In R/SPECIAL CIVIL APPLICATION No. 2825 of 2020-GUJ HC- Micro or Small Enterprise can be treated as supplier only when it has filed Memorandum with Authority as per Sec.8 of MSMED Act, rules Gujarat HC
Justice A. P. Thaker [16-12-2022]

Read Order: ANUPAM INDUSTRIES LTD v. THE STATE LEVEL INDUSTRY FACILITATION COUNCIL 

Tulip Kanth

Ahmedabad, December 12, 2022: The Gujarat High Court has set aside an arbitral award where exercise of the jurisdiction by the Arbitrator under the Micro, Small and Medium Enterprises Development Act, 2006  was without jurisdiction.

Throwing light on the issue of Court’s jurisdiction while considering petition under Article 227 of the Constitution, the Bench said, “ High Courts cannot, at the drop of a hat, in exercise of its power of superintendence under Article 227 of the Constitution, interfere with the orders of tribunals or Courts inferior to it. Nor can it, in exercise of this power, act as a Court of appeal over the orders of Court or tribunal subordinate to it. In cases where an alternative statutory mode of redressal has been provided, that would also operate as a restrain on the exercise of this power by the High Court.”

It was the claim of the third respondent-a proprietorship concern engaged in the business of providing transport services that it had filed before MSME Facilitation Council and it had provided transport service to the petitioner-Company engaged in the business of manufacturing Gantry and EOT Cranes.

The third Respondent had raised separate distinct invoices and had approached the Micro, Small and Medium Enterprises Facilitation Council (first respondent) for invoking the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) somewhere in the month of July- August, 2017.

It was contended that as per record , the third respondent Firm was registered in “E" category i.e. "Small" enterprise category. It was submitted that conciliation efforts exerted by the MSME Facilitation Council, Gandhinagar did not yield the result and, therefore, the matter was referred to GCCI for conducting the Arbitral proceedings as per the provisions of Arbitration and Conciliation Act, 1996. The entire arbitral proceedings were conducted ex-facie in absence of the petitioner and the impugned award came to be passed by the sole Arbitrator. 

The same had been challenged by the petitioner by way of filing the petition on the grounds that the claim filed by the third respondent was not maintainable as it was not registered under the MSMED Act at the time of transaction.

Referring to the definition of “supplier” as presented in the Act, the Bench said “In view of the aforesaid definition clause, a Micro, Small Enterprise can be treated as supplier only when it has filed Memorandum with the Authority as per Section 8 of the Act”, while also adding that unless and until, the firm or establishment is treated as Micro, Small or Medium Enterprise and registered under Section 8, the provisions of the Act would not be applicable.

According to the Bench,the respondent-supplier was not registered under the MSMED Act during the period of transaction between the parties which was from May 17, 2013 to July 15, 2015 and August 15, 2013 to October 13,2015.As per the records, it had been registered as Small Enterprise category with effect from December 31, 2016.

Noting that the third respondent had initiated the proceedings under the MSMED Act after its registration, for the services provided before the date of registration, the Bench held that the entire proceedings undertaken by the Council under the provisions of the MSMED Act, would be without jurisdiction.

As per the Bench, even if the petitioner had knowledge regarding the arbitral proceedings conducted under the MSMED Act and purposefully did not participate in the proceedings, and ultimately the Award came to be passed, did not give any jurisdiction to the mechanism under the MSMED Act.

“Now, admittedly, in the present case, the exercise of the jurisdiction of the Arbitral Tribunal under the MSMED Act is under challenge and, therefore, the present petition is maintainable”, the Bench held while also adding that when the provisions of MSMED Act itself is not applicable to the transaction in question, there would not be any question of applicability of the provisions of the Arbitration and Conciliation Act, 1996.

Thus, noting that  the exercise of the jurisdiction by the Arbitrator under the MSMED Act, 2006 was without jurisdiction, the Bench allowed the petition and quashed the order passed by the Sole Arbitrator.