Karnataka High Court

M/S Raffles Residency Pvt Ltd vs M/S Enkon Engineering on 10 November, 2025

     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 10TH DAY OF NOVEMBER, 2025

                        PRESENT

        THE HON'BLE MRS. JUSTICE ANU SIVARAMAN

                           AND

       THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL

           COMMERCIAL APPEAL NO.389 OF 2024


BETWEEN:

M/S. RAFFLES RESIDENCY PVT. LTD.
A COMPANY INCORPORATED UNDER
THE PROVISIONS OF
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
No.54, 'THE PLANET'
2ND FLOOR
WHITEFIELD MAIN ROAD
OPPOSITE HUL RESEARCH CENTRE
WHITEFIELD
BENGALURU-560 066
NOW AT:
RAFFLES PARK, SOUKYA ROAD
SAMETHANAHALLI VILLAGE
ANUGONDAHANAHLLI HOBLI
HOSKOTE TALUK
BENGALUUR RURAL DISTRICT-560 067
REPRESENTED BY ITS DIRECTOR
MR. HUSSAIN SOMJEE
                                           ...APPELLANT

(BY SRI. JOSHUA HUDSON SAMUEL, ADVOCATE)

AND:

1.    M/S. ENKON ENGINEERING
      A REGISTERED PARTNERSHIP FIRM
      HAVING ITS REGISTERED OFFICE AT:
 -

                            2




     No.42, 2ND FLOOR, 8E MAIN ROAD
     JAYANAGAR 4TH BLOCK
     BENGALURU-560 011
     REPRESENTED BY ITS PARTNER
     MR. B.K. SUBRAMANYAM

2.   THE MICRO AND SMALL ENTERPRISES
     FACILITATION COUNCIL
     HAVING ITS OFFICE AT:
     DEPARTMENT OF INDUSTRIES
     AND COMMERCE
     HAVING OFFICE AT: No.49
     FIRST FLOOR, SOUTH BLOCK
     KHANIJA BHAVAN
     RACE COURSE ROAD
     BENGALURU-560 001
                                          ...RESPONDENTS

(BY SRI. UDAYA HOLLA, SENIOR ADVOCATE FOR
    SRI. BALASUBRAHMANYA K.M., ADVOCATE FOR C/R1)

     THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1A) OF THE COMMERCIAL COURTS ACT, 2015 (AS AMENDED)
R/W SECTION 96 AND ORDER XLI RULE 1 AND 2 OF CPC, 1908
(AS AMENDED), PRAYING TO CALL FOR RECORDS IN COM.A.P.
No.68 OF 2023 ON THE FILE OF THE LXXXIII ADDITIONAL CITY
CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT AT
BENGALURU (CCH-84), AND AFTER EXAMINING THE LEGALITY
AND VALIDITY OF THE ORDER DATED 26.07.2024, BE PLEASED
TO (a) SET ASIDE THE ORDER DATED 26.07.2024 PASSED BY
THE LXXXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE,
COMMERCIAL COURT AT BENGALURU (CCH 84), IN COM.A.P.
No.68/2023 AND RESTORE THE COM. A.P. No.68/2023 TO THE
FILE OF LXXXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE,
COMMERCIAL      COURT   AT   BENGALURU     (CCH-84)   FOR
PROCEEDINGS ON THE MERITS OF THE CASE.

      THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT ON 29.10.2025 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN
J., PRONOUNCED THE FOLLOWING:
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CORAM:     HON'BLE MRS. JUSTICE ANU SIVARAMAN
           and
           HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL


                        CAV JUDGMENT

(PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN)

This Commercial Appeal is preferred challenging the

order dated 26.07.2024 of the LXXXIII Additional City Civil

and Sessions Judge, Bengaluru (CCH-84) ('Commercial

Court' for short) in COMAP No.68/2023.

2. We have heard Shri. Joshua Hudson Samuel,

learned counsel appearing for the appellant and Shri. Udaya

Holla, learned senior counsel as instructed by Shri.

Balasubrahmanya K.M, learned advocate appearing for

Caveator/Respondent No.1.

3. The appellant who was the respondent before the

Arbitral Tribunal had filed an application under Section 34 of

the Arbitration and Conciliation Act, 1996, challenging the

award dated 19.01.2023 passed by the Micro and Small

Enterprises Facilitation Council ('Facilitation Council' for

short) in Case No.141 of 2020. An office objection as well

as the preliminary objection by the first respondent herein

was raised as to the maintainability of the application

without depositing 75% of the award amount. Relying on

Section 19 of the Micro, Small and Medium Enterprises

Development Act, 2006, ('MSMED Act' for short), the

Commercial Court held that whenever an application or

petition is filed for setting aside an award made Facilitation

Council, the Court cannot entertain the petition without

deposit of 75% of the awarded amount.

4. It is the contention of the learned counsel for the

appellant that respondent No.1 was not a "Supplier" within

the meaning of the MSMED Act as on the date of entering

into the contract with the appellant and consequently could

not have made the reference under Section 18 of the

MSMED Act. It is therefore contended that the award is

made without jurisdiction and is non est in law. It is

contended that these aspects of the matter were specifically

raised before the Commercial Court, but were not

considered in the proper perspective.

5. The learned counsel appearing for the appellant

relies on the following judgments:-

• Silpi Industries and Others Vs. Kerala State Road Transport Corporation and Another, reported in (2021) 18 SCC 790;

• Vaishno Enterprises Vs. Hamilton Medical AG and Another reported in 2022 SCC On Line SC 355;

• Tirupati Steels Vs. Shubh Industrial Component and Another reported in (2022)7 SCC 429;

• NBCC (India) Limited Vs. State of West Bengal and Others reported in (2025)3 SCC 440; and

• Tamil Nadu Cements Corporation Limited Vs. Micro and Small Enterprises Facilitation Council and Another reported in (2025) 4 SCC

1.

6. However, the learned senior counsel appearing

for respondent No.1 would submit that the MSMED Act

provides only for a registration of an entity as an MSME and

the factum of the registration is not what makes the entity

an MSME. It is submitted that it is for availing the benefits

of the Act that registration is required.

7. The learned senior counsel appearing for

respondent No.1 relies on the following judgments:-

• M/s. Tirupati Steels Vs. Shubh Industrial Component and another, reported in AIR 2022 SC 1939;

• Gujarat State Disaster Management Authority Vs. M/s. Aska Equipment Limited, reported in AIR On Line 2021 SC 870;

• Hindusthan Commercial Bank Ltd. Vs. Punnu Sahu (Dead) Through LRs, reported in AIR 1970 SC 1384;

• Martin and Harris Limited Vs. VI Additional District Judge and Others, reported in 1998 ALL. L.J 200(SC); and

• NBCC (India) Ltd. Vs. State of West Bengal and Others, reported in (2025)3 SCC 440.

8. Relying on these decisions, the learned senior

counsel contended that an application under Section 34 of

the Arbitration and Conciliation Act, 1996 challenging an

award made by the Facilitation Council cannot be

entertained unless 75% of the awarded amount is deposited.

9. We have considered the contentions advanced.

Section 19 of the MSMED Act reads as follows:-

-

"19. Application for setting aside decree, award or order.- No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court:

Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose."

10. Section 2(n) of the MSMED Act defines "supplier"

as a micro or small enterprise, which has filed a

memorandum with the authority referred to in sub-section

(1) of Section 8 of the MSMED Act. Section 8 of the MSMED

Act provides that a micro or small enterprise may, at its

discretion, file a memorandum with the specified authority

and that such authority shall follow the procedure notified by

the Central Government under sub-section (2) of Section 8

of the MSMED Act. Section 7 provides the criteria for

classification of enterprises as micro, small and medium

enterprises.

11. The Apex Court considering the provisions of the

MSMED Act had held in Tirupati Steel's case (supra), that

Section 19 of the MSMED Act specifically provides for the

deposit of 75% of the amount as a pre-deposit and that an

application under Section 34 of the Arbitration and

Conciliation Act, 1996, cannot be entertained without the

said pre-deposit. The same view was taken in Gujarat

State Disaster Management Authority's case (supra). In

NBCC (India) Ltd's case (supra), the provisions of the Act

were considered in detail and held at paragraphs No.39 and

40 as follows:-

"39. Further, it is noteworthy that a "micro"

[Section 2(h)], "small" [Section 2(m)] or "medium enterprises" [Section 2(g)], formation and existence is simply on the basis of their investment as provided in Section 7 relating to classification of an Enterprise. They subsist without any formal "recognition", "consent" or "registration". The Act uses the expression filing of a "memorandum". That is all. That too, at the discretion of the micro and small enterprises. The cumulative account of these four features is compelling and leads us to the conclusion that an application by a micro or a

small enterprise to the Facilitation Council under Section 18 cannot be rejected on the ground that the said enterprise has not registered itself in Section 8.

40. Having considered the definition of the expression "supplier", and also having considered the classification of enterprises into micro, small and medium with respect to each of which there is a separate legal regime to be suggested by the Advisory Committee and notified by the Central and State Governments, and in view of the discretion specifically vested with the micro and small enterprises for filing a memorandum under Section 8 of the Act, the submission that the Facilitation Council cannot entertain a reference under Section 18 if the enterprise is not registered under Section 8 must be rejected."

12. In Silpi Industries's case (supra), the Apex

Court held that the filing of a memorandum under sub-

section (1) of Section 8 of the MSMED Act, subsequent to

entering into the contract and supply of goods will not confer

the legal status of an MSME on the supplier.

Further, in Vaishno Enterprises's case (supra), it was

held that if as on the date when the contract/agreement was

entered into, the supplier was not a registered MSME, then,

the provisions of Section 18 of the MSMED Act would not be

available to him.

In Tirupati Steel's case (supra), the permission

granted by the High Court, permitting proceedings under

Section 34 of the Arbitration and Conciliation Act, 1996, to

be filed without insistence for making the compulsory pre-

deposit of 75% of the awarded amount in terms of Section

19 of the MSMED Act was held to be bad in law.

13. All the decisions on the question were considered

in NBCC (India) Ltd's case (supra). Thereafter, due to the

conflict of opinion in the decisions in Silpi Industries's case

(supra), Gujarat State Civil Supplies Corpn. Ltd. Vs.

Mahakali Foods (P) Ltd. reported in (2023) 6 SCC 401

and Vaishno Enterprises's case (supra), the Bench

referred the question to a Larger Bench holding as follows:-

"56. On the interpretation of the provisions of the Act we have arrived at a clear opinion and have expressed the same. Though it is possible for us to follow the precedents referred to in paras 53 and 54 to arrive at the conclusion that the judgments in Silpi Industries and Mahakali Foods coupled with the subsequent orders in Vaishno Enterprises and Nitesh Estates [Nitesh Estates Ltd. v. Outsourcing Xperts, (2024) 12 SCC 221] cannot be considered to be binding precedents on the issue that has arisen for our consideration, taking into account the compelling need

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to ensure clarity and certainty about the applicable precedents on the subject, we deem it appropriate to refer this appeal to a three-Judge Bench."

14. The decision of the three-Judge Bench of the

Apex Court in Tamil Nadu Cements Corporation's case

(supra), considered the question whether there is an

absolute and complete bar to invoke writ jurisdiction under

Article 226 of the Constitution of India as against an order

passed by the Facilitation Council. It was held that since

there was a pre-condition of deposit of 75% of the awarded

amount for entertaining a Section 34 application as against

an award of the Facilitation Council, the exercise of

jurisdiction under Article 226 Constitution of India, cannot

be held to be totally barred. In the light of the conflictive

decisions, the following questions were raised and the

matter was directed to be placed before a larger Bench.

Paragraph No.64 of the said judgment reads as follows:-

"64. In the light of the aforesaid decisions, we deem it appropriate to refer the following questions raised in the present appeal to a larger Bench of five Judges, namely:

(i) Whether the ratio in India Glycols [India Glycols Ltd. v. S.R. Technologies, (2025) 5

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SCC 780] that a writ petition could never be entertained against any order/award of MSEFC, completely bars or prohibits maintainability of the writ petition before the High Court?

(ii) If the bar/prohibition is not absolute, when and under what circumstances will the principle/restriction of adequate alternative remedy not apply?

(iii) Whether the members of MSEFC who undertake conciliation proceedings, upon failure, can themselves act as arbitrators of the Arbitral Tribunal in terms of Section 18 of the Msmed Act read with Section 80 of the A&C Act?

The first and second question will subsume the question of when and in what situation a writ petition can be entertained against an order/award passed by Msefc acting as an Arbitral Tribunal or conciliator."

15. We have given our anxious consideration to all

the decisions placed before us. The view expressed that

there can be no reference under Section 18 of the MSMED

Act in the absence of a registration of the MSME under

Section 8 of the MSMED Act has been doubted in NBCC

(India) Ltd's case (supra) and the matter stands referred

for consideration to a Larger Bench.

16. On a careful examination of the facts of the

instant case, we find that Facilitation Council has entered

upon the reference made to it and has passed an award as

against the appellant. The appellant has filed an application

to set aside the said award under Section 34 of the