AI Structured Summary
Not yet generated for this judgment
Judgment
Vaibhavi D. Nanavati, J
The present writ-application is filed under Article 226 of the Constitution of India seeking the following reliefs :-
“(A) That this Hon’ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction calling upon the respondent No.1-DIC, Vadodara to forthwith cancel the acknowledgment dated 25.04.2013 and the amended acknowledgment dated 22.12.2015 (Annexure-A and Annexure-C respectively);
(B) That this Hon’ble Court may be pleased to hold and declare that in absence of the mandatory procedure being followed by the private respondent, the respondent No.1-DIC was not justified in issuing the amended acknowledgment dated 22.12.2015 (Annexure-C) and be further pleased to quash and set aside the same.
(BB) That this Hon’ble Court may be pleased to hold and declare that since the private respondent had filed the memorandums subsequent to the award of the contract and the disputes having been arisen prior to such filing, the respondent no.2 facilitation council had no jurisdiction to entertain the reference under section 18 of The Micro, Small and Medium Enterprices Development Act, 2006.
(C) Pending hearing and final disposal of this petition this Hon’ble Court may be pleased to stay the further proceedings in the form of Delay Payment Application No.154 pending before the respondent No.2-Council.
(D) Pending hearing and final disposal of this petition, this Hon’ble Court may be pleased to stay the effect, implementation and operation of the amended acknowledgment dated 22.12.2015 issued by the respondent No.1.
(E) This Hon’ble Court may be pleased to grant any other and further relief/s which may be deemed just and fit in the interest of justice.”
The brief facts as stated by the writ-applicant in the present writ-application are stated thus :-
2.1 The writ-applicant is a Company incorporated under the Companies Act, 1956. The writ-applicant is also registered under The Micro, Small & Medium Enterprises Development Act, 2006 (for short ‘MSME Act’).
2.2 The writ-applicant intended to construct factory and for the said purpose had issued work order to the respondent No.3. The said respondent No.3 did not adhere to the terms and conditions of the work order and also caused undue delay.
2.3 It is further the case of the writ-applicant that the invoices raised by the respondent No.3 were not in consonance with the terms of the work order. It is the case of the writ-applicant that there was no outstanding amount due and payable by the writ-applicant to the respondent No.3.
2.4 The respondent No.3 herein invoked the provisions of the MSME Act and more particularly under Section 18 of the MSME Act. The respondent No.3 filed a copy of the Entrepreneurs Memorandum for setting up micro, small or medium enterprises acknowledgment for Part-II dated 25.4.2013 issued by the respondent No.1 – District Industries Center (for short ‘DIC’). In the said acknowledgment initial date of production/commencement of services were shown to be 27.11.2010. A copy of the said acknowledgment dated 25.4.2013 is duly produced alongwith the writ-application.
2.5 Upon service of the said application, the writ-applicant appeared before the respondent No.2 and filed reply/objections and contended that the subject work order was dated 10.06.2010 whereas as per the assertion of the respondent No.3, in the certificate dated 25.4.2013 which is issued by the respondent No.1, the service commencement date was shown as 27.11.2010 – DIC. It was thus contended that the respondent No.3 was not “a supplier” within the meaning of Section 2(n) of the Act.
2.6 It is the case of the writ-applicant that the Reference under Section 18 of the Council would be maintainable only if the private respondent is a supplier within the meaning Section 2(n) of the Act. In the present case, with regard to the first certificate dated 25.4.2013 wherein the commencement of service is stated to be 27.11.2010. Since the work order is dated 10.6.2010, the respondent No.3 would not be eligible to maintain application under Section 18 of the Act. The above referred aspect was pointed out by the writ-applicant, the respondent No.3 produced the impugned : amended acknowledgment EM Part-II dated 22.12.2015 issued by the respondent No.1 – DIC showing the date of commencement of service as 31.3.2006. It is further stated that the sole purpose of obtaining such amended certificate dated 22.12.2015 was received by the writ-applicant on 21.1.2016 which was undated. The sole purpose for obtaining the amended certificate dated 22.12.2015 was to take undue benefit of the proceeding before the Council which otherwise would not be available to the respondent No.3.
2.7 The writ-applicant made a specific grievance before the respondent No.1 – DIC that only because of the impugned amended acknowledgment was dated 22.12.2015 the respondent No.3 could not maintain his application under Section 18 before the respondent Council. In view of the fact that the respondent Council in the hearing on 30.9.2016 indicated that the Council would continue with the proceeding under Section 18 of the Act and since the respondent No.3 could not be stated to be a supplier within the meaning of Section 2(n), the said proceeding under Section 18 would not be maintainable.
2.8 In view of above, the dispute was with regard to the jurisdiction of the authority and, therefore, the writ-applicant was constrained to approach this Court by filing the present writ-application.
The Coordinate Bench of this Court issued notice by order dated 4.10.2016 and interim relief came to be granted in terms para-27(B). The said order reads thus :-
“In view of the contentions raised and after hearing learned senior counsel, Shri Manish Bhatt appearing with learned advocate, Mrs.Mauna Bhatt for the petitioner, Notice to the respondents returnable on 8th November, 2016.
Adinterim relief in terms of Para Nos.27(C) & 27(D) till then.
Direct service is permitted.”
The Coordinate Bench of this Court by order dated 15.10.2019 passed further order which reads thus :-
“Learned senior advocate Mr.M.R.Bhatt with learned advocate Mrs.Mauna M. Bhatt for the petitioner states that issue in this petition with regard to applicability of Micro, Small and Medium Enterprises development Act, 2006 is squarely covered by the decision of this Court in case of M/s Easun Reyrolle Limited v. M/s. Nik San Engineering Co. Ltd. & Ors reported in 2019(2) GLR 1175.
Learned advocate for the respondent states that the aforesaid decision is under challenge before the Devision Bench of this Cort, as the Letters Patent Appeal is preferred. In view of the aforesaid facts, issue Rule.
Ad-interim-relief, granted earlier, to continue till final disposal of this petition.”
Heard Mr. Manish Bhatt, the learned Senior Advocate assisted by Mr. Munjaal M. Bhatt, the learned advocate appearing for the writ-applicant.
4.1 Mr. Manthan K. Bhatt, the learned advocate for the respondent No.3 was not present when the matter was conducted.
4.2 Mr. Manish Bhatt, the learned Senior Advocate appearing for the writ-applicant submitted that the writ-applicant issued work order to respondent No.3 for construction of factory on 10.6.2010 which commenced on 27.11.2010. The learned Senior Advocate Mr. Bhatt further submitted that the accounts stood settled upon payment of dues. Mr. Bhatt, the learned Senior Advocate submitted that though the accounts were settled the respondent No.3 filed an application before the Council under Section 18 of the Act, 2006. Such an application was made based on the Memorandum dated 25.4.2013 issued by the respondent No.1 - DIC (page-283) showing the initial date of production/commencement of service as 27.11.2010. Mr. Bhatt, the learned Senior Advocate submitted that the writ-applicant in the objections filed before the Council in para-5 page-27 specifically raised an objection that when the work order was issued, the respondent No.3 admittedly was not registered under the MSME Act.
4.3 Mr. Manish Bhatt, the learned Senior Advocate further submitted that the respondent No.3 preferred an application dated 22.12.2015 to the DIC seeking amendment of the Memorandum (page-45). The respondent No.1 – DIC without conducting any inquiring issued amended of the Memorandum dated 22.12.2015 (page-39).
4.4 In view of above, Mr. Bhatt, the learned Senior Advocate submitted that both acknowledgments i.e. dated 25.4.2013 as well as 22.12.2015 admittedly are subsequent to the date of the issuance of work order i.e. 10.6.2010 and commencement of work i.e. 27.11.2010. Thus, Mr. Manish Bhatt, the learned Senior Advocate reiterated that when the work order was issued, admittedly the respondent No.3 could not be said to be a ‘supplier’ under the provisions of Section 2(n) of the Act.
4.5 Mr. Manish Bhatt, the learned Senior Advocate relied on the order passed taken by the Coordinate Bench of this Court reported in (2019) 2 GLR 1175 which came to be confirmed by the Division Bench in the Letters Patent Appeal No.619 of 2019.
4.6 Mr. Manish Bhatt, the learned Senior Advocate also submitted that in view of the latest judgment dated 29.6.2021 rendered by the Hon’ble Apex Court in the case of M/s. Shilpi Industries etc., reported in 2021 SCC Online SC 439 the said issue held in favour of the writ-applicant and is no more res integra.
4.7 Mr. Manish Bhatt, the learned Senior Advocate also submitted that to seek the benefit of provisions of MSME Act, 2006, the seller is required to be registered under the provisions of the said Act as on the date of entering into the contract. Mr. Bhatt, the learned Senior Advocate lastly submitted that the respondent No.3 could not have initiated proceeding under the MSME Act, 2006 and the said issuance of notice being without jurisdiction the writ-application is required to be allowed. Mr. Bhatt, the learned Senior Advocate submitted that consequently the order/direction be passed against the respondent No.1 – DIC, Vadodara to forthwith cancel the acknowledgment dated 25.4.2013 and the amended acknowledgment dated 22.12.2015.
Having heard Mr. Manish Bhatt, the learned Senior Advocate for the writ-applicant, undisputed facts which emerge for adjudication of the present controversy are that on 10. 6.2010 when the writ-applicant issued work order to the respondent No.3 for construction of the property the respondent No.3 was not registered under the MSME Act, 2006. Initial date of production/commencement of service was also dated 27.11.2010. The respondent No.3 was the applicant of the application filed under Section 18 of the MSME Act. The respondent No.3 invoked the provisions of the Act and more particularly Section 18 of the MSME Act and filed a copy of the Entrepreneur Memorandum for setting up micro, small & medium enterprises acknowledgment for Part-II dated 25.4.2014 issued by the respondent No.1 – DIC. In the said acknowledgment initial date of production/commencement of service were shown to be 27.11.2010.
5.1 The writ-applicant on issuance of notice filed objection before the Council specifically raising an objection that when the work order was issued the writ-applicant was not registered under the Micro, Small & Medium Enterprises Development Act, 2006. It appears that the respondent No.3 thereafter made an application dated 22.12.2015 to the respondent No.1 - DIC seeking amendment of the Memorandum. The DIC without inquiry issued amended Memorandum on 22.12.2015. This Court has considered both the Memoranduly duly produced by the writ-applicant i.e. 25.4.2013 and 22.12.2015 respectively. Clearly the said both the Memorandums are subsequent to date of the work order dated 10.6.2010 and initial date of production/commencement of service of respondent No.3 i.e. 27.11.2010.
5.2 Section 2(n) of the Micro, Small & Medium Enterprises Development Act, 2006 reads thus :-
“2(n) "supplier" means a micro or small enterprise, which has filed a memorandum with the authority referred to in sub-section (1) of Section 8, and includes,
(i) the National Small Industries Corporation, being a company, registered under the Companies Act, 1956 (1 of 1956);
(ii) the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956 (1 of 1956);
(iii) any company, co-operative society, trust or a body, by whatever name called, registered or constituted under any law for the time being in force and engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises;”
In appears that in view of Section 2(n) of the Act the date of issuance of work order i.e. 10.6.2010 and initial commencement of the order by the respondent No.3 i.e. 27.11.2010 and admittedly both the Memorandums are dated 25.4.2013 and 22.12.2015 it can clearly be inferred that the respondent No.3 could not be said to be a ‘supplier’ under Section 2(n) of the Act when the work order was issued in favour of the respondent No.3.
5.3 The Coordinate Bench of this Court in M/s Easun Reyrolle Limited v. M/s. Nik San Engineering Co. Ltd. & Ors reported in 2019(2) GLR 1175 held in paragraphs 8.4 and 8.5 thus :-
“[8.4] Apart from this, even the reference could not have been made in view of the fact that the status of Small Enterprises has not been obtained prior to entering into transaction as well as within a period of 2 years as per the requirement of statute and the claim cannot be availed by resorting to Chapter-V of the Act. This has not been appreciated in its true purspective. As a result of this, the matter could not have been referred to at all for arbitration. The record of the petition indicates that initial date of production commencement has been stated to be on 04.08.2007, but then Part-II Memorandum which has been submitted to the District Industrial Centre, Varodadra is on 20.03.2012 almost after 5 years much beyond the period, and therefore, there is no jurisdiction lies with the authority to make reference under Section 18 of the Act.
[8.5] Further, it is also noticed from the record that requirement of Section 8 would have been fulfilled prior to the dispute arose which is not a question visible on hand. Here, the last supply is of 14.06.2011 and there was a dispute about the poor quality etc. was in the year 2011 whereas the Memorandum has been submitted in 2012 only, and therefore also, respondent No.1 cannot have any remedy under the Act. Additionally, it is reflecting that registered office of respondent No.1 has been shifted in the State of Maharashtra on 10.08.2012 and the place of residence of the company is not within the territorial limits of respondent No.2 or 3 in any case, and therefore, it was not open for respondent No.2 to assume the jurisdiction and referred the matter under Section 18 and in turn before the learned Arbitrator. It is a settled position of law that the residence of company is to be assumed at a place where its registered office is situated, and therefore, since the registered office of respondent No.1 is located outside the state of Gujarat, respondent Nos.2 and 3 have no jurisdiction to assume it. Hence, in any case, the dispute which has been raised and ultimately referred before the Arbitrator itself lacks proper authority.”
The order passed by the Coordinate Bench of this Court came to be confirmed by the Division Bench in the Letters Patent Appeal No.619 of 2019. Paragraph-65 reads thus :-
“65. In the light of the view this court has adopted as discussed hereinabove, insofar as supply of goods by the appellant to the first respondent is concerned, to the extent such supply has been made during the period when the Memorandum (Part-I) filed by the appellant was valid, such supply of goods can be said to have been supply of goods by a supplier as contemplated under section 2(n) of the MSMED Act. However, Mr. Jaimin Dave, learned advocate for the appellant, under instructions, has submitted that no payments are pending with respect to the goods supplied during the period when Part-I of the Entrepreneur's Memorandum was valid. Under the circumstances, the demand being in respect of goods supplied when the appellant was not holding a valid Entrepreneur’s Memorandum, the appellant does not fall within the ambit of “supplier” as defined under section 2(n) of the MSMED Act and is, therefore, not eligible to make a reference under section 18 of that Act. The learned Single Judge was therefore, justified in holding that the reference by the appellant was incompetent and could not have been entertained.”
5.4 The Hon’ble Apex Court in the case of M/s. Shilpi Industries etc., reported in 2021 SCC Online SC 439 held in paragraphs 25 and 26 thus :-
“25. In C.A.Nos.1620-1622 of 2021, the High Court, while negating the plea of the appellant, on the maintainability of counter-claim, has allowed the application filed by the respondent under Section 11(6) of the 1996 Act and appointed the second arbitrator. Though, we are of the view that counter- claim and set-off is maintainable before the statutory authorities C.A.Nos.1570-1578 of 2021 etc. under MSMED Act, appellant in this set of appeals is not entitled for the relief, for the reason that on the date of supply of goods and services the appellant did not have the registration by submitting the memorandum as per Section 8 of the Act. The bids were invited on 23.02.2010, appellant submitted its bid on 17.05.2010, respondent awarded contract to the appellant on 24.09.2010 and the parties signed the contract documents for supply of material, installation/commissioning of the power plant on 29.07.2011. Thereafter, supplies were made and the appellant has raised first invoice on 02.11.2011 for supply contract and also raised the first invoice pursuant to contract for installation on 07.07.2012 and the appellant has raised the last invoice in furtherance of contract for supply of material, on 29.03.2014. The appellant also claims to have raised last invoice on 29.03.2015 in furtherance of contract for installation. It is to be noticed that appellant approached the District Industrial Centre for grant of entrepreneur memorandum only on 25.03.2015.
Though the appellant claims the benefit of provisions under MSMED Act, on the ground that the appellant was also C.A.Nos.1570-1578 of 2021 etc. 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 Marketing5, 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 2017 SCC OnLine Del 6978 C.A.Nos.1570-1578 of 2021 etc. 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 & Ors. etc.6 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 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 (2019) 19 SCC 529 C.A.Nos.1570-1578 of 2021 etc. 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.”
5.6 In view of the facts of the present case and the settled legal position as referred to above, in view of this Court the respondent No.3 could not be said to be a ‘supplier’ within the meaning of Section 2(n) of the Act at the time when the work order came to be issued by the writ-applicant in favour of the respondent No.3 on 10.6.2010 and initial commencement/production initiation of the work by the respondent No.3 as on 27.11.2010. Once having held thus the Reference under Section 18 of the Act could be said to be not maintainable in view of the settled legal position.
5.7 It is further held that the said Reference itself was without authority of law. As a result, the Application No.154 filed before the MSME Council under Section 18 of the Act is held to be not maintainable and consequential Reference to respondent No.2 being incompetent is hereby quashed and set aside.
5.8 It is however clarified that this Court has otherwise not examined the merit of the claim of the respondent No.1 since the said Reference is disposed of as being want of jurisdiction and was initiated without any authority of law. It would be open for the respondent No.3 to agitate the claim in accordance with law before the competent forum.
In view of above, the present writ-application is partly allowed. Rule is made absolute to the aforesaid extent. Consequently the civil application stands disposed of.