Gauhati High Court
Assam Small Industries ... vs Micro And Small Enterprises ... on 25 February, 2021
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GAHC010214692018
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WA/283/2018
ASSAM SMALL INDUSTRIES DEVELOPMENT CORPORATION LTD
BAMUNIMAIDAM, GUWAHATI, REPRESENTED BY ITS MANAGING
DIRECTOR
VERSUS
MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL ASSAM, AND
2 ORS
REPRESENTED BY ITS CHAIRMAN, UDYOG BHAWAN, BAMUNIMAIDAM,
GUWAHATI, ASSAM.
2:M/S J.D. PHARMACEUTICALS
M.C. ROAD, GUWAHATI-3
3:M/S SHIVA TRADE AND AGENCIES
RADHA BHAWAN
G.S. ROAD, GUWAHATI-
Advocate for the Petitioner : MR. P N GOSWAMI
Advocate for the Respondent : MR. S P ROY (R2, R3)
BEFORE
HONOURABLE THE CHIEF JUSTICE
HONOURABLE MR. JUSTICE MANASH RANJAN PATHAK
JUDGMENT & ORDER (ORAL)
25.02.2021
(Sudhanshu Dhulia, CJ)
Heard Mr. K. N. Choudhury, learned senior counsel for the appellant, and Mr. S. P. Roy,
learned senior counsel, representing respondent nos. 2 and 3.
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2. This writ appeal has been filed by the Assam Small Industries Development
Corporation Ltd (hereinafter referred to as "the corporation") against the order dated
07.08.2018 passed by the learned Single Judge in WP(C) 2249/2014, by which the writ
petition was dismissed.
3. The matter before this court arises out of a proceeding and an award by the Micro and
Small Enterprises Facilitation Council (hereinafter referred to as "Facilitation Council"), which
is constituted under the provisions of section 21 of the Micro, Small and Medium Enterprises
Development Act, 2006 (hereinafter referred to as "MSME Act").
4. Respondent nos.2 and 3 before this court are small scale pharmaceutical companies
which manufacture medicines and pharmaceuticals. They had supplied medicines to the
Department of Health, Government of Assam, through the corporation, in the year 1992-
1993. Though a part payment was made against the said supply, but the balance amount was
not paid to the manufacturer, respondent nos.2 and 3 were constrained to file a civil suit,
being, Money Suit No. 201/1999, before the Court of District Judge, Senior Division, Kamrup.
However, during pendency of the civil suit, the court was apprised about the enactment of
the MSME Act, 2006, which mandated resolution of dispute of small scale industries through a
facilitation council. The plaintiffs then withdrew the suit and made a reference before the
Facilitation Council as per provisions of section 18 of the MSME Act. Section 18 of the MSME
Act, which governs the functioning of the Facilitation Council, reads as under:
"18. Reference to Micro and Small Enterprises Facilitation Council.--
(1) 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.
(2) On receipt of a reference under sub-section (1), the Council shall either itself
conduct conciliation in the matter or seek the assistance of any institution or centre
providing alternate dispute resolution services by making a reference to such an institution
or centre, for conducting conciliation and the provisions of sections 65 to 81 of the
Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the
conciliation was initiated under Part III of that Act.
(3) Where the conciliation initiated under sub-section (2) is not successful and stands
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terminated without any settlement between the parties, the Council shall either itself take
up the dispute for arbitration or refer it to any institution or centre providing alternate
dispute resolution services for such arbitration and the provisions of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was
in pursuance of an arbitration agreement referred to in sub-section(1) of section 7 of that
Act.
(4) Notwithstanding anything contained in any other law for the time being in force,
the Micro and Small Enterprises Facilitation Council or the centre providing alternate
dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator
under this section in a dispute between the supplier located within its jurisdiction and a
buyer located anywhere in India.
(5) Every reference made under this section shall be decided within a period of ninety
days from the date of making such a reference."
5. A bare perusal of the aforesaid provisions shows that the duty of the Facilitation
Council is to bring the contesting parties to a settlement by way of conciliation proceeding,
but in case conciliation proceedings fail, then either the Facilitation Council itself becomes the
arbitrator in the case, or it refers the case for arbitration. In the present case, since the
matter could not be settled by the Facilitation Council, an award was passed by the
Facilitation Council on 31.03.2011 for an amount of Rs. 14,08,187/- along with interest. Since
the amount was not paid to the respondent nos. 2 and 3, they instituted Money Execution
Case No. 13/2012 before the court of District Judge, Kamrup, for execution of the aforesaid
award. However, the corporation approached this court by filing the writ petition before a
learned Single Judge against the award dated 31.03.2011, which was dismissed. Aggrieved
by the dismissal of the writ petition, the corporation (writ petitioner) is now before this court
in appeal.
6. While hearing the appeal, this court has been informed by the learned counsel for
respondent pharmaceutical companies (respondent nos. 2 and 3), Mr. Roy, that a dispute
exactly of the same nature, between the same parties, had arisen even in the past and the
matter had reached the Apex Court, where a decision has already been given by the Apex
Court, which, by now, settles all the controversies between the parties, particularly as to their
rights and liabilities. A reference in this regard has been made to decision of the Hon'ble Apex
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Court in the case of Assam Small Scale Industries Development Corporation Ltd. and Others
vs. J.D. Pharmaceuticals and Another, reported in (2005) 13 SCC 19.
7. A reading of the above judgement makes it clear that the Corporation actually stand in
the shoes of a purchaser and it is his liability to pay the amount to the suppliers which, in the
present case, are respondent nos. 2 and 3, i.e. the pharmaceutical companies. The
contention of the appellant that he is only an agent a facilitator and not a buyer as that is
how he is shown in the contract, has been negated by the Apex Court. This was because the
role of the Corporation has to be seen not merely by the terms of the contract but in context
of the two statutory provisions which are (a) Assam Preferential Stores Purchase Act, 1989
and (b) Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings
Act, 1993 (which has now been replaced by MSME Act). It must also be stated here that as of
now, the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings
Act, 1993 has been repealed and, in its place we now have a much elaborate statute
addressing the same problem called the MSME Act, 2006, and it is the Act under which the
Facilitation Council has made the award.
8. In paragraph 27 of the judgment, the Apex Court said as under:-
"27. It is no longer in doubt or dispute that while interpreting the terms of agreement, it
is necessary to look to the substance of the matter rather than its form. Use of a
terminology may not be sufficient to lead to a conclusion that the parties to the contract in
fact intended that the said status would be conferred."
9. The findings as to the status of the Corporation are further recorded in paragraphs 29,
30 and 31 of the judgement, which are reproduced below:
"29. Law contemplates different types of agency. Under the Contract Act, the concept of
del credere agent is well known. A del credere agent assumes responsibility for the
solvency and performance of their contract by the vendees and, thus, indemnifies his
employer against loss. He gives an additional security to the seller. (See Bowstead &
Reynolds on Agency, 17th Edn., para 1-038). However, it is not necessary to dilate
thereupon as the status of the parties herein must be determined in terms of the
provisions of the 1989 Act.
30. The 1989 Act makes a statutory provision beyond the concept of agency as contained
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in the Contract Act. It is a special stature. In terms thereof the respondent was not
required to pay any commission to the Corporation, though the Corporation was described
as 'agent' of the respondent under the agreement. Five percent commission was to be
paid to the Corporation by the purchasing authorities. The provisions of the 1989 Act,
thus, should be given full effect. The status of the parties must not, thus, be determined
as to how they have described themselves but having regard to the substance of the
transaction as envisaged under the Act and the Scheme framed, which as noticed
hereinbefore, is as a part of the Act.
31. As a statutory agency came up into being by and between the purchasing authorities
and the Corporation in terms whereof the Corporation not only exercised the control in
relation to the entire supply of materials, as a part of the statutory scheme, it also
undertook to collect the price of the goods supplied from the purchasing authorities and
pay the same to the manufacturers subject, of course, to the payment of its commission
which would be a substantial amount. Under the scheme, the purchasing authorities had a
duty to pay 90% of the price before the Corporation makes an indent and, thus, the latter
had a statutory duty to realise the same before an indent is made, as also the remaining
10% when supplies are completed. If the payment was to be made by the Corporation to
the respondent, both under the contract as also in terms of the statutory provision, it
cannot now turn around and contend that it was not part of its duty and leave the matter
at that. It was obliged having regard to the statutory scheme on the part of the
Corporation to realize the price for the consideration of the goods supplied. It was not
constituted merely to act as a conduit pipe. It was bound to perform its statutory duties
envisaged under the 1989 Act."
10. What has been stated by the Hon'ble Apex Court is that what would be relevant is not
by what name the Corporation calls itself but what matters is what the Corporation does or
has the duty to do. Under the overall scheme of the MSME Act, referred above, the main
purchaser of the medicines is none else but the Corporation and it is the liability of the
Corporation to pay the amount to the supplier. The judgment finally fixes the liability of
making the payment not on the State Department who had made the purchase but on the
Corporation. This is what was said in paragraph 35 of the judgment, which reads as under:-
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"35. The Corporation for all intent and purport having undertaken the liability of the
purchasing authorities would also be liable for all consequences arising from non-payment
of the price of the goods supplied."
11. There is absolutely no doubt in our mind and we are in agreement with the findings of
the learned Single Judge that the Corporation being the buyer, it was his responsibility to
have paid the amount to the supplier which had not been done.
12. Having made the aforesaid determination, we may also address the initial objections of
the learned counsel for the respondent nos. 2 and 3 Mr. Roy as to the maintainability of the
writ petition itself and contrary contention of the learned senior counsel for the appellant Mr.
Choudhury that the only remedy for the petitioner is a writ petition. According to the learned
senior counsel for the writ petitioner, the award dated 31.03.2011 given by the Facilitation
Council is not an award in the eyes of law and the same cannot be executed and, hence, they
had no remedy but to come to this court by means of the writ petition. This objection,
however, is liable to be rejected at the very threshold for the simple reason that the merits of
the award and the feasibility of the award has to be seen now under the provisions of
Arbitration and Conciliation Act, 1996. Till a different pronouncement is made by the Court it
will remain an award. The petitioner could have moved an application for setting aside the
award under section 34 of the Act, which was not done. Now the award has to be enforced
under section 36 of the Act, which is to be done under the provision of the CPC. Since there
are questions raised about the 'award', at the hands of the petitioner, including as to the
nature of the award, we say nothing on this, but the fact remains that seeking relief before
the court under Article 226 of the Constitution was frankly not a remedy available to the
petitioner in the first place as the law provides a statutory procedure under the Act which the
petitioner must follow. We have been told that the execution court had already rejected the
objections of the Corporation in this regard. Whether the award is executable or not is for the
courts to decide, which have been called upon to do so in terms of the Arbitration and
Conciliation Act. We are, however, of the considered view that the writ petition was not
maintainable in the first place, but on the limited submission of the petitioner as to their
being only supplier but not buyer, etc., we agree with the findings of the learned Single Judge
which are in terms the findings earlier given by the Hon'ble Apex Court, that too, in a similar
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matter between the same parties. The Corporation must perform its responsibilities.
13. We find no merit in the appeal and the same is dismissed.
JUDGE CHIEF JUSTICE
Comparing Assistant
