Madras High Court
M/S.Enviro Services Pvt.Ltd vs Micro And Small Enterprises on 24 September, 2021
1
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 24.09.2021
CORAM:
THE HONOURABLE MR.JUSTICE N.ANAND VENKATESH
W.P.No.16569 of 2021
and
WMP No17544 of 2021
M/s.Enviro Services Pvt.Ltd.,
Rep.by its Managing Director
Mr.V.Balamurugan,
No.125, Velachery Road,
Saidapet, Chennai 600 015. ... Petitioner
.Vs.
1. Micro and Small Enterprises
M & SE Facilitation ouncil Chennai Region
Rep by its Chairman
Thiru.Vi.Ka. Industrial Estate
Guindy , Chennai- 600 032.
2. Micro and Small Enterprises
M & SE Facilitation Council,
Chennai Region
Rep. by the Regional Joint Director of Industries
and Commerce
Thiru.Vi.Ka. Industrial Estate, Guindy.
3. M/s.Richardson & Cruddas (1972) Ltd .,
Rep. by its Chairman & Managing Director,
Sir JJ Road, Byculla, Mumbai- 400 008.
4. M/s.Steel Authority of India Ltd.,
Rep.by its Executive Director
Salem Steel Plant,
Salem- 636 013. ... Respondents
Prayer:- Writ Petition filed under Article 226 of the Constitution of India praying for
https://www.mhc.tn.gov.in/judis/
2
issuance of a Writ of Certiorarified Mandamus Calling for records of the order of the 1st
Respondent dated 23.02.2021 passed in the Proceedings numbered as MSEFC/ CR/ 398/
2019 bearing online Application No.TN02A0020121/ M/00001 and quash the same and
consequently, directing the 1st Respondent to refer the disputes between the petitioner
company and the Respondents 3 and 4 to any institution or centre providing alternate
dispute resolution services or initiating arbitration proceedings among the parties in terms
of Section 18 of the MSME Act.
For Petitioner : Mr.N.L.Rajah
Senior Counsel
for Mr.K.R.Arun Shabarai
For Respondents : Mr.A.Selvendran
Government Advocate
for R1, R 2,
Mr.M.Selvam
for R 3
Mr.A.V.Arun
for R 4
ORDER
This writ petition has been filed challenging the impugned order passed by
the first respondent and for a consequential direction to the first respondent to refer the
dispute between the petitioner Company and respondents 3 and 4 for arbitration.
2.The case of the petitioner is that they are involved in the business of
installing and commissioning of water treatment plants, sewage and effluent treatment
plants. The petitioner Company is a registered unit under the Micro Small and Medium
Enterprises Development Act, 2006 [hereinafter referred as 'the Act"] and the same is
https://www.mhc.tn.gov.in/judis/
evident from the registration certificate dated 13.02.2019. The further case of the
petitioner is that the fourth respondent had engaged the services of the third respondent
where a project was taken up in the year 2010 to "Design, Engineering, Manufacture,
Supply, Erection, Testing, Commissioning and Demonstration of Performance Guarantee
parameters of Sewage Treatment Facilities at Salem Steel Plant. The petitioner had taken
up the project and completed the works.
3.After the completion of the work, the petitioner was communicating with
the third and fourth respondents requesting them to settle the pending payments.
According to the petitioner, the third and fourth respondents will have to make the
payments under three heads Viz., Earnest Money Deposit and Security Deposit, Taxes and
Dues and towards the additional works done by the petitioner.
4.Since the amount was not settled, the petitioner approached the first
respondent and filed a claim against the third and fourth respondents. The first respondent
had disposed of the claim through the impugned order dated 23.03.2021, wherein, the
Council had directed the respondents to release the EMD and security deposits and
reimburse the taxes and dues and insofar as the claim made for the additional work, the
petitioner was directed to approach a suitable Arbitration Tribunal for redressal. Aggrieved
by the same, the present writ petition has been filed before this court.
5.Heard Mr.N.L.Rajah, learned Senior Counsel for the petitioner,
Mr.A.Selvendran,
https://www.mhc.tn.gov.in/judis/ learned Government Advocate for R 1, R 2, Mr.M.Selvem, learned counsel
for R 3 and Mr.A.V.Arun, learned counsel appearing on behalf of the 4th respondent.
6.The main ground that has been raised by the learned Senior Counsel
appearing on behalf of the petitioner is that the entire proceedings of the first respondent
is in gross violation of the procedure contemplated under Section 18 of the Act. The
learned Senior Counsel submitted that the Council was expected to attempt conciliation
among the parties either by itself or through any institution and if such a conciliation fails,
the first respondent is required to initiate arbitration proceedings among the parties either
by itself or through any institution. However, in the present case, the first respondent did
not follow any of these procedures and went to the extent of directing the petitioner to
approach any suitable Arbitration Tribunal for redressal. The learned Senior Counsel
therefore submitted that the order passed by the first respondent requires the
interference of this Court. The learned Senior Counsel also brought to the notice of this
Court various judgments passed by this Court, wherein, this court had repeatedly held that
the first respondent is expected to follow the procedure contemplated under Section 18 of
the Act. The learned Senior Counsel also brought to the notice of this Court the order
passed in W.P.Nos.2001 and 5452 of 2017, dated 16.03.2021, wherein, in a similar case,
this Court had referred the parties to the High Court annexed Arbitration Centre and had
fixed a time limit for the completion of the arbitration proceedings.
7.Per contra, the learned counsel appearing on behalf of the third respondent
submitted that there are absolutely no dues payable to the petitioner and the liability
claimed by the
https://www.mhc.tn.gov.in/judis/ petitioner was completely denied.
8.The learned counsel appearing on behalf of the 4th respondent submitted
that there is absolutely no privity of contract between the 4th respondent and the petitioner
and the 4th respondent cannot be made as a party in a dispute between the petitioner and
the third respondent. The learned counsel submitted that even if the first respondent
conducts the arbitration, that can only be based on the agreement between the parties and
there is no agreement between the petitioner and the 4th respondent. Therefore, the
learned counsel submitted that the 4th respondent is an unnecessary party and their name
should be deleted and the petitioner has to work out their remedy only as against the third
respondent.
9.This Court has carefully considered the submissions made on either side
and the materials available on record.
10.Insofar as the main issue that has been raised by the learned Senior
Counsel appearing on behalf of the petitioner, this Court has time and again issued
directions to the Council to follow the mandate provided under Section 18 of the Act and
unfortunately it has fell into deaf ear and every other order that is passed by the Council is
challenged before this Court for non compliance of the mandatory procedure under Section
18 of the Act. The Council does not seem to understand that Section 18 mandates the
parties to be referred for conciliation which can be conducted by the Council or the Council
can seek for the assistance of any other institution or centre. When the conciliation is not
successful, the
https://www.mhc.tn.gov.in/judis/ Council should take up the dispute for arbitration or it should refer the
same to any other institution or centre providing for such alternate dispute resolution. The
fact that the Council has not even understood these rudimentary principles contained
under Section 18 of the Act is evident from the impugned order passed by the 1st
respondent where the Council has directed the petitioner to approach any suitable
arbitration tribunal for redressal of the grievance. This direction has been issued in
complete ignorance of what has been mandated under Section 18 of the Act. This Court
is forced to make such an observation since so many orders passed by the Council is
challenged before this Court for non compliance of Section 18 of the Act. Every time this
Court disposes of such writ petitions by giving directions to the Council and the Council
does not seem to follow those directions and continues to commit the same mistake. Even,
in the order that was brought to the notice of this Court passed in W.P.Nos.2001 and 5452
of 2017, dated 16.03.2021, the same issue was raised and this Court once again went
through the process of explaining the scope of Section 18. Ultimately, this Court thought it
fit to refer the parties to the Arbitration Centre annexed to High Court by fixing a time limit
to resolve the dispute.
11.In view of the above discussion, this Court does not have any
hesitation to interfere with the order passed by the first respondent on 23..02.2021.
12.The only other issue that arises for consideration
is with regard to the objections that have been raised by
the learned counsel appearing on behalf of the 4th respondent to the
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effect that the 4th respondent cannot be made to undergo the arbitration proceedings
since the 4th respondent was not a party to the agreement and they did not have any
privity of contract with the petitioner.
13.This Court carefully went through the claim statement filed by the
petitioner before the first respondent. In the claim statement, the 4th respondent has been
shown as the 2nd respondent. However, ultimately when the order was passed by the first
respondent, the name of the 4th respondent is not shown in the array of parties. In the
claim that was filed by the petitioner, the petitioner has specifically taken a stand by
referring to the work order and stated that the 4th respondent will be an integral part of
the work and it will be binding upon them also. In fact, even during the proceedings before
the first respondent, there was a representative on behalf of the 4th respondent.
14.In the present case, this Court is more concerned about the impugned
order passed by the first respondent and it has been held to be illegal since it did not
comply with the mandate under Section 18 of the Act. The issue as to whether the 4th
respondent should also be made to undergo the arbitration proceedings is a matter which
can be decided by the arbitrator based on the provisions of the MSME Act. This Court does
not want to render any finding on the same.
https://www.mhc.tn.gov.in/judis/ 15.It is clear from the stand taken by the third and fourth respondents that
there is no possibility of any conciliation in this case and therefore the parties will have to
be necessarily referred for arbitration. This Court does not want to waste any more time
by once again remanding the matter back to the first respondent. Rather this Court wants
to follow the very same procedure that was followed in the earlier order passed in
W.P.Nos.2001 and 5452 of 2017, dated 16.03.2021.
16.In view of the above discussion, the impugned order passed by the first
respondent dated 23.02.2021, is hereby quashed. The dispute is referred to the
Arbitration Centre annexed to High Court. The Arbitration Centre shall nominate an
arbitrator to arbitrate the dispute between the petitioner and the third and fourth
respondents. The fees payable to the arbitrator shall be in accordance with the fees
charged in the Arbitration Centre. The Arbitrator shall arbitrate the dispute between the
parties and award shall be passed within a period of 90 days from the date on which the
reference is taken up by the arbitrator. The Arbitration Centre shall appoint the Arbitrator
within a period of one week from the date of receipt of copy of this order. It is left open to
the 4th respondent to raise the preliminary objection that was raised before this Court and
the Arbitrator will have the jurisdiction to decide on this issue also.
17.In the result, this writ petition is allowed with the above directions. No
costs. Consequently, connected miscellaneous petition is closed.
https://www.mhc.tn.gov.in/judis/ 24.09.2021.
Internet : Yes
Index : Yes/No
KP
To
1. Micro and Small Enterprises
M & SE Facilitation ouncil Chennai Region
Rep by its Chairman
Thiru.Vi.Ka. Industrial Estate
Guindy
Chennai- 600 032.
2. Micro and Small Enterprises
M & SE Facilitation Council,
Chennai Region
Rep. by the Regional Joint Director of Industries
and Commerce
Thiru.Vi.Ka. Industrial Estate
Guindy.
https://www.mhc.tn.gov.in/judis/
N.ANAND VENKATESH, J.
KP
W.P.No.16569 of 2021
24.09.2021
https://www.mhc.tn.gov.in/judis/
