M/S. Iti Limited vs The Union Of India
2023 Latest Caselaw 1432 Tel

      THE HONOURABLE SMT. JUSTICE P. MADHAVI DEVI


                WRIT PETITION NO.5431 OF 2023

                              ORDER

In this Writ Petition, the petitioner is seeking a Writ of Mandamus

declaring the action of respondent No.3 Council in entertaining the

claim of respondent No.4 vide Claim Petition No.1191/MSEFC/2020

dt.11.09.2020 under the MSMED Act, 2006 on the ground that

respondent No.4 does not fall within the definition of 'supplier' as per

Section 2(n) of the Micro Small and Medium Enterprises Development

Act, 2006, as illegal and arbitrary and consequently to direct the

respondent No.3 to drop the claims of respondent No.4 and to pass such

other order or orders as this Court may deem fit and proper in the

circumstances of the case.

2. Brief facts leading to the filing of the present Writ Petition are

that the petitioner, which is a Public Sector Undertaking under the

Department of Telecommunications, Ministry of Communications,

Government of India, is a nodal agency to the Central and State

Governments for execution of turnkey projects and other data collection

projects of the Government, including the project for execution of Socio W.P.No.5431 of 2023

Economic & Caste Census, Ministry of Rural Development, Ministry of

Housing & Urban Poverty Alleviation and Registrar General & Census

Commissioner of India, Ministry of Home Affairs, Government of

India. It is submitted that the Consortium of Public Sector Undertakings

had floated a tender for procuring data and processing the same on door

to door basis for a 120 crore population. Respondent No.4 had entered

into an agreement with the petitioner on 11.05.2012 and respondent

No.4 was required to carry out all jobs related to the said Project.

3. According to the learned counsel for the petitioner, Sri

P.Somashekar Reddy, all works related to the project were completed

before 2016. It is submitted that respondent No.4 got registered as an

MSM Enterprise on 23.02.2017, i.e., after the completion of the contract

work. According to the learned counsel for the petitioner, the Micro

Small and Medium Enterprises Development Act, 2006 (MSMED Act)

had come into force in the year 2006 and the enterprises which are

registered with Micro and Small Enterprises Facilitation Counsel

(MSEF Council) alone are eligible to file claim petition before MSEF

Council in respect of supply of goods or services. It is submitted that

respondent No.4 had filed a claim petition before MSEF Council in W.P.No.5431 of 2023

respect of the contract entered into on 11.05.2012, i.e., before its

registration under Section 8(1) of MSMED Act, 2006 and therefore, the

MSEF Council ought not to have entertained the claim petition and

issued notice to the petitioner. It is submitted that the Hon'ble Supreme

Court in the case of Silpi Industries Etc. Vs. Kerala State Road

Transport corporation and another1 has clearly held that the

provisions of MSMED Act can be availed of only by such organizations

which are registered with MSEF Council and also in respect of only

such contracts which are entered into or executed after such registration

under Section 8 of the MSMED Act. He therefore relied upon the said

decision to argue that the MSEF Council, i.e., respondent No.3 ought

not to have entertained the application. He also placed reliance upon the

decision of the Hon'ble Supreme Court in the case of Whirlpool

Corporation Vs. Registrar of Trade Marks, Mumbai and others2 for

the proposition that under Article 226 of the Constitution of India, the

High Court can interfere if the order or proceeding is wholly without

jurisdiction or vires of the Act is challenged. He also referred to the

judgment of the Hon'ble A.P. High Court in the case of Rashtriya Ispat

2021 SCC OnLine SC 439

(1998) 8 SCC 1 W.P.No.5431 of 2023

Nigam Limited rep. by its Authorized Signatory-R. Monikandan Vs.

Union of India rep. by Secretary, the Ministry of Micro Small and

Medium Enterprises3, wherein after taking into consideration the

decision of the Hon'ble Supreme Court in the case of Silpi Industries

Etc. Vs. Kerala State Road Transport corporation and another (1

supra), it was held that the Court can interfere in the cases where the

Council does not have jurisdiction to entertain and decide the dispute.

Therefore, according to him, this Court can and should interfere in the

matter and set aside the notice dt.09.02.2023 issued to the petitioner to

appear before the MSEF Council.

4. Learned counsel for respondent No.4, Sri Sinde Mohan

Devidhas, submitted that in the present case, the MSEF Council is

discharging its judicial functions and therefore, it is only a forum

entertaining applications under the MSMED Act, 2006 and the

Arbitration and Conciliation Act, 1996 and therefore, any order or notice

or proceedings before the same cannot be challenged in a Writ of

Mandamus. He further submitted that the notice issued by the MSEF

Council also refers to the preliminary objections to be raised by the

2022 SCC OnLine AP 970 W.P.No.5431 of 2023

parties which would be considered by the Tribunal. He submitted that

the jurisdiction issue is a preliminary issue which has to be decided by

the primary authority only and therefore, this Court under Article 226 of

the Constitution of India ought not to interfere with the same at this

stage. Therefore, according to him, the remedy of the petitioner lies with

the MSEF Council and not before this Court. He further submitted that

the case of the petitioner is not of availing an alternative remedy, but is

of being before the same authority and therefore, the decision of the

Hon'ble Supreme Court in the case of Whirlpool Corporation Vs.

Registrar of Trade Marks, Mumbai and others (2 supra) would not

be applicable to this case. With regard to the judgment of Hon'ble

Supreme Court in the case of Silpi Industries Etc. Vs. Kerala State

Road Transport corporation and another (1 supra), the learned

counsel submitted that in the said case, the facts are distinguishable as it

was at the stage of Section 34 of the Arbitration and Conciliation Act,

1996 that the matter had come up before the Hon'ble Supreme Court

and that it was at this stage, that the Hon'ble Supreme Court had held

that only such organizations which are registered under the MSMED

Act, 2006 and their transactions made thereafter, are amenable to

MSMED Act, 2006. It is submitted that in this case, the Tribunal is yet W.P.No.5431 of 2023

to take a decision on the jurisdictional issue and therefore, the Writ

Petition is premature. He further drew the attention of this Court to

various documents to submit that invoices have been raised by

respondent No.4 on the petitioner in the year 2018, i.e., after registration

of respondent No.4 with MSEF Council and therefore, without prejudice

to his argument that all the transactions are amenable to the jurisdiction

of the Tribunal, the transactions at least after such registration are

amenable to MSMED Act, 2006. He therefore submitted that the

supplies which are made post registration and the invoices raised

thereafter are amenable to its jurisdiction and therefore, it is not a case

of inherent lack of jurisdiction. He also referred to the decision of the

Hon'ble Supreme Court in the case of Whirlpool Corporation Vs.

Registrar of Trade Marks, Mumbai and others (2 supra) to

demonstrate that the said decision is in favour of respondent No.4.

5. In rebuttal, the learned counsel for the petitioner submitted that

the invoices which are being referred to by the learned counsel for

respondent No.4 are only amendments to the earlier invoices and it is

reiterated that the entire contract was completed before the end of the

year 2016. Therefore, according to him, the claim petition filed by W.P.No.5431 of 2023

respondent No.4 ought not to have been entertained by the MSEF

Council.

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

record, this Court finds that the undisputed facts are that respondent

No.4 was registered in the year 2017, whereas the claim petition was in

respect of the transactions done before such registration. Therefore,

whether the claim petition can be entertained by the MSEF Council is

the question before this Court.

7. In the case of Silpi Industries Etc. Vs. Kerala State Road

Transport corporation and another (1 supra), the Hon'ble Supreme

Court has clearly held that to seek the benefits of the provisions under

the MSMED Act, 2006, the seller should have been registered under the

provisions of the Act as on the date of entering into the contract and for

the supplies pursuant to the contract made before the registration of the

unit under the provisions of the MSMED Act and that no benefit can be

sought by such entity as contemplated under the MSMED Act. For the

sake of ready reference, the relevant paragraph, i.e., para 26, is

reproduced hereunder:

W.P.No.5431 of 2023

"26. Though the appellant claims the benefit of provisions under MSMED Act, on the ground that the appellant was also supplying as on the date of making the claim, as provided under Section 8 of the MSMED Act, but same is not based on any acceptable material. The appellant, in support of its case placed reliance on a judgment of the Delhi High Court in the case of GE T&D India Ltd. v. Reliable Engineering Projects and Marketing (2017 SCC OnLine Del 6978), but the said case is clearly distinguishable on facts as much as in the said case, the supplies continued even after registration of entity under Section 8 of the Act. In the present case, undisputed position is that the supplies were concluded prior to registration of supplier. The said judgment of Delhi High Court relied on by the appellant also would not render any assistance in support of the case of the appellant. In our view, to seek the benefit of provisions under MSMED Act, the seller should have registered under the provisions of the Act, as on the date of entering into the contract. In any event, for the supplies pursuant to the contract made before the registration of the unit under provisions of the MSMED Act, no benefit can be sought by such entity, as contemplated under MSMED Act. While interpreting the provisions of Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, this Court, in the judgment in the case of Shanti Conductors Pvt. Ltd. & Anr. etc. v. Assam State Electricity Board [(2019) 19 SCC 529] has held that date of supply of goods/services can be taken as the relevant date, as opposed to date on which contract for supply was entered, for applicability of the aforesaid Act. Even applying the said ratio also, the appellant is not entitled to seek the benefit of the Act. There is no acceptable material to show that, supply of goods has taken place or any services were rendered, subsequent to registration of appellant as the unit under MSMED Act, 2006. By taking recourse to filing memorandum under sub-section (1) of Section 8 of the Act, subsequent W.P.No.5431 of 2023

to entering into contract and supply of goods and services, one cannot assume the legal status of being classified under MSMED Act, 2006, as an enterprise, to claim the benefit retrospectively from the date on which appellant entered into contract with the respondent. The appellant cannot become micro or small enterprise or supplier, to claim the benefits within the meaning of MSMED Act 2006, by submitting a memorandum to obtain registration subsequent to entering into the contract and supply of goods and services. If any registration is obtained, same will be prospective and applies for supply of goods and services subsequent to registration but cannot operate retrospectively. Any other interpretation of the provision would lead to absurdity and confer unwarranted benefit in favour of a party not intended by legislation."

By following the said decision, a Coordinate Bench of Hon'ble A.P.

High Court has held that unless a memorandum is filed under Section 8

of the Act 27 of 2006 and the contract is a pure and simple supply

contract, the party cannot move the Facilitation Council to entertain and

decide any dispute. The A.P. High Court has also considered the issue as

to whether the High Court can entertain a Writ Petition against the issue

of MSME jurisdiction of the Council where there is a patent lack of

jurisdiction. The Court has held that the Court should not be a silent

spectator and allow the issue to go to the Facilitation Council even

though the Council lacked jurisdiction as per the mandate of the Hon'ble

Supreme Court in the case of Silpi Industries Etc. Vs. Kerala State W.P.No.5431 of 2023

Road Transport corporation and another (1 supra). The Hon'ble

Supreme Court in the case of Whirlpool Corporation Vs. Registrar of

Trade Marks, Mumbai and others (2 supra) has also held that under

Article 226 of the Constitution, the High court, having regard to the

facts of the case, has a discretion to entertain or not to entertain a Writ

Petition. and the availability of alternative remedy does not operate as a

bar in three contingencies, namely, where the writ petition has been filed

for the enforcement of any of the Fundamental Rights or where there has

been a violation of the principle of natural justice or where the order or

proceedings are wholly without jurisdiction or the vires of an Act is

challenged. In the case before this Court, the objection of respondent

No.4 is that the petitioner should have raised the issue of jurisdiction as

advised in the notice itself before the MSEF Council, but the petitioner

ought not to have filed this Writ Petition. This Court is of the opinion

that since the Council apparently lacks jurisdiction to entertain the

application, the Writ Petition can be entertained. The petitioner is not

challenging the validity of the proceedings before the Council, but is

challenging the entertainment of the claim petition itself and therefore,

the Writ of Mandamus is maintainable. A Writ of Certiorari is W.P.No.5431 of 2023

maintainable only when an order is passed and correctness of the said

order is challenged before the High Court.

8. In view of the same, this Court holds that respondent No.3 has

no jurisdiction to entertain the claim petition filed by respondent No.4.

The notice dt.09.02.2023 requiring the petitioner to be present and file

its objections before respondent No.3 is therefore set aside.

9. The Writ Petition is accordingly allowed. No order as to costs.

10. Pending miscellaneous petitions, if any, in this Writ Petition

shall stand closed.

___________________________ JUSTICE P. MADHAVI DEVI

Date: 28.03.2023 Svv