M/S Sanganer Enviro Project ... vs Advent Envirocare Technology ...
2023 Latest Caselaw 550 Guj

     C/SCA/23939/2022                              JUDGMENT DATED: 18/01/2023




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               R/SPECIAL CIVIL APPLICATION NO. 23939 of 2022

==========================================================
              M/S SANGANER ENVIRO PROJECT DEVELOPMENT
                                Versus
               ADVENT ENVIROCARE TECHNOLOGY PVT. LTD.
==========================================================
Appearance:
MR. MITUL SHELAT, ADVOCATE for MR. HARSH K RAVAL(9068) for the
Petitioner(s) No. 1
for the Respondent(s) No. 2,3
MR. ARJUN R SHETH(7589) for the Respondent(s) No. 1
==========================================================

 CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE
       ARAVIND KUMAR
       and
       HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI

                               Date : 18/01/2023

                      ORAL JUDGMENT

(PER : HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR)

1. Petitioner has sought for the following reliefs : -

"7(A). To hold and declare that the Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 as arbitrary, unfair, unjust, discriminatory and consequently strike down the same as being the ultra-vires of the Constitution of India, 1950;

(B) This Hon'ble may be pleased to quash and set aside the orders passed by the learned 3rd Additional District Judge, Gandhinagar below Exh. 4 in Civil Misc. Application No. 66 of 2022 dated 15.10.2022 and further be pleased to allow the application filed under Exh. 4 by the petitioner."

C/SCA/23939/2022 JUDGMENT DATED: 18/01/2023

2. We have heard arguments of Mr. Mitul Shelat,

learned advocate appearing for petitioner and Mr. Arjun

Sheth, learned advocate appearing for respondent No.1,

who is on caveat.

3. First prayer relates to vires of Section 19 of the

MSME Act. A Coordinate Bench of this Court has already

bestowed its attention in the matter of Devi Enterprise

Limited versus State Level Industry Facilitation

Council and Others, disposed of on 27.03.2015 in

Special Civil Application No. 17344 of 2012, after

having taken note of the judgment rendered by the

Karnataka High Court in the case of The Karnataka

Power Transmission Corporation Limited and

Another versus Union of India and others reported in

AIR 2013 Kar 333, and it has been held as follows : -

"4. Having gone through the provision of the law, we are of the opinion that the condition of pre- deposit of 75% introduced by Section 19 of the Act is valid and does not suffer from the vice of unconstitutionality. The reasonable restrictions can always be imposed by the legislation by putting conditions. While enhancing condition of pre-

C/SCA/23939/2022 JUDGMENT DATED: 18/01/2023

deposit with the main section, the object sought to be achieved was that there shall be no dilatory tactics. Such an object of the legislature cannot be said to be arbitrary, unconstitutional or ultra vires. Therefore, we are of the considered opinion that the provisions of Section 19 of the Act are not ultra vires to any constitutional provision either Article 14 or Article 19(1)(g) of the Constitution of India.

5. Mr.Saurabh G. Amin, learned advocate for respondent No.3-Union of India has placed reliance on the decision of the Karnataka High Court in the case of Karnataka Power Transmission Corporation Limited and another Vs. Union of India and others, reported in (2013)1 Karnataka LJ 497 = (2012)0 Supreme (Karnataka) 500 [Writ Petition Nos. 22370-371/2010, C/W. 22374-375/2010, 22377- 378/2010, 40138, 40140 & 40141/2011 (GM-Res), decided on 13th September, 2012] and he has also submitted that paragraphs 24 to 27 be treated as a part of his argument. Paragraphs 24 to 27 of the said decision of the Karnataka High Court is reproduced below:

24. This takes us to the vires of Section 19 of the Act. Mr.Naganand, learned Senior counsel appearing for the respondent submits that having regard to the decision rendered by the Apex Court in Mardia Chemical's case, the appeal or the remedy should not be illusory. He submitted that the condition imposed under Section 19 of the Micro Act is onerous.

25. Indeed provisions of the Securitization Act fell for consideration before the Apex Court in the case of Mardia Chemicals Ltd., etc. etc. V/ s. Union of India and other etc. etc. reported in AIR 2004 SC 2371. The condition of pre- deposit under the Act was held to be illusory on the grounds that : -

(i) It is imposed while approaching the adjudicating authority for the first instance, not in appeal;

(ii) There is no determination of the amount due as yet;

C/SCA/23939/2022 JUDGMENT DATED: 18/01/2023

(iii) The secured assets or its management with transferable interest is already taken over and under control of the secured creditor;

(iv) no special reason for double security in respect of an amount yet to be determined and settled.

(v) 75% of the amount claimed by no means would be a meagre amount;

(vi) it will leave the borrower in a position where it would not be possible for him to raise any funds to make deposit of 75% of the undetermined demand.

The Apex Court has further observed that such conditions are not only onerous and oppressive but also unreasonable and arbitrary. Therefore, sub-section (2) of Section 17 of the Securitization Act was found to be unreasonable, arbitrary and violative of Article 14 of the Constitution.

26. The observations made by the Apex Court in Mardia Chemical's case are with reference to a situation, where there is no adjudication of the amount payable and that the secured assets or its management with transferred interest are already taken over under the control of the secured creditor. The Apex Court has observed that there is no determination of the amount due as yet. In those circumstances, the Apex Court was of the view that the said condition regarding pre-deposit of 75% without any prior determination by competent authority is unreasonable, arbitrary and violative of Article 14 of the Constitution.

27. In the case on hand, it is not so. There is already adjudication of the quantum by the Competent Authority, which is designated under the Act, which is the Facilitation Council. The Facilitation Council had issued

C/SCA/23939/2022 JUDGMENT DATED: 18/01/2023

notice to the respondents and an enquiry was conducted and an award is passed. The provisions of Arbitration Act so far as it relates to holding of an enquiry have been followed. Thus, there is an adjudication of quantum. Thus, it is not a case where without an adjudication, the amount is determined. In fact it is a full-fledged trial and on an enquiry the amount is determined. Thus, I am of the view that the provisions relating to deposit of 75% of the amount cannot be said to be unreasonable, arbitrary and violative of Article 14 of the Constitution. It is not a case where the property or the asset of respondent No.2 is taken over without adjudication which would make it difficult or impossible for them to comply with the provisions of Section 19 of the Act."

4. Infact similar view has been taken by the High

Court of Kerala, High Court of Madras, High Court of

Punjab and Haryana in the following matters :

(i) K.S.R.T.C. versus Union of India (UOI), W.P. (C) No. 19050 of 2009 dated 01.12.2009 : MANU/KE/0864/2009 (Kerala HC)

(ii) Eden Exports Company versus Union of India & Ors., MANU/TN/2148/2012 (Madras HC)

(iii) Mahesh Kumar Singla and Another versus Union of India and Other, 2017 SCC Online P&H 5493 (P&H HC)

5. We are in complete agreement with the view

expressed by the Coordinate Bench and judgments of

C/SCA/23939/2022 JUDGMENT DATED: 18/01/2023

other High Courts and we do not find any intervening

circumstances which would persuade us to take a

different view by referring it to a Larger Bench. As such

contention raised in that regard stands rejected in view

of quietus having been given by Coordinate Bench in the

matter of Devi Enterprise Limited versus State Level

Industry Facilitation Council and Others (supra).

Hence, first prayer is rejected.

6. Insofar as second prayer which has been

sought for to set aside the order dated 15.10.2022

passed by the Jurisdictional Civil Court on Exh. 4,

whereunder the applicant had sought for waiver of pre-

deposit of the award amount on the grounds mentioned

in Civil Misc. Application No. 66 of 2022 has been

rejected by the trial Court is concerned, we notice from

the record is that application came to be rejected by the

learned trial Judge by impugned order dated 15.10.2022.

As a consequence of this order, Civil Court has also

subsequently dismissed the petition filed under section

C/SCA/23939/2022 JUDGMENT DATED: 18/01/2023

34 in Civil Misc. Application No. 66 of 2022 by rejecting

the application for adjournment sought for by order

dated 14.12.2022 and on account of non-deposit of

amount. Thus, order dated 15.10.2022 has got merged

with the order dated 14.12.2022 and thereby only

remedy which would be available to the petitioner is to

challenge the order dated 14.12.2022 by filing an appeal

under section 37 of the Arbitration and Conciliation Act,

1996. Hence, without expressing any opinion on merits

of the case and keeping open all contentions of both

parties, present petition stands REJECTED.

(ARAVIND KUMAR,CJ)

(ASHUTOSH SHASTRI, J) AMAR SINGH