Madras High Court
Bharat Heavy Electricals Limited vs The Chairman on 3 January, 2023
W.P.No.6216 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 03.01.2023
CORAM:
THE HONOURABLE MR.JUSTICE N.SATHISH KUMAR
W.P.No.6216 of 2021
and W.M.P.No.6834 of 2021
Bharat Heavy Electricals Limited,
Power Sector Western Region,
Represented by its General Manager
and Head Mr.Sanjeev Kumar Agarwal,
No.345, Kingsway, Nagpur - 440 001. .. Petitioner
Vs.
1. The Chairman,
Micro Small Enterprises Facilitation Council,
Represented by its Regional Joint Director of
Industries and Commerce,
Thiru-vi-ka Industrial Estate,
Guindy, Chennai - 600 032.
2. ICS Engineering Limited,
Represented by its Director,
No.144, Shaila Villa, Thomas Street,
Ganapathy Nagar, Alapakkam,
Porur, Chennai - 600 116.
Also at: No.3A, 3rd Floor, 'Pushkar',
'Soundarya Enclave, Block No.H-65,
East Avenue Road, Periyar Nagar,
Korattur, Chennai - 600 080.
3. The Hon'ble Presiding Arbitrator,
Madras High Court Arbitration Centre,
High Court, Parry's Corner,
George Town, Chennai - 600 108. .. Respondents
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W.P.No.6216 of 2021
Prayer : Writ Petition has been filed under Article 226 of the Constitution
of India seeking a Writ of Certiorari calling for the records of the first
respondent culminating in passing the order dated 09.06.2017 in
O.P.No.MSEFC/CR/68/2016 and quash the same.
For Petitioner : Mr.V.V.Sivakumar
For Respondent 1 : Mr.N.Naveen Kumar
Government Advocate
For Respondent 2 : Mr.O.Padma Prakash
For Respondent 3 : No appearance
-----
ORDER
This writ petition has been filed challenging the order passed by the
first respondent Micro Small Enterprises Facilitation Council, dated
09.06.2017 in O.P.No.MSEFC/CR/68/2016.
2. The case of the writ petitioner is that the second respondent was
the successful bidder in respect of a subcontract floated by the petitioner
through its Western, Eastern and Northern regions. The contract is in
respect of material handling, erection, testing and commissioning of boilers,
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W.P.No.6216 of 2021
turbines and their auxiliaries in the State of Gujarat, Orissa, Bihar and
Rajasthan.
3. The contracts are in the nature of works contract. The second
respondent could not able to perform the contract as per the stipulations. In
the meanwhile, the second respondent has approached the first respondent
Micro Small Enterprises Facilitation Council (for short 'MSEF Council')
seeking conciliation of difference of opinion which had arisen between the
petitioner and the second respondent on the delay in execution of the subject
contract.
4. The MSEF Council by its impugned order dated 09.06.2017,
concluded that conciliation process could not succeed as the matter involves
intricate engineering issues of contract management i.e. deployment of
machineries, labour etc.,. The MSEF Council has however referred the
matter to the Arbitration Center of the Madras High Court. The writ
petitioner has received communication from the Arbitration Center of
Madras High Court after a lapse of three years.
5. The petitioner appeared before the Arbitrator and agreed to the
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W.P.No.6216 of 2021
time schedule of hearing drawn up by the Arbitrator. Now, it is contended
that MSEF Council has no jurisdiction to refer the issue to the Arbitrator
since the dispute relates to works contract. The first respondent MSEF
Council ought to have taken cognizance of these aspect of the matter and
ought to have declined to refer the matter to arbitration and therefore on the
ground of jurisdiction, the order of the first respondent MSEF Council is
challenged in this writ petition.
6. The second respondent has filed a counter stating that their
company is a MSME unit engaged in the business of planning, fabrication,
construction, erection and commissioning of plant, machinery etc. The
second respondent satisfactorily completed the contract at Kutch site,
Gujarat and was executing the contracts at the other sites without any hitch
or room for any complaint.
7. The second respondent has further stated that the writ petitioner
has failed to pay the amount to the second respondent and therefore the
second respondent has sent a letter to the petitioner for initiating arbitration
in the year 2013 itself. As the steps taken by the second respondent did not
fructified, finally he filed a reference to the MSEF Council.
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W.P.No.6216 of 2021
8. Before the MSEF Council, as conciliation has failed, with consent
of both the parties, the matter has been referred to the Arbitration Center of
the Madras High Court. An Arbitrator was also appointed by the Arbitration
Center of the Madras High Court. The petitioner's representative has
appeared before the Arbitrator on the date of preliminary hearing along with
the counsel for the petitioner. They also gave consent to the Arbitration and
the time schedule fixed by the Arbitrator. Claim petition and written
statement has also been filed. Therefore, having given consent for
arbitration, now the impugned order cannot be challenged after a lapse of
several years and seeks dismissal of the writ petition.
9. The main contention of the learned counsel appearing for the
petitioner is that a contract was entered for works contracts which has not
been disputed by the other side. Such being the position, the learned MSEF
Council should not have entertained the reference made by the second
respondent and referred the matter to Arbitration.
10. It is his further contention that when MSEF Council has no
jurisdiction to entertain the dispute since it is a works contract, conducting
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W.P.No.6216 of 2021
conciliation and referring the matter to arbitration cannot be sustained in the
eye of law. The impugned order proceeded as if the learned counsel for the
petitioner has given his consent for referring the matter to the Arbitration
Center of the Madras High Court to initiate the process of arbitration to
resolve the issue. It is his contention that no such consent has been given by
the learned counsel for the petitioner. At any event, merely based on the
consent of the learned counsel for the petitioner, the MSEF Council ought
not to have referred the matter to the Arbitrator since the MSEF Council has
no jurisdiction to entertain the very dispute. Therefore, the reference made
by MSEF Council itself is bad in the eye of law. In support of his
submissions the learned counsel relied upon the following judgments:
(i) Samvit Buildcare Private Limited Vs. Ministry of Civil Aviation
in Special Civil Application No.1094 of 2018, dated 12.03.2018;
(ii) Rashtriya Ispat Nigam Limited Vs. Union of India in
W.P.Nos.27670 of 2021 dated 26.04.2022;
(iii) Kerala State Electricity Board Vs. Kurien E.Kalathil reported
in (2018) 4 SCC 793;
(iv) Surya International Vs. Union of India reported in
Spl.C.A.No.14297 of 2017 dated 15.11.2017; and
(v) Sterling and Wilson Private Limited Vs. Union of India reported
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W.P.No.6216 of 2021
in AIR 2017 Bom 242.
11. Whereas, the learned counsel appearing for the second
respondent would submit that admittedly there is an arbitration clause in the
contract itself. The second respondent has in fact requested the petitioner to
invoke Arbitration by sending a notice in the year 2013 itself. Even after
such notice, the petitioner has not appointed any Arbitrator and dragged the
matter one way or the other. Therefore, the second respondent has no other
go except to file a claim before the MSEF Council for recovery of the
money. The MSEF Council has in fact conducted conciliation and as the
conciliation did not yield any result, the MSEF Council referred the matter to
Arbitration Center of the Madras High Court for appointing an Arbitrator
with the consent of the petitioner. Thereafter, an Arbitrator has been
appointed by the Arbitration Center of the Madras High Court. Even before
the Arbitrator, the petitioner has never raised any objections for his
appointment or schedule of dates fixed by the Arbitrator. The learned
counsel further submitted that arbitration proceedings has almost been
completed and the second respondent side evidence is already over and on
the petitioner's side three witnesses were already examined and only one
witness has to be examined on petitioner's side.
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W.P.No.6216 of 2021
12. According to the learned counsel appearing for the second
respondent, at this stage, the writ petition has been filed to quash the very
impugned order, therefore the learned counsel for the second respondent
submitted that even assuming that the MSEF Council has no jurisdiction to
go into the complicated works contract, the fact remains that MSEF Council
has not decided the issue whereas the MSEF Council has only referred the
matter to the Arbitration Center of the Madras High Court with the consent
of both the parties and that the appointment of the Arbitrator has also not
been challenged by the petitioner and the petitioner has in fact participated
in the arbitration proceedings and therefore now the petitioner cannot
question the impugned order. Hence, the learned counsel appearing for the
second respondent oppose this writ petition. In support of his submissions,
he relied upon the following judgments:
(i) Krishna Bahadur Vs. M/s. Purna Theatre reported in
MANU/SC/0667/2004;
(ii) Joint Action Committee of Airlines Pilots Association of India
Vs. The Director General of Civil Aviation reported in AIR 2011 SC 2220;
(iii) State of Punjab Vs. Dhanjit Singh Sandhu reported in AIR
2014 SC 2004; and
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W.P.No.6216 of 2021
(iv) The Rajasthan State Industrial Development and Investment
Corporation Vs. Diamond and Gem Development Corporation Ltd
reported in AIR 2013 SC 12241.
13. I have heard the learned counsel on either side and also perused
the materials available on record carefully.
14. It is not disputed by both sides that the contract entered into
between the petitioner and the second respondent provides for arbitration.
Similarly, the second respondent has also sent a notice on 07.08.2013 for
appointment of an Arbitrator as per Clause 2.14 of the General Conditions of
Contract for Work in Construction Management of Bharat Heavy Electricals
Limited. However, as the petitioner has not taken any steps for appointing
an Arbitrator as per the Contract, claim has been filed by the second
respondent before the MSEF Council for recovery of certain dues.
15. It is relevant to note that in this writ petition the impugned order
dated 09.06.2017, passed by the MSEF Council is challenged. A perusal of
the impugned order makes it clear that after entertaining the reference, the
MSEF Council meeting was held on 23.11.2016. Thereafter, conciliation
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W.P.No.6216 of 2021
has failed and it is recorded that since the matter involves intricate
engineering issues of contract management, deployment of machineries,
labour etc., arbitration by a professional body is needed and accordingly,
with the consent of both sides the matter has been referred to Arbitration
Center of the Madras High Court for appointment of Arbitrator. The
impugned order clearly records in paragraph 5 as follows:
"5.......Accordingly, both sides agreed for
nomination of Madras High Court Arbitration
Centre for the arbitration process to resolve the
issue."
16. Pursuant to the same, a communication has been sent by the
Arbitration Center of the Madras High Court with some delay. It is relevant
to note that the reference was made by the MSEF Council in the year 2017
itself to the Arbitration Center of Madras High Court, however due to some
delay communication was sent from the Arbitration Center of Madras High
Court only on 09.11.2020.
17. Be that as it may, the Arbitration Center of the Madras High
Court appointed Mr.K.M.Aasim Shehzad, Advocate as the Sole Arbitrator.
The minutes of the first sitting held at 11.00 a.m. on 21.12.2020 before the
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W.P.No.6216 of 2021
Sole Arbitrator indicate that none of the parties and their respective counsel
expressed any objections to the constitution of the present Arbitral Tribunal
or objections as to the Arbitration Clause or the adjudication of the mater by
the Tribunal. Pursuant to the same, the Arbitral proceedings were
commenced. Now it is admitted by both sides that on the side of the
claimant namely the second respondent herein his evidence has been closed
and on the side of the writ petitioner three witnesses have already been
examined and only one witness has to be examined. The above facts are not
in dispute.
18. It is relevant to note that it is the contention of the learned
counsel appearing for the petitioner that though he has not given its consent
before the MSEF Council, the Council had referred the matter to Arbitration.
The fact remains that MSEF Council has recorded a fact that the matter has
been referred to the Arbitration Center of the Madras High Court only after
consent by both sides. That apart, before the Arbitrator also no objections
whatsoever has been raised by the petitioner.
19. It is relevant to note that the arbitration proceedings is in the final
stage and even the application filed under Section 16 of the Arbitration and
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W.P.No.6216 of 2021
Conciliation Act, raising objections has been rejected by the Arbitrator.
Now the writ petition has been filed for challenging the very impugned order
on the ground that there is no jurisdiction for the MSEF Council to refer the
matter to the Arbitrator on the ground that the contract is a works contract
and therefore the MSEF Council cannot have any jurisdiction.
20. Admittedly, the Contract governing the parties contains
Arbitration Clause which is not in dispute. Clause 2.14 of the General
Conditions of the Contract provides mechanism for the parties if they choose
so to go for arbitration and the parties have agreed by way of contract for
such resolution of dispute by Arbitrator. This Court is of the view that when
the matter has been referred by the MSEF Council after consent of the
parties to the Arbitration Center of the Madras High Court to nominate an
Arbitrator, the same cannot be said to be without any jurisdiction, since the
contract itself provides for arbitration when the parties have given consent
for going to arbitration. After the proceedings before the Arbitrator has
reached the final stage, the writ petitioner cannot take a U-turn and question
the proceedings on the ground of jurisdiction. Once the petitioner has
given his consent and has also participated in the proceedings, now
he cannot take up the issue of jurisdiction. Though it is stated that since
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W.P.No.6216 of 2021
it is a works contract, the MSEF Council ought not to have entertained the
reference, it is relevant to note that MSEF Council has not decided the issues
arising out of the works contract. The MSEF Council has only referred the
matter to the arbitration with the consent of the parties. Admittedly, the
contract between the parties also provides for arbitration. Such view of the
matter, this Court is of the view that having participated in the arbitration
proceedings and now it is in the final stage, the writ petitioner cannot at this
stage question the impugned order.
21. The learned counsel appearing for the petitioner placed relied on
a Division Bench judgment of the High Court of Gujarat in Samvit
Buildcare Private Limited Vs. Ministry of Civil Aviation in Special Civil
Application No.1094 of 2018, dated 12.03.2018, wherein the Division Bench
has held that the contract in question is a works contract, for which the
MSME Act shall not be applicable and that the authority is justified in
applying QCBS method while evaluating bids and the eligibility criteria
cannot be said to be perverse and/or arbitrary and accordingly dismissed the
said writ petition. In the above matter, the writ petition has been filed for
direction directing the respondents to accept the bids submitted by the
petitioner considering Section 11 of the MSME Act and the Court rejected
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the said plea.
22. The learned counsel appearing for the petitioner further relied
upon a judgment of the Andhra Pradesh High Court in Rashtriya Ispat
Nigam Limited Vs. Union of India in W.P.Nos.27670 of 2021 dated
26.04.2022. The Andhra Pradesh High Court has held that MSME Act is not
applicable to the works contract. In the above judgment the learned Single
Judge has also held that once a party appears before the Court or a Tribunal
and raises an issue about the jurisdiction of the said Tribunal, it cannot be
said that they have submitted to its jurisdiction. They are appearing under
protest. Therefore, they are at liberty to seek an adjudication of this issue
before the Writ Court under Article 226 of the Constitution of India. It is
relevant to note that in the above judgment the jurisdiction of MSEF Council
is questioned by the writ petitioner therein, whereas the impugned order in
this writ petition does not show any such objections being raised as to its
jurisdiction. Be that as it may, the MSEF Council has not involved itself in
deciding the issue arisen out of the so called works contract. It has only
referred the matter to the Arbitrator with the consent of the parties.
Admittedly the parties are governed by the contract which provides for
alternative dispute resolution by way of arbitration. When the parties have
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consciously agreed that the matter be referred to the Arbitration, this Court is
of the view that it cannot be said that MSEF Council has no jurisdiction at
all, no doubt, if the MSEF Council had entertained the claim based on works
contract and passed an order, it may be easily said that it lacks jurisdiction,
whereas the MSEF Council has just with the consent of the parties referred
the matter to arbitration and an Arbitrator has also been appointed, wherein,
also no objection has been raised by the petitioner. Therefore the above
judgment of the Andra Pradesh High Court will not be helpful to the
petitioner.
23. The learned counsel for the petitioner also relied upon the
judgment of the Hon'ble Supreme Court in Kerala State Electricity Board
Vs. Kurien E.Kalathil reported in (2018) 4 SCC 793. The Hon'ble Supreme
Court has held that insofar reference of the parties to arbitration, oral consent
given by the counsel without a written memo of instructions does not fulfill
the requirement under Section 89 C.P.C. Since referring the parties to
arbitration has serious consequences of taking them away from the stream of
Civil Courts and subject them to the rigor of arbitration proceedings, in the
absence of arbitration agreement, the Court can refer them to arbitration only
with written consent of parties either by way of joint memo or joint
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W.P.No.6216 of 2021
application; more so, when government or statutory body like the appellant-
Board is involved. In the above judgment the Hon'ble Apex Court has clearly
spelt out that in the absence of any written instructions either by way of
memo or joint application, the matter cannot be referred to arbitration.
Admittedly, in this case, the parties agreed for referring the dispute to
arbitration in the contract itself. Besides, the petitioner has also given
consent for referring the matter to the Arbitrator. No objection has been
raised by the petitioner. Therefore, the above judgment is also not
applicable to the facts of the present case since the contract between the
parties itself provides for reference to Arbitration. The petitioner has
consented to refer the matter to arbitration and without raising any
objections participated in the arbitration proceedings and now the arbitration
is in the final stages and therefore now the petitioner cannot be permitted to
approbate and reprobate.
24. The Hon'ble Apex Court in R.N.Gosain Vs. Yashpal Dhir,
reported in AIR 1993 SC 352 has observed as follows:
"Law does not permit a person to both
approbate and reprobate. This principle is based
on the doctrine of election which postulates that no
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W.P.No.6216 of 2021
party can accept and reject the same instrument
and that "a person cannot say at one time that a
transaction is valid any thereby obtain some
advantage, to which he could only be entitled on
the footing that it is valid, and then turn round and
say it is void for the purpose of securing some
other advantage."
25. Such view of the matter, this Court is of the view that as the
dispute itself is not resolved by MSEF Council, only the matter has been
referred to Arbitration with the consent of the parties, further the contract
governing the parties also provides for such reference to arbitration, the
second respondent has also already invoked the Arbitration Clause by
issuing notice in the year 2013 itself and the petitioner has also participated
in the said arbitration proceedings, now the petitioner cannot challenge the
impugned order at this belated stage that to when the arbitration proceedings
is in the final stage. Further, when the parties have consciously agreed to
resolve the dispute arising out of the contract by way of arbitration, they can
very well agitate their right before the Arbitrator and canvass their points
and no prejudice would be caused to them since the Arbitrator has been
independently appointed by the Arbitration Center of the Madras High
Court.
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26. Such view of the matter, this Court finds no merit in this writ
petition and the writ petition is liable to be dismissed and accordingly
dismissed. Consequently, the connected miscellaneous petition is closed. No
costs.
03.01.2023
Index : Yes / No
Neutral Citation : Yes / No
kk
To
1. The Chairman,
Micro Small Enterprises Facilitation Council,
Represented by its Regional Joint Director of
Industries and Commerce,
Thiru-vi-ka Industrial Estate,
Guindy, Chennai - 600 032.
2. The Hon'ble Presiding Arbitrator,
Madras High Court Arbitration Centre,
High Court, Parry's Corner,
George Town, Chennai - 600 108.
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W.P.No.6216 of 2021
N.SATHISH KUMAR, J.
kk
W.P.No.6216 of 2021 and
W.M.P.No.6834 of 2021
03.01.2023
https://www.mhc.tn.gov.in/judis
