Kalpataru Power Transmission ... vs Thiru. N. Athimuthan ...
2023 Latest Caselaw 1684 Mad

                                                                             W.P. (MD) No. 26527 of 2022

                         BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

                                              DATED : 02.03.2023

                                                     CORAM

                                  THE HON'BLE MR. JUSTICE P.D. AUDIKESAVALU

                                           W.P. (MD) No. 26527 of 2022
                                                      and
                                          W.M.P. (MD) No. 20712 of 2022

                Kalpataru Power Transmission Limited,
                Represented by its
                Authorized Signatory Mr.Harbinder Gulati
                Madurai Chettikulam,
                NH 785, Chettikulam,
                Madurai – 625020.                                                       ... Petitioner
                (Cause-title amended by order dated
                28.02.2023 in W.M.P. (MD) No.2356 of 2023)

                                                        -vs-
                1. Thiru. N. Athimuthan (Proprietor),
                   M/s. Aathees Hard Flooring,
                   26/2, LDC Road, Chinnachokkikulam,
                   Madurai – 625 002.

                2. The Micro Small Enterprise Facilitation Council,
                   Madurai Region, District Industries Centre,
                   AlagarKoil Road,
                   Madurai – 625 002.                                               ... Respondents

                Prayer:- Writ Petition filed under Article 226 of the Constitution of India praying
                to issue a Writ of Certiorari, calling for the records pertaining to the proceedings
                intiated in O.P.55/MSEFC/Madurai/2021 by the 2nd respondent which culminated
                into an order dated 26.07.2022 in case No. MSEFC/MDU/55/2021 passed by the
                2nd Respondent and quash the same.

                1/21


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                                                                             W.P. (MD) No. 26527 of 2022

                                  For Petitioner   :    Mr. M.Vallinayagam
                                                        Senior Counsel for M/s. A.Sivaji

                                  For Respondents :     Mr. S.Meenakshisundaram,
                                                        Senior Counsel for
                                                        Mr. M.Thirunavukarasu (for R1)

                                                        Mr. V.J.Kumaravel
                                                        Central Government Senior Panel Counsel
                                                        (for R2)


                                                       ORDER

Heard Mr. M.Vallinayagam, Learned Senior Counsel appearing for the

Petitioner, Mr. S.Meenakshisundaram, Learned Senior Counsel appearing for the

First Respondent and Mr. V.J.Kumaravel, Learned Counsel for the Second

Respondent and perused the materials placed on record, apart from the pleadings

of the parties.

2. The First Respondent made a claim in Case No. MSEFC/MDU/55/2021

before the First Respondent under Section 18 of the Micro, Small and Medium

Enterprises Development Act, 2006 (hereinafter referred to as 'the MSMED Act'

for short), for payment of Rs. 99,74,825/- from the Petitioner towards the amount

due for the works carried out with calculation in terms of the Act, in which an

order dated 26.07.2022 was passed holding that the Petitioner was liable to pay

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the sum of Rs. 99,74,825/- together with compounded interest with monthly rests

at three times of the Bank rate notified by the Reserve Bank of India as stipulated

in MSMED Act for the invoices during the period from 23.10.2020 to 02.08.2021

till the date of realization of dues, which is assailed in this Writ Petition.

3. Learned Senior Counsel for the First Respondent has raised preliminary

objections regarding the maintainability of the Writ Petition by contending that if

the Petitioner is aggrieved by the impugned order, it has only to resort to filing of

an application under Section 34 read with Section 2(4) of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as 'the A & C Act' for short), to

have it set aside as an arbitral award, and that in any event, a Writ Petition to set

aside an arbitral award cannot be prosecuted without complying with the

requirement of pre-deposit of 75% of the amount involved in terms of Section 19

of the MSMED Act.

4. In response, Learned Senior Counsel for the Petitioner contends that when

the Second Respondent has not conducted the arbitral procedure as required to be

followed under the A & C Act read with MSMED Act, the Petitioner is justified in

invoking the plenary jurisdiction of this Court under Article 226 of the

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Constitution to impeach it placing reliance on the decision of the Hon'ble Supreme

Court of India in Jharkhand Urja Vikas Nigam Limited -vs- State of Rajasthan

(Order dated 15.12.2021 in Civil Appeal No. 2899 of 2021) in that regard. It is

further submitted that the requirement of pre-deposit of 75% of the amount

involved as stipulated in Section 19 of the MSMED Act cannot be made

applicable to Writ Petitions under Article 226 of the Constitution.

5. The primordial question that arises for consideration in this case is whether

a Writ Petition under Article 226 of the Constitution could be entertained to

challenge the order passed under Section 18 of the MSMED Act and if so,

whether the requirement of pre-deposit of 75% of the amount involved as required

under Section 19 of the MSMED Act would not be applicable to such case?

6. At this juncture, it must be noticed that Section 34(2)(v) of the A & C Act

provides that an arbitral award may be set aside by the jurisdictional Court on an

application made by the aggrieved party when the arbitral procedure is not in

accordance with the provisions of that Act. It must, at once, be emphasized that

the Hon'ble Supreme Court of India in Assistant Collector of Central Excise -vs-

Dunlop India Limited [(1985) 1 SCC 260] has precisely explained the legal

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position relating to the exercise of discretionary powers under writ jurisdiction

when an alternative remedy exists, in the following words:-

"3. Article 226 is not meant to short-circuit or circumvent

statutory procedures. It is only where statutory remedies are entirely

ill-suited to meet the demands of extraordinary situations as for

instance where the very vires of the statute is in question or where

private or public wrongs are so inextricably mixed up and the

prevention of public injury and the vindication of public justice

require it that recourse may be had to Article 226 of the

Constitution. But then the Court must have good and sufficient

reason to by-pass the alternative remedy provided by statute. Surely

matters involving the revenue where statutory remedies are available

are not such matters. We can also take judicial notice of the fact that

the vast majority of the petitions under Article 226 of the

Constitution are filed solely for the purpose of obtaining interim

orders and thereafter prolong the proceedings by one device or the

other. The practice certainly needs to be strongly discouraged.”

In Nivedita Sharma -vs- Cellular Operators Association of India [(2011) 14 SCC

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337], adverting to the the previous decisions with regard to the rule of self-

restraint when an alternative remedy is available to the aggrieved person, the

Hon'ble Supreme Court of India has emphasized that when a statutory forum is

created by law for redressal of grievance, a writ petition should not be ordinarily

entertained ignoring that statutory dispensation. Further, the law has been restated

by the Hon'ble Supreme Court of India in Radha Krishan Industries -vs- State of

Himachal Pradesh [(2021) 6 SCC 771] as extracted below:-

“27.1. The power under Article 226 of the Constitution to issue

writs can be exercised not only for the enforcement of fundamental

rights, but for any other purpose as well.

27.2. The High Court has the discretion not to entertain a

writ petition. One of the restrictions placed on the power of the High

Court is where an effective alternate remedy is available to the

aggrieved person.

27.3. Exceptions to the rule of alternate remedy arise where :

(a) the writ petition has been filed for the enforcement of a

fundamental right protected by Part III of the Constitution; (b) there

has been a violation of the principles of natural justice; (c) the order

or proceedings are wholly without jurisdiction; or (d) the vires of a

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legislation is challenged.

27.4. An alternate remedy by itself does not divest the High

Court of its powers under Article 226 of the Constitution in an

appropriate case though ordinarily, a writ petition should not be

entertained when an efficacious alternate remedy is provided by law.

27.5. When a right is created by a statute, which itself

prescribes the remedy or procedure for enforcing the right or

liability, resort must be had to that particular statutory remedy

before invoking the discretionary remedy under Article 226 of the

Constitution. This rule of exhaustion of statutory remedies is a rule

of policy, convenience and discretion.

27.6. In cases where there are disputed questions of fact, the

High Court may decide to decline jurisdiction in a writ petition.

However, if the High Court is objectively of the view that the nature

of the controversy requires the exercise of its writ jurisdiction, such

a view would not readily be interfered with.”

Learned Senior Counsel for the Petitioner has not been able to demonstrate from

the facts of this case as to how it would fall under any of the exceptional

circumstances mentioned therein or that the Petitioner has been impeded from

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canvassing what is sought to be agitated in this Writ Petition in an application to

set aside the arbitral award under Section 34 of the A & C Act, and the affidavit

filed in support of the Writ Petition is also bereft of any details in that regard.

7. Coming to the requirement of making pre-deposit of 75% of the amount

involved, it would be necessary to refer to Section 19 of the MSMED Act, which

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

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to such conditions as it deems necessary to impose.”

The clear language of the aforesaid provision makes its compliance mandatory

though the Court has discretion to permit the buyer to remit the amount in

installments as it may deem fit as held by the Hon'ble Supreme Court of India in

Gujarat State Disaster Management Authority -vs- Aska Equipments Limited

[(2022) 1 SCC 61] in the following words:-

“13. On a plain/fair reading of Section 19 of the MSME Act, 2006,

reproduced hereinabove, at the time/before entertaining the

application for setting aside the award made under Section 34 of the

Arbitration and Conciliation Act, the appellant-applicant has to

deposit 75% of the amount in terms of the award as a pre-deposit.

The requirement of deposit of 75% of the amount in terms of the

award as a pre-deposit is mandatory. However, at the same time,

considering the hardship which may be projected before the

appellate court and if the appellate court is satisfied that there shall

be undue hardship caused to the appellant-applicant to deposit 75%

of the awarded amount as a pre-deposit at a time, the court may

allow the pre-deposit to be made in instalments.”

The same view has been taken by the Hon'ble Supreme Court of India in the

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decisions in Goodyear India Limited -vs- Norton Intech Rubbers Private

Limited [(2012) 6 SCC 345] and Tirupati Steels -vs- Shubh Industrial

Component [(2022) 7 SCC 429]. The Division Bench of this Court in M/s. Eden

Exports Company -vs- Union of India [(2013) 1 MLJ 445] has declined to

entertain Writ Petitions challenging the orders passed by the Micro and Small

Enterprises Facilitation Council when 75% of the amount involved as required

under Section 19 of the MSMED Act has not been deposited before the matter is

taken up for hearing. Moreover, in the absence of any restriction of the

applicability of Section 19 of the MSMED Act only to proceedings under Section

34 of the A & C Act and having due regard to the doctrine of purposive

construction to achieve the objects of an enactment, it is not possible to exclude

Writ Petitions under Article 226 of the Constitution from the ambit of the phrase

'application to set aside any award' in that legal provision. The Seven Judges

Bench of the Hon'ble Supreme Court of India in Mafatlal Industries Ltd. -vs-

Union of India [(1997) 5 SCC 536] while explicating that the High Court in

exercise of powers under Article 226 of the Constitution of India can neither

ignore the law nor it can override it, has observed as follows:-

“77. .... So far as the jurisdiction of the High Court under Article

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226 — or for that matter, the jurisdiction of this Court under Article

32 — is concerned, it is obvious that the provisions of the Act cannot

bar and curtail these remedies. It is, however, equally obvious that

while exercising the power under Article 226/Article 32, the Court

would certainly take note of the legislative intent manifested in the

provisions of the Act and would exercise their jurisdiction consistent

with the provisions of the enactment.”

Viewed from that perspective, it would not be possible to entertain the Writ

Petition in the absence of the Petitioner complying with the statutory requirement

of pre-deposit in this case.

8. It would assume significance here that there is nothing to infer from the

facts reflected in the decision of the Hon'ble Supreme Court of India in

Jharkhand Urja Vikas Nigam Limited -vs- State of Rajasthan (Order dated

15.12.2021 in Civil Appeal No. 2899 of 2021) relied by Learned Senior Counsel

for the Petitioner that the requirement of pre-deposit of 75% of the amount

involved as stipulated in Section 19 of the MSMED Act, had been brought to the

notice of the Court in those cases. In this backdrop, it must be recapitulated that

the Hon'ble Supreme Court of India in Regional Manager -vs- Pawan Kumar

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Dubey [(1976) 3 SCC 334] has highlighted that it is the rule deducible from the

application of law to the facts and circumstances of a case which constitutes its

ratio decidendi and not some conclusion based upon facts which may appear to be

similar. One additional or different fact can make a world of difference between

conclusions in two cases even when the same principles are applied in each case

to similar facts. The Constitution Bench of the Hon'ble Supreme Court of India in

Padma Sundara Rao (Dead) -vs- State of Tamil Nadu [(2002) 3 SCC 533] has

aptly ruled in this regard as follows:-

“Courts should not place reliance on decisions without discussing

as to how the factual situations fits in with the fact situation of the

decision on which reliance is placed. There is always peril in

treating the words of a speech or judgment as though they are

words in a legislative enactment, and it is to be remembered that

judicial utterances are made in the setting of the facts of a

particular case, said Lord Morris in Herrington Vs. British

Railways Board (1972) 2 WLR 537. Circumstantial flexibility, one

additional or different fact may make a world of difference between

conclusions in two cases.”

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9. Learned Senior Counsel for the Petitioner by relying on the decision of the

Hon'ble Supreme Court of India in Silpi Industries etc., -vs- Kerala State Road

Transport Corporation (Order dated 29.06.2021 in Civil Appeal Nos. 1570-1578

of 2021) contends that the UDYAM Registration Certificate dated 15.10.2020 has

been obtained from the First Respondent only for 'manufacturing' activities, which

cannot be applied for the 'works contract' performed by the First Respondent. In

this regard, it is satisfactorily explained by Learned Senior Counsel for the First

Respondent that in the column relating to National Industry Classification Code in

the said UDYAM Registration Certificate, it has been mentioned as 'specialized

construction activities', that has been treated as 'manufacturing' in terms of clause

6 of the Notification dated 26.06.2020 issued by the Government of India in the

exercise of powers conferred by the relevant statutory provisions of the MSMED

Act, and the invoices for the works contract are for the period from 23.10.2020 to

02.082021, which are apparently after such registration entitling the Petitioner to

invoke the remedy provided under Section 18 of the MSMED Act.

10. It is asserted by Learned Senior Counsel for the Petitioner that before

commencement of arbitration, there was no termination of the conciliation

proceedings in the manner provided under Section 76 of the A & C Act, which

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would vitiate the impugned order. At this juncture, it must be noticed that the

conciliation proceedings had taken place before the impugned order was passed as

reflected from paras 5 to 7 thereof, which is extracted below:-

“5. During the 3rd Hearing on 15 03.2022 through Video

Conference, the Petitioner was present and represented by

Thiru N. Athimuthan and the Respondent was present and

represented by Thiru Narasimman Counter and Rejoinder are

filed by the Respondent and the Petitioner respectively. The

Respondent stated that bills submitted and work given did not

match. The Council instructed both the parties to appear

before the General Manager. District Industries Centre,

Madurai for joint sitting on 22.03.2022 at 11:00 AM for

conciliation and adjourned the case for next hearing.

6. During the 4th Hearing on 29.04.2022 through Video

Conference, the Petitioner was present and represented by

Thiru N Athimuthan and the Respondent was present and

represented by Thiru Narasimman. The Respondent submitted

that the Petitioner did not complete work on time and

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therefore they had to engage a third party to complete the

work Respondent prayed for time to reconcile with the

Petitioner and arrive at a settlement. The Petitioner submitted

that any reconciliation has failed with the Respondent Hence,

the Council instructed the Respondent to file a Counter and

adjourned the case to the next hearing.

7. During the 5th Hearing on 13.06.2022 through Video

Conference, the Petitioner was present and represented by

Thiru. Athimuthan and the Respondent was present and

represented by Counsel Thiru PJ. Sri Ganesh. The Respondent

contended that the Petitioner had abandoned work and

therefore they had to engage a third party to complete the

work at the risk and cost of the Petitioner and raised a counter

claim of Rs 61,70,741/- The Petitioner stated that Running

Account bills were raised and reconciled and thereafter raised

the final bill. Further, no dues certificate was also given by the

Respondent. The Council directed the Petitioner and the

Respondent to appear before the General Manager, District

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Industries Centre, Madurai and the Council members Vice

President, TANSTIA, Madurai, President, Tamil Nadu

Chamber of Commerce, Madurai in the joint sitting proposed

to be held on 27.06.2022 at 11.00 AM for conciliation of the

issues related to the pending dues and adjourned the case to

the next hearing.

As per the instruction of the Council, the joint sitting was held

on 27.06.2022. Both the Petitioner Thiru. N.Athimuthan and

the Respondent Counsel Thiru. PJ.Sri Ganesh did not agree to

amicable settlement. Conciliation failed and hence closed and

the case is posted for arbitration proceeding.”

On a bare reading of the said paras of the impugned order, it is beyond any cavil

that the Petitioner and the First Respondent could not arrive at any amicable

settlement on the dispute between them during the conciliation proceedings.

Learned Senior Counsel appearing for the Petitioner has also reiterated before this

Court that there is no possibility of any conciliation on the dispute between the

parties even at this advanced stage of the matter. In that scenario, the only

possible inference that can be drawn is that the parties themselves have terminated

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the conciliation proceedings and that no useful purpose would be served to take

any further efforts for conciliation between them. Section 76 of the A & C Act

merely illustrates certain situations where conciliation proceedings would get

terminated, but it cannot be construed as if there cannot be termination of

conciliation proceedings in any other manner. As such, it is not possible to accept

that the conduct of the arbitration proceedings has taken place without prior

termination of the conciliation proceedings so as to nullify the impugned order in

this case.

11. That apart, it is settled position of law that discretionary relief under Article

226 of the Constitution ought not to be exercised in favour of a person merely

because it may be lawful to do so and it would follow as its corollary that it is

incumbent upon the Petitioner to establish that prejudice has been caused by the

impugned order. It is also relevant to point out here that Sections 15 to 25 of the

MSMED Act provides for an expeditious mechanism for recovery of delayed

payments to micro and small industries arising out of goods supplied and services

extended, in which a claim would have to be supported by invoices with proof of

delivery. Once such claim is made by the supplier with that requisite evidence, the

burden shifts on the buyer to plead and prove his defences. The Second

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Respondent has given details of the claim made by the First Respondent

specifying 33 invoices with amount due aggregating to Rs. 6,23,40,488/- for

goods supplied and services extended and after deducting Rs. 5,23,65,665/-

towards payments received, has mentioned the amount of Rs. 99,74,824/- as

remaining to be recovered in para 8 of the impugned order. The mandate for

granting interest for delayed payment has been stipulated in the MSMED Act

itself for which there is no discretion either to reduce or waive the same. After

discussing the controversy involved, the Second Respondent has given cogent

reasons for arriving at the conclusion in rejecting the contentions of the Petitioner

and granting the relief claimed by the First Respondent.

12. Learned Senior Counsel for the Petitioner lastly made a fervent plea that the

Second Respondent has failed to examine the counter-claim made by the

Petitioner which would invalidate the impugned order. Reliance in this regard is

placed on the decision of the Hon'ble Supreme Court in Silpi Industries etc., -vs-

Kerala State Road Transport Corporation (Order dated 29.06.2021 in Civil

Appeal Nos. 1570-1578 of 2021) where the right to make a counter-claim in

proceedings under Section 18 of the MSMED Act has been taken cognizance. In

view of the said binding decision, the Petitioner is certainly entitled to make a

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counter-claim, but at the same time, it is pertinent to notice here that the Petitioner

had not produced any supporting documents along with his counter-claim

belatedly made on 30.05.2022 after the conciliation proceedings had already

commenced on 31.01.2022. The conciliation proceedings had ended on

13.06.2022 and the matter had been posted for conducting arbitration on next

hearing on 26.07.2022, when the Petitioner was expected to be prepared to lead

evidence in support of the counter-claim on the said date. Though Learned Senior

Counsel for the Petitioner accuses that the arbitration proceedings have been

hurriedly completed in a single hearing, there is nothing to show that Petitioner

had been denied any opportunity by the Second Respondent to prove its counter-

claim in the arbitration. If the Petitioner had not been prudent enough to prove its

counter-claim then, no fault could be found on the Second Respondent for the

same. In any event, as already observed, the Petitioner could raise such contention

in a proceeding to set aside the arbitral award under Section 34 of the A & C Act,

which the Petitioner has failed to avail without any acceptable justification.

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In the result, the Writ Petition, which is devoid of merits, is dismissed.

Consequently, the connected Miscellaneous Petition is closed. No costs.

02.03.2023 SJ

Index: Yes/No NCC: Yes/No

Note: Issue order copy by 19.04.2023.

To

1. The Micro Small Enterprise Facilitation Council, Madurai Region, District Industries Centre, AlagarKoil Road, Madurai – 625 002.

https://www.mhc.tn.gov.in/judis W.P. (MD) No. 26527 of 2022

P.D. AUDIKESAVALU, J.

vjt/sj

W.P. (MD) No. 26527 of 2022

02.03.2023

https://www.mhc.tn.gov.in/judis