Calcutta High Court
(Earlier Known As Board Of Trustees Of ... vs Marinecraft Engineers Private Limited on 13 June, 2025
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
In the High Court at Calcutta
In Its Commercial Division
Ordinary Original Civil Jurisdiction
The Hon'ble Justice Sabyasachi Bhattacharyya
A.P.-COM No.296 of 2024
(Old No. A.P. 179 of 2023)
The Board of Major Port Authority
for the Syama Prasad Mukherjee Port, Kolkata
(earlier known as Board of Trustees of the Port of Kolkata)
Vs.
Marinecraft Engineers Private Limited
For the petitioner : Mr. Krishnaraj Thaker, Adv.,
Mr. Ashok Kr. Jena, Adv.
For the respondent : Mr. Shounak Mukhopadhyay, Adv.,
Mr. S. Bhattacharya, Adv.,
Ms. Anewesha Guha Roy, Adv.,
Mr. Abhijit Guha Roy, Adv.
Heard on : 08.07.2024, 29.11.2024,
31.01.2025, 25.04.2025
and 16.05.2025.
Hearing concluded on : 16.05.2025.
Judgment on : 13.06.2025.
Sabyasachi Bhattacharyya, J.:-
1. The present application under Section 34 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as "the 1996 Act") has been preferred
against an award passed in respect of a claim filed by the respondent herein
in a reference under Section 18 of the Micro, Small and Medium Enterprises
Development Act, 2006 (for short, "the 2006 Act").
2. Initially, conciliation proceedings commenced under Section 18(2) of the
2006 Act. Subsequently, the present petitioner having failed to appear in
the said proceedings, it was recorded by the Micro and Small Enterprises
Facilitation Council (in brief, "the Council") that the conciliation had
terminated. The dispute was accordingly taken up for resolution by
arbitration under sub-section (3) of the Section 18 of the 2006 Act.
3. Learned counsel appearing for the petitioner contends that the impugned
award is a nullity, since the mandate of the Council as the arbitral tribunal
had already terminated when the award was passed, by operation of Section
29-A of the 1996 Act, the provisions of which statute were applicable in
terms of Section 18(3) of the 2006 Act. The mandatory timeline as stipulated
in Section 29-A(1) of the 1996 Act, it is argued, had expired before passing
of the award.
4. Learned counsel next argues that the principles of natural justice were
violated by the Council in failing to grant adequate opportunity to the
present petitioner to place its case on merits before the Council. It is argued
that initially the matter came up for conciliation. Upon termination of the
conciliation, however, no opportunity was granted to the petitioner to argue
its case on merits. The Council proceeded on the premise that the parties
had already placed their respective cases by way of their written statements;
however, denying opportunity to advance oral arguments to the petitioner.
This, it is contended, brings the award within the purview of Section 34 of
the 1996 Act for violation of the fundamental policy of Indian Law and basic
notions of justice.
5. The petitioner next argues that no GC-3 Form was submitted by the
respondent/claimant, which was mandatory for disbursal of the dues of the
claimant as per the contract between the parties, as borne out by the tender
document. Thus, the award is vitiated, having not taken into consideration
such aspect of the matter and the legal effect thereof. It is argued that the
claimant/respondent did not become entitled to get its dues, even if any, in
view of non-submission of such Form.
6. On merits, learned counsel for the petitioner argues that the Council erred
in law and committed patent illegality in allowing the respondent‟s claims in
respect of the illegal deductions and interests and other aspects of the
matter. It is submitted that the Council could not have proceeded on the
concessions given during conciliation proceedings but ought to have
independently adjudicated the dispute on merits by granting opportunity of
hearing to the petitioner.
7. It is further submitted that the Council initiated conciliation amid the
arbitration proceedings and, as such, committed a patent illegality in
deciding the matter on merits during such conciliation attempts, by
construing the said proceedings to be an arbitral proceeding under Section
18(3) of the 2006 Act.
8. Learned counsel for the petitioner next argues that the Council committed
jurisdictional error amounting to patent illegality in delegating its authority
by leaving the task of computing the interest to the claimant/respondent,
through its designated Chartered Accountant (CA). Learned counsel cites
Usha Martin Limited v. Eastern Gases Limited, reported at 2022 SCC OnLine
Cal 3342, as well as an unreported judgment in AP No.90 of 2023
[Government of Maharashtra v. Shrivin Pharma], both Co-ordinate Bench
decisions of this Court, in support of such contention.
9. Learned counsel for the petitioner, during oral arguments, submits that the
dispute between the parties pertains to a "Works Contract" and, as such, is
not amenable to the jurisdiction of the Council under the 2006 Act,
although such point was not elaborated much in the written notes of
arguments filed by the petitioner.
10. Learned counsel for the respondent/claimant controverts the above
submissions and submits that it has been settled by this Court that the
provisions of Section 29-A of the 1996 Act are not applicable, particularly
insofar as the timelines are concerned, to a proceeding under the 2006 Act.
In such context, learned counsel cites a judgment of this Court in Porel Dass
Water & Effluent Control Private Limited v. West Bengal Power Development
Corporation Limited and others, reported at 2024 SCC OnLine Cal 8927.
11. Learned counsel for the respondent next takes the court through the various
dates of the arbitral proceeding, as reflected in the impugned award of the
Council, to show that sufficient opportunity was given at every stage to the
petitioner to address the dispute on merits. It is submitted that the
petitioner filed its Statement of Defence as well as written statement,
including notes of arguments, and also, on several occasions, addressed the
Council on the merits of the dispute.
12. On the issue of natural justice, it is argued that the reliance by the
petitioner on Ssangyong Engineering and Construction Company Limited v.
National Highways Authority of India (NHAI), reported at (2019) 15 SCC 131
is misplaced, since adequate opportunity of hearing was given to the
petitioner in the present case.
13. Learned counsel for the respondent next argues that GC-1 and GC-2 Forms
were duly submitted and, on the basis of those, the petitioner had certified
and approved the completion of the work by the claimant/respondent. A
GC-3 Form, it is contended, is only submitted when there is no further
dispute regarding the dues, since it is in the nature of a "No Dues
Certificate". There was no occasion for the respondent to submit such
Form, since the dues of the respondent were not cleared by the petitioner,
which is the very crux of the present dispute.
14. Insofar as the merits of the claim are concerned, it is argued that the
Council dealt with the matter at length, considering the arguments of both
sides as well as their pleadings, and accordingly came to its conclusions. It
is submitted that the Council equally considered the contentions of both
parties and, in fact, a part of the claim was not granted by the Council as
well. Thus, there cannot be a reopening of the award under Section 34 of
the 1996 Act.
15. Insofar as the attempts at conciliation during arbitral proceedings are
concerned, learned counsel for the respondent points out that such efforts
were taken only at the behest of the petitioner itself and did not partake the
character of pre-arbitral conciliation, since such stage was already over and
the Council had made it clear that the pre-arbitral conciliation had failed
and was terminated, fixing the matter for arbitration.
16. It is submitted that the power of the Council of adjudicating interest was not
delegated to a CA. The Council came to specific conclusions as to the date
from which and the rate at which the interest is payable. Thus, it was
merely the arithmetical calculations which were left to the CA.
17. Hence, it is argued that the decisions cited by the petitioner on such count
are not germane in the context of the present case.
18. Learned counsel relies on (2021) 3 SCR 1044 [M/s Silpi Industries v. Kerala
State Road Transport Corporation & Anr.] for the proposition that the 2006
Act is a beneficial legislation to be read for the benefit of MSME units such
as the respondent and that Sections 15 to 23 of the 2006 Act have
overriding effect on any other statute, including the 1996 Act.
19. Insofar as Work Contracts are concerned, it is argued that such contracts
came within the ambit of adjudication by arbitration by the Council under
the 2006 Act, provided the concerned unit is registered as an MSME Unit
under the Act, which criterion is met by the respondent in the present case.
Learned counsel cites Hindustan Petroleum Corporation Limited v. West
Bengal State Micro, Small Enterprises Facilitation Council, reported at 2023
SCC OnLine Cal 1700 in such context.
20. Upon hearing learned counsel for the parties, it transpires that several
issues have cropped up for consideration, which are dealt with sequentially
as follows:
Bar under Section 29-A of the 1996 Act
21. This issue was dealt with at length in Porel Dass (supra), where it was held
that the timeline stipulated under Section 29A of the 1996 Act are not
applicable to an arbitral proceeding under the 2006 Act. Rather, the period
stipulated under Section 18(5) of the 2006 Act is the relevant guiding factor.
However, the latter period is directory and not mandatory.
22. It has to be noted here that the 2006 Act is a special statute insofar as
MSME Enterprises are concerned and is a piece of beneficial legislation in
aid of such units. The provisions of the Act, including the non obstante
clause in Section 18 of the 2006, makes it abundantly clear that in case of
conflict between two statutes, the 2006 Act would prevail.
23. The power of the Council to arbitrate disputes arising in respect of MSME
units flows from Section 18 of the 2006 Act and not the 1996 Act. Sub-
section (3) of Section 18 of the 2006 Act confers such power and enables the
provisions of the 1996 Act to apply to such disputes. Thus, it has to be kept
in mind that the arbitration contemplated under the 2006 Act emanates
from the said statute (and not from the 1996 Act), and Section 18 the 2006
Act provides a complete eco-system of pre-arbitral conciliation, followed in
case of failure of the same by arbitration.
24. A composite reading of Section 29A of the 1996 Act and Section 18 of the
2006 Act clearly shows that there is a direct conflict between the two
provisions as to the respective timelines provided for completion of an
arbitral proceeding under the two statutes.
25. In the first place, the timeline of twelve months under sub-section (1) of
Section 29-A of the 1996 Act is made applicable to the date of completion of
pleadings under sub-section (4) of Section 23 of the said Act. Section 23 of
the 1996 Act operates within the window of the 1996 Act, under which
arbitral proceedings are commenced in terms of Section 21 of the 1996 Act.
As opposed thereto, the commencement of an arbitral proceeding under
Section 18 of the 2006 Act is under sub-section (3) of Section 18 itself, on
failure of conciliation proceedings. Thus, Section 29A of the 1996 Act does
not come into play at all in respect of such arbitral proceedings before the
Council, which are commenced under and by virtue of the 2006 Act.
26. As opposed to the timeline stipulated in Section 29A (1) of the 1996 Act,
sub-section (5) of Section 18 of the 2006 Act independently stipulates period
of 90 days from the date of making the reference for the completion of the
arbitral proceedings. On a proper reading of sub-section (5) of Section 18, it
is seen that although the expression "shall" has been used, the provision is
couched not in a negative way, debarring the Council from proceeding with
the reference after the expiry of 90 days, in stark contradistinction with sub-
section (4) of Section 29A of the 1996 Act which stipulates that the mandate
of the arbitrator itself terminates after the timeline stipulated in sub-Section
(1) of Section 29A expires, unless the mandate is extended in terms of sub-
Section (4) the said provision. As opposed thereto, Section 18 or, for that
matter, any other provision of the 2006 Act, does not carry any sanction
(such as termination of the mandate of the Council) or penalty for non-
completion of the reference within the said period.
27. Whereas Section 29-A of the 1996 Act hits at the very mandate of the
arbitral tribunal, rendering the tribunal functus officio after the expiry of the
stipulated time, Section 18(5) merely nudges the Council to adhere to a
timeline for the completion of the reference, without translating over-
stepping such period into a termination of the mandate of the Council itself.
28. In fact, a contrary interpretation would frustrate the very purpose of the
enactment of the 2006 Act, which categorically clothes the Facilitation
Council under the 2006 Act to conduct the arbitral proceedings in respect of
MSME Enterprises. If it is construed that the mandate of the Council
terminates after 90 days, the necessary corollary would be that it would be
open to the court, functioning independently under the 1996 Act, to
substitute the Council by any other arbitrator, or for the parties to initiate
fresh arbitral proceedings under the 1996 Act, thereby taking the arbitral
process itself beyond the pale of the 2006 Act, which is an absurd
interpretation, contrary to the very object and purpose of the 2006 Act.
Another possible corollary to such termination of the mandate of the Council
after 90 days would be that a fresh arbitral proceeding would be initiated
before the Council itself or the arbitrator appointed by it, which would be an
exercise in futility, since the Council or its appointed arbitrator would then
be already in seisin of the matter, having substantially completed the
arbitral process.
29. The root of the power of the Council is in consonance with the object of the
2006 Act, which is the promotion and development and enhancing the
competitiveness of MSME units, a part of which is early terminus to
disputes relating to such units by alternative dispute resolution, first by
conciliation and, if it fails, then followed by arbitration, by the Council or its
designated arbitrator under the aegis of the 2006 Act itself.
30. As such, the argument of the petitioner that the Council became functus
officio and the award was a nullity, due to the expiry of the timeline
stipulated in Section 29-A of the 1996 Act (or even under Section 18(5) of
the 2006 Act), cannot be accepted and is decided in the negative.
Violation of natural justice
31. The petitioner has alleged that the Council violated the principles of natural
justice by denying it opportunity of arguing on the merits of the case.
32. The impugned award itself contains the gist of the minutes of the previous
meetings of the Council, both at the conciliation stage and at the arbitration
stage. At the pre-arbitral conciliation stage, it was recorded by the Council
in its minutes dated February 16, 2016 that as the buyer unit (present
petitioner) was absent, it was not possible to amicably settle the matter and
a second notice for conciliation was issued to the parties. The petitioner
repeated its absence, due to which on November 16, 2016, the Council
recorded that the conciliation procedure as per Section 18(2) of the 2006 Act
had failed due to the abstinence of the petitioner in the conciliation
meetings. The Council decided simultaneously that the arbitration process
would be initiated as per the provisions of Section 18(3), in its minutes
dated November 16, 2016 itself.
33. Notice of termination of the conciliation process was issued vide Letter No.
D/845(2)/2017 dated December 4, 2017. Although the respondent initially
did not get a copy thereof, subsequently, the same was served on it. The
petitioner never complained that such notice was not served on it.
34. We find from the award that the claimant/respondent had submitted its
Statement of Facts before the Council with a copy to the buyer unit/present
petitioner. The petitioner also duly submitted its Statement of Defence as
well as points of arguments. The summary of the points raised by both the
parties in their respective pleadings were recorded at length in the impugned
award.
35. From the minutes dated February 26, 2018, it is found that despite being
aware since the year 2016 that arbitral proceedings were commenced on
termination of conciliation, the buyer unit (present petitioner) prayed for
time to submit written statement, upon which three (03) weeks‟ time was
granted to the petitioner on concession by the respondent. Yet again, on
April 24, 2018, the petitioner repeated its request for further time, to which
the claimant/respondent also did not raise any objection.
36. It was recorded in the minutes dated June 6, 2018, as reflected in the
impugned award, that the Statement of Defence was filed by the present
petitioner on June 5, 2018, but a copy thereof was handed over to the
claimant/respondent only on the date of hearing, that is, June 6, 2018. On
the said date, the learned advocate for the petitioner also commenced
arguments on merits and submitted that the supplier unit (present
respondent) had done additional work but the same was not approved by
the appropriate authority. The Council further recorded in its minutes
dated June 6, 2018 that the present petitioner also advanced arguments in
tune with its written notes. Arguments were also advanced by the present
respondent on the extra work done by it. Submissions were made by both
parties on the submission of GC-3 Form as well. Thus, both sides
commenced arguments on merits on June 6, 2018 itself.
37. On August 28, 2018, the learned advocate for the petitioner (buyer unit)
claimed that the supplier had disclosed new/additional documents, which
allegation was refuted on behalf of the claimant/respondent. The learned
advocate for the buyer unit/petitioner also raised the question of veracity of
bills submitted by the supplier unit and proclaimed that the bills had
already been paid by the buyer unit and that the supplier unit had forged
and fabricated the bills, for which FIR had been lodged, which was denied
by the supplier.
38. The learned advocate for the present petitioner further argued before the
Council on non-submission of GC-3 Form by the buyer unit for reducing
security deposit and contended that therefore the buyer was not entitled to
the release of security deposit. It was alleged that the supplier had
tampered some challans for repair of Kort Nozzle (Port Side), which were
accordingly not considered by the buyer/petitioner. Such contentions were
controverted by the supplier unit on merits.
39. Hence, it is evident that arguments were advanced on several occasions on
merits of the dispute by both the parties. However, at that juncture, the
buyer unit proposed a reconciliation meeting. As per the learned advocate
for the buyer, it expressed eagerness to settle the matter and informed that
the payment against Kort Nozzle could be reviewed by the appropriate
authority and that the supplier was to submit fresh documents on the
CENVAT claim.
40. On September 24, 2019, the buyer unit (present petitioner) admitted the
claim of the supplier unit, including the claim of dues on Kort Nozzle, but
refused to settle the claim of CENVAT and to pay interest. The supplier unit
did not accept such proposal and continued to contest the matter. However,
although on previous occasions the buyer/petitioner had advanced
arguments at length on merits, the learned advocate for the petitioner
submitted that he was not ready to contest the matter and had only come
up with the settlement proposal and wanted to come back "with appropriate
documentary evidences".
41. Conspicuously, even at that stage, the petitioner‟s prayer for adjournment
was granted by the Council, recording that it did not take up the matter for
final arbitration "in order to provide natural justice to both the parties".
42. On January 21, 2020, the matter again came up before the Council, when
the buyer/petitioner, arguing on merits, raised the question whether
repairing came under the purview of the 2006 Act and whether the claim of
the supplier unit came under the category of service. The
supplier/respondent contended that the buyer/petitioner wrongly deducted
some amounts and refused to pay certain justified due amounts. The
matter was then adjourned on the prayer of both sides.
43. Subsequently on May 12, 2021, when the matter was again taken up for
hearing, the learned advocate for the buyer unit/petitioner argued that the
Council is governed by "the Special Act" and addressed the issue of
jurisdiction of the Council to take up the matter for arbitration. The learned
advocate for the buyer unit contended further that the supplier had
erroneously submitted its application before the Council and that the
petitioner was agreeable to sit together on a further offer of Rs.26 Lakhs
settlement. The learned advocate for the buyer unit also sought for a
decision on the said legal points. Legal arguments were advanced by both
sides on the said issues.
44. The learned advocate for the supplier unit requested the Council further to
have an opportunity to place its arguments on merits. In reply, the learned
advocate for the buyer unit countered that it is a contractual matter and
there is "no applicability of equality" and that the arbitration clause would
be applicable only if there is a rejection on the part of the Chairman and
that the arbitration clause should be read as a whole.
45. However, when further asked by the Council to address on merits, the
learned advocate for the buyer unit insisted that the point of jurisdiction
may be decided first before further arguments on merits.
46. The Council decided the objection as to jurisdiction accordingly on the self-
same date and, by giving reasons, held that it had jurisdiction to take up the
matter. It was further clarified that the matter would be taken up in the
next hearing to adjudicate the points on merit.
47. Pausing here, it is abundantly clear that till the above date, both sides had
already argued on merits elaborately, as well as on the issue of jurisdiction.
It is not that the petitioner argued only on jurisdiction, but it had also
addressed the Council on several occasions on the merits of the case. It is
only that on May 12, 2021, the Council decided the issue of jurisdiction
first, that too on the insistence of the buyer/petitioner, and posted the
matter for adjudication on merits on the next date. Thus, although
arguments had been advanced on merits as well as jurisdiction, the
jurisdiction point was decided first and the adjudication on merits was left
for a further date.
48. Accordingly, the matter was taken up on April 28, 2022, when the buyer
unit/petitioner took a flimsy pretext of an undertaking having been given by
the parties regarding no steps being taken before the Council, since
apparently a challenge had been preferred against the decision of the
council on its jurisdiction.
49. It is noteworthy that the challenge under Section 34 of the 1996 Act, to the
decision of the Council that it has jurisdiction, failed before a learned Single
Judge as well as affirmed by a Division Bench of this Court subsequently,
on the ground that the ruling on jurisdiction was not an „award‟ which was
amenable to a challenge under Section 34 of the 1996 Act.
50. Coming back to April 28, 2022, the learned advocate for the
buyer/petitioner, quite surprisingly, urged that he had not made his
submission on merits and that the matter should be heard on merit. The
learned advocate for the supplier/respondent submitted that he had already
argued the matter on merits at least five times during the arbitral
proceedings. The Council, quite rightly, opined that the matter had been
thoroughly heard on several occasions on merits and proceeded to scrutinize
the written arguments of the parties and their pleadings and decide the
matter on merits.
51. The above narrative clearly goes on to show that not only was ample
opportunity given to the petitioner to argue the matter on merits but the
petitioner had availed of such opportunity by arguing the matter on merits
as well as on jurisdiction on several dates, covering the salient features of
the dispute. The prior adjudication of the issue of jurisdiction, that too on
the insistence of the petitioner, does not automatically signify that the other
issues were not heard previously.
52. In fact, the conduct of the present petitioner is deplorable, since it sought to
hinder the proceedings before the Council by seeking several adjournments
and lingering a non-maintainable challenge before this Court, first the
learned Single Judge concerned and thereafter in appeal before the
concerned Division Bench, on the issue of jurisdiction.
53. Accordingly, I am of the clear opinion that the facts on record are clearly
contrary to the argument of the petitioner that no opportunity of hearing
was given to it. Thus, the natural justice principle, reiterated in Ssangyong
Engineering and Construction Company Limited (supra), was never violated
by the Council in the present case.
54. Hence, this issue is also decided against the petitioner.
Non-submission of GC-3 Form
55. In terms of the contract between the parties, the GC-1 and GC-2 Forms
precede the submission of GC-3 Form. In the present case, the materials on
record placed before the Tribunal clearly show that certificates were issued
by the petitioner itself under Form GC-1 and Form GC-2 in respect of final
completion of the work done by the respondent. The liability of the
petitioner to clear the respondent‟s dues for such work arose immediately,
upon such completion certificates being issued by the petitioner itself, and
was not dependent on any further paraphernalia.
56. The claimant/respondent duly submitted its bill on October 15, 2013, which
was also produced before the Tribunal and has been annexed to the present
application of the petitioner itself.
57. The GC-3 Form, in terms of the contract between the parties, as evidenced
by the tender document, was in the nature of a "No Dues Certificate" in full
and final settlement of claims between the parties, which could only be
submitted by the respondent if it did not have any further dispute regarding
non-payment of its legitimate dues. The very crux of the present reference is
such a dispute as to non-payment and it is absurd to argue that non-
submission of GC-3 Form can be a deterrent to the respondent getting its
dues, as the very submission of a GC-3 Form by the respondent would
indicate its acceptance of the amount paid in full and final settlement of the
dues and would preclude the respondent from raising any challenge thereto.
58. Hence, such argument of the petitioner is hereby negated as well.
Merits
59. A thorough perusal of the impugned award shows that the Council
meticulously dealt with the pleadings of the parties, including the Statement
of Defence and written arguments filed by the petitioner, and the arguments
of parties advanced on several occasions. It thoroughly discussed the
claims under separate heads by adverting to the materials on record,
including the invoices raised by the supplier unit, the tender document, the
letters issued by the petitioner and the certificates issued in respect of
completion of the work. Upon a consideration of the entire germane body of
evidence, the Tribunal came to reasoned conclusions and decided separately
each and every head of the claim, granting some and refusing others.
60. It is thus found that there is no dearth of reasons in the impugned award.
It cannot be lost sight of that this Court, sitting in its jurisdiction under
Section 34 of the 1996 Act, is not taking up a regular appeal or reassessing
the evidence on record. The limited window within which the court can
intervene has to be read on the anvil of the parameters set forth in Section
34 itself. I do not find any patent illegality or the violation of the
fundamental policy of Indian Law and/or natural justice or for that matter
any other provisions of the 1996 Act to justify interference under Section 34.
As such, no case has been made out on merits of the case by the petitioner
to interfere with the impugned award. In fact, the majority of the claims had
been admitted by the petitioner itself in its several letters as well as
submissions made before the Council itself. However, the Council took the
pains of independently adjudicating on each of the said claims of the
respondent on merits. The petitioner, by its several letters, agreed the settle
the claim under all the heads in principle, although not on quantum, except
the claims on the respondent on CENVAT and deduction on account of Kort
Nozzle.
61. However, by its communication dated September 24, 2019, the petitioner
agreed to settle the Kort Nozzle claim as well, without admitting the claim in
respect of interest only.
62. The Council proceeded on the basis of the petitioner‟s letter, on the minutes
of the meeting dated January 28, 2014 granting additional time for
completion of the work, the satisfactory completion of the Kort Nozzle work
by the letter dated July 24, 2014, the agreement of the petitioner to pay the
majority of the heads of claim by its letter dated September 26, 2018, and
also independently adjudicated that the deductions in respect of illegal
claims is not permissible. Such findings were arrived at by adverting to the
evidence at length. The Council decided all issues accordingly on giving
substantial reasons and it is not for this Court, under Section 34 of the
1996 Act, to substitute its own views, even if possible, on a re-appreciation
of the evidence.
63. Thus, there is no scope of interference with the impugned award on merits
in the present case.
Initiation of conciliation in the midst of arbitration
64. The very premise of the arguments of the petitioner is fallacious, since it is
only on the basis of the proposal of the petitioner, as recorded in the
minutes dated June 6, 2018, that the option of settlement of the claims
between the parties was again explored by the Council. It is found from the
records that such an attempt could not be equated with a re-commencement
of the pre-arbitral conciliation process, since there is no such provision of
re-initiation of pre-arbitral conciliation afresh after the commencement of
arbitration, once the pre-arbitral conciliation is terminated. The Council
had already recorded in its Order dated November 16, 2016 that in view of
the non-participation of the buyer/petitioner, the conciliation procedure
under Section 18(2) was terminated and arbitral process was initiated under
Section 18(3) of the 2006 Act. Due communication was made on December
4, 2017 to the parties to that effect.
65. Thus, once arbitral proceedings commenced under Section 18(3), the clock
could not be set back by recommencing pre-arbitral conciliation, nor did the
Council do so. Rather, it is only on the prayer of the petitioner that further
avenues of mutual settlement, in addition to the arbitral proceeding, were
explored by the Council, which having failed, the matter was decided on
merits. It is to be noted further that the parallel attempts at mutual
settlement did not deter the parties from continuing with the arbitral
proceeding by advancing arguments on merits as well as jurisdiction before
the Council all along, as reflected in the minutes of the prior proceedings
and recorded in the impugned award itself.
66. Thus, such argument of the petitioner cannot also be accepted.
Sub-delegation of interest-adjudication by Council
67. The ordering portion of the impugned award is self-explanatory and
comprehensively answers such issue. The Council held therein that the
buyer unit is liable to pay Rs.16,77,027/- against deduction made for excess
and extra work from different bills "plus interest thereon @ 3 times of Bank
Rate of RBI, compounded with monthly rest to the supplier unit under
Section 16 of Chapter V of the 2006 Act". It was further recorded that such
interest would be "calculated after 45 days from the date of invoice till
realisation of the due amount".
68. Sections 15 and 16 of the 2006 Act govern the imposition of interest under
the 2006 Act. A bare perusal of the said provisions, juxtaposed with the
language used by the Council in the award, as narrated above, goes on to
show that the Council categorically decided all the adjudicable elements of
interest in consonance with Sections 15 and 16 of the 2006 Act, not only
stipulating the agreed date but also the period for which interest would be
payable, the rate and mode of interest, as well as specifically invoked
Section 16 of the 2006 Act while doing so. Hence, a complete and thorough
adjudication on all the decisive ingredients of interest was undertaken by
the Council.
69. It was only the clerical act of mathematical calculation of the interest that
was left to the CA, duly certified, to be appointed by the
claimant/respondent. The job of the CA was clear-cut - merely to
arithmetically calculate the quantum in terms of the parameters already
fixed by the Tribunal in its award. Hence, there was no element of
"adjudication" which was delegated to the respondent or its CA.
70. In Usha Martin (supra), relied on by the petitioner in this context, the
principal amount was left to be adjudicated by the CA and the award did not
specify the time from which the interest was to be calculated.
71. Again, in Government of Maharashtra v. Srivin (supra), the Council had failed
to indicate the time-period for calculation of interest.
72. As opposed to both the above cases, all such ingredients of adjudication
were completely taken care of by the Council in its award. Thus, the ratio
laid down in the said judgments is not applicable to the instant case at all.
73. Rather, the reliance of the respondent on M/s Silpi Industries (supra) is apt
in the present context. Sections 15 to 23 of the 2006 Act have overriding
effect on all other statutes, including the 1996 Act and, being a beneficial
legislation, has to be given a wider interpretation, since it is not in dispute
that the respondent is an MSME unit and is squarely covered by the 2006
Act.
Whether the MSME Council had jurisdiction to adjudicate on disputes
in respect of Works Contract
74. Although not elaborately stated in its written notes of arguments, the
petitioner‟s counsel verbally agued the point, for which the same is taken up
for adjudication for the sake of completion.
75. The issue at hand was dealt with elaborately by this Court in Hindustan
Petroleum Corporation Limited (supra) in WPO No.2896 of 2022, referred to
by the respondent in its written notes of arguments.
76. The relevant judgments of the Supreme Court in respect of works contracts,
rendered in respect of taxing statutes, were misinterpreted in some of the
judgments of different High Courts by automatically borrowing such concept
in respect of the 2006 Act, which is a beneficial piece of legislation, whereas
those were read in correct context by others. The entire gamut of the said
citations was considered and dealt with in Hindustan Petroleum Corporation
Limited (supra), which is not being repeated verbatim to save unnecessary
time and paper (virtual) space. Suffice to mention the crux of the principle
as follows:
77. Section 2(e) of the 2006 Act defines "enterprise" as an industrial
undertaking or a business concern or any other establishment, by whatever
name called, engaged in the manufacture or production of goods or engaged
in providing or rendering any service or services.
78. Section 2(m) provides that "supplier" means a micro or small enterprises
which has filed a memorandum with the authority referred in sub-section (1)
of Section 8 of the 2006 Act. The 2006 Act applies to all such enterprises,
irrespective of the nature of the contract entered into. There is no bar in the
2006 Act for works contracts, having ingredients both of goods and services
supply, to come within the purview of the Act. Rather, the expansive
definition of "enterprise", covering both manufacture and production of
goods as well as providing or rendering of any service or services, makes it
abundantly clear that both supply of goods and services are covered by the
Act. Section 18 is impartial as to the nature of dispute which may be
referred to the Council and merely provides that "any dispute regarding any
amount under Section 17" of the 2006 Act is referable under the said
provision to the Council.
79. Section 17 of the 2006 Act stipulates that the recovery of amount has to be
of any good supplied or services rendered by the supplier. Hence, both the
facets of goods and services are included within the ambit of such dispute
and works contracts, which by their very nature have both components,
cannot be excluded from the purview of the Act.
80. In fact, the previous judgments in that regard were elaborately dealt with in
Hindustan Petroleum Corporation Limited (supra) in the backdrop of the
liberal interpretation of the 2006 Act, which is a beneficial statute, as
opposed to the interpretation of whether "works contracts" would be taxable
by the States in the context of taxing statutes, which are by their very
nature to be interpreted strictly, being penal in nature.
81. Furthermore, there is nothing in the 2006 Act itself to debar works contracts
from being covered by the 2006 Act, including Section 18 therein, provided
the dispute relates to an MSME unit and is covered by Section 17 of the said
Act.
82. As such, the above issue is also decided in the negative and against the
petitioner.
CONCLUSION
83. In fine, on the basis of the discussions above, there is no scope of
interference with the impugned award under Section 34 of the 1996 Act.
The petitioner has abjectly failed to establish any of the grounds stipulated
under Section 34 of the 1996 Act for this Court to intervene with the arbitral
award. In fact, if we go by the principle enunciated in Section 5 of the 1996
Act itself, no judicial authority shall intervene except were so provided under
the concerned Part of the 1996 Act and, as such, there cannot be any
intervention in the present case.
84. Another aspect of the matter is required to be dealt with here. In the
caption of the present application under Section 34 of the 1996 Act, a
challenge has also been purportedly thrown to the Order dated May 12,
2021 passed by the Council, whereby the Council had held in favour of its
jurisdiction to adjudicate the dispute.
85. However, such challenge is not maintainable within the four corners of the
1996 Act. The only two situations in which a challenge can be preferred
under the 1996 Act to a decision of a domestic arbitral tribunal are under
Sections 34 and 37 of the said Act.
86. Section 34 contemplates a challenge to an award. The petitioner preferred a
previous challenge under Section 34 to the self-same Order dated May 12,
2021 which was turned down by the learned Single Judge on the ground
that such a challenge was not maintainable since the order was not an
award. The said view was affirmed by a Division Bench of this Court. Thus,
there is no scope of further reopening the said issue.
87. Insofar as Section 37 of the 1996 Act is concerned, the said provision clearly
stipulates the specific orders which can be challenged under it. Sub-section
(2)(a) of Section 37 provides for a challenge where a plea referred to in sub-
section (2) or sub-section (3) of Section 16 of the Act is "accepted".
88. Section 16(2) and Section 16(3) pertain respectively to the Arbitral Tribunal
not having jurisdiction and exceeding the scope of its authority.
89. In the present case, by the order dated April 12, 2021, the objection as to
jurisdiction under sub-sections (2) and/or (3) of Section 16 of the 1996 Act,
raised by the petitioner, was not "accepted" but refused. Thus, under the
specific scheme of Section 37(2)(a), although an acceptance of an objection
of jurisdiction would be appealable, the converse is not true and, thus, no
appeal lies against the refusal to entertain an objection under sub-Sections
(2) and (3) of Section 16 of the 1996 Act.
90. An analogy cannot be drawn with Section 105 of the Code of Civil Procedure,
under sub-section (1) of which an error, defect or irregularity in any order
affecting the decision of a case may be set forth as a ground of objection in a
memorandum of appeal under Section 96 of the Code against the final
decree, since Section 105 is only provided in respect of an appeal under the
Code of Civil Procedure, which provides for an entirely distinct and different
legal ecosystem and hierarchy of appeals than Sections 34 and 37 of the
1996 Act. Thus, we cannot superimpose the provision of a different statute,
operating in a completely different field, to an arbitral proceeding under the
1996 Act. What cannot be done directly cannot also be indirectly brought in
by the backdoor by permitting a challenge to an interlocutory order passed
by the arbitral tribunal within the ambit of a challenge to the final award by
way of an application under Section 34 of the 1996 Act.
91. Another important aspect of the matter is that although a challenge under
Section 37 of the 1996 Act has been consciously termed as an "appeal", the
Legislature, in its wisdom, has deliberately named a challenge under Section
34 not as an "appeal" but as an "application".
92. Hence, the analogy of an appeal could not even otherwise be drawn in
respect of an application under Section 34 of the 1996 Act, which is not an
appeal in any event.
93. Hence, the said challenge to the Order dated May 12, 2021 is not
maintainable and is hereby turned down as well.
94. In view of the above, the present challenge fails. Accordingly, A.P.-COM
No.296 of 2024 (Old No. A.P. 179 of 2023) is dismissed on contest without,
however, any order as to costs, thereby affirming the impugned award dated
April 28, 2022, passed by the West Bengal Micro, Small Enterprises
Facilitation Council and turning down the challenge to the order dated May
12, 2021 passed by the said Council as not maintainable.
95. Urgent certified copies of this order, if applied for, be supplied to the parties
upon compliance of all formalities.
(Sabyasachi Bhattacharyya, J.)
LATER :
After the above judgement is passed, learned Counsel appearing for
the petitioner seeks a stay of operation of the above judgement.In view of
certain arguable question being involved, stay of operation of the above
judgement is granted for a period of four weeks from date.
Learned Counsel appearing for respondent seeks permission to
withdraw the amount which has been deposited pursuant to a previous
order passed in the matter. However, such prayer shall be subject to any
order, if passed in the challenge, if any, to be preferred against the above
judgement and/or till the period of four weeks from date, whichever is
earlier. In the event no appeal is preferred against the above judgment
within four weeks, the respondent shall be at liberty to withdraw such
amount and adjust it with the decretal dues.
(Sabyasachi Bhattacharyya, J.)
