Narayana Educational ... vs The Telangana Regional Micro And ...
2023 Latest Caselaw 1075 Tel

     THE HONOURABLE SMT JUSTICE P.MADHAVI DEVI

       WRIT PETITION Nos.27376 and 27381 of 2021


COMMON ORDER:

      In both these Writ Petitions the petitioner is seeking a

Writ of Prohibition to quash the proceedings initiated by the

respondent No.2 before the respondent No.1 vide MSEFC-Case

Nos. TS/09/S/RGY/00328 & TS/09/S/RGY/00329, as being

barred by limitation as held by the Hon'ble Supreme Court in

the case of Shilpi Industries Vs. Kerala State Road Transport

Corporation, reported in 2021 SCC Online SC 439 and to pass

such other order or orders.

2. Brief facts leading to the filing of the present writ petitions

are that the respondent No.2 has filed an application before the

respondent No.1 under Section 18 of the Micro, Small and

Medium Enterprises Development (MSMED) Act, 2006. On

issuance of notice to the petitioner herein, the petitioner has

filed its counter taking a preliminary objection that the claim

petition was barred by limitation and therefore, the respondent

No.1 ought not to have entertained the said application. To the

said counter affidavit, respondent No.2 has also filed its reply

PMD,J W.P.Nos.27376 & 27381 of 2021

affidavit. The grievance of the petitioner is that without

adjudicating on the preliminary objection raised by the

petitioner about the applicability of Limitation Act, the

respondent No.1 is proceeding with the matter. Therefore, the

petitioner has filed the present writ petition seeking quashing of

the proceedings vide MSEFC-Case Nos.TS/09/S/RGY/00328 &

TS/09/S/RGY/ 00329.

3. Learned counsel for the petitioner submitted that

according to the claim petition filed by the respondent No.2, he

is seeking payment for the supply of goods during the years

2009 & 2010. It is submitted that the respondent No.2 has kept

quite all along and filed the claim petition only in the year 2020

by filing an application under Section 18 of the MSMED Act,

2006. He has further drawn the attention of this Court to the

counter filed by the petitioner herein before the MSME Council,

wherein at Para-5 of the said counter it was stated that "an

objection has been taken that no cause of action has arisen for

filing of the present petition and that the alleged cause of action

is created and concocted for the purpose of filing the petition

and also that the petition is barred by limitation and therefore,

the petition is liable to be dismissed".

PMD,J W.P.Nos.27376 & 27381 of 2021

4. Learned counsel for the petitioner submitted that the

application filed by the petitioner before the respondent No.1 is

in the nature of the Suit filed before the Civil Court and the law

of limitation which is applicable to the claims before the Civil

Court is also applicable to the claims filed before the Council. It

is submitted that the respondent No.2 has filed reply affidavit

giving the details of the alleged payments due to them and has

relied upon the FAQ's and Answers thereto provided by the

respondent No.1 and particularly in Question No.38 wherein it

is mentioned that "no limitation is applicable in arbitration by

Council, but delay and latches principle is applicable and

supplier sleeping over his legal rights cannot get assistance of

Council". He submitted that the respondent No.2 is taking

shelter of the said reply to claim that the petition is

maintainable and that the law of limitation is not applicable

before the Council.

5. Learned counsel for the petitioner also placed reliance

upon the judgment of the Hon'ble Supreme Court in the case of

Shilpi Industries Vs. Kerala State Road Transport

PMD,J W.P.Nos.27376 & 27381 of 2021

Corporation1, wherein the Hon'ble Apex Court has considered

the issue and held that the Limitation Act would apply to

Arbitration under MSMED Act, 2006 as well. The learned

counsel for the petitioner therefore, sought a Writ of Prohibition

or to quash the proceedings before the respondent No.1.

6. Learned counsel for the respondent No.2 submitted that

there was no limitation for raising a dispute or making a

reference to the respondent No.1 under the MSMED Act and

even as per the judgment of the Hon'ble Supreme Court in the

case of Shilpi Industries (cited supra), the limitation period

would be applicable to arbitration proceedings under Section

18(3) and not for making reference under Section 18(1) of the

Act. He submitted that the Hon'ble Supreme Court in the cases

of GTPL Hathway Limited Vs. Strategic Marketing Private

Limited in Special Civil Application No.4524 of 2019, decided

on 20th April, 2020 has held that in the orders passed by an

Arbitration Tribunal during the pendency of arbitration

proceedings, cannot be challenged or interfered with in a writ

petition filed under Articles 226 and 227 of Constitution of

India. He further relied upon the decision of the Hon'ble

1 2021 SCC Online SC 439

PMD,J W.P.Nos.27376 & 27381 of 2021

Supreme Court in the case of M/s.S.B.P. and Co. Vs.

M/s.Patel Engineering Limited and Another2, and the

decision in the case of M/s.Deep Industries Limited Vs. Oil

and Natural Gas Corporation3, that an order passed by an

Arbitary Tribunal during the course of arbitral proceedings,

could not be challenged or interfered with, in a writ petition filed

under Articles 226 and 227 of Constitution of India. He also

relied upon the decision of the Division Bench of this Court

dated 16.02.2023 in W.P.No.2358 of 2023 wherein it was held

that an award passed by the Facilitation Council under Section

18 of the MSME Act can be questioned under Section 34 of the

Arbitration and Conciliation Act, 1996 and therefore, there was

an alternative remedy provided under the Act and further that

the intervention by the High Court under Articles 226 and 227

of the Constitution of India in an arbitral award is not

permissible. He submitted that instead of participating in the

proceedings before the respondent No.1, the petitioner has

approached this Court and obtained stay order, due to which

the respondent No.2 is suffering great hardships.

2 (2005) 8 SCC 618 3 2019 SCC Online SC 1602

PMD,J W.P.Nos.27376 & 27381 of 2021

7. Having regard to the rival contentions and the material on

record, this Court finds that the only issue before this Court is

whether the issue of the limitation is applicable to an

application filed before the MSME Council and if the MSME

Council is required to decide the same before proceeding or

before initiating the proceedings under Section 18 of the Act.

The issue as to whether the limitation Act would apply to the

proceedings, is admittedly a preliminary issue which has to be

considered by the MSME Council before proceeding with the

Act.

8. It is observed from the answer given to the Question

No.38 of frequently asked questions posted on the website of the

respondent No.1, "the claims of suppliers who sleep over their

rights cannot be entertained". Except for the change of Forum,

the litigation before the respondent No.1 is like a Suit before the

Civil Court and therefore, the question of limitation can be

raised as a preliminary issue. The Hon'ble Supreme Court, in

the case of Shilpi Industries (cited supra), has observed that

the period of limitation would be applicable to the arbitral

proceedings under Section 18(3) of MSME Act. Section 18(1)

deals with the reference made to the respondent No.1 for

PMD,J W.P.Nos.27376 & 27381 of 2021

adjudication of a dispute between the supplier and buyer and

Sub Section(2) thereof deals with the Conciliation proceedings

thereunder and when the Conciliation proceedings fail or is not

found to be successful, then under Sub Section(3), the

arbitration proceedings can be initiated.

9. The Hon'ble Supreme Court has made a specific reference

to Sub Section (3) of Section 18 to hold that the period of

limitation would be applicable to the provisions under Section

34 of the Arbitration and Conciliation Act, 1996. Following the

same analogy, this Court observes that the period of limitation

would be applicable even while making a reference under Sub

Section (1) of Section 18 of the MSMED Act of 2006. Under

MSMED Act, the Council is formed to adjudicate the issues

arising out of the transactions between the enterprises classified

under Section 7 of MSMED Act. Therefore, the Council is only

an alternative to the Civil Courts as a Forum for adjudication of

disputes between enterprises and hence, the period of limitation

which is applicable to the Suits before the Civil Courts would be

applicable to the applications to be filed under Sub Section (1)

of Section 18 of MSMED Act. When such an objection is taken

by the petitioner before the Council, the Council is bound to

PMD,J W.P.Nos.27376 & 27381 of 2021

consider the preliminary objections of the respondents and take

a decision on the same after giving opportunity of hearing to

both the parties and thereafter proceed with the Conciliation

proceedings under Sub Section (2) of Section 18 of the Act if it is

so required.

10. The decisions relied upon by the learned counsel for the

respondents are to the effect that the Courts cannot interfere

with any decision taken during the arbitral proceedings by the

arbitral Tribunal under Section 226 and 227 of Constitution of

India. In this case, this Court finds that the challenge is not of

any decision or any proceedings during the arbitral proceedings,

but is against the inaction on the part of the respondent No.1 in

taking a decision on the preliminary objection raised by the

petitioner.

11. In view of the same, this Court deems it fit and proper to

direct the respondent No.1 to take a decision on the objection

raised by the petitioner about the claim being barred by the Act

of limitation before proceeding further in accordance with the

other provisions of the Act. The respondent No.1 is directed to

PMD,J W.P.Nos.27376 & 27381 of 2021

pass an order within a period of three (3) weeks from the date of

receipt of a copy of the order.

12. Accordingly, the writ petitions are disposed of. There shall

be no order as to costs.

Miscellaneous petitions, if any, pending in the Writ

Petitions, shall stand closed.

____________________________ JUSTICE P.MADHAVI DEVI

Date: 06.03.2023

Note:

LR Copies to be marked (B/o). bak

PMD,J W.P.Nos.27376 & 27381 of 2021

THE HONOURABLE SMT JUSTICE P.MADHAVI DEVI

W.P.Nos. 27376 and 27381 of 2021

Date: 06.03.2023

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