Orissa High Court
M/S Odisha Mining Corporation Limited vs Union Of India on 18 June, 2025
Author: K.R. Mohapatra
Bench: K.R. Mohapatra
Signature Not Verified
Digitally Signed
Signed by: SASANKA SEKHAR SATAPATHY
Reason: Authentication
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
FIN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.22236 OF 2014
(An application under Articles 226 and 227 of the Constitution of India)
*****
M/s Odisha Mining Corporation Limited,
Government of Odisha Undertaking,
registered/ Head Office AT OMC House,
Bhubaneswar, represented through its
Managing Director, OMC Limited ...... Petitioner
-Versus-
1. Union of India, Ministry of Micro,
Small and Medium Enterprises,
Shastri Bhawan, New Delhi, represented
through its Secretary
2. Member Secretary,
Micro and Small Enterprises Facilitation
Council and Director of Industries,
Konkan Region, Office Complex Building,
Opposite Mulund Check Naka,
Wagle Estate Corner, Thane-400604
3. M/s Indiana Engineering Works
(Bombay Private Limited, Indiana House,
Makwana Road, Marol Naka, P.B. No.7409,
Andheri (East), Mumbai-400059
....... Opp. Parties
Advocates appeared:
For Petitioner : Ms. Pami Rath, Senior Advocate
being assisted by Ipsit Acharya, Advocate
For Opp. Parties : Mr. Durga Prasad Nanda, Senior Advocate
being assisted by Suvalaxmi Devi, Advocate
(For Opposite Party No.3
CORAM :
JUSTICE K.R. MOHAPATRA
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Date of Hearing 04.04.2025 :: Date of Judgment 18.06.2025
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W.P.(C) No.22236 OF 2014
Page 1 of 43
Signature Not Verified
Digitally Signed
Signed by: SASANKA SEKHAR SATAPATHY
Reason: Authentication
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
JUDGMENT
K.R.Mohapatra, J;
1. This matter is taken up through hybrid mode.
2. Petitioner-M/s Odisha Mining Corporation Limited (for brevity
'OMC') has filed this Writ Petition seeking for a direction to
quash and set aside the proceeding in IFC Case No.1 of 2006
initiated by the Industries Facilitation Council, Thane (for
brevity 'IFC') and consequential letter dated 30th January, 2014
(Annexure-7) issued by Micro, Small and Medium Enterprises
Facilitation Council, Konkon Region, Thane (for brevity
'Council') communicating the order of the even date
terminating the conciliation proceeding and initiating arbitration
proceeding under Section 18 (3) of the Micro, Small and
Medium Enterprises Development Act, 2006 (for brevity,
'MSMED Act, 2006') and letter dated 23rd July, 2014
(Annexure-9) communicating that the IFC, Thane had
jurisdiction to entertain the proceeding in question. Petitioner,
by way of amendment to the Writ Petition also assailed the ex-
parte award dated 15th November, 2014 (Annexure-10) passed
by the IFC/Council, Thane.
3. Ms. Rath, learned Senior Advocate appearing for OMC
submitted that technical and commercial bids for design,
manufacture, supply, storage, erection, testing, commissioning
and performance guarantee test on turn-key basis of one 75
TPH crushing and screening plant at Jajanga, Odisha was
invited by the Petitioner-OMC. The Opposite Party No.3- M/s
W.P.(C) No.22236 OF 2014
Signed by: SASANKA SEKHAR SATAPATHY
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
Indiana Engineering Works (Bombay) Private Limited was the
successful bidder. Petitioner issue LoI to Opposite Party No.3
on 22nd December, 1992, whereas the work order was issued by
OMC on 29th September, 1993. Accordingly, contract was
executed between OMC and Opposite Party No.3 on 13th May,
1994 (Annexure-2). The Opposite Party No.3 failed to achieve
the rated capacity in performance test, i.e., 75 TPH (Ton Per
Hour) and left the work incomplete. In spite of repeated
communications, the Opposite Party No.3 did not comply with
the terms and conditions of the contract. On the other hand,
Opposite Party No.3 claiming to be a Supplier, filed an
application on 27th March, 2006 before the IFC, Thane under
Section 4 of the Interest on Delayed Payments to Small Scale
and Ancillary Industrial Undertakings Act, 1993 (for brevity
'IDP Act, 1993'). The said application was registered as IFC
Case No.1 of 2006 (Annexure-1). It was alleged in the said
application that the OMC failed to clear the bills of the
Opposite Party No.3 from 6th May, 1998 to 17th April, 1999
though the plant in question was handed over to OMC on 11th
April, 1999 and it was provisionally accepted on the said date.
Thus, IFC Case No.1 of 2006 was registered before IFC.
4. The plant in question was proposed to be constructed at Jajanga,
Odisha, but the petition under the IDP Act, 1993 (as amended in
1998) was filed at Thane in the State of Maharashtra. The entire
cause of action, if any, i.e., issuance of tender, work order,
execution of contract and submission of bills etc., arose within
the geographical territory of the State of Odisha. The contract
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Signed by: SASANKA SEKHAR SATAPATHY
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
between OMC and Opposite Party No.3 under Annexure-2
clearly stipulated that the contract shall be subject to the
exclusive jurisdiction of the Court at Bhubaneswar in Odisha.
Thus, the IFC had no jurisdiction to entertain such an application
under the IDP Act, 1993. Before issuance of notice to the
Petitioner, the IFC should have examined as to whether it had
jurisdiction to entertain an application under the IDP Act, 1993
or not. When the matter stood thus, MSMED Act, 2006 came
into force with effect from 2nd October, 2006, but the IFC
assuming jurisdiction under the MSMED Act, 2006 acted in
terms of Section 18 of the MSMED Act, 2006 and proceeded
with the matter. The provision under Section 18 of the MSMED
Act, 2006 does not have any retrospective application to validate
a proceeding under the IDP Act, 1993. When initiation of the
proceeding under the IDP Act, 1993 by the IFC, Thane was
without jurisdiction and a nullity, no action under the MSMED
Act, 2006 could have been taken by the said IFC validating an
invalid proceeding. Thus, IFC, Thane lacked territorial
jurisdiction to entertain IFC Case No.1 of 2006.
4.1 In support of her submission, Ms. Rath, learned Senior
Advocate relied upon the case of Harshad Chiman Lal Modi
Vs. DLF Universal Limited; (2005) 7 SCC 791 and Sneh Lata
Goel Vs. Pushpalata; (2019) 3 SCC 594.
5. Section 32 of the MSMED Act, 2006 deals with repeal and
saving of IDP Act, 1993 (as amended in 1998). Sub-section (1)
of Section 32 of MSMED Act, 2006 makes it clear that by
enactment of the said Act, IDP Act, 1993 was repealed. It is,
W.P.(C) No.22236 OF 2014
Signed by: SASANKA SEKHAR SATAPATHY
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
however, clarified in Sub-section (2) that that notwithstanding
the said repeal clause, anything done or any action taken under
the IDP Act, 1993 so repealed, be deemed to have been done or
taken under the corresponding provision of MSMED Act, 2006.
Purportedly assuming jurisdiction under the said provision, the
IFC proceeded with IFC Case No.1 of 2006. But when the
initiation of the proceeding was itself defective and without
jurisdiction, the IFC could not have assumed jurisdiction and
undertaken exercise under the MSMED Act, 2006. Section 18
(4) of the MSMED Act, 2006 confer territorial jurisdiction of
IFC, Thane to entertain application for which the cause of
action arose beyond its territorial jurisdiction. But there was no
such corresponding provision under the IDP Act, 1993 (as
amended in 1998). Thus, the said provision makes it clear that it
has a prospective effect. As such, neither Section 32 nor Section
18 (4) of the MSMED Act, 2006 confers any jurisdiction on
IFC, Thane to entertain the application in question.
5.1 Further, upon receipt of the application filed by Opposite Party
No.3, IFC Case No.1 of 2006 was registered and notice was
issued to the Petitioner-OMC. On 13th December, 2006,
Petitioner on being served with the notice moved the IFC,
Thane-Opposite Party No.2 and prayed for two months' time to
file reply. But no order was passed by the IFC, Thane on the
said application filed by the Petitioner-OMC. As during the
relevant period, IFC, Thane was not functioning; Petitioner
could not also enquire about the status of its application and
further proceeding in the matter. However, the Petitioner was
W.P.(C) No.22236 OF 2014
Signed by: SASANKA SEKHAR SATAPATHY
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
served with 2nd notice on 23rd May, 2013 by the Council, which
was in continuation of the notice issued by IFC, Thane for filing
reply. Pursuant to the 2nd notice dated 23rd May, 2013,
Petitioner filed an application raising preliminary issue of
jurisdiction of IFC, Thane/ Council to accept and decide IFC
Case No.1 of 2006. However, vide letter dated 27th January,
2014 (Annexure-6), the Council intimated the Petitioner and
Opposite Party No.3 the minutes/order passed pursuant to the
hearing held on 18th January, 2014 in IFC Case No.1 of 2006,
wherein, it was stated as under:-
"Council come to the conclusion that Respondent
is not interested in conciliation. Therefore, the Council
decided to terminate the conciliation process and to start
the arbitration process. It is also decided to inform the
Respondent that if remains absent for next hearing, the
case will be decided on merit. Next hearing will be held
on 1st February, 2014."
Again vide letter dated 30th January, 2014, the Council
communicated to the Petitioner and Opposite Party No.3 the
minutes/order passed pursuant to hearing held on 18 th January,
2014, wherein, it was stated as under:-
"As per the decision taken in the MSEFC Hearing
Dtd. 18.01.2014, Arbitration Order pertaining to your
Petition is enclosed herewith for your information."
5.2 Ms. Rath, learned Senior Advocate further submitted that upon
receipt of the notice dated 23rd May, 2013 from the Council, the
Petitioner had filed an application dated 13th August, 2013
requesting the Council to decide the issue of jurisdiction as
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
preliminary issue. But without taking a decision on the same,
the Council communicated its decision to terminate the
conciliation proceeding holding that the Petitioner was not
interested to settle the matter amicably. Further, the Council
took a decision to take up the arbitration proceeding under
Section 18 (3) of the MSMED Act, 2006 by itself. Letter dated
31st January, 2024 (Annexure-7) contained the order passed
pursuant to the hearing held on 18th January, 2014. On the said
date, a composite order was passed, firstly, finally terminating
the conciliation proceeding and secondly, initiating arbitration
proceeding under Section 18(3) of the MSMED Act, 2006 by
the Council itself. Thus, the same resulted in procedural
irregularity as well as impropriety.
5.3 In the letter dated 23rd July, 2014 (Annexure-9), reference to
hearing on 1st February, 2014 was made. In the said letter, it
was stated that in view of provision under Section 32 of the
MSMED Act, 2006, the Council had jurisdiction to entertain the
case as the Unit (Opposite Party No.3) was registered as SSI
with Directorate of Industries, Government of Maharashtra.
However, the said letter under Annexure-9 did not indicate as to
whether any hearing on preliminary issue of jurisdiction was
undertaken on that day or not. The present Writ Petition was
filed assailing the letter dated 23rd July, 2014 (Annexure-9).
During pendency of the Writ Petition, the ex-parte award was
passed on 23rd February, 2015 (Annexure-10) in IFC Case No.1
of 2006 by the Council. Hence, the Petitioner amended the Writ
Petition also to challenge the said order/award.
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
5.4 It is further submitted that order dated 7 th February, 2014
(Annexure-8) stipulates that the Council gave direction to the
parties to resolve the issue amicably. The same implies that by
that date, the proceeding was at the stage of conciliation and no
arbitration proceeding had been initiated. Even after filing of
the present Writ Petition on 14th November, 2014, the Petitioner
intimated the Council about filing the Writ Petition via e-mail
dated 14th November, 2014 (same date) (Annexure-12).
However, the impugned award was passed on 23rd February,
2015 under Annexure-10.
5.5 It is stated that the impugned award dated 23rd February, 2015
was passed on the basis of purported hearing on 15th November,
2014. The impugned award was passed without resorting to the
procedure of arbitration. When the Council took up arbitration, it
was incumbent on its part to allow the Petitioner to file its
written statement of defence under Section 23 of the Arbitration
and conciliation Act, 1996 (for brevity 'Arbitration Act'). No
notice whatsoever was issued to the Petitioner intimating either
initiation of the proceeding under the Arbitration Act, 1996 or
providing opportunity to file statement of defence. It was stated
in the impugned award under Annexure-10 that the Petitioner
was represented by Sri Saswat Mishra and Sri N.C. Sahu in the
hearing on 15th November, 2014, which was not at all correct, as
by that time Sri Mishra was no longer associated with the
Petitioner-OMC. An affidavit was also filed through Mr. N. C.
Sahu stating that neither he nor Sri Mishra appeared before the
Council at Thane in the proceeding dated 15th November, 2014.
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
Procedure laid down in the Arbitration Act, 1996 was given a
total go by the Council. Hence, the impugned award is a nullity.
Ms. Rath, learned Senior Advocate in support of her submission
also relied upon the case law JSW Steel Limited Vs. M/s Micro,
Small Enterprises Facilitation Council, Cuttack; (2023) 3 ILR
Cuttack 643 and Jharkhand Urja Vikas Nigam Limited Vs.
State of Rajasthan and others; (2021) 19 SCC 206. Date of
communication of the award was 4th March, 2015, i.e., after four
months from the purported date of award dated 15th November,
2014.
6. Ms. Rath, learned Senior Advocate arguing on the
maintainability of the Writ Petition, submitted that this Court
has the jurisdiction to entertain the present Writ Petition, as the
initial cause of action for filing the Writ Petition arose in the
State of Odisha. She relied upon the case of Shanti Debi Vs.
Union of India; (2020) 10 SCC 766, Nawal Kishore Sharma
Vs. Union of India and others; AIR 2014 SC 3607 and M/s.
Kusum Ingots and Alloys Ltd. vs Union of India and
another; AIR 2004 SC 2321. Alternate remedy though
available to the Petitioner is not a bar to entertain the Writ
Petition as the ex-parte award passed by the Council was ex-
facie illegal and without jurisdiction is settled in Whirlpool
Corporation Vs. Registrar of Trade Marks, Mumbai and
others; AIR 1999 SC 22. Section 19 of the MSMED Act, 2006
does not oust the jurisdiction of this Court under Articles 226
and 227 of the Constitution of India since it relates to judicial
review. She, therefore, prays for setting aside the letters under
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
Annexures-7, 9 and 10 and also prayed for a direction to hold
the very initiation of the proceeding before the IFC, Thane
under the provisions of the IDP Act, 1993 to be without
jurisdiction and prayed for declaring the entire proceeding to be
a nullity. She also prayed for declaring the consequential award
under Annexure-10 to be a nullity.
7. Mr. Nanda, learned Senior Advocate appearing for Opposite
Party No.3 submitted that on being adjudged successful in the
bid, a contract was executed between the Petitioner and
Opposite Party No.3 on 13th May, 2013 for the designing,
supply installation and commissioning of one 75 TPH crushing
and screening plant in BPJ Mines under Barbil Zone, Keonjhar,
Odisha. Due to certain breaches (as alleged) in the claim
application dated 27th March, 2006 (Annexure-1) in IFC Case
No.1 of 2006, the Opposite Party No.3 was prevented from
completing the work within the stipulated period as envisaged
in the contract. Certain dues of Opposite Party No.3 remained
unpaid. Hence, Opposite party No.3 filed IFC Case No.1 of
2006 before IFC, Thane under the provisions of the IDP Act,
1993 (as amended in 1998) claiming an amount of
Rs.5,37,01,293/-. Upon enactment of the MSMED Act, 2006,
the IFC was replaced by MSME Council, Thane (MSEFC-
Opposite Party No.2). In view of Section 32 of the MSMED
Act, 2006, the Council took up the proceeding; proceeded with
the case and passed the award under Annexure-10 directing the
Petitioner to pay Opposite Party No.3 a sum of Rs.45,60,886/-
W.P.(C) No.22236 OF 2014
Signed by: SASANKA SEKHAR SATAPATHY
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
along with interest. Just a day before passing of the award under
Annexure-10, the Petitioner filed the present Writ Petition.
7.1 After the award under Annexure-10 was passed, the Petitioner
sought for amendment of the Writ Petition to challenge the
award, which was allowed by this Court. Vide order dated 12 th
May, 2015 and in Misc. Case No.5231 of 2015, directed interim
stay operation of award under Annexure-10, which is
continuing till date. Although an application for vacation of the
interim order has been filed by Opposite Party No.3, but the
same is still pending. Due to non-payment of the amount so
awarded by the Council in the impugned award, the Opposite
Party No.3, which is a Small Schal Industrial Unit, is suffering
financially. Upon receipt of the application filed by Opposite
Party No.3 under Annexure-1, IFC, Thane issued notice to the
Petitioner on 9th November, 2006 to file their reply. The
Petitioner in its letter dated 13th December, 2006 (Annexure-
R/24 to the additional affidavit) sought for extension of two
months for filing their reply to IFC Case No.1 of 2006. On 24 th
July, 2007 (Annexure-R/25 to the additional affidavit), the
Petitioner wrote to the Principal Secretary, IFC, Thane that they
had engaged Sri Ashok Kumar Pati to defend their case before
the IFC. When the matter stood thus, due to enactment of
MSMED Act, 2006, the Council, vide its letter dated 4th March,
2013 (Annexure-R/28 to the additional affidavit) directed the
Petitioner to file its reply within fifteen days from the receipt of
the said letter with a copy to the Opposite Party No.3 failing
which, the Council would take an ex-parte decision. Again, on
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
23rd May, 2013 (Annexure-4 to the writ petition and Annexure-
R/29 to the additional affidavit), the Council referring to its
earlier letters informed the Petitioner that no reply by the
Petitioner was filed by then and it was also indicated therein
that in the event no submission/say is received within seven
days from the date of communication, the Council would decide
the case ex-parte and the same would amount to waiver of
opportunity of hearing at Petitioner's own risk. In reply to the
said letter under Annexure-R/29, the Petitioner intimated
Opposite Party No.2 vide its letter dated 29 th May, 2013
(Annexure-R/30 to the additional affidavit) that pursuant to
notice dated 9th November, 2006 by the Council when its
Advocate went to the office of Opposite Party No.2/Council to
verify the case record and to obtain necessary documents in
January, 2007, the Council was found defunct in view of the
enactment of MSMED Act, 2006. It was also alleged, inter alia,
that no communication was made by the Council thereafter.
Further, the Petitioner alleged that the Council had no
jurisdiction to entertain the dispute on account of Clause-9.20 of
the contract and the case was barred by limitation. However, the
Petitioner requested for another set of claim petition and sought
for two months' time for submission of reply. Accordingly, the
Council-Opposite Party No.2 sent a set of documents in respect
of the claim petition to the Petitioner on 13th June, 2013
(Annexure-R/31 of the additional affidavit) directing them to
file their reply within fifteen days of receipt of the documents.
In reply, the Petitioner infirmed the Council in its letter dated
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
3rd July, 2013 (Annexure-R/32 to the additional affidavit) that
they had received documents on 17th June, 2013 only and would
require one month time with effect from 1st July, 2013 to file
their reply. However, the Council/Opposite Party No.2 issued
notice for final hearing of the parties on 18th July, 2013
(Annexure-R/33 to the additional affidavit) informing them that
despite having served with notice to the Petitioner to file reply
nothing had been received. Thus, as last opportunity the
Petitioner was directed to make the payment as claimed or to
file its reply within fifteen days from the date of receipt of the
said notice failing which, the Council would be compelled to
hear the matter without waiting for reply of the Petitioner. On
8th August, 2013, the Petitioner filed its preliminary reply
(Annexure-5). On receipt of the aforesaid reply, the Council
sent a copy of the same to the Opposite Party No.3 to respond to
the same within fifteen days. In due course on 29 th August,
2013 (Annexure-R/34 to the additional affidavit), the Council
directed both the parties to attend the hearing scheduled on 6 th
September, 2013. The matter was then adjourned on 6th
September, 2013. Thus, hearing of the case was scheduled to
11th October, 2013 and the parties were directed by the Council
to attend hearing on the scheduled date vide Annexure-R/37 to
the additional affidavit. On the said date, the Opposite Party
No.3 filed its rejoinder to the Petitioner's reply. Accordingly,
the date of hearing was fixed to 15th November, 2013
(Annexure-R/39 to the additional affidavit). Notice was also
sent enclosing minutes of the hearing held on 11th October,
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Location: HIGH COURT OF ORISSA CUTTACK
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2013, which disclosed that the Petitioner did not attend hearing.
On receipt of the said letter /notice, the Petitioner requested for
adjournment of four weeks to file the reply to the affidavit filed
by Opposite Party No.3. Further, the Petitioner vide its letter
dated 21st December, 2013 and 26th December, 2013 raised the
objection of jurisdiction. It also admitted to have withheld a
sum of Rs.25,13,775/- from the Opposite Party No.3 on account
of their failure to achieve the rated capacity. The Petitioner also
raised objection that the money claim made by Opposite Party
No.3 related to financial year 1999-2000 and the application
under the IDP Act, 1993 was filed in the year 2006, i.e., after
six years despite having other fora for redressal of its
grievances. It was further stated that MSMED Act, 2006 has
come into force on 2nd October, 2006, which is prospective in
nature. Thus, it could not be made applicable to the claim of
Opposite Party No.3 retrospectively more particularly after a
lapse of six years. Thereafter, the hearing before the Council
was scheduled to 18th January, 2014, which was communicated
to the parties vide notice of the Council dated 7th January, 2014.
In the said notice, minutes of the hearing held on 21st
December, 2013, was also enclosed which revealed that the
Petitioner did not attend the hearing. Subsequently, the date of
hearing was scheduled to 1st February, 2014 and it was
communicated by the Council to the parties vide notice dated
24th January, 2014. In the said notice, minutes of the hearing
held on 18th January, 2014 was enclosed which disclosed that
the Petitioner did not attend the hearing. Thus, the Council
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Location: HIGH COURT OF ORISSA CUTTACK
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opined that the Petitioner is not interested for conciliation. As
such, it decided to terminate the conciliation and commence the
arbitration process. Thus, its Mr. Nanda, learned Senior
Advocate argued that the Petitioner having afforded ample
opportunity to participate in the conciliation, chose not to avail
the same. As such, no irregularity or illegality was committed
by the Council in terminating the conciliation proceeding and
commencing the arbitration process. Even thereafter, the
Council provided opportunities to the parties to settle the matter
amicably without involving the Council, which is clear from the
subsequent minutes of the Council dated 1st February, 2014.
However, vide its letter dated 5th May, 2014 (Annexure-R/45 to
the additional affidavit), the Petitioner being not satisfied again
wrote to the Council/Opposite Party No.2 that it lacked
jurisdiction to decide the dispute and requested to decide the
issue of jurisdiction preliminarily. Hearing of matter was then
posted to 21st June, 2014 by the Council. Vide the said notice
under Annexure-R/46 to the additional affidavit, the Petitioner
informed the Council/Opposite party No.2 to decide the issue of
jurisdiction first without which attendance of the Petitioner
should not be insisted upon. In response to the said letter, the
Council intimated the Petitioner vide Annexure-7 that it had
jurisdiction to entertain the claim of Opposite Party No.3 in
view of Section 32 of the MSMED Act, 2006 read with
notification dated 7th January, 2008 issued by the Industry,
Energy and Labour Department, Government of Maharashtra.
Thereafter, the Council proceeded with the arbitration issuing
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
notice to the parties to attend the hearing for arbitration to be
held on 30th August, 2014 (Annexure-R/48 to the additional
affidavit). In response to the same, the Petitioner vide its letter
dated 27th August, 2014 (Annexure-R/49 to the additional
affidavit), requested the Council to adjourn the hearing for four
weeks on account of change in the office order of
Chairman/Managing Director. Hence, the matter was then fixed
to 15th November, 2014 under intimation to the parties. When
the matter stood thus, the Petitioner filed the instant Writ
Petition on 14th November, 2014. On the same date, it intimated
to the Council about filing of the Writ Petition. The matter was,
however, taken up on 15th November, 2014 and on conclusion
of hearing in absence of the Petitioner award under
Annexure-10 was passed directing the Petitioner to pay
Rs.45,60,886/- along with interest till the date of payment to
Opposite Party No.3 within a period of one month from the date
of receipt of the award. Thus, the Petitioner moved this Court
for amendment of the Writ Petition to challenge the award,
which was allowed. Mr. Nanda, learned Senior Advocate,
therefore, submitted that since award under Annexre-10 has
already been passed in the IFC Case, the Writ Petition in the
present form is not maintainable. Legality of the decision with
regard to issue of jurisdiction as well as merit of the award
(Annexure-10) can only be challenged under Section 34 of the
Arbitration Act read with Section 19 of the MSMED Act, 2006.
The Petitioner was afforded with ample opportunity by the
Council as would be apparent from the documents along with
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
additional affidavit filed by Opposite Party No.3. The
grievance, if any, with regard to termination of the conciliation
proceeding can only be challenged in a properly constituted
petition under Section 34 of the Arbitration Act, 1996 and not in
the present Writ Petition.
7.2 It is further submitted that the Council at Thane had jurisdiction
to entertain the claim of the Opposite Party No.3, as the
Opposite Party No.3 was registered with the Directorate of
Industries, Maharashtra, which come under the jurisdiction of
the Council at Thane. Mr. Nanda, learned Senior Advocate also
relied upon the case of Kanwar Singh Saini Vs. High Court of
Delhi; (2012) 4 SCC 307, wherein, at para-23, Hon'ble
Supreme Court held as under:-
"When a statute gives a right and provides a
forum for adjudication of rights, remedy has to be sought
only under the provisions of that Act. When an Act creates
a right or obligation and enforces the performance thereof
in a specified manner, "that performance cannot be
enforced in any other manner". Thus, for enforcement of a
right/obligation under a statute, the only remedy available
to the person aggrieved is to get adjudication of rights
under the said Act."
The Opposite Party No.3 being an SSI Unit under the
jurisdiction of Council at Thane had jurisdiction to entertain the
dispute relating to IDP Act, 1993. Again, after commencement
of MSMED Act, 2006, the act done or orders passed under the
IDP Act, 1993 was saved and taken to have been passed under
the provisions of MSMED Act, 2006. The Council has also
intimated the Petitioner under Annexure-7 that it had jurisdiction
to entertain the dispute/claim made by the Opposite Party No.3.
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Signed by: SASANKA SEKHAR SATAPATHY
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
Mr. Nanda, learned Senior Advocate also placed reliance on the
case of Marsons Electrical Industries Vs. Chairman, Madhya
Pradesh Electricity Board and another; 2023 SCC OnLine All
2675. Mr. Nanda, learned Senior Advocate further submitted
that in view of the ratio in the case of M/s Silpi Industries etc.
Vs. Kerala State Road Transport Corporation and another;
(2021) 18 SCC 790, the MSMED Act, 2006 being a special
statute will have overriding effect on the Arbitration Act, 1996
and in the instant case, Opposite Party No.3 under the IDP Act,
1993 had approached the competent authority and filed its claim
under the said Act. "Any agreement to the contrary has to be
ignored in view of the statutory obligations." The same view
was taken by the Allahabad High Court taking into consideration
the case law in the case of Marsons Electrical Industries
(supra), Kerla High Court in Shreyas Marketing vs Micro and
Small Enterprises Facilitation Council (MSEFC), Bangalore
and another; (2023) SCC OnLine (Ker) 4206 has discussed the
jurisdiction of the Council established under Section 20 of the
MSMED Act, 2006 and its overriding effect in view of Sections
18 and 24 of the MSMED Act, 2006. It is held therein that the
jurisdiction of a Council is determined by the location of the
Supplier's business. Section 18 (4) of the MSMED Act, 2006
categorically states that only the Facilitation Council in the area
where the Supplier's business is located has jurisdiction to
entertain the claim.
7.3 In Gujarat State Civil Supplies Corporation Limited Vs.
Mahakali Foods Private Limited (Unit-2) and other; (2023) 6
W.P.(C) No.22236 OF 2014
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
SCC 401, Hon'ble Supreme Court delt with several issues
regarding applicability of the MSMED Act, 2006. In para-44
and 45 of the said case, Hon'ble Supreme Court held as under:-
"44. The submissions made on behalf of the counsel for
the Buyers that a conscious omission of the word
"agreement" in sub-section (1) of Section 18, which
otherwise finds mention in Section 16 of the MSMED Act,
2006 implies that the arbitration agreement independently
entered into between the parties as contemplated
under Section 7 of the Arbitration Act, 1996 was not
intended to be superseded by the provisions contained
under Section 18 of the MSMED Act, 2006 also cannot be
accepted. A private agreement between the parties cannot
obliterate the statutory provisions. Once the statutory
mechanism under sub- section (1) of Section 18 is
triggered by any party, it would override any other
agreement independently entered into between the parties,
in view of the non obstante clauses contained in sub-
section (1) and sub-section (4) of Section 18 (2005) 1 SCC
754. The provisions of Sections 15 to 23 have also
overriding effect as contemplated in Section 24 of the
MSMED Act, 2006 when anything inconsistent is
contained in any other law for the time being in force. It
cannot be gainsaid that while interpretating a statute, if
two interpretations are possible, the one which enhances
the object of the Act should be preferred than the one
which would frustrate the object of the Act. If submission
made by the learned counsel for the buyers that the party
to a dispute covered under the MSMED Act, 2006 cannot
avail the remedy available under Section 18(1) of the
MSMED Act, 2006 when an independent arbitration
agreement between the parties exists is accepted, the very
purpose of enacting the MSMED Act, 2006 would get
frustrated.
45. There cannot be any disagreement to the
proposition of law laid down in various decisions of this
Court, relied upon by the learned counsel for the buyers
that the Court has to read the agreement as it is and
cannot rewrite or create a new one, and that the parties to
an arbitration agreement have an autonomy to decide not
only on the procedural law to be followed but also on the
substantive law, however, it is equally settled legal
position that no agreement entered into between the
parties could be given primacy over the statutory
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provisions. When the Special Act i.e., MSMED Act,
2006 has been created for ensuring timely and smooth
payment to the suppliers who are the micro and small
enterprises, and to provide a legal framework for
resolving the dispute with regard to the recovery of dues
between the parties under the Act, also providing an
overriding effect to the said law over any other law for the
time being in force, any interpretation in derogation
thereof would frustrate the very object of the Act."
Hon'ble Supreme Court in the aforesaid case law also clarified
the powers of the Facilitation Council so that it acts as an
Arbitrator vis-à-vis the Arbitration Act, 1996. The relevant para-
48 is reproduced hereunder for ready reference.
"48. When the Facilitation Council or the institution or
the centre acts as an Arbitrator, it shall have all powers to
decide the disputes referred to it as if such arbitration was
in pursuance of the arbitration agreement referred to in
sub- section (1) of Section 7 of the Arbitration Act, 1996
and then all the trappings of the Arbitration Act,
1996 would apply to such arbitration. It is needless to say
that such Facilitation Council/institution/centre acting as
an arbitral tribunal would also be competent to rule on its
own jurisdiction like any other arbitral tribunal appointed
under the Arbitration Act, 1996 would have, as
contemplated in Section 16 thereof."
In view of the above, Mr. Nanda, learned Senior Advocate
argued that the Council under the IDP Act, 1993 initially and
Facilitation Council under the MSMED Act, 2006 after its
enactment had the jurisdiction to entertain the claim/dispute of
the Opposite party No.3.
7.4. It was further argued by Mr. Nanda, learned Senior Advocate that
the claim of Opposite Party No.3 was not time barred as alleged
by the Petitioner. Elaborating his submission
Mr. Nanda, learned Senior Advocate stated that the Petitioner
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
refused to make payment of certain invoices raised by Opposite
Party No.3 from 13th February, 1997 till 29th February, 2000.
Several requests and reminders of the Opposite Party No.3 to the
Petitioner went in vain. All the time, the Petitioner although
proposed to settle the dispute amicably, but in essence, it only
killed time and no fruitful step was taken at the instance of the
Petitioner in that regard. Till 6th October, 2004 (Annexure-R/6 to
the Additional Affidavit), the Petitioner proposed settlement with
Opposite Party No.3. On 18th November, 2004 (Annexure-R/17
to the Additional Affidavit), the Petitioner forwarded the copy of
the minutes of the meeting on 14th October, 2004, which
indicated that the Petitioner would float fresh tender to bring in
the third party to repair the crusher and price quoted in the tender
would be deducted from the outstanding dues of Opposite Party
No.3. Thereafter, the Opposite Party No.3 in its letters dated 7 th
February, 2005 and 11th February, 2005 (Annexure-R/61 to the
rejoinder affidavit) disputed the contents of the minutes of the
meeting dated 3rd October, 2003 and 14th October, 2004 and
requested for another meeting to resolve the dispute. Further, the
letters of Opposite Party No.3 dated 16th February, 2005, 21st
February, 2005, 14th March, 2006, 2nd May, 2005, 22nd June,
2005, 30th July, 2005, 31st August, 2005 and 9th September, 2005
to the Petitioner (Annexure-R/62 series to the additional
affidavit) were not responded to by the Petitioner. Thus, the
Opposite Party No.3 was constrained to move the IFC under the
IDP Act, 1993. Further, in the letter dated 26th October, 2013, it
was mentioned for the first time that although the claim relates to
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
financial year 1999-2000 approached MSEFC after six years
despite having other fora for redressal of its grievances. Thus,
Mr. Nanda, learned Senior Advocate prayed for dismissal of the
Writ Petition.
8. Learned Senior Advocates appearing for the parties were heard
on several occasions. Lengthy arguments were also made. In fact,
after closure of the argument, the judgment was reserved on 2nd
January, 2025. But at the time of preparation of the judgment,
some clarification both on facts and law was required in view of
the peculiar fact and circumstances of the case as well as points
raised by learned Senior Advocates at the time of argument of the
case. Hence, the matter was listed on 4th April, 2025 under the
heading 'To be Mentioned'
9. This Court heard learned Senior Advocates for the parties on the
said date on relevant points and the judgment was reserved on the
said date. The Petitioner has raised an objection with regard to
maintainability, continuance and culmination of the proceeding
before the IFC as well as before the Council broadly on three
grounds.
i) the IFC as well as the Council had no
territorial jurisdiction to entertain and continue
with the proceeding;
ii) the Council under MSMED Act, 2006 did
not assume jurisdiction to entertain the claim of
the Opposite Party No.3;
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Date: 18-Jun-2025 17:47:27
iii) the claim of the Opposite Party No.3 was
barred by time; and
iv) the impugned award is not sustainable
both of law and facts.
10. As narrated above by learned Senior Advocates appearing for
the respective parties and the materials available on record,
there remains no dispute with regard to the factual aspect of
the case. It remains undisputed that the Opposite Party No.3
was awarded with a contract for designing, manufacture,
supply, search, erection, testing, commissioning and
performance guarantee test on turnkey basis 75 TPH Crushing
and Spinning Plant at Jajanga, Odisha. There arose some
dispute between the parties for which payment of Opposite
Party No.3 was withheld by Petitioner-OMC. The Opposite
Party No.3 filed a claim petition before the Industrial
Facilitation Council, Thane (IFC) under the provisions of the
IDP Act, 1993, as amended in 1998. The claim petition by
Opposite Party No.3 was filed on 27th March, 2006
(Annexure-1). The said claim petition was registered as IFC
Case No.1 of 2006. On 21st September, 2006, IFC sought for
clarification from Opposite Party No.3 as to whether its claim
was only for interest or for principal amount along with
interest (R-21 to the additional affidavit). The Opposite Party
No.3 clarified the same on 28th September, 2006 stating that
the claim was for principal outstanding, interest as well as for
damages. Thus, the IFC issued notice to the Petitioner on 9 th
November, 2006 (Annexure-3 to the Writ Petition). On receipt
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
of the said notice, the Petitioner, vide its letter dated 13th
December, 2006 (R-24 to the additional affidavit) sought for
extension of two months' time for filing reply in IFC Case
No.1 of 2006. When the matter stood thus, MSMED Act, 2006
came into force with effect from 2nd October,
2006, vide notification No.S.O.1154(E) dated 18th July,
2006 [see Gazette of India, Extraordinary Part II sec.3(ii)] and
the Council was constituted under the provisions of MSMED
Act, 2006. After the Council was constituted, fresh notices
were issued to the Petitioner and Opposite Party No.3. It is
worthwhile to state here that although the Petitioner had
sought for extension of two months' time to file its reply, but
no reply was filed for a considerable period. As such, vide
letter dated 4th March, 2013 (Annexure-R-28 to the additional
affidavit), the Council informed the Petitioner that despite its
letter dated 13th December, 2006, no response was received
from the side of the Petitioner. Thus, the Council directed the
Petitioner to file its reply within fifteen days from the date of
receipt of the said letter failing which, it was indicated that the
Council would proceed ex parte in the matter. Reminder to file
objection was also issued to the Petitioner by the Council on
23rd May, 2013 (Annexure-4 to the Writ Petition). On receipt
of the said letter, the Petitioner, vide its letter addressed to the
Council, inter alia, alleged that pursuant to letter dated 9th
November, 2006, learned Advocate appearing for the
Petitioner had visited office of the IFC/Council to verify the
case record and obtain necessary documents during January,
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2007, but the same was found defunct following repeal of the
IDP Act, 1993. No communication by the Council was made
to the Petitioner thereafter. The Petitioner further alleged that
the Council had no jurisdiction to entertain the dispute in view
of the Clause 9.20 of the contract and the dispute was also
barred by limitation. Thus, for the first time, the Petitioner,
vide its letter dated 29th May, 2013, raised an objection with
regard to the territorial jurisdiction of the Council and that the
dispute was barred by limitation.
10.1 However, adhering to the request of the Petitioner to provide
another set of claim petition, the Council sent a set of
documents to the Petitioner in respect of the claim petition
dated 13th June, 2013. The Petitioner was also directed therein
to file its reply within fifteen days from the date of receipt of the
documents. On receipt of the said documents, the Petitioner
again requested for one month time with effect from 1st July,
2013 to file its reply (Annexure R-32 to the additional
affidavit). However, vide letter dated 18th July, 2013 (Annexure
R-33 to the additional affidavit), the Council issued notice of
final hearing to the Petitioner intimating that despite several
notices it had not filed its response to the claim petition. Thus,
the Petitioner was directed by the Opposite Party No.2 either to
make payment of the claim amount or to file its reply within
fifteen days of the date of the notice failing which, the Council
would be compelled to proceed with the matter without waiting
for the reply of the Petitioner. On receipt of the same, the
Petitioner filed its preliminary reply on 8th August, 2013
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
(Annexure-5 to the Writ Petition). Thereafter, the matter was
posted to different dates either on the request of the Petitioner
or Opposite Party No.3. Although hearing of the dispute was
scheduled on 11th October, 2013, the Petitioner did not attend
the hearing before the Council. However, the Council informed
the Petitioner that since Opposite Party No.3-Unit is located in
Mumbai and was registered with the Industry Commissioner,
Mumbai, the Council had jurisdiction to entertain the dispute.
Upon receipt of the said letter/notice dated 29th October, 2013,
the Petitioner again raised the issue of jurisdiction of the
Council as well as limitation to file the claim petition. However,
the Council, vide its notice dated 4th/7th January, 2014
(Annexure-R-41 to the additional affidavit), directed both
parties to attend the hearing scheduled on 18th January, 2014.
The minutes of proceeding dated 18th January, 2014 is annexed
to the notice dated 24th / 27th January, 2014 (Annexure R-44 to
the additional affidavit), which is relevant in the instant case to
be referred to.
"GOVERNMENT OF MAHARASHTRA
Micro & Small Enterprises Facil1itation Council
Konkan Division
Petitioner-- M/s Indiana Engineering Works
(Bombay) Pvt. Ltd. Mumbai
Respondent--M/s Orissa Mining Corporation Ltd.,
Bhubaneswar
Delayed Amount
Principal Rs.4,35,31,677/-
Interest Rs.1,01,69,616/-
Total Rs.5,37,01,293/-
W.P.(C) No.22236 OF 2014
Signed by: SASANKA SEKHAR SATAPATHY
Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
The sitting of Micro & Small Enterprises
Facilitation Council, Konkan Division Thane was
held on 18th January, 2014 at 11 a.m. in the office of
the Joint Director of Industries, Konkan Region
Thane under the chairmanship of Mr. Dilip Shinde,
Chairman, MSEFC & Addl. Divisional Commissioner
Revenue, Konkan Division in the presence of
following members.
1. Mr. Anilkumar Chandorikar, Member
Secretary, MSEFC
2. Mr. Umesh Tayade, Member & Chairman,
AAMA
3. Mr. Mukesh Gupta, Member & Chairman,
APΜΑ
4. Mr. R. K. Singh, Member & AGM, SIDBI.
During hearing, discussion was held and following
decision was taken by Council.
Petitioner was present for the hearing.
Respondent never attended the hearing. Petitioner
submitted reply to the letter dtd. 21.12.2013 &
26.12.2013 filed by respondent. Council came to the
conclusion that respondent is not interested in
Conciliation. Therefore, Council decided to terminate
the conciliation process, and to start the arbitration
process. It is also decided to inform the Respondent
that if he remains absent for next hearing, the case
will be decided on merit. Next hearing will be held on
1st February, 2014.
Sd/- (illegible)
Member Secretary
Micro & Small Enterprises Facilitation Council
& Jt. Director of Industries, Konkan Division
Sd/- (illegible)
Chairman
Micro & Small Enterprises
Facilitation Council &
Addl. Commissioner (Revenue),
Konkan Division"
Thus, it appears from the minutes of the proceeding dated 18th
January, 2014 that due to non-cooperation of the Petitioner,
the Council decided to terminate the conciliation process and
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Date: 18-Jun-2025 17:47:27
to proceed with arbitration. The Petitioner never challenged
the said order dated 18th January, 2014 passed by the Council
terminating the conciliation proceeding and deciding to start
arbitration under Section 18 (3) of the MSMED Act. Ms. Rath,
learned Senior Advocate appearing for the Petitioner,
however, raised certain objections with regard to culmination
of the conciliation proceeding on 18th January, 2014. It was
her submission that the Council by order dated 1st February,
2014, called upon both parties to resolve the dispute amicably
and to inform the Council. Thus, the conciliation proceeding
was not terminated on 18th January, 2014 and was still alive.
The said feeble contention raised by Ms. Rath, learned Senior
Advocate is not sustainable inasmuch as, vide order dated 1st
February, 2014, the Council had only requested the parties to
resolve the dispute amicably and inform the Council. Thus, it
is apparent that the Council had never taken up the
conciliation proceeding beyond 18th January, 2014.
11. Jurisdiction of IFC/Council to initiate, adjudicate and
entertain the dispute :-
Ms. Rath, learned Senior Advocate argued with vehemence
that neither the IFC had any territorial jurisdiction to initiate
the proceeding by entertaining the claim application and to
proceed with the same nor the Council had any jurisdiction to
adjudicate upon the dispute. It was her submission that the
cause of action, i.e., issuance of work order and execution of
the contract dated 13th May, 1994 in respect of the work in
question arose within the territorial jurisdiction of the State of
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Odisha. The contract dated 13th May, 1994 also specifically
provided that any dispute arising out of the contract shall be
subject to the exclusive jurisdiction of the Court at
Bhubaneswar, Odisha. There was no provision under the IDP
Act, 1993 conferring jurisdiction on the IFC to initiate and
entertain the proceeding on the complaint of the Opposite
Party No.3. MSMED Act, 2006 came into force on 2nd
October, 2006 and is prospective in nature. Thus, the
provisions under the Act, has no retrospective application
more particularly to validate a proceeding, which is null and
void ab initio.
11.1 It is in fact Clause 9.20 of the contract dated 13 th May, 1994
(Annexure-2) deals with 'disputes and jurisdiction'. It reads
as under:-
"The Court/Courts at Bhubaneswar shall
have the exclusive jurisdiction for deciding the
conflicts or the disputes, if at all it occurs."
It is also not in dispute that Opposite Party No.3 had never
approached Court/Courts at Bhubaneswar for resolution of
any dispute arising out of the contract. Mr. Nanda, learned
Senior Advocate, however, submitted that the Opposite Party
No.3, which is a Small-Scale Unit, has been registered in the
State of Maharashtra under the IDP Act, 1993. The claim of
the Petitioner under the IDP Act, 1993 was registered before
IFC Thane (IFC Case No.1 of 2006). It was further argued
that although the Petitioner appeared before IFC Thane, but
for the first time, it raised the issue of jurisdiction before the
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Council (not before IFC) after MSMED Act, 2006 came into
force. Mr. Nanda, learned Senior Advocate also referred to
Section 32 of the MSMED Act and submitted that proceeding
initiated under the IDP Act, 1993 including any act done or
action taken under the said Act shall be deemed to have been
done or taken under the corresponding provision of the
MSMED Act. Thus, Opposite Party No.3 is deemed to have
been registered under the MSMED Act. Further, in view of
the provisions under Section 32 of the MSMED Act, all
proceedings initiated under the said Act shall be deemed to
have been initiated under the MSMED Act. The MSMED
Act being a special statute overrides the Clause more
particularly Clause 9.20 of the contract under Annexure-2.
The provisions under MSMED Act confers jurisdiction on
the Council to entertain and proceed with the dispute. The
Opposite Party No.3 being the Supplier, which is situated and
ordinarily carries on its business within the State of
Maharashtra. Thus, the Council at Thane had territorial
jurisdiction to entertain and adjudicate the proceeding.
12. In view of rival contentions of the parties, this Court thinks it
profitable to refer to Section 18 (4) of the MSMED Act,
2006, which reads as under:-
"18. Reference to Micro and small Enterprises
Facilitation Council.
xx xx xx
(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
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under this section in a dispute between the supplier
located within its jurisdiction and a buyer located
anywhere in India.
xx xx xx"
(emphasis supplied)
Thus, the Council at Thane had the territorial jurisdiction to
entertain the dispute as the Supplier, namely, Opposite Party
No.3 is located within its jurisdiction. This provision has been
made in conformity with the scope and object of the MSMED
Act, which provides for facilitating the promotion and
development and enhancing the competitiveness of Small and
Medium Enterprises. Further, Section 32 of the MSMED Act,
2006 while repealing the IDP Act, 1993, under Sub-section
(1) of the said provision, made provision under Sub-section
(2), which reads as under:-
"Section 32 Repeal Act 32 of the Act, 1993
(1) The Interest on Delayed Payments to Small
Scale and Ancillary Industrial Undertakings Act, 1993
is hereby repealed.
(2) Notwithstanding such repeal, anything done
or any action taken under the Act so repealed under
sub-section (1), shall be deemed to have been done or
taken under the corresponding provisions of this Act."
Thus, the proceeding initiated under the IDP Act, 1993 is
deemed to have been initiated under corresponding provisions
of MSMED Act. In case of Kanwar Singh Saini (supra), it is
observed that "When a statute gives a right and provides a
forum for adjudication of rights, remedy has to be sought
only under the provisions of that Act. When an Act creates a
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right or obligation and enforces the performance thereof in a
specified manner, 'that performance cannot be enforced in
any other manner'. Thus, for enforcement of a
right/obligation under a statute, the only remedy available to
the person aggrieved is to get adjudication of rights under the
said Act." In the case of M/s Silpi Industries etc. (supra), it
is clarified that MSMED Act being a special statute would
have overriding effect on the Arbitration and Conciliation
Act, 1996 and if the claims come under the ambit of MSMED
Act, 2006, the Supplier can approach the competent authority
and file its claim under the said Act. The Hon'ble Supreme
Court in the said case law further clarified that any agreement
to the contrary would have to be ignored in view of the
statutory obligation. The same view was taken up by the
Allahabad High Court in Marsons Electrical
Industries(supra), wherein, at para-40 quoting M/s Silpi
Industries etc. (supra), it is held as follows:-
"40. Hon'ble Supreme Court in the matter of Silpi
Industries (supra) has clearly held that MSMED Act,
2006 being a special Act will have overriding effect on
the Arbitration and Conciliation Act, 1996 and if the
seller comes under the ambit of MSMED Act, 2006, he
can approach the competent authority and file his
claim under the said Act. Any agreement to the
contrary has to be ignored in view of the statutory
obligations. The Court further held that if any
registration is obtained the same will be prospective
and applies for supply of goods and service subsequent
to its registration but cannot operate retrospectively."
In view of the above, Clause 9.20 of the contract under
Annexure-2 becomes redundant, in view of the provision
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under the MSMED Act, which overrides Clause 9.20 of the
Contract.
13. Learned counsel for the parties made elaborate arguments on
the jurisdiction of the Council to adjudicate the dispute, but
this Court does not feel it necessary to further delve into the
issue of jurisdiction in view of the clear statutory provision as
stated above as well as the settled position of law. Ms. Rath,
learned Senior Advocate appearing for the Petitioner,
however, submitted that although preliminary objection with
regard to the jurisdiction of the Council was raised, but its
objection was rejected and communicated to it vide letter
dated 23rd July, 2014 (Annexure-9). On perusal of Annexure-
9, it reveals that the petition raising issue of jurisdiction was
taken into consideration by the Council and it was decided
that in view of Section 21 (3) and Section 32 of the MSMED
Act, the Council had jurisdiction to entertain the case, as the
Opposite Party No.3-Unit was registered as SSI with
Directorate of Industries, Government of Maharashtra. It is
submitted that the IFC under the IDP Act, 1993 had no
jurisdiction to entertain the claim of Opposite Party No.3, as
the entire cause of action arose within the territorial
jurisdiction in the State of Odisha. It was also argued that
MSMED Act, 2006 is prospective in nature and its provisions
cannot be retroactive in nature to validate the claim of
Opposite Party No.3 to be entertained by IFC Thane. The
argument advanced by Ms. Rath, learned Senior Advocate is
not acceptable, inasmuch as although the Opposite Party No.3
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filed its claim petition before IFC Thane, but it was taken up
for consideration by the Council when MSMED Act, 2006
came into force. By the time the issue of jurisdiction was
raised, the Council was in seisin of the matter. As discussed,
the Council had ample jurisdiction to entertain the claim as
Opposite Party No.3 situates within its local jurisdiction.
Thus, the argument with regard to prospective application of
the provision of MSMED Act in the instant case loses its
significance. Be that as it may, the decision with regard to
jurisdiction of the Council could have been raised in a
properly constituted petition under Section 34 of the
Arbitration Act, 1996 read with Section 19 of the MSMED
Act, 2006, which the Petitioner has not yet availed. In view of
the above, the objection with regard to jurisdiction raised by
the Petitioner being devoid of any merit stands overruled.
14. Whether the IFC has any jurisdiction to entertain the claim
of Opposite Party No.3;
Ms. Rath, learned Senior Advocate vehemently argued that a
preliminary issue of jurisdiction of the IFC, Thane and the
limitation as to whether it has the jurisdiction to decide the
instant dispute was raised by the Petitioner. It was argued that
that the preliminary issue, as aforesaid, was raised pursuant to
the 2nd notice dated 23rd May, 2013 issued by the Council. It
is further argued that upon receipt of the claim by the IFC, it
should have made an endeavour to see as to whether it had
jurisdiction to entertain such a claim. Instead, IFC registered
the claim petition and mechanically issued notice to the
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
Petitioner on the claim petition filed by Opposite Party No.3.
This Court has vividly discussed the issue of jurisdiction of
the Council to entertain the claim of Opposite Party No.3 in
preceding paragraphs. Thus, the same needs no reiteration.
Contention of Ms. Rath, learned Senior Advocate to the effect
that upon receipt of the claim of Opposite Party No.3, the IFC
should have made endeavour to see that whether it had the
jurisdiction to entertain the same or not, this Court observes
that there is no provision under the IDP Act, 1993 or
MSMED Act, 2006 obliging the IFC or the Council, as the
case may be, to decide the issue or jurisdiction at the
threshold unless it is raised by the adversary, namely, the
Petitioner. When an application raising such preliminary issue
was filed, the Council observed that it had jurisdiction to
entertain the proceeding. The veracity of such decision can
only be adjudicated under Section 34 of the Arbitration Act
read with Section 19 of the MSMED Act, 2006.
15. Section 32 of the MSMED Act, 2006 repealed IDP Act, 1993.
Sub-section (2) of Section 32 of the MSMED Act stipulates
"notwithstanding such repeal, anything done or any action
taken under the IDP Act was repealed under Sub-section (1),
shall be deemed to have been done or taken under the
corresponding provisions of this Act". It was thus argued by
Ms. Rath, learned Senior Advocate that there is no
corresponding provision under the repealed Act, i.e., IDP Act,
1993 (as amended in 1998) to entertain such a claim by the
IFC to entertain the proceeding/claim raised by Opposite
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Party No.3 by the Council. It was further argued that the
provision under Section 18(4) being prospective in nature
would only be applicable to the claim petition filed after
MSMED Act came into force. Ms. Rath, learned Senior
Advocate vehemently argued that the claim petition was filed
by Opposite Party No.3 before MSMED Act, 2006 came into
force. Thus, the same could not have been deemed to be filed
under the MSMED Act.
16. Mr. Nanda, learned Senior Advocate appearing for Opposite
Party No.3 refuting the same submitted that there cannot be
any controversy to the position of law that Opposite Party
No.3 was entitled to file a claim under the provisions of IDP
Act. Issue with regard to place of filing such claim can only
be adjudicated when it is raised. Such a preliminary issue was
raised only after MSMED Act came into force. As such, no
illegality has been committed by the Council in answering the
preliminary issue against the Petitioner observing that the
Council had territorial jurisdiction to entertain the claim.
16.1 Upon hearing learned counsel for the parties and on perusal
of record, it is apparent that the claim petition was filed by
Opposite Party No.3 under Section 4 read with Section 7-A of
the IDP Act, 1993 (as amended in 1998). Save and except the
objection with regard to territorial jurisdiction of the
IFC/Council, it can be safely said that Opposite Party No.3
was legally entitled to raise a claim under the IDP Act, 1993.
Section 18(1) of the MSMED Act, 2006 is the corresponding
provision entitling the Supplier to make a reference to the
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Council for adjudication of the claim. Thus, the Council had
apparently committed no error in holding that it had
jurisdiction to entertain such claim. As such, the argument of
Ms. Rath, learned Senior Advocate that there was no
corresponding provision under the MSMED Act to entertain
such claim is not sustainable. Ms. Rath, learned Senior
Advocate referred to the case law in the case of Rabinder
Kumar Dhariwal Vs. Union of India; (2023) 2 SCC 209,
which does not deal with a case of the present nature. The
observations made therein are in the context of facts and
circumstances of the said case, which has no application to
the instant case. It is, however, observed in the said case law
that the test to identify two statutes are 'corresponding' is
whether firstly, subject matter of two statutes is essentially
same and secondly, main object and purpose are substantially
similar. It is further observed therein that the said test,
however, cannot be applied to identify corresponding
provision, since a much more specific analysis will have to be
undertaken. A provision does not correspond to another
merely because it deals with the same subject matter. Rather,
the test would be whether both provisions are essentially
similar or not. In the instant case, core issue to be considered
is whether a claim before the IFC was entertainable or not.
From the observations made in Rabindra Kumar Dhariwal
(supra), it is apparent that the same requires adjudication, if
raised. There was no occasion for the IFC to adjudicate upon
the same in the facts and circumstances of the case. The issue
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with regard to the territorial jurisdiction would come at a later
stage when it is raised. When the issue with regard to the
territorial jurisdiction was raised after enactment of MSMED
Act, 2006, this Court feels that the Council has committed no
error in holding that it had territorial jurisdiction to entertain
the same more particularly in view of Section 18 (4) of the
MSMED Act, 2006. Thus, the contention raised by Ms. Rath,
learned Senior Advocate for the Petitioner, is not sustainable.
17. Whether the claim of the Opposite Party No.3 was barred by
time;
It appears from the record that the Petitioner refused to make
payment of certain invoices raised by Opposite Party No.3
from 13th February, 1997 till 29th February, 2000 in spite of
several requests and reminders of the Opposite Party No.3 to
the Petitioner. The Petitioner appears to have proposed to
settle the dispute amicably. Till 6th October, 2004 (Annexure-
R/6 to the additional affidavit), the Petitioner proposed
settlement with Opposite Party No.3. On 18th November,
2004 (Annexure-R/17 to the additional affidavit), the
Petitioner forwarded the copy of the minutes of the meeting
on 14th October, 2004, which indicated that the Petitioner
would float fresh tender to bring in the third party to repair
the crusher and price quoted in the tender would be deducted
from the outstanding dues of Opposite party No.3. Thereafter,
the Opposite Party No.3 in its letters dated 7th February, 2005
and 11th February, 2005 (Annexure-R/61 to the rejoinder
affidavit), disputed the contents of the minutes of the meeting
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dated 3rd October, 2003 and 14th October, 2004 and requested
for another meeting to resolve the dispute. Further, the letters
of Opposite Party No.3 dated 16th February, 2005, 21st
February, 2005, 14th March, 2006, 2nd May, 2005, 22nd June,
2005, 30th July, 2005, 31st August, 2005 and 9th September,
2005 to the Petitioner (Annexure-R/62 series to the additional
affidavit) were not responded by the Petitioner. Apparently
aforesaid series of communications constrained the Opposite
Party No.3 to move the IFC under the IDP Act, 1993. Further,
in the letter dated 26th October, 2013, it is stated for the first
time that although the claim relates to financial year 1999-
2000, the Opposite Party No.3 approached IFC after six years
despite having other fora for redressal of its grievances. No
specific objection with regard to limitation appears to have
been raised by the Petitioner either before the Council or in
the Writ Petition. However, from the series of events, as
discussed above, it cannot be said that the claim of the
Opposite Party No.3 was barred by limitation. Had such an
issue been raised, the Council would have an occasion to
adjudicate the same. But, the Petitioner preferred not to
participate in the proceeding before the Council and allowed
it to be adjudicated ex parte. In view of the above, this Court
feels that the objection with regard to limitation raised by the
Petitioner is not sustainable.
18. Legality of the Award passed by the Council :-
Ms. Rath, learned Senior Advocate vehemently urged that
there are several procedural irregularities and improprieties in
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passing the impugned award under Annexure-10. Relying
upon Jharkhand Urja Vikas Nigam Limited (supra), it was
argued that the award is a nullity as the Council had neither
taken up the conciliation proceeding nor arbitration before
passing the ex-parte award under Annexure-10. It was argued
by Ms. Rath, learned Senior Advocate that minutes of the
hearing held on 18th January, 2014 in IFC Case No.1 of 2006
clearly indicated that ".....Council come to the conclusion
that Respondent is not interested in conciliation. Therefore,
the Council decided to terminate the conciliation process and
to start the arbitration process. It is also decided to inform
the Respondent that if remains absent for next hearing, the
case will be decided on merit...." Again, vide letter dated 30th
January, 2014, the Council communicated the Petitioner and
Opposite Party No.3 referring to the hearing held on 18th
January, 2014 stating that "arbitration order pertaining to
your petition enclosed herewith for your information." In
spite of the same, the Council vide its letter dated 7th
February, 2014 (Annexure-8) referred to order dated 1st
February, 2014, wherein, it is indicated that "Council heard
the both. Council advised both to solve the issue amicably
and inform the Council accordingly." Thus, it is apparent that
in spite of the order dated 18th January, 2014 to terminate the
conciliation, the Council again proceeded to direct both
parties to amicably resolve the issue and intimate the Council.
Thus, the process of conciliation was still on beyond 18th
January, 2014. Ms. Rath, learned Senior Advocate thus
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
submitted that no order thereafter was passed terminating the
conciliation proceeding. As such, the award, which is stated
to be an outcome of the arbitration proceeding is null and
void. As such, the writ petition is maintainable in view of the
ratio in Jharkhand Urja Vikas Nigam Limited (supra). Mr.
Nanda, learned Senior Advocate for Opposite Party No.3
objecting to the same submitted that after termination of the
conciliation proceeding, vide order dated 18th January, 2014 by
the Council, it had only advised the parties to settle the matter
amicably and inform the Council without involving itself in the
conciliation. The said order can never be construed as a
continuation of the conciliation proceeding, as alleged by the
Petitioner. In order to settle the matter amicably, even after
termination of the conciliation proceeding, the Council
provided another opportunity to the parties to settle the matter
amicably without involving itself. Thus, there was no illegality
on the part of the Council to proceed with the arbitration and
pass ex-parte award under Annexure-10.
19. Giving an anxious thought to the rival contentions of the
parties, this Court on perusal of records finds that vide order
dated 18th January, 2014, the Council holding that the
Petitioner is not interested in conciliation, terminated the
conciliation proceeding and directed the parties to participate
in the hearing of the case thereby initiating arbitration
proceeding. As such, the ratio of Jharkhand Urja Vikas
Nigam Limited (supra) has no application to the instant case.
Minutes of hearing held on 1st February, 2014, which was
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Location: HIGH COURT OF ORISSA CUTTACK
Date: 18-Jun-2025 17:47:27
communicated to the parties on 7th February, 2014 by the
Council, does not indicate that the Council had taken up the
conciliation proceeding beyond 18th January, 2014. It only
provided another opportunity to the parties, namely, the
Petitioner and the Opposite Party No.3 to settle the dispute
amicably and inform the Council accordingly. Thus, it is clear
from the said order that the Council never involved itself in
taking up the conciliation proceeding beyond 18th January,
2014. As such, the contention of Ms. Rath, learned Senior
Advocate in that regard, is not sustainable.
20. An argument was advanced by Ms. Rath, learned Senior
Advocate that no opportunity was given to the Petitioner to file
written statement to the claim of Opposite Party No.3 in the
arbitration proceeding. It was her submission that arbitration
was to be undertaken in accordance with the provisions of the
Arbitration Act, 1996. The mandatory provision having not
been followed by the Council while taking up the arbitration
proceeding, the same vitiates the entire arbitration proceeding,
so also the award. Such an argument advanced by Ms. Rath,
learned Senior Advocate is not acceptable, inasmuch as the
legality and propriety of the procedure followed and merit of
the award can only be adjudicated in a properly constituted
proceeding under Section 34 of the Arbitration Act, 1996 read
with Section 19 of the MSMED Act, 2006. Admittedly, the
Petitioner has not resorted to the statutory provision, as yet.
Without referring to the case laws in the field it can be safely
said that such an argument cannot be entertained in a
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Date: 18-Jun-2025 17:47:27
proceeding under Articles 226 and 227 of the Constitution of
India. This Court is not vested with the power under Articles
226 and 227 of the Constitution to adjudicate upon the legality
and validity of the award passed by the Council. The argument
of Ms. Rath, learned Senior Advocate on this legal aspect is
also not sustainable.
21. Cumulative assessment of the facts and circumstances of the
case, argument advanced as well as case laws referred to, this
Court is of the considered opinion that the writ petition merits
no consideration. Learned counsels for the parties have
referred to several case laws and have also made arguments
on minute details of the proceeding before the IFC as well as
the Council. In view of the discussions made above, this
Court does not feel it necessary to discuss the same in detail.
22. Accordingly, the writ petition being devoid of any merit
stands dismissed, but in the facts and circumstances, there
shall be no order as to costs.
(K.R. Mohapatra)
Judge
Orissa High Court, Cuttack,
Dated 18th June, 2025/s.s.satapathy
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