Rajasthan High Court: While deciding the issue for consideration in an appeal, whether the application filed by respondent 1 under Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 (the MSMED Act) before the Micro Small Enterprises Facilitation Council (MSEFC) was maintainable under the law, a division bench comprising of Manindra Mohan Shrivastava, CJ., and Munnuri Laxman, J., decided to entertain the appeal despite having a prima facie view that the application may not be maintainable under the MSMED Act and the availability of an alternative remedy under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award.
In the instant matter, respondent 1 filed an application under Section 15 of the MSMED Act before the MSEFC. The appellant argued that on the date of entering the contract, i.e., 02-09-2016, respondent 1 was not registered as a small-scale industry, as it was registered only on 14-12-2016. The appellant relied on legal precedents and asserted that no proceedings could be initiated under the MSMED Act. On the other hand, the respondents contended that once a unit is registered as a small-scale industry, subsequent supplies should be treated as made by a small-scale unit, making the application maintainable under Section 15 of the MSMED Act.
The Court noted that the issue for consideration is whether the application filed by respondent 1 under Section 15 of the Act is maintainable given the registration status of respondent 1 as a small-scale industry at the time of contract formation.
The Court, after considering the arguments advanced an authorities cited such as Vaishno Enterprises v. Hamilton Medical AG, 2022 SCC OnLine SC 355, Nitesh Estates Ltd. v. Micro & Small Enterprises Facilitation Council of Haryana, 2022 SCC OnLine SC 1198, and Silpi Industries v. Kerala State Road Transport Corpn., 2021 SCC OnLine SC 439, expressed a prima facie view that the application might not be maintainable under the MSMED Act. However, the Court is inclined to entertain the appeal due to doubts regarding the maintainability of the application under Section 15 of the MSMED Act, despite the appellant having an alternative remedy under Section 34 of the Arbitration and Conciliation Act, 1996.
The Court has decided to entertain the appeal to determine the maintainability of the application under Section 15 of the MSMED Act, with further proceedings scheduled for April 2024 and a stay on execution until then.
[K K Electro Trade v. Sushil Agarwal, 2024 SCC OnLine Raj 721, order dated 20-03-2024]
Advocates who appeared in this case:
Mr. Harsh Tikoo, Counsel for the Appellant
Mr. Akshat Verma and Mr. Vipul Dharnia, Counsel for the Respondents
Buy Arbitration and Conciliation Act, 1996 HERE
