[Cites 26, Cited by 0]
Gujarat High Court
Gujarat State Civil Supplies ... vs M/S Mahakali Foods Pvt.Ltd. ( Unit 2) on 10 December, 2025
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Reserved On : 18/08/2025
Pronounced On : 10/12/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 11824 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE Sd/-
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Approved for Reporting Yes No
No
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GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD.
Versus
M/S MAHAKALI FOODS PVT.LTD. ( UNIT 2) & ORS.
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Appearance:
MR PK JANI, SR. COUNSEL WITH MR SHIVANG P JANI(8285) for the
Petitioner(s) No. 1
MR SAURABH G AMIN(2168) for the Respondent(s) No. 1
MS DIMPLE A THAKER(6838) for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2
MR JK SHAH AGP for the Respondent(s) No. 3,4
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CORAM:HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE
CAV JUDGMENT
1. The present Special Civil Application is filed praying for the
following reliefs:-
"62A. YOUR LORDSHIPS may be pleased to issue a writ of certiorari or
writ in the nature of certiorari quashing and setting aside the
letter/communication dated 13.04.2023 issued by Industries
Commissioner, MSME, Council, Bhopal Madhya Pradesh. (Annexure-Z).
B. That this Hon'ble Court may be pleased to quash and set aside
the proceedings initiated by Collector by way of issuing notice dated
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29.05.2023 (Annexure-2Z).
C. That this Hon'ble Court may be pleased to quash and set aside
the notice dated 29.05.2023 (Annexure-Z2) which is issued by
Mamlatdar, Gandhinagar in exercise of power under Section 154 and
155 of the Gujarat Land revenue Code, 1879 and may be pleased to
issue writ of certiorari, and be further pleased to quashed and set aside
the proceedings in the form of notice dated 28.06.2023 (Annexure-Z5)
issued under Section 200 of the Gujarat Land Revenue Code, 1879.
D. Pending hearing and final disposal of this writ petition, the
Hon'ble Court may be pleased to stay the operation, implementation
and execution of the letter/communication issued by the respondent no.
2 dated 13.04.2023 (Annexure-Z) and the proceedings initiated by
respondent no. 3, the Collector, Gandhinagar by way of notice dated
29.05.2023. (Annexure-Z2).
E. Pending hearing and final disposal of the present petition, the
Hon'ble Court may be further pleased to stay the notice issued by
Mamlatdar, Gandhinagar dated 29 th May, 2023 (Annexure-Z2) issued
under Section 200 of the Gujarat Land Revenue Code, 1879.
F. Pending hearing and final disposal of this writ petition Special
Civil Application, this Hon'ble Court may be pleased to stay the
operation and implementation of the notice issued by the Mamlatdar,
Gandhinagar. under Section 200 of the Gujarat Land Revenue Code,
1879 dated 28.06.2023 (Annexure-Z5)."
2. The factual matrix giving rise to the present writ petition is
that on 08.11.2010 the petitioner floated a public tender for the
purchase of Toasted Defatted Soya Flour.
2.1 That on 04.12.2010 the petitioner issued Purchase Order
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No. GSCSC/CGP/PDS/TDFS/1011/04/1193 for supply of
2,335.50 MT of Toasted Defatted Soya Flour and the petitioner
and respondent No.1 thereafter executed an agreement on
18.12.2010 for supply of 1,524 MT for Gandhinagar District and
811.50 MT for Sabarkantha District.
2.2 That on or about 18.04.2011 four trucks laden with soya
bags were intercepted by the Dewas Police (Madhya Pradesh) and
a newspaper report of such seizure was published on
18.04.2011. About 1,445 bags of the seized consignment were
prima facie found to belong to the petitioner. That on 13.05.2011
the petitioner lodged FIR No. 1/2011 at the CID Crime Police
Station, Vadodara, alleging theft and related offences under
Sections 379 and 114 IPC in respect of the consignment seized
at Dewas.
2.3 That on 29.06.2011 the petitioner communicated to
respondent No.1 (M/s Mahakali Foods Pvt. Ltd.) its decision to
withhold all pending payments in view of the seizure and the
prima facie involvement of respondent No.1 in respect of the said
shipment.
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2.4 That on 21.06.2012 respondent No.1 initiated proceedings
before the Madhya Pradesh Micro and Small Enterprises
Facilitation Council (MSME Council), Bhopal, being case No.
MSMEFC/442/2012, for recovery of the outstanding amounts.
2.5 That on 25.07.2012 the Respondent's Special Civil
Application (No. 8330/2012) seeking release of the withheld
amounts was dismissed by the Hon'ble High Court of Gujarat by
an oral order observing that the dispute was contractual in
nature and shall be more appropriately decided by appropriate
forum.
2.6 That on 11.09.2014, the MSME Council (Bhopal) passed an
award directing the petitioner to pay to respondent No.1 the
withheld amounts (Rs. 1,99,25,940/-) and performance security
(Rs. 23,36,000/-) together with interest therein, subject to the
respondent's right of appeal on depositing 75% of the awarded
amount.
2.7 That on 10.12.2014 the petitioner deposited 75% of the
amount as directed by the MSME Council (Rs. 4,34,67,597/-
inclusive of interest) in the District Court, Gandhinagar, in
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compliance with the condition prescribed by the MSME Council.
2.8 That on 01.01.2015 a Revenue Recovery Certificate was
purportedly issued in relation to the outstanding amount as
awarded by the MSME Council.
2.9 That on 21.10.2015 the District Court, Gandhinagar made
orders permitting withdrawal by respondent No.1 of a portion of
the amount deposited and observed that the question of the
withdrawal of the remaining amount would be decided at the
time of hearing of the application under Section 34 of the
Arbitration and Conciliation Act, 1996.
2.10 That on 20.08.2018 the Commercial Court, Ahmedabad
(designated under the Commercial Courts Act, 2015) dismissed
the petitioner's application under Section 34, and the petitioner
thereafter filed First Appeal No. 3613/2019 before the Hon'ble
High Court of Gujarat.
2.11 That on 13.11.2019 the Hon'ble High Court of Gujarat
dismissed the petitioner's First Appeal, and thereafter the
petitioner preferred Special Leave Petition (SLP) before the
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Hon'ble Supreme Court of India.
2.12 That on 27.10.2020 the Hon'ble Supreme Court passed an
order in SLP (Civil) No. 12884/2020 directing that the balance
25% of the awarded amount be deposited with the Registrar of
the High Court of Gujarat within four weeks and further granted
liberty to respondent No.1 to withdraw the amount subject to
furnishing a bank guarantee to the satisfaction of the Registrar
of the High Court.
2.13 That on 27.11.2020 the petitioner deposited the balance
25% amount (Rs. 1,44,80,109/-) as per the award before the
Registrar of the High Court of Gujarat in compliance with
judicial directions.
2.14 That on 31.10.2022, the Hon'ble Supreme Court dismissed
the petitioner's Special Leave Petition on merits.
2.15 That on 10.02.2023 the petitioner communicated to the
Collector, Gandhinagar and the Mamlatdar, Gandhinagar that it
had complied with all judicial orders and requested closure of
the revenue recovery proceedings. A copy of the said
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communication is placed on record (Annexure-Y).
2.16 That the respondent No.1 addressed a communication
dated 13.03.2023 to the Madhya Pradesh Micro and Small
Enterprises Facilitation Council, Bhopal, seeking payment of
interest duly certified by its Chartered Accountant.
2.17 That the Industries Commissioner of the Madhya Pradesh
on behalf of Micro and Small Enterprises Facilitation Council,
relying on a certificate issued by the Chartered Accountant sent
a letter dated 13.04.2023 to the Collector, Gandhinagar stating
that respondent No. 1 was entitled to recover Rs. 34,89,19,321/-
from the petitioner and the same may be recovered from the
petitioner.
2.18 That based on this communication, the Collector,
Gandhinagar intimated to the Mamlatdar, Gandhinagar to
recover the said amount as land revenue from the petitioner.
2.19 That acting on the Collector's letter dated 29.05.2023, the
Mamlatdar and Executive Magistrate, Gandhinagar issued a
notice dated 28.06.2023 under Section 200 of the Gujarat Land
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Revenue Code, 1879, directing the petitioner to pay Rs.
34,89,19,321/-, failing which attachment proceedings would
take place on 13.07.2023.
2.20 That before the issuance of the notice, the petitioner had
appeared before the Collector on 01.06.2023 in reference to the
earlier notice dated 29.05.2023, and also submitted a detailed
written representation on 16.06.2023, requesting that the
proceedings be closed. These representations were also
forwarded to the Mamlatdar and Executive Magistrate for
consideration.
2.21 That the petitioner also made a detailed representation to
the Industries Commissioner, MSME Council, Madhya Pradesh
on 12.06.2023 vide letter no. GSCSC/CS/111/Mahakali
Foods/MSME Order Compliance/23 /1377, explaining the entire
case and clearly stating that no amount was due from the
petitioner. This representation too was forwarded to the
Mamlatdar and Executive Magistrate, Gandhinagar.
Aggrieved, the petitioner has filed present Special Civil
Application.
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3. Learned Senior Counsel Mr. P. K. Jani, appearing with
learned advocate Mr. Shivang P. Jani for the petitioner, submits
that the impugned letter dated 13.04.2023 issued by the
Industries Commissioner on behalf of the Micro and Small
Enterprises Facilitation Council, Madhya Pradesh, is wholly
illegal, unconstitutional and de hors the provisions of the Micro,
Small and Medium Enterprises Development Act, 2006 ("MSMED
Act"). It is submitted that the MSMED Act does not confer any
authority upon the said respondent to issue such a
communication and, therefore, the impugned action deserves to
be quashed and set aside.
3.1 Learned Senior Counsel for the petitioner submits that the
Industries Commissioner, MSME Council, Bhopal, Madhya
Pradesh, has absolutely no power, authority or jurisdiction to
direct the Collector, Gandhinagar to recover an alleged amount
of Rs. 34,89,19,321/-. It is submitted that the MSMED Act does
not empower the Commissioner to issue recovery instructions to
any authority of another State or to act as a recovery officer, and
therefore, the impugned communication is without jurisdiction
and void ab initio.
3.2 Learned counsel for the petitioner submits that the
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impugned letter dated 13.04.2023 has been issued without
granting any opportunity of hearing to the petitioner and without
following the basic principles of natural justice. No show-cause
notice or prior intimation was issued before directing recovery of
such a substantial amount, rendering the action arbitrary,
unjust and liable to be set aside on this ground alone.
3.3 Learned Senior Counsel further submits that the Industries
Commissioner has relied upon a letter dated 24.03.2023, issued
by the Chartered Accountant in favour of respondent No.1
Mahakali Foods Pvt. Ltd., stating that it is entitled to recover Rs.
34,89,19,321/-. It is submitted that such a Chartered
Accountant's certificate cannot constitute valid evidence and be
treated as proof of any legally recoverable dues.
3.4 Learned Senior Counsel for the petitioner submits that no
adjudication of the alleged claim has taken place under Section
18 of the MSMED Act. It is submitted that no recovery
proceedings can be initiated. The impugned communication
directing recovery is, therefore, without authority of law and
liable to be quashed.
3.5 Learned Senior Counsel for the petitioner submits that the
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Mamlatdar has wrongly invoked the provisions of the Gujarat
Public Moneys (Recovery of Dues) Act, 1979, which have no
application to the facts of the present case. It is submitted that
respondent No.1 Mahakali Foods Pvt. Ltd. (Unit-II) does not fall
under any category of authorities notified under the said Act and
therefore no recovery could be initiated under the said
provisions.
3.6 Learned Senior Counsel for the petitioner submits that the
Mamlatdar has relied on the letter dated 13.04.2023, issued by
the Industries Commissioner, Bhopal, Madhya Pradesh.
However, such a letter was never addressed to the Mamlatdar.
The impugned notices dated 29.05.2023 and 28.06.2023 do not
even refer to this communication. Hence, the foundation of the
recovery proceedings is erroneous and unsustainable.
3.7 Learned Senior Counsel submits that the Collector,
Gandhinagar heard the petitioner on 01.06.2023 and the
petitioner filed a detailed representation on 16.06.2023. It is
submitted that before the Collector could take any decision, the
Mamlatdar hastily issued the impugned notice dated 28.06.2023
without waiting for orders of the superior authority, thereby
demonstrating undue haste and lack of jurisdiction.
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3.8 Learned Senior Counsel for the petitioner submits that the
Mamlatdar acted illegally when the subject matter was sub
judice before the Collector, his superior officer. Such conduct
shows that the Mamlatdar had pre-decided the issue and
proceeded in an arbitrary manner without authority of law.
3.9 Learned Senior Counsel submits that no Recovery
Certificate has been issued by the MSME Council, Bhopal,
Madhya Pradesh, nor has any such recovery certificate been
received by the Mamlatdar from any competent State authority.
In the absence of a Recovery Certificate, it is submitted that no
recovery proceedings under the Gujarat Land Revenue Code can
be initiated.
3.10 Learned Senior Counsel further submits that the
respondent authorities themselves admit in their affidavit that
no computation, determination or certification of the alleged
dues has been made by any competent authority. In such
circumstances, the Mamlatdar has no power to determine
liability or recover any amount.
3.11 Learned Senior Counsel submits that under the Gujarat
Land Revenue Code, 1879, recovery is permissible only when the
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arrears are duly determined, adjudicated and certified. Without
adjudication by an authority and without fixation of liability, no
notice under Sections 152 or 200 of the Code can be issued.
3.12 Learned Senior Counsel submits that recovery cannot be
based on a figure calculated by the Chartered Accountant of
respondent No.1. It is submitted that a private party or its
accountant has no legal competence to determine liability for
recovery under the Gujarat Land Revenue Code.
3.13 Learned Senior Counsel submits that the letter dated
13.04.2023 of the Industries Commissioner, Madhya Pradesh,
does not constitute a Recovery Certificate under the MSMED Act,
2006, or under the Gujarat Land Revenue Code. Therefore, it
cannot form the basis of coercive recovery action by the
Mamlatdar.
3.14 Learned Senior Counsel further submits that, according to
the petitioner, the entire amount has already been paid, and
respondent No.1 is not entitled to claim compound interest
under Section 16 of the MSMED Act, as it does not qualify as a
small enterprise. This issue has also been raised before the
MSME Council and the Industries Commissioner by the
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petitioner.
3.15 Learned Senior Counsel submits that since the powers of
the Collector under the MSMED Act stand delegated to the
Mamlatdar, the Mamlatdar is required to exercise such powers
strictly in accordance with law. In the present case, such legal
requirements have been blatantly disregarded.
4. The learned Senior Counsel for the petitioner relied upon
the judgment of the Division Bench of the Jharkhand High Court
in Project Director, through Umashankar Singh v. National Printers
- 2023 SCC OnLine Jhar 1351, wherein it was categorically held
that a petition seeking only interest--after the principal amount
stands paid--is maintainable before the Facilitation Council
under Section 18 of the MSMED Act, 2006. This judgment was
relied upon to submit that, assuming without admitting that any
interest claim survives, the only lawful remedy available to
respondent No. 1 was to approach the Facilitation Council, and
not to seek direct recovery through the Industries Commissioner.
Thus, the action of the Industries Commissioner, which is based
solely upon a Chartered Accountant's certificate, is contrary to
the statutory mechanism prescribed under the MSMED Act.
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4.1 The learned Senior Counsel for the petitioner next relied
upon the judgment in Modern Industries v. Steel Authority of
India Ltd., - (2010) 5 SCC 44, wherein the Hon'ble Supreme
Court, while affirming the Full Bench judgment of the Guwahati
High Court, held that claims relating to interest on delayed
payments under the Interest on Delayed Payments to Small
Scale and Ancillary Industrial Undertakings Act, 1993 (which is
pari materia with the provisions of the MSMED Act, 2006) are
independently maintainable even after the principal amount has
been discharged. The learned Senior Counsel submitted that any
interest claim must undergo adjudication under the MSMED
statutory procedure, and cannot be enforced through arbitrary
recovery proceedings initiated on the basis of Chartered
Accountant's certificate.
4.2 The learned Senior Counsel for the petitioner further relied
on the judgment in Government of Maharashtra v. Shrivin
Pharma Pvt. Ltd., - AP 90 of 2023 (IA NO: GA 2 of 2023), wherein
it was held that the Facilitation Council cannot delegate its core
adjudicatory function to a Chartered Accountant, particularly for
determining interest under an award. The Court held that
delegating the computation of interest to a Chartered Accountant
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is impermissible under the Arbitration and Conciliation Act,
1996, as interest constitutes an integral part of the award. It was
relied upon to contend that the Industries Commissioner could
not have solely relied upon a Chartered Accountant's certificate
for determining alleged dues, and any such delegation is legally
unsustainable.
4.3 The learned Senior Counsel for the petitioner also relied
upon the judgment of Gurpreet Singh v. Union of India - 2006 (8)
SCC 457, wherein it was held that interest ceases to run once
the decretal amount is deposited in Court. This judgment was
cited to support the petitioner's submission that having
deposited the awarded amount, the liability to pay further
interest ought to cease.
4.4 The learned Senior Counsel for the petitioner relied upon
the judgment in Union of India v. MP Trading Investment
Corporation Ltd. - 2016 (16) SCC 699, wherein it was held that
after deposit of the decretal amount in Court, interest runs only
on the amount not deposited.
4.5 The learned Senior Counsel for the petitioner also relied
upon the judgment of Himachal Pradesh Housing and Urban
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Development Authority v. Ranjit Singh Rana - 2012 AIR (SC)
1337, which deals with the principle that deposit of decretal
amount in Court equates to payment.
4.6 The learned Senior Counsel for the petitioner also relied
upon the judgment in Rama Civil India Constructions Pvt. Ltd. v.
Union of India - 2024 SCC Online Del 4899, which reiterates the
legal principle that liability to pay interest ceases once the
decretal amount stands deposited in Court.
4.7 The learned Senior Counsel for the petitioner relied upon
the judgment in Jay Banas Metals Pvt. Ltd. v. Taluka Land
Revenue Officer - 2017 (2) GLH 213, wherein it was held that the
powers of the Mamlatdar under Section 200 of the Gujarat Land
Revenue Code are limited to procedural functions and do not
extend to seizure or confiscation. This supports the submission
that the recovery notices issued by the Mamlatdar are without
authority and illegal.
4.8 The learned Senior Counsel for the petitioner relied upon
the judgment in Seva Mandal v. State of Gujarat - 2022 (2) GLR
1311, wherein it was held that liability must be adjudicated
before initiating recovery proceedings under the Gujarat Land
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Revenue Code. This was submitted that the recovery notices in
question are invalid in the absence of prior adjudication.
4.9 The learned Senior Counsel for the petitioner relied uponthe
judgment in Gupta Power Infrastructure Ltd. v. Micro and Small
Enterprises Facilitation Council (W.P.C. No. 14518 of 2014,
Orissa High Court), wherein it was held that the MSMED
Council becomes functus officio after issuing the award, and any
further claims would require separate statutory adjudication.
4.10 The learned Senior Counsel for the petitioner further relied
upon the judgment in Anupam Industries Ltd. v. State Level
Industry Facilitation Council - 2022 (0) GUJHC 65181, wherein it
was held that for entitlement under the MSMED Act, the
claimant must be a registered small or medium enterprise at the
relevant time.
4.11 The learned Senior Counsel for the petitioner relied upon
the judgment in Kusum Ingots and Alloys Ltd. v. Union of India -
2004 (0) AIR SC 2321 and Navinchandra N. Majithia v. State of
Maharashtra - 2000 (7) SCC 640 to submit that territorial
jurisdiction of the Gujarat High Court is attracted in the present
case, as the venue of contract as well as prior proceedings are
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situated within the State of Gujarat.
4.12 The learned Senior Counsel for the petitioner thereafter
relied upon the judgmetn in Asgar & Ors. v. Mohan Varma & Ors.
- 2020 (16) SCC 230 to submit that issues already decided or
under challenge in appeal cannot be reopened in collateral
proceedings such as revenue recovery.
4.13 The learned Senior Counsel for the petitioner further
submitted that respondent No.1's attempt to claim additional or
further interest after full payment and finality of the award is
barred by the principles of res judicata, estoppel, and waiver.
Reliance was placed on Asgar & Ors. v. Mohan Varma & Ors. -
2020 (16) SCC 230, where it is held that reopening settled
award-related issues in collateral proceedings is impermissible.
4.14 In view of the aforesaid submissions and authorities, the
learned Senior Counsel for the petitioner submits that the
present Special Civil Application deserves to be allowed.
5. Per contra, Mr. Saurabh G. Amin, learned advocate for
respondent No.1, submits that the petitioner has challenged the
communication dated 13.04.2023 issued by the MSMED
Council, Madhya Pradesh, which, according to respondent No.1,
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is merely a communication and not an order. It is further
submitted that even if the said communication is treated as a
letter, it necessarily emanates from the principal Revenue
Recovery Certificate (RRC) dated 31.12.2014 and previous
orders, none of which have been challenged by the petitioner.
Therefore, a challenge to only the consequential communication,
without challenging the foundational RRC, is legally
impermissible.
5.1 The learned counsel for respondent No.1 submits that since
the main cause of action originated in the State of Madhya
Pradesh, the Gujarat High Court lacks territorial jurisdiction to
entertain the present petition, especially when the impugned
notices issued at Gandhinagar are merely ministerial in nature.
It is accordingly argued that the petition is not maintainable
before this Court.
5.2 The learned counsel for respondent No.1 submits that the
notices issued under Section 200 and other provisions of the
Gujarat Land Revenue Code (GLRC) are purely ministerial and
consequential to the unchallenged RRC dated 31.12.2014. It is
submitted that prior notices issued under Sections 152, 154,
and 200 of the GLRC were also not challenged by the petitioner
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and have been considered valid by Courts in earlier proceedings.
It is therefore contended that the present writ petition
challenging such notices is not maintainable, more so when
statutory alternative remedies of appeal exist under Sections 203
and 204 of the GLRC.
5.3 The learned counsel for respondent No.1 submits that the
interest at 27% per annum compounded monthly, as awarded by
the MSMED Council has been upheld by the successive judicial
proceedings culminating in the dismissal of appeals by the
Hon'ble Supreme Court. It is thus argued that the petitioner
cannot now reopen issues pertaining to MSME status, interest
rate, or cessation of interest at this execution stage, as such
issues are barred by the principles of res judicata and waiver.
5.4 The learned counsel for respondent No.1 submits that the
petitioner's assertion that it never objected to disbursement
stands falsified by the record, which shows that respondent No.1
had repeatedly sought disbursement and that the petitioner had
filed multiple objections to the same. It is contended that the
petitioner has suppressed material facts that have direct bearing
on interest computation and the relief sought in the petition.
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5.5 The learned counsel for respondent No.1 submits that
Clauses 24 and 25 of the Contract, relied upon by the petitioner,
pertain to contractual disputes that have already been settled. It
is submitted that the present proceedings arise from execution
under the Madhya Pradesh Micro and Small Enterprises
Facilitation Rules and the GLRC, which do not fall within the
scope of contractual jurisdiction clauses. Hence, reliance upon
contractual clauses is misconceived.
5.6 The learned counsel for respondent No.1 submits that the
petitioner's current challenge to MSME status, the rate of
interest, and the alleged cessation of interest were either raised
earlier or could have been raised in earlier proceedings. As such,
the present challenge is barred by waiver, estoppel, and res
judicata.
5.7 The learned counsel for respondent No.1 further submits
that the deposits made by the petitioner - namely 75% before the
Commercial Court and 25% before this Court - were conditional
deposits made pursuant to Section 19 of the MSMED Act or
subject to further judicial directions. These cannot be treated as
unconditional payments under Order XXI Rule 1 of the CPC. It is
therefore submitted that interest continues to run on the unpaid
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balance until actual payment is made.
5.8 The learned counsel for respondent No.1 submits that
interest under Section 16 of the MSMED Act is mandatory and
statutory in nature. Such interest begins from the appointed day
and continues until actual payment, computed at three times
the bank rate prevailing on the appointed day, fixed at that point
and not subject to variation over time. It is argued that accepting
the petitioner's contention of variable interest would run
contrary to legislative intent, create uncertainty, and frustrate
the Act's remedial purpose.
5.9 The learned counsel for respondent No.1 submits that the
Council has awarded interest even on the security deposit, and
this issue has already been litigated and upheld in prior
proceedings. Consequently, any fresh challenge to interest on
security deposits is barred by finality of adjudication.
5.10 The learned counsel for respondent No.1 further submits
that the Council has already adjudicated the interest claims
under Section 18 of the MSMED Act; therefore, any subsequent
calculations are merely arithmetical in nature and procedural in
character, not requiring fresh adjudication. It is accordingly
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submitted that the petitioner's contention that a fresh reference
or appeal is required for computing interest is devoid of merit
and contrary to the objectives of the MSMED Act.
5.11 In view of the foregoing submissions, the learned counsel
for respondent No.1 submits that the present Special Civil
Application is devoid of merit and deserves to be dismissed.
6. Learned counsel for respondent No.1 relies on judgment in
P.S.L. Ramanathan Chettiar v. O.R.M. Ramanathan Chettiar - AIR
1968 SC 1047, to submit that a deposit made in court, which is
not freely withdrawable by the decree-holder, does not amount to
"payment" so as to stop the running of decretal interest. It is
submitted that such a deposit merely places the money beyond
the reach of the parties during pendency of appeal, and therefore
interest continues to accrue until actual payment or withdrawal
by the decree-holder.
6.1 Learned counsel for respondent No.1 further relies on
judgment in Gurpreet Singh v. Union of India - 2006 (8) SCC 457,
to reiterate well-established legal proposition that only an
unconditional payment to the decree-holder, or an unconditional
deposit made in the executing court in a manner that permits
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the decree-holder to withdraw the amount, constitutes
"payment" for the purpose of stopping interest. It is argued that
where the deposit is conditional, or made subject to objections or
court orders, such deposit cannot be treated towards satisfaction
of the decree and does not halt the accrual of interest.
6.2 Learned counsel for respondent No.1 also relies on the
three-Judge Bench judgment in Delhi Development Authority v.
Bhai Sardarsingh & Sons - (2023) 17 SCC 671, cited by the
respondents, to reaffirm that the principles laid down in
Ramanathan Chettiar continue to be applied. The said judgment
held that where the decree-holder is not permitted to withdraw
the amounts deposited in court, such deposits do not amount to
payment under Order XXI Rule 1 of the CPC, and interest
continues to run. This decision is relied upon to submit that the
petitioner's deposits made before various courts did not
extinguish or suspend the statutory interest liability.
6.3 Learned counsel for respondent No.1 further relies on the
judgment in Power Machines India Ltd. v. State of Madhya
Pradesh - 2017 (7) SCC 323, to highlight the legislative purpose
underlying Rule-5 recovery under the MSMED legal framework,
namely the execution of MSME awards as arrears of land
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revenue. It is submitted that this provision is intended to ensure
a speedy and efficacious mechanism for recovery, avoiding
procedural delays, and therefore arithmetical computation and
ministerial issuance of recovery notices under Rule-5 do not
require fresh, elaborate adjudication.
6.4 Learned counsel for respondent No.1 also relies on the
judgment in Fertilizer Corporation of India v. M/S. Coromandal
Sacks Private Limited - SCC Online TS 3505 to support the
interpretation that statutory interest under Section 16 of the
MSMED Act can be fixed with reference to the rate prevailing on
the appointed or due date. It is submitted that higher
compounded interest rates fixed by the statute or by the
Facilitation Council are legally sustainable and have been
upheld by courts as consistent with the object of ensuring
speedy, certain, and effective recovery under the MSMED Act.
6.5 Learned counsel for respondent No.1 relies on the judgment
in Asgar & Ors. v. Mohan reported in 2020 (16) SCC 230, to
submit that the issues which were raised or which could have
been raised in earlier proceedings, including at the stage of
award, appeal, and Special Leave Petition, are barred. It is
submitted that the petitioner is precluded from reopening
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questions regarding MSME status, interest rate, or interest
computation at the execution stage, as these issues have
attained finality and are barred by res judicata and constructive
res judicata.
6.6 In view of the aforesaid submissions and the authorities
relied upon, the learned counsel for respondent No.1, therefore,
submits that the present Special Civil Application deserves to be
dismissed.
7. Heard learned counsels for the parties, perused the
documents and considered the submissions.
8. The facts as brought on record in the present writ petition
are that by communication dated 13.03.2023, the respondent
No.1 herein addressed the communication to the respondent
No.2 stating that after the disposal of the Supreme Court
proceedings, it was informed by the respondent Nos. 3 and 4 to
the respondent No.1 that the petitioner had deposited
Rs.4,34,67,567/- in the District Court, Gandhinagar and
Rs.1,44,89,199/- in the Gujarat High Court and that the
amount as per the award and the recovery certificate issued
pursuant thereto stands satisfied. By the said communication,
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the respondent No.1 has further stated that the petitioner
corporation has admitted in the Hon'ble Supreme Court
proceedings that till 27.01.2022, there was outstanding arrears
of Rs. 28,63,11,546.31 ps. to be paid to the respondent No.1 and
the same may be kindly realized by giving appropriate direction
to the respondent No.3 Collector, Gandhinagar. Alongwith the
said communication, the respondent No.1 has furnished an
Interest Calculation Sheet duly certified by its Chartered
Accountant. Pursuant to such receipt of communication, the
Industries Commissioner on behalf of the respondent No.2
forwarded a communication dated 13.04.2023 to the respondent
No.3 Collector, Gandhinagar seeking to recover the outstanding
amount towards interest. It was stated in the said
communication that the interest outstanding as on 31.03.2023
as duly certified by the Chartered Accountant for
Rs.34,89,19,321/- is to be realized. The said communication
dated 13.04.2023 is annexed as Annexure-R10 to the reply of
the respondent No.1. A perusal of the communication dated
10.03.2023 issued by the Chartered Accountant (at page-407 of
the petition) reveals that it is not addressed either to the
respondent No.1 or to the respondent No.2. The certificate is a
general certificate addressed as "TO WHOMSOEVER IT MAY
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CONCERN". Alongwith the said certificate, calculation of interest
from 26.12.2014 till 10.04.2023 has been calculated. The
Industries Commissioner on behalf of the respondent No.2
Council has simply forwarded this communication of the
respondent No.1 alongwith the calculations made by the
Chartered Accountant to the respondent No.3 District Collector,
Gandhinagar for realization of the same. There is no proper
application made by the respondent No.1 for realization of such
amount on affidavit. Neither the said communication has been
placed before the respondent No.2 Council for its consideration.
It seems that the Industries Commissioner on behalf of the
respondent No.2 Council has unilaterally forwarded this
communication to the respondent No.3 District Collector,
Gandhinagar for realization of such amount as an arrears of
land revenue. No recovery certificate for this amount has been
issued by the respondent No.2 Council. The said action of the
Industries Commissioner lacks any application of mind or
adjudication by the respondent No.2 Council in respect of the
amount sought to be realized.
9. Upon receipt of such communication from the Industries
Commissioner on behalf of the respondent No.2 Council, the
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respondent No.3 Collector, Gandhinagar by notice dated
29.05.2023 has directed the petitioner to remain present
personally for payment of the said amount on 01.06.2023 at
11:00 a.m. It it further stated in the said notice that if the said
amount is not paid, then appropriate procedure shall be initiated
for issuing revenue recovery certificate. Immediately on the same
date, the respondent No.4 Mamlatdar, Gandhinagar has also
issued another notice to the petitioner under Section 200 of the
Gujarat Land Revenue Code, 1879 for attaching the movable and
immovable assets of the petitioner corporation after a period of 7
days. Thereafter by another notice dated 28.06.2023, the
respondent No.4 Mamlatdar, Gandhinagar has intimated that
the movable and immovable assets of the petitioner corporation
shall be attached on 13.07.2023 at 11:00 a.m.
10. From the facts and the documents placed on record, it is
revealed that the present proceedings for recovery as arrears of
land revenue is not initiated on the basis of any order passed by
the MSME Council. The communication dated 13.03.2023 of the
respondent No.1 does not seem to have been placed before the
respondent No.2 Council for its consideration by the Industries
Commissioner. In the present case, the respondent No.1 herein
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is claiming outstanding interest on the amount as per the award
passed in favour of the respondent No.1. The interest component
is a part of the awarded amount and it is the case of the
respondent No.1 that the amount awarded has not been paid to
the respondent No.1 till date and therefore, the interest is still
due on the said amount. The interest component in the present
case translates into a substantial sum of money. The said
interest as claimed by the respondent No.1 is seriously disputed
by the petitioner herein. The communications dated 25.04.2023
and 12.06.2023 were also addressed by the petitioner to the
respondent No.2 disputing the interest claim as certified by the
Chartered Accountant. However, the respondent No.2 has not
even taken the same into consideration or replied to the said
communications of the petitioner. It was the duty of the
respondent No.2 to adjudicate the outstanding interest as
claimed by the respondent No.1 herein by due application of
mind accompanied with cogent reasons. More so when Section
16 of the MSMED Act provides for award of rate of interest and
makes the purchaser liable for payment of compound interest. In
the present case, it is not in dispute that the amount as awarded
by the Arbitral Tribunal and in terms of the recovery certificate
dated 31.12.2014 has been deposited by the petitioner before the
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District Court as well as High Court. Further, there is a
communication from the respondent No.3 Collector,
Gandhinagar stating that the amount in terms of the revenue
recovery certificate dated 31.12.2014 has been deposited. The
respondent No.1 has thereafter initiated this claim of non-
payment of interest on the basis of the written submissions
which came to be filed by the petitioner in the proceedings before
the Apex Court.
11. In the considered opinion of this Court, the respondent
No.2 Council had an onerous responsibility of adjudicating the
application preferred by the respondent No.1 for payment of
interest which according to it was due and payable. The stand of
the respondent No.1 is that till the amount as per the award and
which is purported to have been deposited in the District Court
as well as in the High Court is received by the respondent No.1,
the petitioner herein is liable to pay the interest on the awarded
amount as per the award. It is the case of the respondent No.1
that even though the amount as per the award has been
deposited partly in the District Court as well as High Court, the
same has yet not been received by him and therefore, he is
entitled for the payment of interest on the awarded amount till
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its actual receipt by the respondent No.1. Thus, it is clear that
the final amount of interest as claimed by the respondent No.1 is
still not quantified by the respondent No.2 Council. The
respondent No.2 ought to have decided the application of the
respondent No.1 by proper adjudication of the same and by
coming to a considered decision on the specific amount of
interest which the petitioner may have to pay to the respondent
No.1 as per the award dated 11.09.2014. Despite the said claim,
the respondent No.2 Council has simply forwarded the certified
statement issued by the Chartered Accountant as a Post Office
without any application of mind. The respondent No.2 has not
performed its important part of adjudication to come to a
conclusion and quantify the amount payable by the petitioner
since the payment of interest is inseparable part of the award.
The communication dated 13.03.2023 for recovery issued by the
respondent No.1 is based upon the calculation made by the
Chartered Accountant and blind acceptance of the same is not
permissible in law as the respondent No.2 Council was obligated
to adjudicate the said claim of the respondent No.1 by following
principles of natural justice and was required to hear the
petitioner since the post-award interest becomes part and parcel
of the "sum awarded". The respondent No.2 Council could not
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have abdicated its task of decision making by adopting the
certified statement as issued by the Chartered Accountant in
toto without even passing any order. If such a course of action is
to be approved, then it would undermine the very object of the
MSMED Act and the legislative intent in enacting it.
12. Under the MSMED Act, the unpaid amount as per the
award is liable to be recovered as arrears of land revenue, it is,
therefore, imperative that such an amount which is liable to be
recovered as arrears of land revenue must undergo the process
of adjudication for quantification and fixation of the liability to
pay. Once the liability to pay is fixed in an adjudicatory process,
thereafter it is the duty of the adjudicatory body to quantify such
an amount which is liable to be recovered as arrears of land
revenue. Once such adjudication takes place and liability is fixed
and the amount is quantified, only thereafter the provisions of
the Gujarat Land Revenue Code, 1879 could be invoked and the
requisite amount can be recovered as arrears of land revenue. In
the present case, no such process has been done.
13. It is further observed from the notice of the respondent
No.3 dated 29.05.2023 which states that if the amount as
forwarded by the respondent No.2 Council is not paid, then the
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process for issuance of revenue recovery certificate would be
undertaken. However, thereafter the Mamlatdar, Gandhinagar
has straight away issued a notice for attachment with revenue
recovery certificate being issued for the said amount. It was
imperative upon the revenue authorities before issuing the
notices to the petitioner that it had arrived at a satisfaction that
there was a passing of a substantive order and quantification of
proper amount after appropriate adjudication. The respondent
Nos.3 and 4 could not have straight away issued notices under
the Gujarat Land Revenue Code, 1879 after receipt of the letter
from the respondent No.2 and take further steps without any
substantive order for such recovery.
14. In the considered opinion of this Court, the certificate
issued by the Chartered Accountant in respect of the amount
payable by the petitioner towards the interest awarded as per the
award dated 11.09.2014 is not a conclusive evidence. It may be
the base of a claim by the respondent No.1. Such claim ought to
have been properly adjudicated by the respondent No.2 by
providing adequate opportunity of being heard to the petitioner
who has seriously disputed the payment of interest as claimed
after the satisfaction of the amount as awarded. The respondent
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No.2 was under an obligation to issue notice to the petitioner,
adjudicate the claim of the respondent No.1 and finalize the
liability, if any, and thereafter quantify the exact amount of
interest which was liable to be paid by the petitioner if at all.
15. In the facts and circumstances of the present case, this
Court has no option but to hold that the communication dated
13.04.2023 issued by the respondent No.2 as well as the
impugned notices issued by the respondent Nos.3 and 4 towards
recovery as arrears of land revenue have been issued without
following any due procedure as established by law. In the
present case, approximately an amount of Rs.34,89,19,321/- is
sought to be recovered from the petitioner towards non-payment
of interest on the principal amount as per the award. The
petitioner has raised a dispute as regards the amount due and
recoverable. Therefore, without adjudication of the same, the
respondent No.2 could not have straight away proceeded to
recover the amount as arrears of land revenue without following
due procedure of law and in breach of principles of natural
justice.
The present procedure adopted by the respondent No.2 is
dehors the procedure of law as well as in breach of the principle
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of natural justice and therefore, is liable to be quashed and set
aside.
16. For the aforesaid reasons and observations, the impugned
letter/communication dated 13.04.2023 issued by the
respondent No.2 and the Notices dated 29.05.2023 and
28.06.2023 are quashed and set aside. The respondent No.2
Council is directed to adjudicate and decide afresh the claim of
the respondent No.1 being communication dated 13.03.2023 by
adopting appropriate adjudicatory process and in consonance
with the principles of natural justice after giving due and
effective hearing to the petitioner herein and thereafter passing a
reasoned order.
17. In view of remand, all the contentions raised in the present
writ petition by the petitioner as well as the respondent No.1 are
kept open to be agitated before the respondent No.2 Council in
the fresh adjudication.
18. It is clarified that this Court has not gone into the merits of
the claim raised by the respondent No.1 and no opinion is
expressed thereon. The claim of the respondent No.1 shall be
decided on its own merits and in accordance with law by the
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respondent No.2.
The present Special Civil Application is accordingly
disposed of. No order as to costs.
Sd/-
(ANIRUDDHA P. MAYEE, J.)
After pronouncement of the judgment, Mr. Saurabh G.
Amin, learned advocate for the respondent No.1 prays for stay of
the judgment for a period of six weeks so as to enable the
respondent No.1 to approach the higher forum.
The request is rejected.
Sd/-
(ANIRUDDHA P. MAYEE, J.)
KAUSHIK D. CHAUHAN
