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Judgment
Rajiv Shakdher, J
I.A. No.6468/2019
1 This is an application filed for advancing the date of hearing. The reason given for this request is that the objection by the judgment debtors in their reply to the enforcement petition is no longer res integra.
2 Accordingly, with the consent of counsel for the parties, the prayer made for advancing the date of hearing is allowed and the enforcement petition is taken up for hearing.
3 The application is disposed of in the aforesaid terms.
OMP (ENF.) (COMM.) 1/2019
4 The decree holder seeks execution of the award dated 07.06.2018. Via this Award, the decree holder has been awarded a sum of Rs.2,24,51,969/- along with interest at the rate of 27% per annum at monthly rest, commencing from 21.07.2016.
5 It is important to note that the award came to be passed after the conciliation proceedings held under the Micro, Small and Medium Enterprises Development Act, 2006 (in short "2006 Act") failed. The conciliation proceedings were held by the Micro and Small Enterprises Facilitation Council (in short "Council").
6 The record shows that in consonance with the powers conferred on the Council under Section 18(3) of the 2006 Act, the dispute was referred by it to the Delhi Arbitration Centre (in short "DAC"). The DAC, thereupon, appointed an Arbitrator who has rendered the award in the matter.
7 In a nutshell, the dispute between the parties veered around the delay in payment of bills raised by the decree holder for services rendered by it.
The decree holder is a partnership firm which entered into a contract dated 01.02.2010 with the judgment debtors. The contract required the decree holder to oversee the collection of toll at 11 toll plazas as stipulated in the contract obtaining between the parties.
According to the judgment debtors, the decree holder had failed to carry out continuous observations of the assignment given to it vis-à-vis the 11 toll plazas referred to in the contract.
It was also the stand of the judgment debtors that there was a delay in furnishing the reports by the decree holder.
10.1 As a result of the delay in submission of reports, according to the judgment debtors, the payment of invoices raised by the decree holder also got delayed.
11 The record shows that the judgment debtors did finally clear the invoices raised by the decree holder, which cumulatively amounted to Rs 20,18,650/-. The decree holder being aggrieved by the fact that there was a delay in clearance of its invoices moved the Council for necessary relief.
It may be pertinent to note that the decree holder had itself registered under the 2006 Act only on 22.02.2011, that is, after the contract between the parties was executed.
As indicated above, since the conciliation proceedings failed, the Council, in its exercise of its powers under Section 18(3) of the 2006 Act, referred the parties to an institutional arbitration via DAC, which is now known as the Delhi International Arbitration Centre (in short "DIAC").
14 The subject award came to be passed thereafter.
15 Concededly, the judgment debtors have not filed any petition under Section 34 of the Arbitration and Conciliation Act, 1996 (in short "1996 Act") to assail the award.
15.1 What the judgment debtors instead have done, as noted above, is filed a reply to the captioned enforcement petition.
15.2 In the reply, the judgment debtors have taken the objection that in view of the arbitration agreement obtaining between the parties, the reference to DAC (now, DIAC) by the Council under Section 18(3) of the 2006 Act was bad in law. For this proposition, Ms. Priyadarshini relies upon a judgment of the Division Bench of the Bombay High Court in the matter of M/s Steel Authority of India Ltd. and Anr.Vs. Micro, Small Enterprise Facilitation Council, AIR 2012 Bom 178.
It may be pertinent to note, at this stage, that this very objection was taken by the judgment debtors before the learned Arbitrator. The Arbitrator, for whatever it was worth, dealt with the objection and repelled the contention of the judgment debtors.
16.1 As noted above, the judgment debtors, for reasons best known to it, did not carry the matter further.
16.2 Therefore, to my mind, for the judgment debtors to raise the very same objection in the enforcement petition would be an exercise in futility.
Besides this, as has been correctly pointed out by Mr. Shiv Charan Garg during the course of his submissions, the matter is no longer res integra as two separate Division Benches have in the past dealt with a similar issue.
17.1 The more recent judgment is judgment of the Bombay High Court in the matter of Gujarat State Petronet Ltd. Vs. Micro and Small Enterprises Facilitation Council. This judgment was rendered on 06.08.2018 in W.P.(C) No.5459/2015. The other judgment was passed by the Gujarat High Court in Principal Chief Engineer Vs. Manibhai & Brothers (Sleeper), on 20.06.2016, in F.A. No.637/2016.
17.2 The judgment in the matter of Manibhai & Brothers (Sleeper)' case was carried in appeal to the Supreme Court. The Supreme Court, via a reasoned order dated 05.07.2017, rejected the Special Leave Petition. The Supreme Court, while rejecting the Special Leave Petition, made the following observations:
"We are satisfied, that the interpretation placed by the High Court on Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006. in the impugned order, with reference to arbitration proceeding is fully justified and in consonance with the provisions thereof.
Having affirmed the above, we are of the view, that all other matters dealt with in the impugned order are not relevant for adjudication of present controversy and need not be examined.
The special leave petition is dismissed in the above terms. Pending applications stand disposed of"
17.3 This very aspect of the matter has been noted by the Division Bench, as indicated hereinabove, in the matter of Gujarat State Petronet Ltd. Vs. Micro and Small Enterprises Facilitation Council. Furthermore, the observations of the Division Bench as to why the action of the Council in referring parties to an institution providing for dispute resolution mechanism in exercise of its powers under Section 18(3) 2006 Act was valid despite a separate arbitration agreement obtaining the parties, being apposite, are extracted hereafter:
"..23. The argument, similar to the present one, was advanced before the the Division Bench of the Gujarat High Court that once there is an arbitration agreement in existence, the dispute is required to be referred for arbitration and thus, the application under Section 8 of the Arbitration Act, 1996 could not have been dismissed. The Division Bench of the Gujarat High Court followed the decision of the Allahabad High Court in the case of Paper and Board Convertors v. U.P. State Micro and Small Enterprise in writ petition No. 24343 of 2014 and held that the Council has jurisdiction to act as an arbitrator or conciliator in a dispute between the parties and the Council has only one of the two courses of action open to it: either to conduct an arbitration itself or to refer the parties to a centre or institution providing alternate dispute resolution services stipulated in sub-section (3) of Section 18 of the MSMED Act. Consequently, the Division Bench of the Gujarat High Court did not find any error in the decision of the Council in not entertaining the buyer's application under Section 8 of the Arbitration Act, 1996. The Division Bench of the Gujarat High Court also referred to the decision of the Nagpur Bench of this Court in Steel Authority of India Ltd. (supra) and expressed inability to agree with it. The relevant discussion is contained in paragraph 7.0. to 8.0. which reads as under:
"7.0 Identical question came to be considered by the Division Bench of the Allahabad High Court in the case of Paper and Board Convertors (supra). While interpreting the very provision of Section 18 of the Act, 2006, in para 12, the Division Bench has observed and held as under:
The non-obstane provision contained in subsection (1) of Section 18 and again in subsection (4) of Section 18 operates to ensure that it is a Facilitation Council which has jurisdiction to act as an arbitrator or Conciliator in a dispute between a supplier located within its jurisdiction and a buyer located anywhere in India. The Facilitation Council had only one of the two courses of action open to it: either to conduct an arbitration itself or to refer the parties to a centre or institution providing alternate dispute resolution services stipulated in sub-section (3) of Section 18.
7.1. After observing as above, the Division Bench of the Allahabad High Court has set aside the order passed by the Facilitation Council directing the parties to place its version before the sole arbitrator in terms of the rate contract agreement and restored the proceedings back to the Council and directed the Council to act in accordance with the provisions of sub-section (3) of Section 18 and either conduct the arbitration itself or refer the arbitral proceedings to any institution or centre providing alternate dispute resolution services.
8.0 Now, so far as reliance placed upon the decision of the Division Bench of the Bombay High Court in the case of Steel Authority of India Ltd. (supra) relied upon by Shri Patel, learned advocate for appellant, for the reasons stated above provision of Act 2006 referred herein above and the Act 2006 being Special Act under which the parties are governed, we are not in agreement with the view taken by the Division Bench of the Bombay High Court and we are in complete agreement with the view taken by the Division Bench of the Allahabad High Court in the case of Paper and Board Convertors (supra).
The decision of the Division Bench of the Gujarat High Court in Manibhai And Brothers (Sleeper) (Supra) was challenged before the Apex Court by filing Diary No. 16845 of 2017. These proceedings came to be disposed of by the Division Bench of the Hon'ble Apex Court by its order dated 5th July, 2017, which reads as follows:
"We have given our thoughtful consideration to the submissions advanced before us yesterday and today.
We are satisfied, that the interpretation placed by the High Court on Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, in the impugned order, with reference to arbitration proceeding is fully justified and in consonance with the provisions thereof.
Having affirmed the above, we are of the view, that all other matters dealt with in the impugned order are not relevant for the adjudication of the present controversy, and need not be examined.
The special leave petition is dismissed in the above terms. Pending applications stand disposed of."
The above order of the Apex Court apparently shows that the Apex Court approved the view of the Gujarat High Court in Manibhai and Brothers (Sleeper) (supra) and the Allahabad High Court in Paper and Board Convertors (supra). In that view of the matter, the submission of Mr. Kane, learned counsel for the petitioner, that the reference made by respondent No. 3 and entertained by respondent No. 1 - MSEFC is not maintainable in view of the independent arbitration agreement between the parties cannot be entertained and the same is liable to be rejected..."
17.4 I must, however, indicate that while the Division Bench of the Bombay High Court in the matter Gujarat State Petronet Ltd. Vs. Micro and Small Enterprises Facilitation Council upheld the contention that the Council had the jurisdiction to refer the matter to the arbitrator and thus, entertain a reference under the 2006 Act, it interdicted the direction whereby the Council having acted as a conciliator intended to act as an arbitrator which is one of the two courses of action available under subsection (3) of section 18 of the 2006 Act.
Thus, having regard to the aforesaid, in my view, the objection raised by the judgment debtors cannot be sustained. Even otherwise, as noted hereinabove, since the judgment debtors failed to file objections under Section 34 of the 1996 Act, it is, in my opinion, no longer open to the judgment debtors to raise the very same objection which was raised and repelled by the arbitral tribunal before this Court in the enforcement petition.
Accordingly, the contention raised by the judgment debtors in opposition to the enforcement petition is rejected.
Resultantly, the judgment debtors are directed to deposit the up-to-date awarded amount, which, according to the decree holder, is a sum of Rs.4,18,62,706/-, as on 20.11.2018. In addition thereto, according to the decree holder, cost in the sum of Rs.3,20,988/- is payable.
20.1 The judgment debtors will calculate the amount, which, according to them, is payable to the decree holder under the award and, accordingly, deposit the same.
20.2 In case the judgment debtors are of the view that the amount payable under the award is lesser than what is indicated hereinabove, the judgment debtors will place their own calculations before the Court on the next date of hearing. The deposit of up-to-date decretal amount will be made by the judgment debtors within two weeks from today.
List for further directions on 23.05.2019.
The date already fixed in the matter i.e. 29.08.2019 shall stand cancelled.