M/S Merrito Polymers India Private ... vs The State Of Telangana
2024 Latest Caselaw 4067 Tel

Telangana High Court

M/S Merrito Polymers India Private ... vs The State Of Telangana on 14 October, 2024

Author: Nagesh Bheemapaka

Bench: Nagesh Bheemapaka

       HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA

             WRIT PETITION No. 24139 OF 2023

O R D E R:

Petitioner seeks to set aside the Award passed by

the 2nd respondent - Micro & Small Enterprises Facilitation

Council in Case No.21C/IFC/2018/52181, dated 06.07.2023,

duly declaring the same as null and void on the ground that it

was passed under repealed Telangana State Micro, Small

Enterprises Facilitation Council Rules(TSMSEFC) 2014, with

effect from 03.07.2017.

2. The brief facts of the case are : petitioner - Micro

Medium Small-Scale Industry which involved in manufacturing

Poly Vinyl Chloride (PVC) film used in Pharmaceutical packaging

industry, accepted the quotation of the 3rd respondent to

construct a clean room, on which, the purchase order was

issued on 17.05.2017 for a total amount of Rs.55,08,000/- +

excise duty @12.5% to the tune of Rs.6,00,000/- and CST @ 2%

to the tune of Rs. 1,08,000/-, which are mandatory. Rs.

10,00,000/- was given along with the purchase order and it was

agreed that 65% of amount would be given against delivery of

material and balance of 10% only after completion i.e.,

installation of the clean room, with all specifications. It was

clearly stipulated that clean room has to be installed within 20

days from the date of issuance of purchase order. Thus the 3rd

respondent having accepted the above, started supplying goods

from 24.05.2017 onwards till 04.10. 2017.

Though supply and installation should have been

completed by 06.06.2017, the 3rd respondent breached the

contract. In spite of many reminders, the 3rd respondent did not

install the clean room even till today, due to which, petitioner

company was made to suffer loss of more than Rs.40,00,000/-.

Resultantly, production of Films got delayed and purchasers

also delayed payments and Petitioner Company, in turn, had to

raise a dispute before the MSME Council against those

companies.

It is stated that demand notice was got issued by

the 3rd respondent on 29.10.2018 demanding balance payment

under Insolvency and Bankruptcy Code 2016 (under Rule 5 of

the Insolvency and Bankruptcy (Application to Adjudicating

Authority) Rules 2016) in Forms 3 and 4, for which a suitable

reply was issued clearly stating that alleged balance payments

due to the tune of Rs. 15,40,268/-are liable to be released only

on successful completion of construction of clean room. It is

further clearly stated that even though many pharma

companies are visiting unit to observe manufacturing of

film/give orders, as they are dissatisfied with the end film, have

not issued purchase orders only due to non-maintenance of the

temperature in the clean room. In fact, as the expected turnover

was not there, EMIs. due to Andhra Pradesh State Financial

Corporation were not cleared, which resulted in issuance of

Notice under Sec.29 of Andhra Pradesh State Financial

Corporation (APSFC) Vijayawada, vide Ref:

AFC/VJA/SEC.29Notice/Vj603902/2022-23/1694, dated

16.01.2023. Therefore, they were constrained to file four writ

petitions and paid the amounts by barrowing, to save the

manufacturing unit.

The 3rd respondent, without rectifying the

installation of clean room, to make it functional, appeared to

have approached the MSME Facilitation Council on 09.05.2018

itself even before sending notice dated 28.10.2018, complaining

that Rs. 15,40,268/- remained unpaid and that they are

entitled to Rs.1,30,931/-@ 3 times bank rate i.e. 6.25 X 3-

18.75%, as on 09.05.2018. Notice was sent to petitioner on

20.10.2021 to pay Rs. 2,257/- towards Arbitration fees and to

attend the meeting of council on 30.10.2021 @ 2.30p.m. at

Cherlapally Industries Association office complex. It is stated,

when the Council directed petitioner to pay the alleged dues,

they stated that the 3rd respondent did not complete the work

entrusted and they incurred more than Rs.40 Lakhs loss. Their

representative was directed to endorse the same on the notice,

dated 14.02.2022, accordingly, he did so which clearly shows

that there is no amicable settlement. Another notice dated

08.03.2023 was issued directing the company to depute a

person who is capable of taking decisions in the matter to

attend the meeting on 24.03.2023, as the case is taken up

under ARBITRATION. If amicable settlement fails, as per Section

18(3) of the MSME Act, conciliation stands terminated.

Thereafter, the Council shall either itself take up the dispute for

Arbitration or refer it to any institution or centre providing

alternate dispute resolution services for such Arbitration and

the provisions of the Arbitration and Conciliation Act, 1996

shall then apply to the dispute as if the arbitration was in

pursuance of an Arbitration agreement referred to in sub-

section (1) of section 7 of the Act. Thus, when Arbitration

proceedings were initiated by Council, Arbitration Authority

ought to have followed the procedure laid down for deciding the

disputes under the Act. When conciliation proceedings have

been terminated, the 2nd respondent ought to have called for

statement of claim, reply to the statement of claim or counter

claim, adduce evidence, mark documents and then hear the

parties and pass Award on the basis of the evidence on record,

on merits, but in the present case, the 2nd respondent without

doing so and without giving opportunity to petitioner, passed

the Award on 06.07.2023 taking the letter of the 3rd respondent

dated 27.01.2023 into consideration, without even taking the

contents of their letters dated 15.03.2023 and 25.04.2023

addressed to the 2nd respondent.

3. The Chairman, Micro and Small Enterprises

Facilitation Council (MSEFC) / General Manager, District

Industries Centre filed the counter-affidavit stating that the 3rd

respondent made a reference on 11.05.2018 under Section 18

(1) of the Micro Small and Medium Enterprises Development

Act, 2006 (Act 27 of 2006) to the Telangana State Micro and

Small Enterprises Facilitation Council (TSMSEFC) at Hyderabad

for acting as Conciliator and Arbitrator in respect of the amount

claimed Rs.15,40,268/- as Principal and Rs.1,30,931/- [as on

09.05.2018] towards interest, totalling to Rs. 16,71,199/-from

petitioner. As the claimant 3rd respondent is registered under

Small Enterprises category and located in the jurisdiction of the

council, the case was numbered as 21C/IFC/2018/52181 and

admitted by the Chairman, MSEFC on 14.10.2021 and notices

calling for Statement of Defence 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 petitioner on

20.10.2021. It is stated that the Council initially taken up the

case under conciliation in the first two meetings and as no

amicable settlement was arrived by the parties, case was taken

up under arbitration treating as conciliation failed in the

succeeding meetings. Case was placed in the Council meetings

held on 30.10.2021, 28.01.2022 under conciliation and on

28.02.2022, 25.03.2022, 24.03.2023 and 28.06.2023 under

arbitration. The council issued notices for conciliation as well as

for arbitration (specifically mentioning as conciliation /

arbitration as per the case is in conciliation and arbitration)

through registered post with acknowledgement due to both the

parties for all the above meetings and also sent through mail. In

the 3rd Council meeting held on 28.02.2022 under arbitration,

the representative of petitioner informed that they would clear

the dues to the 3rd respondent in three months period and the

same is recorded in the minutes. During the meetings held on

25.03.2022, 24.03.2023, the Council gave opportunities to both

the parties to submit their evidence and documents and after

going through the same, the Council issued the impugned

Award duly following the procedure laid as per the MSMED Act,

2006.

4. The 3rd respondent also came up with a counter

stating, inter alia, that pursuant to the understanding, they

supplied materials to petitioner; invoices and delivery challans

clearly prove the same; therefore, as per Section 2(d) of the

Micro, Small and Medium Enterprises Development Act, 2006,

petitioner is a buyer, as such it is responsible for payment to

this Respondent Company.

It is also stated that the 3rd respondent company

had approached the Hon'ble MSEFC for the claim and the

Council initially conducted conciliation which was reported as

failed as per the norms of Section 18(2) of the 2006 Act and

later, the Council conducted Arbitration proceedings and passed

the Award. According to this respondent, Writ Petition is not

maintainable upon reading the Chapter V which is dealing with

delayed payments through Sections 15 to 24 of the Act. Section

18 of the 2006 Act contemplates reference to Micro and Small

Enterprises Facilitation Council. Section 19 speaks that an

Application for setting aside the decree, award or order shall be

entertained by any Court unless the appellant (not being a

supplier) has deposited with it seventy five percent of the

amount in terms of the decree, award, as the case may be, the

other order in the manner directed by such court.

5. Petitioner retaliated the averments of the counter-

affidavit filed by the 3rd respondent by way of reply. It is stated

that Purchase Order clearly indicates that material supplied has

to be installed as a clean room and the 3rd respondent is

pleading falsehood and contrary to the very contract which is

the basis for approaching the 2nd respondent. The 3rd

respondent is also liable for perjury for filing false affidavit.

From the quotation, it is clear that contract is not only for

supply but also for installation of clean room. Petitioner

reiterated the contents of writ affidavit. Apart from that, it is

stated that Petitioner Company is liable to pay for the goods

purchased, if the contract is only for supply of material, but per

contra, the contract is for supply and installation and when the

installation is not done, petitioner Company is not liable to pay.

When time stipulated is 20 days from the Purchase order, the

3rd respondent had supplied only 35% of the material by that

time, thus they breached the terms of contract and on top of it,

did not install clean room as per the specifications.

6. Learned counsel for petitioner Smt. B. Neeraja

Sudhakar Reddy submits that though the 3rd respondent

contends that there is a statutory alternative remedy available

to petitioner, this Court may directly entertain the Writ Petition

in the light of the judgment of the Hon'ble Supreme Court in

Whirlpool Corporation v. Registrar of Trade Marks,

Mumbai 1 and petitioner may not be relegated to avail the said

remedy. According to her, Section 19 of the 2006 Act stipulates

that no Application can be entertained against setting aside of

decree, award or order unless the appellant (not being a

supplier) has deposited with it 75% of the order, however, when

Award itself is not passed following the procedure laid down in

law, petitioner cannot be directed to avail the said remedy. Even

if Parliament had enacted the MSME Act, it does not bar the

jurisdiction of this Court under Article 226. Reliance is also

placed on the judgments of the Hon'ble Supreme Court in M/s

India Glycols Limited v. Micro and Small Enterprises

Facilitation Council, Medchal-Malkajgiri (Civil Appeal No.

7491 of 2023) and Harbanslal Sahnia v. Indian Oil Corpn. 2

She therefore, contends that Writ Petition is maintainable;

impugned Award is liable to be set aside and the matter has to

be remitted to the 2nd respondent to pass appropriate orders by

following the procedure laid down in Law.

(1998) 8 SCC 1

AIR 2003 SC 2120

7. Per contra, learned Counsel Sri G. Satya Jagannath

appearing for the 3rd respondent as well as learned Government

Pleader for Industries and Commerce supported the impugned

Award and submit that petitioner has an efficacious statutory

alternative remedy of Appeal. They place reliance on the

following judgments on this aspect:

In M/s Sterling Industries v. Jayprakash

Associates Ltd. 3, the Hon'ble Supreme Court had heavily come

down observing that 'It is seen that some High Courts have

proceeded on the basis that any order passed by an arbitral

tribunal during arbitration, would be capable of being challenged

under Article 226 or 227 of the Constitution of India. We see no

warrant for such an approach. Section 37 makes certain orders of

the arbitral tribunal appealable. Under Section 34, the aggrieved

party has an avenue for ventilating his grievances against the

award including any in-between orders that might have been

passed by the arbitral tribunal acting under Section 16 of the Act.

The party aggrieved by any order of the arbitral tribunal, unless

has a right of appeal under Section 37 of the Act, has to wait until

the award is passed by the Tribunal. This appears to be the

scheme of the Act. The arbitral tribunal is after all, the creature of

a contract between the parties, the arbitration agreement, even

AIR 2019 SC 3558

though if the occasion arises, the Chief Justice may constitute it

based on the contract between the parties. But that would not

alter the status of the arbitral tribunal. It will still be a forum

chosen by the parties by agreement. We, therefore, disapprove of

the stand adopted by some of the High Courts that any order

passed by the arbitral tribunal is capable of being corrected by

the High Court under Article 226 or 227 of the Constitution of

India. Such an intervention by the High Courts is not

permissible."

The Bombay High Court in Gujarat State

Petronet Ltd. held that MSMED Act, 2006 contains special

provision for providing delayed payment to such Enterprises. A

special procedure for recovery of amount due towards supply of

goods and services rendered thereto has been laid down. It

further observed that MSMED Act, 2006 does not contemplate

arbitration through an 'Arbitrator' appointed by the parties but

provides for special forum in the form of MSEFC or under aegis of

any Institution or a Centre providing alternate dispute resolution

services as referred by MSEF Council. Section 19 of MSMED Act,

2006 which mandates pre-deposit of 75% of awarded amount,

ensures recovery of dues and thus safeguards the interest of all

Micro, Small and Medium Enterprises. The 1996 Act does not

contain such similar provisions. MSMED Act, 2006 is a special

enactment, enacted with an object of facilitating promotion and

development and enhancing, competitiveness of Micro, Small and

Medium Enterprises, which do not command significant

bargaining power.

In Bruhat Bangalore Mahanagara Palika v.

Telangana State Micro And Small Enterprises

Facilitation 4, the Hon'ble High Court had held that Writ of

Certiorari is not maintainable for setting aside the MSEFC

Award.

In Bihar State Power (Holding) Co. Ltd. v. West

Bengal State Micro Small Enterprises Facilitation Council

(MAT No. 1345 of 2018; CA N No. 8649 of 2018), it was held

that 'looking into the applicable provisions of law, i.e., sections 18

and 19 of the Micro, Small and Medium Enterprises Development

Act, 2006, it appears that in respect of any award passed by the

Micro Small Enterprises Facilitation Council, statutory remedy to

challenge the award lies under the applicable provisions as

contained in the Arbitration & Conciliation Act, 1996. This factor

has been taken into consideration by the learned Single Judge

while proceeding to dismiss the writ petition. Clearly, the

(2018) 3 HLT 512

appellant is required to avail of its statutory remedy. Even if it is

a point of jurisdiction, as sought to be raised by the learned

advocate of the appellant, such a point can very well be raised

while challenging the award invoking the applicable provisions of

the Arbitration & Conciliation Act, 1996.'

In Narmada Transmission Private Limited v.

Rajasthan Rajya Vidyut Prasaran Nigam Limited (D.B.

Special Appeal Writ No. 889/2014 in S.B. Civil Writ Petition

No. 1815/2012. It was held that 'the writ Court should not have

interfered in the matter where alternative remedy of filing appeal

against the award was available.'

In Goodyear India Limited Vs. Norton Intech

Rubbers (P) Ltd. the Hon'ble Supreme Court held that 'deposit of

75% of the Award, as a condition precedent for filing an appeal,

is a valid condition, and that there was no reason to interfere

with the Division Bench judgment of the Kerala High Court,

interpreting Section 19 of the Act of 2006'.

In M/s G.P.T. Infra Projects Limited, Salt Lake

City, Kolkata v. State Of Jharkhand 5, it was held that 'Writ is

not maintainable for setting aside the award, while alternate

remedy is defined. It was further held as under:

(2016) 161 AIC 591

" 9. In conclusion, it can only be said that in such Reference matters when hierarchy of statutory remedy is Point Nos. available and interference of the Courts are to 9 & 10. Be avoided as is the spirit of Section 5 of the Arbitration and Conciliation Act, 1996, there is no reason for this Court to exercise its discretionary jurisdiction to entertain the challenge to the award on the grounds urged. Moreover, losing party i.e. the Buyer in the instant case is also under a statutory obligation to make deposit of 75% of the amount awarded before his application under Section 34 of the Act of 2006 is entertained by the concerned Court.

10. Considering the totality of the facts and circumstances and the reasons discussed herein above, this Court is not satisfied that any interference is required to be made in exercise of the writ jurisdiction of this Court. The writ petition is dismissed, however with a liberty to the petitioner to avail of the statutory remedy available under the law

I submit that the requirement of pre-deposit of interest is introduced as a disincentive to prevent dilatory tactics employed by the buyers against whom the small-scale industry might have procured an award, just as in cases of a decree or order. Presumably, the legislative intent behind Section 7 was to target buyers, who, only with the end of pushing off the ultimate event of payment to the small-scale industry undertaking, institute challenges against the award/decree/order passed against them. Such buyers cannot be allowed to challenge arbitral awards indiscriminately, especially when the section requires pre- deposit of 75% interest even when appeal is preferred against an award, as distinguished from an order or decree."

In Fives Stein India Project Pvt. Ltd., KOLKATA

v. State of MP 6 , the Madhya Pradesh High Court held that -

"Since the present writ petition deserves to be dismissed on the

ground of availability of alternative and efficacious remedy,

therefore, the other contentions raised by the counsel appearing

for the parties are not considered. However, the petitioner will be

at liberty to avail the alternative remedy in accordance With law"

The law relating to an alternative efficacious Reference remedy, can be summarized as follows:

i. When a statutory forum is created by law for No.20,21 redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.(Refer: Nivedita Sharma vs. Cellular Operators Assn. Of India, (2011) 14 SCC 337) ii. In CIT vs. Chhabil Dass Agrawal, (2014) 1 SCC 603, this Court held that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation iii. In Cicily Kallarackal vs. Vehicle Factory, (2012) 8 SCC 524, this Court issued a direction of caution that it will not be a proper exercise of the jurisdiction by the High Court to entertain a writ petition against such orders against which statutory appeal lies before this Court."

In Ballarpur Industries Limited v. Andhra

Pradesh Micro, Small Enterprises Facilitation Council 7, it

was held that the Hon'ble Supreme Court in Goodyear India

Limited Vs. Norton Intech Rubbers (P) Ltd. held that the Court

has no discretion to either waive or reduce the amount of 75% of

award as a pre-deposit for filing of application/appeal under the

MSMED Act. The Hon'ble Supreme Court in Modern Industries Vs.

Steel Authority of India Ltd. And Others, also held in the context

of the Act of 1993 that though the Act of 1993 provides a

(2014) 5 ALT 502

statutory remedy of appeal against the award, the buyer in that

case availing the extraordinary jurisdiction under Article 226 of

the Constitution bypassing statutory remedy was held to be not

justified. The petitioner ought to have availed the remedy of

appeal under the Arbitration Act, if the petitioner had any

grievance with regard to the awards passed against it by the

Council. But the petitioner filed the present Writ Petitions on the

plea that the grounds raised in the Writ Petitions challenging the

award go to the root of the matter. Even if the grounds raised

against the award go to the root of the matter, the provisions of

the Arbitration Act are self contained and deal with all situations

in relation to arbitration proceedings. When a self contained

statute is available in a particular situation as an alternate

remedy, invocation of extraordinary jurisdiction of this Court

cannot be encouraged and accordingly the present Writ Petitions

are not maintainable."

In Eden Exports Company v. Union of India 8, it

was held that

" In all these writ petitions filed by various companies challenging the award/order passed by the Arbitrators/Facilitation Council, the question to be gone into is whether such writ petitions could be maintained before this Court. If one carefully goes through the provisions of the MSMED Act under Chapter V, in particular Section 18, it

(2013) 1 CWC 378

could be seen that the said Act is in consonance with the Arbitration and Conciliation Act, 1996. Moreover, the award/order passed by the Arbitrators/Facilitation Council is similar and identical to that of the award passed u/s 31 of the Arbitration and Conciliation Act. Section 5, which is contained in Part I of the Arbitration Act, defines the extent of judicial intervention in arbitration proceedings. It says that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I, no judicial authority shall intervene except where so provided in that Part. The Hon'ble Supreme Court in P. Anand Gajapathi Raju and Others Vs. P.V.G. Raju (Died) and Others, has held that the judicial intervention in arbitration proceedings should be minimal. Keeping in view the object of the MSMED Act, we have no hesitation in adopting Section 5 of the Arbitration and Conciliation Act, 1996, which prohibits interference of the judicial authority, to the awards passed under the MSMED Act.

Apart from the reason stated above, these writ petitions were filed without complying with the provisions contained in Section 19 of the MSMED Act, which contemplates pre-deposit of 75% of the decree amount. The petitioners cannot overtake Section 19 and invoke Article 226 of the Constitution before this Court. As we have held that pre- deposit of 75% is mandatory, we see no reason to entertain the present writ petitions. Moreover, once the petitioners have submitted themselves to the jurisdiction of the Council and when the decision of the Council went against them, they cannot turn round and state that the Council has no jurisdiction or the conciliators cannot sit as arbitrators or the pre-de- posit of 75% is against the provisions of law. As rightly pointed out by the learned single Judge, it is always open to the petitioners to move the appropriate civil Court for relief or to invoke arbitration clause, if provided in the agreement. Hence, we are not inclined to entertain the present writ petitions filed challenging various awards/orders passed by the Facilitation Council and they are liable to be dismissed.

In Gujarat State Civil Supplies Corporation Ltd. V.

Mahakali Foods Private Ltd., the Supreme Court held that

Chapter V of the Micro, Small and Medium Enterprises

Development Act, 2006 pertaining to delayed payments to Micro

and Small Enterprises would override the provisions of the

Arbitration and Conciliation Act, 1996. The bench of Chief

Justice UU Lalit and Justice Bela M Trivedi observed thus

"...the Arbitration Act, 1996 in general governs the law of

Arbitration and Conciliation, whereas the MSMED Act, 2006

governs specific nature of disputes arising between specific

categories of persons, to be resolved by following a specific

process through a specific forum. Ergo, the MSMED Act, 2006

being a special law and Arbitration Act, 1996 being a general

law, the provisions of MSMED Act would have precedence over

or prevail over the Arbitration Act, 1996."

8. Perused the record. In the context of the question to

be decided as to whether a writ petition is maintainable in view

of the specific remedies which are provided under the special

statute, it is appropriate to note that very recently, the Hon'ble

Division Bench of this Court in Writ Petition No. 3148 of 2024,

dated 22.07.2004, has drawn a fine distinction between

'entertainability' and 'maintainability'. In the said judgment, it is

observed that 'a Writ Petition is maintainable despite availability

of alternative remedy in certain situations. However, it is

discretion of the Court and there exists no compulsion to

'entertain' a petition merely because it is 'maintainable'. The

'maintainability' and 'entertainability' are two different facets.

The Apex Court in its recent judgment dated 10.04.2024 in PHR

Invent Educational Society v. UCO Bank ((2024) 4 SCR 541),

disapproved the order of Telangana High Court in Writ Petition

No. 5275 of 2021, dated 04.02.2022, wherein despite

availability of 'statutory efficacious remedy', the Writ Petition

was entertained. The Apex Court has reiterated that merely

because the Writ Petition is maintainable, it is not a compulsion

on the Writ Court to entertain such petitions. In the matter,

where huge involvement of tax, recovery of public money, bank

loans, etcetera are involved, the Writ Petition should be

entertained with circumspection. The Apex Court in the said

order at the relevant portion opined as under:

" It could thus be seen that, this Court has clearly held that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person. It has been held that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. The Court clearly observed that, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. It has been held that,

though the powers of the High Court under Article 226 of the Constitution are of widest amplitude, still the Courts cannot be oblivious of the rules of self-imposed restraint evolved by this Court. The Court further held that though the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, still it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution."

9. The Parliament enacted the Micro, Small and

Medium Enterprises Development Act, 2006 for facilitating the

promotions and development and enhancing the

competitiveness of micro, small and medium enterprises and for

matters connected therewith or incidental thereto which came

into force from 02.10.2006. It repealed the Interest on Delayed

Payments to Small Scale and Ancillary Industrial Undertakings

Act, 1993. Chapter V of the 2006 Act deals with delayed

payments to micro and small enterprises. Section 15 prescribes

a maximum of 45 days for payment of amounts due to supplier

under the Act. In the event the amount is not paid within the

aforesaid period, Section 16 provides for payment of compound

interest with monthly rests to the supplier. Section 17 provides

for recovery of the amount due. Section 18 provides for the

forum where the claim for recovery of amount could be initiated.

In fact, sub-section (5) of Section 18 mandates that reference

under Section 18 to the Micro and Small Enterprises

Facilitation Council shall be decided within 90 days from the

date of making such reference. Once the said Council passes a

decree or an order or an Award, Section 19 provides for an

Appeal. Section 19 reads as under:

" No Application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any Court unless the appellant (not being a supplier) has deposited with it seventy-five percent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such Court:

Provided that pending disposal of the application to set aside the decree, award or order, the Court shall order that such percentage of amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose."

In terms of Section 19, an Application for setting

aside an award of the Facilitation Council cannot be entertained

by any Court unless the appellant has deposited seventy-five

percent of the amount in terms of the Award. In view of the

provisions of Section 18(4), where the Facilitation Council

proceeds to arbitrate upon a dispute, the provisions of the Act of

1996 are to apply to the dispute as if it is in pursuance of an

arbitration agreement under sub-section (1) of Section 7 of the

Act. Hence, the remedy which is provided under Section 34 of

the Act of 1996 would govern an award of the Facilitation

Council. However, there is a condition which is imposed by

Section 19 of the 2006 Act to the effect that an application for

setting aside the Award can be entertained only upon the

appellant depositing with the Council seventy-five per cent of

the amount in terms of the Award. Section 19 was introduced

as a measure of security for enterprises for whom a special

provision is made in the MSMED Act by the Parliament. In view

of the provisions of Section 18(4), the appellant had a remedy

under Section 34 of the 1996 Act to challenge the Award which

it failed to pursue. Apparently, the obligation of depositing

seventy-five per cent of decretal amount under the statute was

sought to be obviated by taking recourse to the jurisdiction of

this Court under Article 226 of the Constitution, which is

impermissible. This Court therefore, is of the view that

entertaining a petition under Article 226, in these

circumstances, would defeat the object and purpose of the

special enactment which has been legislated upon by the

Parliament.

10. In the instant case, in fact, all the contentions

which petitioner raised could have been taken in the Appeal.

Further, in the light of the averments and counter-averments,

there exist mixed questions of fact and law which can very well

be decided by the statutory authority. In this view of the matter,

this Court is not inclined to entertain this Writ Petition.

11. The Writ Petition is therefore, disposed of reserving

liberty to petitioner to avail the alternative remedy available. No

costs.

12. Consequently, miscellaneous Applications, if any

shall stand closed.

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NAGESH BHEEMAPAKA, J 14th October 2024

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