IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF FEBRUARY, 2019 BEFORE THE HON’BLE MRS.JUSTICE S.SUJATHA WRIT PETITION No.47302/2012 C/W W.P.No.47725 & W.P.No.47726/2012 [GM – KEB] IN W.P.No.47302/2012:
BETWEEN :
1. THE KARNATAKA POWER TRANSMISSION CORPORATION LIMITED KAVERI BHAVAN BANGALORE-560009 REP. BY ITS DIRECTOR [ADMINISTRATION & H.R.], KPTCL SRI MUDDU MOHAN.
2. THE CHIEF ENGINEER ELECTRICITY, TENDERING AND PROCUREMENT KARNATAKA POWER TRANSMISSION CORPORATION LTD., KAVERI BHAVAN BANGALORE-560009 SRI K.RAMAKRISHNA. ...PETITIONERS (BY SRI NAGANAND, SENIOR ADV. FOR SRI S.SRIRANGA, ADV.) AND :
1. GOVERNMENT OF KARNATAKA REP. BY ITS PRINCIPAL SECRETARY MINISTRY OF POWER/ENERGY M.S. BUILDING, BANGALORE-560001.
2. M/S. AMIT CONDUCTORS A PROPRIETARY CONCERN OF SRI R.K.TATAER HAVING OFFICE AT TATER PALACE, KRISHNA MANDI ROAD BHANVKHARI BIJAI NAGAR, AJMER RAJASTHAN-305624 REP. BY ITS PROPRIETOR SHRI. RAJENDRA TATER.
3. RAJASTHAN MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL OFFICE OF THE COMMISSIONER OF INDUSTRIES UDYOG BHAWAN, TILAK MARG C-SCHEME, JAIPUR-302005 REP. BY ITS SECRETARY. …RESPONDENTS (BY SMT JYOTHI.M., AGA FOR R-1; SRI M.A.HUMAYUN, ADV. FOR R-2;
R-3 – SERVED BUT UNREPRESENTED.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER/AWARD DATED 08.01.2010 PASSED HEREIN BY THE RESPONDENT No.3 IN CASE No.1/2009 VIDE ANNEXURE-S; DECLARE THAT THE CLAIM OF RESPONDENT No.2 IS BAD IN LAW AND BARRED BY LAW; AND ETC., IN W.P.No.47725/2012:
BETWEEN :
1. THE KARNATAKA POWER TRANSMISSION CORPORATION LIMITED KAVERI BHAVAN BANGALORE-560009 REP. BY ITS DIRECTOR [ADMINISTRATION & H.R.], KPTCL SRI MUDDU MOHAN.
2. THE CHIEF ENGINEER ELECTRICITY, TENDERING AND PROCUREMENT KARNATAKA POWER TRANSMISSION CORPORATION LTD., KAVERI BHAVAN BANGALORE-560009 SRI K.RAMAKRISHNA. ...PETITIONERS (BY SRI NAGANAND, SENIOR ADV. FOR SRI S.SRIRANGA, ADV.) AND :
1. GOVERNMENT OF KARNATAKA REP. BY ITS PRINCIPAL SECRETARY MINISTRY OF POWER/ENERGY M.S. BUILDING, BANGALORE-560001.
2. M/S. S.L.JAIN CONDUCTORS PVT. LTD., A PRIVATE LIMITED COMPANY REGISTERED UNDER THE INDIAN COMPANIES ACT, 1956 HAVING ITS OFFICE AT No.3 KUMAR STREET, BIJAI NAGAR, AJMER RAJASTHAN-305624 REP. BY ITS MANAGER SHRI. TARA CHAND JAIN.
3. RAJASTHAN MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL OFFICE OF THE COMMISSIONER OF INDUSTRIES UDYOG BHAWAN, TILAK MARG C-SCHEME, JAIPUR-302005 REP. BY ITS SECRETARY. …RESPONDENTS (BY SMT JYOTHI.M., AGA FOR R-1; SRI M.A.HUMAYUN, ADV. FOR R-2;
R-3 IS DISPENSED WITH, VIDE COURT ORDER DATED 05.1.2012) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER/AWARD DATED 08.01.2010 PASSED HEREIN BY THE RESPONDENT No.3 IN CASE No.3/2009 VIDE ANNEXURE-P; DECLARE THAT THE CLAIM OF RESPONDENT No.2 IS BAD IN LAW AND BARRED BY LAW; AND ETC., IN W.P.No.47726/2012:
BETWEEN :
1. THE KARNATAKA POWER TRANSMISSION CORPORATION LIMITED KAVERI BHAVAN BANGALORE-560009 REP. BY ITS DIRECTOR [ADMINISTRATION & H.R.], KPTCL SRI MUDDU MOHAN.
2. THE CHIEF ENGINEER ELECTRICITY, TENDERING AND PROCUREMENT KARNATAKA POWER TRANSMISSION CORPORATION LTD., KAVERI BHAVAN BANGALORE-560009 SRI K.RAMAKRISHNA. ...PETITIONERS (BY SRI NAGANAND, SENIOR ADV. FOR SRI S.SRIRANGA, ADV.) AND :
1. GOVERNMENT OF KARNATAKA REP. BY ITS PRINCIPAL SECRETARY MINISTRY OF POWER/ENERGY M.S. BUILDING, BANGALORE-560001.
2. M/S. SHUBHAM CABLES A PARTNERSHIP FIRM DULY REGISTERED UNDER THE INDIAN PARTNERSHIP ACT HAVING ITS OFFICE AT 3 KUMHAR MOHALLA BIJAI NAGAR, AJMER RAJASTHAN-305624 REP. BY ITS PARTNER SHRI. TARA CHAND JAIN.
3. RAJASTHAN MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL OFFICE OF THE COMMISSIONER OF INDUSTRIES UDYOG BHAWAN, TILAK MARG C-SCHEME, JAIPUR-302005 REP. BY ITS SECRETARY. …RESPONDENTS (BY SMT JYOTHI.M., AGA FOR R-1; SRI M.A.HUMAYUN, ADV. FOR R-2;
R-3 IS DISPENSED WITH, VIDE COURT ORDER DATED 28.11.2012) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER/AWARD DATED 08.01.2010 PASSED HEREIN BY THE RESPONDENT No.3 IN CASE No.2/2009 VIDE ANNEXURE-N; DECLARE THAT THE CLAIM OF RESPONDENT No.2 IS BAD IN LAW AND BARRED BY LAW; AND ETC., THESE PETITIONS HAVING BEEN HEARD AND RESERVED ON 13.02.2019, COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, S.SUJATHA J., PASSED THE FOLLOWING:
O R D E R These petitions involving similar and akin issues, have been considered together and are disposed of by this common order.
2. These petitions are directed against the award passed by the respondent No.3 in case Nos.1, 2 and 3/2009 inter alia seeking a declaration that the provisions of The Micro, Small and Medium Enterprises Development Act, 2006 ['Act' for short] are not applicable to the transaction in question in the facts of the case and for such other reliefs.
3. The facts in a nutshell are that the petitioners floated a tender for the purpose of procuring conductors and bare aluminum wires of different quality, quantity and varieties through out the State of Karnataka. The second respondent in all the petitions (referred to as respondent No.2) submitted their bid on 01.05.2001 and the same was accepted by the respondents No.2 by placing a purchaser order on 01.12.2001. The supplies were made by the respondent No.2 commencing from January 2002. It is the allegation of the respondent No.2 that the petitioners wilfully delayed release of payments within 60 days.
4. It transpires that the respondent No.2 got issued a legal notice alleging the delay in payment by the petitioners and demanded interest at the rate of 24% per annum. The respondent No.2 lodged their claim before the petitioners and the same being disallowed, despite issuance of two legal notices had filed writ petition before this Court for consideration of their claim, as no Industrial Facilitation Council ['Council' for short] was functioning under the provisions of the Act. However on establishment of the Council during the pendency of the writ petition proceedings, the writ petition was disposed of as having rendered infructuous. On 09.02.2009, claim petitions were filed by the respondents No.2 under Section 18 of the Act before the Council at Bengaluru. The same came to be disposed of on 16.12.2008 with liberty to the respondents No.2 to approach the Council at Rajasthan for appropriate redressal under Section 18 [4] of the Act.
The respondent No.4 Council passed orders decreeing the claim/award made by the respondents No.2.
5. Being aggrieved, the petitioners filed a Arbitration Suit under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the said award. In the meantime, respondent No.2 had initiated Execution proceedings upon the transfer decree from City Civil and Sessions Court at Jaipur before the City Civil Court at Bengaluru wherein a prohibitory order under Order XXI Rule 52 for attaching the Bank Account of the petitioner was issued. On application filed by the petitioners to recall the said order, the same was re- called. Aggrieved by the same, respondent No.2 filed Writ Petition Nos.40138-141/2011 whereas Writ Petition Nos.22370-371/2010 and allied matters were filed by the petitioners challenging the Constitutional validity of the provisions of the Act.
6. The Cognate Bench of this Court allowed the writ petitions filed by the respondent No.2 and dismissed the writ petitions filed by the petitioners upholding the provisions of Section 19 of the Act. In the said proceedings, it was observed that the Arbitration and Conciliation Act is not applicable to the present proceedings. In view of the same, the petitioners withdrew the suits filed under the provisions of the Arbitration and Conciliation Act with liberty to initiate appropriate proceedings challenging the impugned award. Hence, these writ petitions.
7. The learned Senior counsel Sri. Naganand with the learned counsel Sri.S. Sriranga for the petitioner placing reliance on the judgment of the Hon'ble Apex Court in the case of M/s Shanti Conductors (P) Limited & another Vs. Assam State Electricity Board & others passed in Civil Appeal No.8422-8443 [D.D. 23.01.2019] submitted that the provisions of the Act applies only to the supplies made subsequent to the enforcement of the Act. The Act cannot be made applicable to the sale agreements which were entered into prior to the enforcement of the Act as held in the case of Purbanchal Cables Private Limited Vs. Assam State Electricity Board1, which has been held to be not a good law in Shanthi Conductors. Indisputably, the interest claimed by the respondents/claimants are relating to the supplies made prior to the Act coming into force. The Act, 2006 is prospective in operation and cannot be applied retrospectively. It was argued that the cognate Bench of this court has passed an order on 11.12.2017 directing the petitioner-KPTCL to deposit the entire sum awarded as per the impugned order with the registry of this court and the 2nd respondent in both the cases was permitted to withdraw the said deposited amount upon furnishing an undertaking that in case, these writ petitions are allowed, it would refund back the amount with 6% interest per annum. The KPTCL has filed Writ Appeal No.301/2018 and allied matters challenging the said 1 (2012)7 SCC 462 order of the learned Single Judge which came to be allowed observing that the provision of Section 19 regarding the pre-deposit is applicable only as regards invoking the statutory remedy which is inapplicable in the present case as the awards are sought to be set aside by invoking the remedy under Article 226 of the Constitution which admits of no fetters. No doubt it has been observed that the observations made is limited with respect to the said appeals.
8. It was argued that there is no bar to entertain a writ petition challenging the order passed by the Council without jurisdiction. It was further argued that requirement of Section 8 of the Act has not been fulfilled by the respondent No.2. Hence, they cannot be construed as ‘suppliers’ to avail the benefits of the Act. It was submitted that the Limitation Act, 1963 squarely applies to the facts of the present case. The last payment made by the petitioner towards the amount due is not the criteria to be considered to compute the period of limitation in terms of the judgment of the Hon'ble Apex Court in M/s. Shanthi Conductors, supra. Nextly, it was argued that fixing the liability on the Government of Karnataka-respondent No.1 jointly and severally is untenable. Respondent No.1 is not a proper and necessary party to the adjudication of the dispute between the petitioner and respondent No.2.
9. The learned counsel for the respondent No.2 would submit that the writ petition is not maintainable since the petitioner has not availed the alternative remedy available under Section 19 of the Act. The petitioner having suffered an order from this court in W.P.Nos.22370-371/2010 and allied matters (D.D.13.09.2012) whereby the pre-deposit of 75% of the amount in terms of the decree is held to be legal, no writ petition can be entertained circumventing the alternative remedy of appeal whereby 75% of the award amount is required to be predeposited. It was further argued that no limitation Act is applicable to the provisions of the Act. The Act being a special enactment, the object of the enactment has to be achieved by letter and spirit. It was further argued that the provisions of Arbitration and Conciliation Act are also not applicable in view of the order passed by this court in W.P.No.22370-371/2010.
10. The respondents having approached the Council pursuant to the observations made by the Council at Bangalore and the petitioners herein having participated in the proceedings now can neither object to the jurisdiction of the Council nor the applicability of the provisions of the Act can be challenged at this stage. The Council profusely considering the material evidence on record and analyzing the same, passed an award directing the petitioner and the respondent No.1 to make the payment of interest to which the respondent No.2 is legally entitled to. Hence, the same cannot be found fault with.
11. I have given my anxious consideration to the arguments advanced by the learned counsel for the parties and perused the material on record.
12. The undisputed facts are that the bid was accepted by the 2nd respondent for supply of ACSR conductors and Bare Aluminium wires on 01.05.2001. Accepting the same, orders were placed by the petitioners on 1.12.2001. First demand was made by the respondent No.2 on 23.10.2004 under the provisions of the Act claiming interest. Notices were issued by the respondents No.2 on 27.11.2004 and 16.8.2005 calling upon the petitioner to make the payment claimed by them. According to the respondents No.2, last payment was made on 10.1.2005. The Act has come into force on 2.10.2006 in terms of the Notification issued by the Central Government on 18.7.2006. Respondents No.2 filed the claim before the Industrial Facilitation Council, Bangalore under the provisions of the Act in the year 2007. The said claim being dismissed for want of jurisdiction, the claim was made by the respondents No.2 before the Council at Rajasthan. The awards being passed by the Council, the same is challenged by the petitioner before this Court withdrawing the suits filed before the Civil Court invoking the provisions of the Arbitration and Conciliation Act, 1996.
13. The main ground of attack of the petitioner is that the provisions of the Act are not applicable to the present case on hand for the reason that the respondent No.2 is not a ‘supplier’ in terms of Section 2(n) of the Act and is not governed by the provisions of the Act. To analyse the same, it is apt to refer to Section 2(n) of the Act in terms of which, ‘supplier’ means a micro or small enterprise, which has filed a memorandum with the authority referred to in sub-section (1) of Section 8.
14. In terms of proviso to Section 8(1) of the Act, any person who, before the Commencement of this Act, established-
(a) a small scale industry and obtained a registration certificate, may, at his discretion and shall within one hundred and eighty days from the commencement of this Act, file the memorandum in accordance with law under the provisions of this Act. Indisputably, such a memorandum is not filed by the respondent Nos.2.
15. Nextly it is beneficial to refer to the judgment of the Hon'ble Apex Court in the case of Shanti conductors wherein the Hon'ble Apex Court considering the provisions of the Industrial Undertakings Act 1993 which is akin to the Act 2006 has held that the incidence of applicability of the liability under the Act is supply of goods or rendering of service. In the said case, the Assam Electricity Board placed an order for supply of all conductors on 31.3.1992. The supplies were made during June and December 1992. On 13.5.1992 another order was placed by the Board for the supply of various types of conductors. On 23.09.1992 the President of India promulgated an ordinance, namely , the Interest on Delayed Payment to Small Scale Ancillary Industrial Undertakings Ordinance, 1992. Subsequently, on 02.04.1993, the interest on Delayed Payment to Small Scale and Ancillary Industrial Undertaking Arbitration Act, 1993 was enacted and it was deemed to have come into force with effect from 23.09.1992.
16. In that context, the Hon'ble Apex Court held that, when the date of agreement is not referred as material or incidence for fastening the liability, by no judicial interpretation the said date can be treated as a date for fastening of the liability. Liability to make payment of interest shall arise if supplies are made subsequent to the enforcement of the Act. Considering the phrase between retrospective and retroactive it is observed that the Act, 1993 is not retroactive in operation. The Act, 1993 is clearly prospective in operation. Further considering Section 10 of the Act,1993 which is in parameteria with Section 24 of the Act, 2006 held that Section 10 of 1993, Act will operate only with regard to expressed provisions contained in 1993, Act. It shall be given overriding effect but reading Section 10 to the effect that it will override Limitation Act is not the interpretation to be given to Section 10 and the Trial Court fell in error in relying on Section 10 in holding, the Limitation Act will not apply. The limitation for suit for recovery of interest under the Act, 1993 is a suit of nature which shall be covered by Part X Article 113 of the Schedule to the Limitation Act. The argument of the learned counsel for the claimant that last supply is the relevant factor for computing the period of limitation has been negated observing that the amount become due as soon as liability to pay arises placing reliance on Section 4 of the Act, 1993 which is again in paramateria with Section 15 of the Act, 2006. Thus the fact that the last payment made cannot be treated as period for beginning of the limitation and on that ground it cannot be held that the claim was within time. In the light of the said judgment, the arguments advanced by the learned counsel for the petitioner cannot be held to be unacceptable.
17. It is significant to note that the petitioners have taken all these grounds before the Council. The issues considered by the Council on which the decision has been rendered are as under:
1. Whether the petitioner is an S.S.I. Unit or not.
2. Whether the claim filed by the petitioner is barred by limitation or not.
3. Whether the petition of the petitioner suffers for the misjoinder of the party and misjoinder of cause of action.
4. Whether the petitioner has committed delay in supply of the goods.
5. Whether this council has no jurisdiction to decide the claim raised by the petitioner.
6. Whether the petitioner is entitled for interest on delayed payment as per the provisions of MSMED Act, 2006 if yes then from which date.
18. These points are answered in favour of respondent No.2. As observed earlier, the Act, 2006 is in parameteria with Act, 1993. Hence, in the light of the judgment of the Hon'ble Apex Court in Shanti conductors (supra), the decision rendered by the Council becomes unsustainable.
19. In the case of Whirlpool Corporation V/s.
Registrar of Trade Marks, Mumbai and Others2 the Hon'ble Apex Court in para.15 has observed as under:
“ Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in atleast three contingencies, namely, where the writ 2 [1998] 8 SCC 1 petition has been filed for the enforcement of any of the Fundamental rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field.”
20. It is thus clear that the order passed without jurisdiction is ameanable to writ jurisdiction under Articles 226 and 227 of the Constitution of India despite the availability of the alternative remedy available under the statute.
21. The privity of contract was between the petitioners and the respondent No.2. Government of Karnataka is not a necessary or proper party to the proceedings. However, liability fastened jointly and severally on the Government of Karnataka is untenable and cannot be sustained.
For the aforesaid reasons, it is held thus:
(i) the Respondent Nos.2 are not suppliers in terms of section 2(n) of the Act.
(ii) provisions of the Act, 2006 are not applicable to the supplies made by the respondent Nos.2 prior to the enforcement of the Act.
(iii) claim/s made by the respondent Nos.2 is/are barred by limitation in terms of the provisions of the Limitation Act, 1963.
(iv)The award impugned passed by the Council under the provisions of the Act, 2006 is being without jurisdiction, writ petition is maintainable.
(v) Respondent No.1 not being a proper and necessary party to the proceedings, liability fastened jointly and severally on the respondent No.1 cannot be substantiated.
In the result, writ petitions are allowed.
The impugned order/award passed by the respondent No.3 in case Nos.1, 2 and 3/2009 are quashed.
Sd/- JUDGE Nc/Dvr: