delhi high court

Delhi High Court: In a petition filed by Sterlite Power Transmission seeking to quash or set aside the reference order passed by Sub-Divisional Magistrate (East), Government of NCT of Delhi, (Respondent 2) acting as Micro and Small Enterprises Facilitation Council (MSEFC) under the MSMED Act wherein the reference filed by EPC Solutions LLP (respondent 1) under Section 18 of MSMED Act, 2006 was forwarded to the Delhi International Arbitration Centre (DIAC), Prathiba M Singh, J., upheld the reference order stating that when the agreement was entered into by the parties, respondent 1 was a micro-enterprise, thus making MSEFC eligible to entertain the reference application to arbitration. It is only later when respondent 1 became a medium enterprise.

An agreement was entered into by the petitioner with respondent 1 for providing vacuum pumps and engineers for PMC of 400kv Transmission Line on a rental basis on the project site in the State of Jammu & Kashmir. As per the work order, the deployment of the engineer for PMC of GIS substation was for 90-days, the deployment of the engineer for PMC of 400kV line was for 60-days and the supply for the vacuum pumps was for a period of 90-days from the effective date.

The case of the petitioner is that respondent 1 failed to lift the vacuum pumps from the project site due to which disputes arose between the parties in respect of return of the said vacuum pumps. Respondent 1 filed a reference application before the MSEFC raising a claim of Rs. 20,27,31,392/- and filed its Udhyam Registration certificate along with the reference application which shows that Respondent 1 is registered under the MSMED Act, 2006 as a medium enterprise.

The issue under consideration is that whether the impugned reference order dated 27-10-2021 passed by the MSEFC at the behest of the Respondent 1 which was a Medium Enterprise under the MSMED Act, 2006 on the date of filing reference petition is valid or not. A perusal of the MSMED, 2006 Act shows that there are various kinds of enterprises that are contemplated under the Act, namely Micro Enterprise, Small Enterprise and Medium Enterprise.

The Court noted that a reading of Section 18 of MSMED Act shows that any party to a dispute can make a reference to the MSEFC in respect of any amount due under Section 17 of MSMED Act. Section 17 of MSMED Act in turn refers to Section 16 of MSMED Act and Section 16 in turn refers to Section 15 of MSMED Act. Thus, the provisions of Sections 15 to 18 of MSMED Act are inter-linked with each other and are also linked to the title of Chapter V i.e., Delayed Payments to Micro and Small Enterprises. Thus, the scheme of Chapter V of the MSMED Act excludes Medium Enterprises under Section 2(g) and only applies to Micro and Small Enterprises. It is in this context that present petition was filed raising an objection to the effect that the reference petition filed by the Respondent 1, which was a Medium Enterprise on the date of filing is invalid.

The Court further noted that in the present case, the agreement was entered into on 15-09-2017 and on the said date, Respondent 1 was a Micro Enterprises as it had obtained registration for the same on 11-04-2017. The status of Respondent 1 changed with effect from 12-06-2019 when it became a Medium Enterprises. Thus, the relevant date in order to confirm as to whether the MSMED Act, 2006 would be applicable shall be the date of agreement between the parties and the date of supply of goods/rendering of services.

The Court opined that in the present case the date of contract between Respondent 1 and the Petitioner is 15-09-2017 and the agreement came to end in November, 2017. A perusal of the registration certificates under the MSMED Act, 2006 makes it clear that Respondent 1 was registered as a Micro Enterprise during the relevant period.

The Court upheld the impugned reference order dated 27-10-2021 passed by the MSEFC and appointed Mr. Ravi Prakash, Advocate as the Sole arbitrator.

[Sterlite Power Transmission Limited v. EPC Solutions LLP, 2023 SCC OnLine Del 3890, decided on 05-07-2023]

Advocates who appeared in this case :

Mr. Deepak Khurana and Mr. Abhishek Bansal, Advocates for the Petitioner;

Mr. Rohit Pandey, Mr. Varad Dwivedi and Mr. Vaibhav Maheshwari, Advs., for R-1, Mr. Prakash Kumar Sinha, Advocate for the Respondent.

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