M/S. Punjab State Forest Development ... vs The State Of Telangana
2024 Latest Caselaw 2268 Tel

Telangana High Court

M/S. Punjab State Forest Development ... vs The State Of Telangana on 18 June, 2024

Author: Nagesh Bheemapaka

Bench: Nagesh Bheemapaka

                                       1



          THE HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA

                        WRIT PETITION No.1440 of 2023

ORDER:

This writ petition is filed seeking a Writ of Certiorari and call for the

records and set aside the respondent No.1 award dated 13.04.2022 in Case

No.25/IFC/MDL-MLG/2021 MSEFC on the file of the Micro and Small

Enteprises Facilitation Council, Medchal - Malkajgiri District, Telangana -

501301, as arbitrary and illegal and clear violation of Section 18 of the

Micro, Small and Medium Enterprises Act, 2006.

2. Heard Sri K.Sudhakar Reddy, learned counsel for the petitioner; and

the learned Government Pleader for Industries.

3. The sum and substance of the averments as per the writ affidavit,

and the crux of the dispute, is that in response to the tender notification

issued by petitioner-Punjab State Forest Development Corporation (PSFDC)

vide No.E-tender/PSFDC/Material/19.09.2017/004 for supply of 240 MT of

Galwanised Steel Wire in the State of Punjab and Phillaur, for

Rs.1,44,40,000/- within 90 days, and the 2nd respondent-M/s Geekay

Wires Limited, Hyderabad, participated in the tender and stood successful

and a contract agreement for Rs.1,44,40,000/- came to be signed between

the petitioner and 2nd respondent. As per the terms of the contract, the 2nd

respondent furnished Bank guarantee for Rs.14,44,000/- and EMD of

Rs.5,00,000/-. It is the case of the petitioner that the 2nd respondent

furnished in-house test results and intimated that the material conforms to

the specification required; however, the sample got tested by the petitioner

from the Bureau of Indian Standards laboratory showed variation from

required specification. The Managing Director of the petitioner-Corporation

issued a Show Cause notice dated 05.04.2018 to terminate the contract

and forfeiting the bank guarantee of Rs.14,40,000/- and also the EMD of

Rs.5,00,000/-, and asked the 2nd respondent to submit reply within 7 days;

and the 2nd respondent allegedly replied within two days and also requested

to allow for replacement of defective materials at the costs of 2nd

respondent. However, the petitioner-Corporation passed order

No.PSFDC/280-83 dated 19.04.2018 terminating the contract. The 2nd

respondent submitted a representation dated 25.06.2018 to the PSFDC to

revoke the termination order, and also requested to release the balance 90%

payment as per Clause 28 of the tender documents. The dispute having not

been settled, the 2nd respondent approached the Micro and Small

Enterprises Facilitation Council, at Medchal-Malkajgiri, and filed a case for

realization of the payment from petitioner-Corporation. The case before the

Council came to be numbered as Case No.25/IFC/Mdl-Mlg/2021. The

petitioner-Corporation has not attended for any hearing before the Council,

however, a letter was addressed vide Letter No.3522 dated 24.01.2022 by

the petitioner stating that as per Condition No.34(c) of the e-tender dated

19.09.2017 and Condition No.10 of Purchase Order dated 18.11.2017, any

case of dispute between the petitioner-Corporation and the 2nd respondent

the jurisdiction will be Civil Court, at Mohali; and therefore, the jurisdiction

of the Council is not justified; and as per condition No.34(b) of e-tender, the

Principal Chief Conservator of Forests (HOFF), Punjab on completion of

Arbitration Proceedings has already sent the copy of decision of Arbitration

to the 2nd respondent vide letter No.23707-708 dated 07.01.2020; and

further the 2nd respondent ahs also filed Arbitration application in ARB

No.115 of 2019 before the Hon'ble Punjab and Haryana High Court,

Chandigarh. The Council, basing on the material available on record,

passed the impugned Award directing the petitioner-Corporation to pay the

amount of Rs.1,14,35,087/- being the amount for the material consumed

by the petitioner-Corporation, along with interest for the delayed period as

per MSMED Act, 2006, within a period of one month from the date of

receipt of the Award. Challenging the same, this writ petition is filed by the

petitioner-Corporation.

4. A counter affidavit is filed by respondent No.1 represented by the

Chairman, Micro and Small Enterprises Facilitation Council

(MSEFC)/General Manager, District Industries Centre, Medchal-Malkajgiri

District. The sum and substance of the counter affidavit is that the

claimant Company i.e., M/s Geekay Wires Limited, respondent No.2, has

made a reference dated 28.12.2020 under Section 18(1) of the Act, 2006 to

the MSEFC at Medchal-Malkajgiri for acting as Conciliator and Abitrator in

respect of the amount claimed Rs.1,20,55,827/- as principal and

Rs.75,58,248/- as interest (as on the date of filing of reference) totaling to

Rs.1,96,14,075/- from the respondent Company i.e., M/s Punjab State

Forest Development Corporation Limited (PSFDC), Tower No.1 & 2, 4th Floor

Forest Complex, Sector-68, SAS Nagar, Mohali, Punjab 140 110 (petitioner

in this case). And as the unit is registered vide Udyog Aadhar No. (UAN)

TS06B0001535 dated 12.05.2016 under Small Manufacturing Enterprises

category and located in the jurisdiction of the council, the case was

numbered as 25/(IFC)/Mdl-Mlg/2021 and admitted by the Chairman,

MSEFC on 06.03.2021 and notices calling for Statement of Defense in

Form-2 and enclosures to be submitted in Form-3 along with claim

application in Form-I and documents submitted by the claimant were sent

to respondent on 09.03.2021. The case was placed in the council meetings

held on 26.03.2021, 29.09.2021, 28.01.2022 under conciliation and on

28.02.2022 and 25.03.2022 under arbitration for which the claimant has

attended all the meetings and respondent was absent for all the council

meetings inspite of receiving notices. The claimant submitted the Purchase

Order, Invoices, Goods consignment note, Bank Guarantee deed, Test

report of material supplied, legal notice and mail communication with the

respondent in support of his claim. The respondent neither furnished the

defense statement nor attended any of the council meetings to deny the

claimant's claim but only addressed a letter to the council vide letter

No.3522 dated 24.01.2022, wherein it is stated as under:

a) As per condition No.34(c) of the e-tender dated 19.09.2017 and condition No.10 of purchase order dt.18.11.2017, in any case of any dispute between PSFDC and the Supplying Firm, the jurisdiction will be Civil Court Mohali. Therefore, in this case, as per condition No.34(c) of e-tender and condition No.10 of purchase order, the jurisdiction of MSEFC Medchal is not justified.

b) Apart from this, as per the condition No.34(b) of e-tender, the Principal Chief Conservator of Forests (HoFF), Punjab, on completition of Arbitration Proceedings has already sent the copy of decision of Arbitration to M/s GeeKay Wires Limited, H.No.11-70/5, Second Floor, G.P.Complex, Shivalayam Road, Fathenagar, Hyderabad, vide his letter No.237/07-708 dated 07.01.2020.

c) The respondent further stated that M/s GeeKay Wires Limited has also filed ARB No.115 of 2019 in the Hon'ble Punjab and Haryana High Court, Chandigarh. The next date of this case is 10.03.2022.

It is further stated in the counter that with regard to the respondent's

objection on jurisdiction of the council, Section 18(4) of The Micro, Small,

and Medium Enterprises Development Act of 2006, empowers the Council

to have jurisdiction to act an arbitrator or conciliator under this section in a

dispute between supplier located within its jurisdiction and a Buyer located

anywhere in India and apart from that it also empowers the Council to

decide the matter notwithstanding anything contained in any other law for

the time being in force; and that there was an option given to the Council

under section 18(2) and 18(3) of The Micro, Small and Medium Enterprises

Development Act, 2006 to initiate Arbitration proceedings under those

circumstances. The Council itself decided to conduct conciliation and

arbitration proceedings on its own as contemplated under Section 18(2) and

18(3), and therefore the respondent's objection with regard to council

jurisdiction is not considered. It is also stated that as per the Udyog Aadhar

Acknowledgment Number (UAN) TS06B0001535 dated 12.05.2016,

registered by the claimant/respondent No.2, the status of the unit is Small

Manufacturing Enterprises and also supplied the materials in 2017-18

year, which shows that the unit is a small manufacturing enterprise at the

time of supplying of materials to the petitioner. The council has issued

award based on the documentary evidences and proceedings of the

hearings after giving ample opportunity to the respondent to represent their

stand duly following the procedure laid as per the MSMED Act, 2006.

5. Having considered the submissions of respective counsel and the

material on record, it is pertinent to note that this writ petition is not

maintainable in view of an alternative remedy under Section 34 of the

Arbitration and Conciliation Act, 1996, as mandated by the MSMED Act.

6. Further, the Hon'ble Supreme Court in M/s India Glycols Limited v.

Micro and Small Enterprises Facilitation Council, Medchal-Malkajgiri 1,

observed as under:

"15. For the above reasons, we affirm the decision of the Division Bench by holding that it was justified in coming to the conclusion that the petition under

Civil Appeal No.7491 of 2023 (Arising out of SLP (C) No.9899 of 2023)

Articles 226/227 of the Constitution instituted by the appellant was not maintainable. Hence, it was unnecessary for the High Court, having come to the conclusion that the petition was not maintainable, to enter upon the merits of the controversy which arose before the Facilitation Council.

16. .......Having come to the conclusion that the remedy which was adopted by the appellant was thoroughly misconceived, it is not necessary for this Court to make any observation on what course of action should be adopted by the appellant. Were the appellant at this stage to take recourse to the proceedings under Section 34 of the Act of 1996, it would be open to the second respondent to object on all counts which are available in law.

17. For the above reasons, we affirm the impugned judgment of the High Court of Telangana dated 21 March 2023 by affirming the finding that the petition which was instituted by the appellant to challenge the award of the Facilitation Council was not maintainable, in view of the provisions of Section 34 of the Act of 1996."

7. Accordingly, the writ petition is dismissed as not maintainable, with

liberty to the petitioner to avail the alternative remedy available as per law.

It shall be open to the parties to raise all the contentions sought to be

raised before this Court in this writ petition. No costs. Miscellaneous

petitions, if any, shall stand closed.

_____________________________ Justice Nagesh Bheemapaka 18th June, 2024 ksm