be a MSME. The
upward change contemplated is only a change from a Micro Enterprise
to a Small Enterprise, and from a Small Enterprise to a Medium
Enterprise. The said Affidavit therefore submitted that the
interpretation sought to be given by the Petitioner to clause 8(5) of the
Notification dated 26th June 2020, as substituted by Notification dated
18th October 2022, is totally fallacious, which, in turn, entailed
dismissal of the Petition with costs.
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20. On the other hand, the Ministry of Micro, Small and
Medium Enterprises of the Respondent has filed an Affidavit in Reply
dated 8th August 2024, wherein it has taken the stand that the
Petitioner would continue to avail of all non-tax benefits of the
category "Medium" as it was in before the re-classification on 9th May
2023, for a period of three years till 8th May 2026. The relevant portion
of the said Affidavit, reads as under:-
"It is pertinent to mention that M/s Marine Electricals (India)
Limited (UDYAM-MH-19-0059391) graduated from "Medium"
to "Not a MSME" on dated 09.05.2023.
In view of the above fact, M/s Marine Electricals (India)
Limited (UDYAM-MH-19-0059391) shall continue to avail of
all non-tax benefits of the category "Medium" as it was in
before the re-classification on 09.05.2023, for a period of three
years till 08.05.2026."
21. Although, the Ministry of Micro, Small and Medium
Enterprises, through its Affidavit in Reply dated 8th August 2024, has
taken a stand in favour of the Petitioner, since the Ministry of Finance,
by its Affidavit in Reply dated 5th April 2024, has taken a contrary
stand, we have, despite the admission of the Ministry of Micro, Small
and Medium Enterprises, decided to adjudicate this Petition on its
merits.
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ANALYSIS AND FINDINGS
22. The short question that arises for our consideration is
whether the Petitioner is entitled to take the benefit of the VSV Scheme
in February 2024 when it was re-classified as 'not an MSME' w.e.f. 9th
May 2023. The relevant eligibility criteria for being entitled to make a
claim under the VSV Scheme is contained in the Office Memorandum
dated 11th April 2023, and reads as under:
"SN Parameter Eligibility condition
i .................
ii .................
iii Nature of the supplier/contractor Registered as a Medium, Small or Micro
eligible for the scheme. Enterprise (MSME) as per prevalent
scheme of Ministry of MSME on the date of
claim by supplier/contractor.
MSME may be registered for any category
of Goods and Services.
iv .................."
23. As per the said eligibility criteria, for the
supplier/contractor to be eligible for the VSV Scheme, it should be
registered as a Medium, Small or Micro Enterprise as per the prevalent
scheme of the Ministry of MSME on the date of the claim by the
supplier / contractor.
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24. As mentioned earlier, the Ministry of MSME has issued a
Notification dated 26th June 2020 notifying certain criteria for
classifying Enterprises as Micro, Small and Medium Enterprises, and
for specifying the form and procedure for filing the Memorandum
known as Udyam Registration w.e.f. 1st July 2020. Clause 1 thereof
provides for classification of Enterprises and reads as under:
"1. Classification of enterprises.-An enterprise shall be
classified as a micro, small or medium enterprise on the
basis of the following criteria, namely:--
(i) a micro enterprise, where the investment in plant and
machinery or equipment does not exceed one crore
rupees and turnover does not exceed five crore rupees;
(ii) a small enterprise, where the investment in plant and
machinery or equipment does not exceed ten crore rupees
and turnover does not exceed fifty crore rupees; and
(iii) a medium enterprise, where the investment in plant
and machinery or equipment does not exceed fifty crore
rupees and turnover does not exceed two hundred and
fifty crore rupees."
25. Clause 8 of the said Notification dated 26th June 2020
provides for updation of information and the transition period in
classification. Clause 8(5) of the Notification dated 26th June 2020,
and which is relevant for our purpose, reads as under:
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"(5) In case of an upward change in terms of
investment in plant and machinery or equipment or
turnover or both, and consequent re-classification, an
enterprise will maintain its prevailing status till
expiry of one year from the close of the year of
registration."
(emphasis supplied)
26. The above Clause 8(5) was thereafter substituted by
Notification dated 18th October 2022 and reads as under:
"(5) In case of an upward change in terms of
investment in plant and machinery or equipment or
turnover or both, and consequent re-classification, an
enterprise shall continue to avail of all non-tax
benefits of the category (micro or small or
medium) it was in before the re-classification, for a
period of three years from the date of such upward
change."
(emphasis supplied)
27. By the substituted Clause 8(5), it was made explicitly clear
that whether an Enterprise was a Micro or Small or a Medium
Enterprise, in case of an upward change and consequent re-
classification, it would continue to avail of all non-tax benefits of the
category it was in before re-classification, for a period of three years
from the date of such upward change. The use of the word "medium"
in the bracketed portion of Clause 8(5) makes it clear that Clause 8(5)
applied to an upward change and re-classification of even a Medium
Enterprise. If we were to accept the submission of the Ministry of
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Finance that Clause 8(5) [as substituted by Notification dated 18th
October 2022], only contemplated an upward change from a Micro
Enterprise to a Small Enterprise, and from a Small Enterprise to a
Medium Enterprise, and not an upward change from a Medium
Enterprise to "not an MSME", then the word "medium" in the
bracketed portion of Clause 8(5) would be rendered otiose. It is now
well settled in law that any legislation, or even a delegated legislation,
cannot be read in a manner that would render any word otiose or
superfluous. Therefore, it is not possible to accept the said submission
of the Ministry of Finance.
28. In our view, Mr. Kadam is right in submitting that Clause
8(5), as substituted by Notification dated 18th October 2022, creates a
legal fiction of treating a Micro or Small or a Medium Enterprise as
such, for a period of three years, from an upward change/re-
classification in its status, notwithstanding the fact that its status may
have changed due to its upward change/re-classification. This, of
course, is for the limited purpose of availing of all non-tax benefits. In
other words, for example, if a Small Enterprise becomes a Medium
Enterprise [by virtue of its upward re-classification], for availing of all
non-tax benefits, it will continue to be treated as a Small Enterprise for
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a period of three years from such upward change/re-classification.
Similarly, if a Medium Enterprise is classified as "not an MSME" by
virtue of its upward re-classification, for availing of all non-tax
benefits, it will continue to be treated as a Medium Enterprise for a
period of three years from such upward change/re-classification. In
this context, the Judgement of the Hon'ble Supreme Court in Voltas
Limited (Supra) is very instructive. The relevant portion of this
decision reads as under:-
"8. The effect of a statute containing a legal fiction is by now
well settled. The legislature by a statute may create a legal
fiction saying that something shall be deemed to have been
done which in fact and truth has not been done, but even then
Court has to give full effect to such statutory fiction after
examining and ascertaining as to for what purpose and
between what parties such statutory fiction has been resorted
to. In the well known case of East End Dwellings Co.
Ltd. v. Finsbury Borough Council [1952 AC 109 : (1951) 2 All ER
587] , Lord Asquith has said:
"If you are bidden to treat an imaginary
state of affairs as real, you must surely,
unless prohibited from doing so, also
imagine as real the consequences and
incidents which, if the putative state of
affairs had in fact existed, must inevitably
have flowed from or accompanied it. ...The
statute says that you must imagine a
certain state of affairs. It does not say that
having done so, you must cause or permit
your imagination to boggle when it comes to
the inevitable corollaries of that state of
affairs."
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This Court in the cases of State of Bombay v. Pandurang
Vinayak [(1953) 1 SCC 425 : AIR 1953 SC 244 : 1953 SCR 773]
; Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC
838 : (1962) 1 SCR 9] ; J.K. Cotton Spg. and Wvg. Mills
Ltd. v. Union of India [1987 Supp SCC 350 : 1988 SCC (Tax) 26 :
AIR 1988 SC 191 : (1988) 1 SCR 700] ; M. Venugopal v. Divisional
Manager, LIC[(1994) 2 SCC 323 : 1994 SCC (L&S) 664 : (1994) 27
ATC 84 : JT (1994) 1 SC 281] and recently in the case of Harish
Tandon v. Addl. District Magistrate [(1995) 1 SCC 537 : JT (1995) 1
SC 290] has dealt with in detail the effect of a statutory fiction
and the limitation of the court to ignore the mandate of the
legislature, unless it is violative of any of the provisions of the
Constitution. So far as sub-section (1) of Section 33 is
concerned, it mandates that agreements covered under
different clauses of sub-section (1) of Section 33 shall be
deemed for the purposes of the Act to be agreements relating
to restrictive trade practices. By the deeming clause one is not
required to treat any imaginary state of affairs as real but to
treat the agreements specified and enumerated in sub-section
(1) of Section 33 as agreements relating to restrictive trade
practices. It can be said that Parliament after having examined
different trade practices, has identified such trade practices
which have to be held as restrictive trade practices for the
purposes of the Act. To keep such trade practices beyond
controversy in any proceeding, a deeming clause has been
introduced in sub-section (1) of Section 33 saying that they
shall be deemed to be restrictive trade practices. In this
background, according to us, there is not much scope for
argument that although a particular agreement is covered by
one or the other clauses of sub-section (1) of Section 33, still it
shall not amount to an agreement containing conditions which
can be held to be restrictive trade practices within the
meaning of the Act."
(emphasis supplied)
29. In these circumstances, in our view, even though the
Petitioner was re-classified as "not an MSME" [by virtue of upward re-
classification] w.e.f. 9th May 2023, for a period of three years from 9th
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May 2023, it was entitled to avail of all non-tax benefits available to a
Medium Enterprise. Since the VSV Scheme is a non-tax benefit
applicable even to a Medium Enterprise, in our view, the Petitioner was
entitled to make a claim under the VSV Scheme. We may add here that
this view is also supported by the Affidavit in Reply dated 8th August
2024 of the Ministry of Micro, Small and Medium Enterprises. In these
circumstances, we are of the view that the emails dated 12th March
2024 and 13th March 2024 have wrongly held that the Petitioner was
not entitled to make a claim under the VSV Scheme.
30. In the light of the aforesaid discussion, and for all the
reasons set out earlier, the emails dated 12th March 2024 and 13th
March 2024 are required to be quashed and the Respondents will have
to be directed to entertain the Petitioner's claim under the VSV
Scheme.
31. In these circumstances, we allow the Writ Petition in
terms of prayer clauses (iii-a) and (iii-b) thereof, and which are
reproduced earlier. Rule is made absolute in the aforesaid terms and
the Writ Petition is also disposed of in terms thereof. In the facts and
circumstances of the case, there will be no order as to costs.
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32. We hasten to clarify that this Court has not gone into the
merits of the Petitioner's claim under the VSV Scheme, and the merits
thereof will have to be considered and decided by the Respondents as
per the provisions of the VSV Scheme and in accordance with law. All
that we have decided is the eligibility of the Petitioner to avail of the
said Scheme.
33. This order will be digitally signed by the Private Secretary/
Personal Assistant of this Court. All concerned will act on production
by fax or email of a digitally signed copy of this order.
[FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.]
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