Allahabad High Court: In an appeal under Section 37 of Arbitration and Conciliation Act, 1996, against the Commercial Court order, wherein the Court held that only the Courts at Jabalpur would have the jurisdiction, the division bench of Mahesh Chandra Tripathi* and Prashant Kumar, JJ. while setting aside the impugned order, held that MSMED Act, 2006 being a special Act will have overriding effect over the Arbitration and Conciliation Act, 1996 and the agreement entered between the parties. Since the proceeding was initiated under the MSMED Act, 2006 and was filed before Facilitation Council, Kanpur, the Commercial Court, Kanpur will have the jurisdiction to entertain Section 34 application.
Background:
The appellant was engaged in the business of manufacturing transformers of various capacities. A contract was entered into between the appellant and the M.P. State Electricity Board (‘Electricity Board’). The appellant, as per work order given by the Electricity Board, had supplied the goods on time, but no payment was made within the stipulated time, which was to be made as per Clause 8(5) of the contract. Hence, the appellant made repeated representations, but neither any heed was paid on the representation nor payment was made. Instead of making the payment in time, when there was a delay, the same was paid without paying interest thereon, which was against the provisions of Interest on Delayed Payments to Small Scale and Ancillary Undertakings Act, 1993 (‘1993 Act’). On demand of the interest made by the appellant, the appellant was blacklisted by the Electricity Board. Feeling aggrieved by the blacklisting, the appellant filed a writ petition before Madhya Pradesh High Court. However, on 22-01-2000 the State of U.P. had notified establishment of U.P. Industry Facilitation Council at Kanpur (‘Council’), which was under the 1993 Act.
When the appellant felt that the Electricity Board may not pay the aforesaid interest although delayed payment for the transformer was made, then a claim petition for delayed payment was filed by the appellant. The Electricity Board being aggrieved of the Council’s award , challenged same by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act, 1996’) before the District Judge. The Commercial Court allowed the Section 34 application filed by Electricity Board on the grounds of jurisdiction. Aggrieved by which the appellant has filed the instant appeal.
Analysis:
The Court noted that impugned order was passed on the ground of jurisdiction. The Commercial Court had concluded that as per the agreement, the parties have decided that the Court in Jabalpur would have jurisdiction to entertain a writ petition and as per Section 20(2) of the Act, 1996, if the parties have decided a place for arbitration, then the Court having jurisdiction of the place can only entertain a petition.
The Court said that Section 32 of the MSMED Act, 2006, makes it very clear that any action taken under the 1993 Act shall be deemed to have been taken or taken under the corresponding provisions of MSMED Act, 2006.
After perusing Section 32 MSMED Act the Court said that all proceedings initiated under the 1993 Act shall be deemed to have been initiated under this Act.
The Court took note of Silpi Industries Etc. v. Kerala State Road Transport Corporation, 2021 SCC OnLine SC 439, wherein the Court held that that MSMED Act, 2006 being a special Act will have overriding effect on the Arbitration and Conciliation Act, 1996 and if the seller comes under the ambit of MSMED Act, 2006, he can approach the competent authority and file his claim under the said Act. The Court further held that if any registration is obtained the same will be prospective and applies for supply of goods and service after its registration but cannot operate retrospectively.
The Court noted that in this case the appellant was registered as “Small Scale Industry” way back on 9-2-1971 and continues to be the same. The only thing which is to be noticed is that it was re-registered and even in the re-registration certificate the date of commencement has been mentioned as 9-2-1971. Thus, as it is not a case of new registration and a case of continuous registration, hence, there is no question of any prospective application.
The Court said that in the case of MSMED Act, 2006 the agreement between the parties cannot have supremacy over the statutory provisions. The purpose of the MSMED Act, 2006 was to ensure timely and smooth payment to the supplier registered as micro, small and medium enterprises.
Thus, the Court gave the following conclusions:
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The appellant is a supplier as per Section 2(n) of the MSMED Act, 2006 and the Electricity Board is a buyer as per Section 2(d) of the Act.
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The appellant was registered as “Small Scale Industry” on 9-2-1971 and continues to be registered as the same. Re-registration/Udyog Aadhar number issued by the Electricity Board on 10-5-2016 clearly mentions that the date of commencement of the appellant’s registration as “Small Scale Industry” with effect from 9-2-1971, hence, the unit of the appellant would be considered as Small-Scale Industry with effect from 9-2-1971 up till date.
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As per Section 32 of the MSMED Act, 2006 while repealing the 1993 Act it was made clear that anything done or any action taken under the 1993 Act shall be deemed to have taken under the MSMED Act, 2006. Hence, the application filed by the appellant before the Facilitation Council is deemed to have been filed under the provisions of MSMED Act, 2006.
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The appellant was justified in making an application under Section 18(1) of the MSMED Act, 2006 and the Council had rightly proceeded under Section 18(2) of the MSMED Act, 2006 and under Section 18(4) the Council had jurisdiction to entertain the matter.
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The judgment of the Commercial Court which was passed placing reliance on Clause 20 of the agreement, wherein it was stated that only the Courts at Jabalpur will have jurisdiction, is incorrect. MSMED Act, 2006 being a special Act will have overriding effect over the Arbitration and Conciliation Act, 1996 and the agreement entered between the parties. Since the proceeding was initiated under the MSMED Act, 2006 and was filed before Facilitation Council, Kanpur, hence, the Commercial Court, Kanpur will have the jurisdiction to entertain the Section 34 application.
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Since the Commercial Court the impugned order has not considered and properly appreciated the provisions of the MSMED Act, 2006 and has held that only the Courts at Jabalpur would have the jurisdiction, the impugned order is incorrect, and hence, set aside. The award passed by the Facilitation Council dated 2-7-2009 and final award passed on 3-2-2012 is hereby restored and affirmed.
[Marsons Electrical Industries v Chairman, Madhya Pradesh Electricity Board, 2023 SCC OnLine All 2675, decided on 12-12-2023]
Judgment Authored by: Justice M.C. Tripathi
Advocates who appeared in this case :
Counsel for Petitioner: Advocate Alok Kumar Yadav
Counsel for Respondent: Advocate Varun Srivastava
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