Madras High Court
M/S.Alfa Therm Limited vs The Commissioner on 4 February, 2025
Author: G.R.Swaminathan
Bench: G.R.Swaminathan
W.A.(MD)No.1267 of 2020
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 04.02.2025
CORAM
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
and
THE HONOURABLE MR.JUSTICE M.JOTHIRAMAN
W.A.(MD)No.1267 of 2020
M/s.Alfa Therm Limited,
6, Community Centre,
Mayapuri, Phase - 1,
New Delhi. ... Appellant / 2nd Respondent
Vs.
1.The Commissioner,
Usilampatti Municipality,
Usilampatti,
Madurai District,
Tamil Nadu. ... 1st Respondent / Petitioner
2.The Chairman,
Micro and Small Enterprises Facilitation
Council of Haryana,
Office of Director of Industries and Commerce,
Haryana, 30 Bays Building,
1st Floor, Sector 17,
Chandigarh. ... 2nd Respondent / 1st Respondent
Prayer : Writ Appeal filed under Clause XV of Letters Patent, to set
aside the order dated 01.10.2019 passed in W.P.(MD).No.10002 of 2019
on the file of this Court.
1/14
https://www.mhc.tn.gov.in/judis
W.A.(MD)No.1267 of 2020
For Appellant : Mr.Mr.S.Ravi, Senior Counsel,
For M/s.Gupta and Ravi.
For Respondents : Mr.K.Mahendran,
Standing Counsel for R1.
No appearance for R2.
JUDGMENT
(Judgment of the court was delivered by G.R.Swaminathan, J.)
Heard the learned senior counsel for the appellant and the learned
standing counsel for Usilampatti Municipality.
2.This writ appeal is directed against the order dated 01.10.2019
allowing W.P.(MD)No.10002 of 2019 filed by the Commissioner,
Usilampatti Municipality by the learned Single Judge.
3.The Commissioner of Usilampatti Municipality and the appellant
entered into an agreement on 26.02.2016. It was a solid waste
management agreement. The appellant was to supply certain machineries
/ equipment and install them. Dispute arose between the parties. The
appellant who is a registered MSME filed an application under Section
https://www.mhc.tn.gov.in/judis
18 of the Micro Small and Medium Enterprise Development Act, 2006
before the Chairman, Micro and Small Enterprises Facilitation Council,
Haryana at Chandigarh. The said Facilitation Council issued notice
along with Claim Application No.954 of 2019 to the Commissioner,
Usilampatti Municipality. The Commissioner, Usilampatti Municipality
questioned the said notice on the ground that Micro and Small
Enterprises Facilitation Council, Haryana lacks the territorial jurisdiction
to entertain the claim lodged by the appellant. The writ petition was
allowed vide order dated 01.10.2019 in the following terms:-
“11. In the instant case, the project itself is for supply,
delivery and erection of pre-processing unit and refinement unit.
There are disputes between the petitioner and the second
respondent in respect of quantum of supply, delivery and erection
of the unit. Section 15 mandates that the buyer, on completion of
supply, shall make payment on or before the date agreed between
them. From the peculiar circumstances of the present contract, it
could be seen that it is not mere supply of goods, but also coupled
with service to be rendered by a supplier. Admittedly,
communications reveal that only 80% of supply of goods were
made and service was not completed by the supplier. The supplier
insists that as per the contract, they are entitled to payment of
money on supply of 80% of the materials and 20% on completion
https://www.mhc.tn.gov.in/judis
of erection of the unit. The very same agreement specifies the
jurisdiction of Courts at Chennai. If that being so, Council which
is within the jurisdiction of Chennai only will have power to issue
notice. The judgment in Fleetguard Filters Private Limited
(supra) dealt with a situation where the supplier was situated at
Haryana. It is true to state that Section 18(4) overrides the all
other laws and confers jurisdiction to the Facilitation Council
where the supplier is located. In that case, the supplier was
located in Haryana within its jurisdiction. But, in the instant case,
it could be seen from the agreement and invoices that the
registered office at New Delhi and the Factory at Haryana. The
contract entered between the parties and other communications
disclose the place of business of the second respondent only at
New Delhi. In that view of the matter, the second respondent,
having entered into a contract within the State of Tamil Nadu and
having registered office at New Delhi, can make reference to the
appropriate Micro and Small Enterprises Facilitation Council
within these two places. It cannot be at every place, where it has a
factory or branch office. Then it will amount to forum shopping.
The object of the Act is to promote the Micro, Small and Medium
Entrepreneurs. The non obstante clause has been incorporated for
the purpose of avoiding delay, to expedite the payment process and
to protect the entrepreneurs from protracted litigations and from
financial crisis. But it will not entail the supplier to abuse the
process, and pressurise the buyer to budge to illegal and
exorbitant demands and to run to places of supplier's choice.
https://www.mhc.tn.gov.in/judis
12. There shall be limitations for the Council to exercise
jurisdiction. The word 'location under Section 18(4) of the Act'
means that the place from where the supplier runs his business or
in other words, where he has the registered office or Head Office.
It is made with an object to facilitate the entrepreneurs to have
easy access to justice and hassle free recovery. In the instant case,
as observed above, the registered office of the second respondent
is at New Delhi and the contract and correspondences have taken
place only from New Delhi. Therefore, it shall be construed that
the supplier is located at New Delhi. Therefore, the first
respondent Council does not have jurisdiction to entertain the
reference and it is abuse of process of law. The judgment relied on
by the second respondent is not applicable to the case on hand, as
the facts and circumstances of this case are entirely different.
13. Secondly, the contract is a composite contract for
supply of goods and for rendering service in erecting pre-
processing and refinement unit. The second respondent cannot
segregate the same and insist for payment only for supply of
materials leaving out the incomplete services rendered. Therefore
also, I consider that the claim of the second respondent is not in
consonance with Section 15 making the petitioner/buyer liable for
payment of amount and the reference is premature and abuse of
process. However, this issue can be decided only through
conciliation or arbitration or through any other alternative dispute
resolution methods. Be that as it may, for inviting parties to
conciliation, the Facilitation Council shall have jurisdiction. In
https://www.mhc.tn.gov.in/judis
the instant case, I have already held that Micro and Small
Enterprises Facilitation Council at Haryana has no territorial
jurisdiction to issue the impugned notice. Therefore, the impugned
notice issued by the first respondent is liable to be set aside and
accordingly, it is set aside.”
Challenging the same, this writ appeal came to be filed.
3.The learned senior counsel for the appellant drew our attention to
Section 18 of the Micro Small and Medium Enterprise Development Act,
2006 (unamended). It reads as follows:-
“18.Reference to Micro and small Enterprises
Facilitation Council._
1) Notwithstanding anything contained in any other law
for the time being in force, any party to a dispute may, with
regard to any amount due under section 17, make a reference to
the Micro and Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the
Council shall either itself conduct conciliation in the matter or
seek the assistance of any institution or centre providing
alternate dispute resolution services by making a reference to
such an institution or centre, for conducting conciliation and
the provisions of sections 65 to 81 of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall apply to such a
https://www.mhc.tn.gov.in/judis
dispute as if the conciliation was initiated under Part III of that
Act.
(3) Where the conciliation initiated under sub-
section (2) is not successful and stands terminated without any
settlement between the parties, the Council shall either itself
take up the dispute for arbitration or refer ittoany institution or
centre providing alternate dispute resolution services for such
arbitration and the provisions of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall then apply to the
dispute as if the arbitration was in pursuance of an arbitration
agreement referred to in sub-section(1) of section 7 of that Act.
(4) Notwithstanding anything contained in any other law
for the time being in force, the Micro and Small Enterprises
Facilitation Council or the centre providing alternate dispute
resolution services shall have jurisdiction to act as an
Arbitrator or Conciliator under this section in a dispute
between the supplier located within its jurisdiction and a buyer
located anywhere in India.
(5) Every reference made under this section shall be
decided within a period of ninety days from the date of making
such a reference.”
He pointed out that Section 18(4) envisages the filing of claim
application before that facilitation council within whose jurisdiction the
supplier is located. The expression “supplier” has been defined in
Section 2(n) of the Act. It reads as follows:-
https://www.mhc.tn.gov.in/judis
“2.(n) "supplier" means a micro or small enterprise,
which has filed a memorandum with the authority referred to in
sub-section (1) of section 8, and includes.”
4.Section 8(1) of the Micro Small and Medium Enterprise
Development Act, 2006 is as follows:-
“8.Memorandum of micro, small and medium enterprises._
(1) Any person who intends to establish,--
(a) a micro or small enterprise, may, at his discretion; or
(b) a medium enterprise engaged in providing or
rendering of services may, at his discretion; or
(c) a medium enterprise engaged in the manufacture or
production of goods pertaining to any industry specified in the
First Schedule to the Industries (Development and Regulation)
Act, 1951 (65 of 1951),
shall file the memorandum of micro, small or, as the case may
be, of medium enterprise with such authority as may be
specified by the State Government under sub-section (4) or the
Central Government under sub-section (3):
Provided that any person who, before the commencement of
this Act, established--
https://www.mhc.tn.gov.in/judis
(a) a small scale industry and obtained a registration
certificate, may, at his discretion; and
(b) an industry engaged in the manufacture or production of
goods pertaining to any industry specified in the First Schedule
to the Industries (Development and Regulation) Act, 1951 (65
of 1951),having investment in plant and machinery of more
than one crore rupees but not exceeding ten crore rupees and,
in pursuance of the notification of the Government of India in
the erstwhile Ministry of Industry (Department of Industrial
Development) number S.O. 477(E), dated the 25th July, 1991
filed an Industrial Entrepreneur's Memorandum,
shall within one hundred and eighty days from the
commencement of this Act, file the memorandum, in
accordance with the provisions of this Act.”
5.Our attention was also drawn to S.O. 1643(E) dated 29.09.2006
issued by the Central Government. It contains the format in which the
memorandum has to be filed by the MSME. The learned senior counsel
for the appellant categorically stated that even though the appellant has
its registered office at New Delhi, their factory is located at Sonepat,
Haryana and they had registered themselves with the District Industries
Centre at Sonepat, Haryana.
https://www.mhc.tn.gov.in/judis
6.It is true that Clause 12 of the agreement dated 26.02.2016
entered into between the parties mentions that Courts at Chennai alone
will have the jurisdiction. But then Section 18(4) of the Act contains the
overriding the clause.
7.The Hon'ble Supreme Court in the decision reported in (2023) 6
SCC 401 [Gujarat State Civil Supplies Corporation Limited Vs.
Mahakali Foods Private Limited (Unit 2)] had held as follows:-
“52.The upshot of the above is that:
52.1. Chapter-V of the MSMED Act, 2006 would override the
provisions of the Arbitration Act, 1996.
52.2. No party to a dispute with regard to any amount due
under Section 17 of the MSMED Act, 2006 would be precluded
from making a reference to the Micro and Small Enterprises
Facilitation Council, though an independent arbitration
agreement exists between the parties.
52.3. The Facilitation Council, which had initiated the
Conciliation proceedings under Section 18(2) of the MSMED
Act, 2006 would be entitled to act as an arbitrator despite the
bar contained in Section 80 of the Arbitration Act.
https://www.mhc.tn.gov.in/judis
52.4. The proceedings before the Facilitation
Council/institute/centre acting as an arbitrator/arbitration
tribunal under Section 18(3) of MSMED Act, 2006 would be
governed by the Arbitration Act, 1996.
52.5. The Facilitation Council/institute/centre acting as an
arbitral tribunal by virtue of Section 18(3) of the MSMED Act,
2006 would be competent to rule on its own jurisdiction as also
the other issues in view of Section 16 of the Arbitration Act,
1996.
52.6. A party who was not the ‘supplier’ as per the definition
contained in Section 2(n) of the MSMED Act, 2006 on the date
of entering into contract cannot seek any benefit as the
‘supplier’ under the MSMED Act, 2006. If any registration is
obtained subsequently the same would have an effect
prospectively and would apply to the supply of goods and
rendering services subsequent to the registration.”
8.The learned standing counsel for the municipality would argue
that the aforesaid decision reported in (2023) 6 SCC 401 [Gujarat State
Civil Supplies Corporation Limited Vs. Mahakali Foods Private
Limited (Unit 2)] will not apply to the facts of this case. According to
him, the contract between the parties involves not only supply but also
https://www.mhc.tn.gov.in/judis
erection and fulfilment of few other functions. He therefore contends
that the Facilitation Council, Haryana will not have jurisdiction.
9.As rightly pointed by the learned senior counsel for the
appellant, even this point regarding jurisdiction can be urged before the
Facilitation Council. The Municipality is permitted to raise the
preliminary objection and if it is so raised before the Facilitation Council,
it shall be decided first before the matter is taken up on merits.
10.We therefore have to necessarily hold that even though the
appellant had agreed that the Courts at Chennai alone will have
jurisdiction, that would still not bind him. It is well settled that there can
be no estoppel against statute. Thus, the provision of the Micro Small
and Medium Enterprise Development Act, 2006 will prevail over any
contract clause in the agreement between the parties. We are therefore
satisfied that the Facilitation Council, Haryana at Chandigarh will have
the territorial jurisdiction to entertain the appellant's claim. The learned
Single Judge had not given the fullest weight and effect to the overriding
clause / non-obstinate clause set out in under Section 18(4) of the Act.
https://www.mhc.tn.gov.in/judis
We therefore set aside the impugned order passed by the learned Single
Judge. The writ appeal is allowed.
11.The Facilitation Council, Haryana at Chandigarh shall issue
fresh notice to the Commissioner, Usilampatti Municipality and if
possible, the proceedings shall be conducted through video conferencing
mode. No costs.
(G.R.S. J.,) & (M.J.R. J.,)
04.02.2025
NCC : Yes/No
Index : Yes / No
Internet : Yes/ No
ias
https://www.mhc.tn.gov.in/judis
G.R.SWAMINATHAN, J.
and
M.JOTHIRAMAN, J.
ias
04.02.2025
https://www.mhc.tn.gov.in/judis
