# M/S Cummins Technologies India Private Limited, Pune v. Micro & Small Enterprises Facilitation Council,Kanpur & Ors

- **Citation:** (2020) 9 ILRA 460
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2020-03-03
- **Case number:** WRIT - C No. 7785 of 2020
- **Bench:** Sudhir Agarwal, Rajiv Misra
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-cummins-technologies-india-private-limited-pune-v-micro-small-enterprises-45972
- **Pages:** 17

## Headnote

A. Civil Law - Arbitration and Conciliation
Act,1996 - Section 80 & Micro Small and
Medium
Enterprises
Development
Act,2006-Section
18-Section
80
of
Act,1996 will not exclude MASEF Council
to act as Arbitrator-it will be contrary to
section 18(3) & 18(4) of MSMED Act,2006MASEF Council having acted as Conciliator
u/s 18(2) is not barred from working as
Arbitral Tribunal to arbitrate the dispute
u/s 18(3)-Since jurisdiction of MASEF
Council has been given overriding effect
by virtue of Section 18(4) and Section 24
which have to be given complete swing in
the area covered by the same. (Para 1 to
63)

B. Civil Law - Arbitration and Conciliation
Act,1996 - Section 80 - Incorporates a
salutary
principle
that
a
'Conciliator'
cannot act also as an Arbitrator when a
specific declaration has been made u/s
18(4) that MASEF Council shall have
jurisdiction to act as an Arbitrator. (Para 59
,60)
The petition is dismissed. (E-6)

List of cases cited: -

## Text

_Characters 0–39,878 of 57,775. This is a partial read: ask again with offset=39878 for what follows._

460 INDIAN LAW REPORTS ALLAHABAD SERIES
filed suit challenging the acquisition of
land. The suit was dismissed in 2001.
Thereafter, the writ petition was filed. This
Court referred to an earlier judgment in
State of Bihar v. Dhirendra Kumar (1995)
4 SCC 229 and observed: ( Ganpatibai v.
State of M.P. (2006) 7 SCC 508, SCC
p.510, para 9)

"9.
In
State
of
Bihar
v.
Dhirendra Kumar (1995) 4 SCC 229 this
Court had observed that civil suit was not
maintainable and the remedy to question
notification under Section 4 and the
declaration under Section 6 of the Act was
by filing a writ petition. Even thereafter the
appellant, as noted above, pursued the suit
in the civil court. The stand that five years
after the filing of the suit, the decision was
rendered does not in any way help the
appellant. Even after the decision of this
Court, the appellant continued to prosecute
the suit till 2001, when the decision of this
Court in 1995 had held that suit was not
maintainable."

25. In Swaran Lata v. State of
Haryana (2010) 4 SCC 532, the dismissal
of writ petition filed after seven years of
the publication of declaration and five
years of the award passed by the Collector
was upheld by the Court and it was
observed: (SCC p.535 para 11)

"11. In the instant case, it is not
the case of the petitioners that they had not
been aware of the acquisition proceedings
as the only ground taken in the writ petition
has been that substance of the notification
under Section 4 and declaration under
Section 6 of the 1894 Act had been
published in the newspapers having no
wide circulation. Even if the submission
made by the petitioners is accepted, it
cannot be presumed that they could not be
aware of the acquisition proceedings for
the reason that a very huge chunk of land
belonging to a large number of tenureholders had been notified for acquisition.
Therefore, it should have been the talk of
the town. Thus, it cannot be presumed that
the petitioners could not have knowledge of
the acquisition proceedings."

89. From the above mentioned
judgments, it is clear that there is a
consistent view that in case there is an
inordinate delay in approaching the Court
and when all steps taken in the acquisition
proceedings have become final, the Court
should be loath to quash the proceedings.

90. The facts discussed above show
that petitioners in this case are also guilty
of undue delay and laches creating an
irreversible situation, and delay and laches
being wholly unexplained, this is another
ground non-suiting the petitioners.

91. In the circumstances, we do not
find any merit in these writ petitions.
Dismissed accordingly.

92. Interim orders, if any, stands
vacated in all writ petitions.
----------
(2020)09ILR A460
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 03.03.2020

BEFORE

THE HON'BLE SUDHIR AGARWAL, J.
THE HON'BLE RAJIV MISRA, J.

WRIT - C No. 7785 of 2020

M/S Cummins Technologies India Private
Limited, Pune ...Petitioner
Versus
Micro & Small Enterprises Facilitation
Council,Kanpur & Ors. ...Respondents

Counsel
for
the
Petitioner:
9 All. M/S Cummins Technologies India Private Limited, Pune Vs. Micro & Small Enterprises
Facilllitation Council, Kanpur & Ors.
461
Sri Aditya Singh Parihar, Sri Himanshu
Kapoor, Sri Prateek Dhanda

Counsel for the Respondents:
C.S.C.

A. Civil Law - Arbitration and Conciliation
Act,1996 - Section 80 & Micro Small and
Medium
Enterprises
Development
Act,2006-Section
18-Section
80
of
Act,1996 will not exclude MASEF Council
to act as Arbitrator-it will be contrary to
section 18(3) & 18(4) of MSMED Act,2006MASEF Council having acted as Conciliator
u/s 18(2) is not barred from working as
Arbitral Tribunal to arbitrate the dispute
u/s 18(3)-Since jurisdiction of MASEF
Council has been given overriding effect
by virtue of Section 18(4) and Section 24
which have to be given complete swing in
the area covered by the same. (Para 1 to
63)

B. Civil Law - Arbitration and Conciliation
Act,1996 - Section 80 - Incorporates a
salutary
principle
that
a
'Conciliator'
cannot act also as an Arbitrator when a
specific declaration has been made u/s
18(4) that MASEF Council shall have
jurisdiction to act as an Arbitrator. (Para 59
,60)
The petition is dismissed. (E-6)

List of cases cited: -

1. Gujarat St.Petronet Ltd. Vs Micro & Small
Enterprises
Facilitation
Council
&
ors.,AIR
(2018) Bom.265

2. M/s Steel Authority of India Ltd.& anr.,AIR
(2012) Bom. 178

3. Principal Chief Engineer Vs M/s Manibhai &
Brothers, Ist App. No. 637 of 2016

4. Paper & Board Convertors. Vs U.P. St. Micro
& Small Enterprise,W.P. No. 24343 of 2014

5. Pal Mohan Electronics Pvt. Ltd. Vs The
Secy.,Deptt. Of Small Scale Industries &
ors.,(2019) 5 Kar.LJ 72

(Delivered by Hon'ble Sudhir Agarwal, J.
& Hon'ble Rajiv Misra, J.)

1.

Petitioner,
M/s
Cummins
Technologies India Private Limited, has
filed present writ petition under Article 226
of Constitution of India with a prayer to
issue a writ of Mandamus commanding
respondent-1,
i.e.,
Micro
and
Small
Enterprises
Facilitation
Council,
Directorate
of
Industries,
Kanpur
(hereinafter
referred
to
as
"MASEF
Council") to adjudicate and pass necessary
orders on petitioner's application dated
7.2.2020 filed under Section 16 of
Arbitration and Conciliation Act, 1996
(hereinafter referred to as "Act, 1996") and
refer Claim Petition No. 14 of 2018, raising
dispute between petitioner and respondent3, i.e., M/s Roots Cooling System Pvt. Ltd.
to an Institution, Centre or Arbitrator for
Arbitration under Act, 1996. In the
alternative, petitioner has also prayed that
this Court should declare that respondent-1,
i.e., MASEF Council has no jurisdiction to
entertain Claim Petition No. 14 of 2018,
raising a dispute between petitioner and
respondent-3 in terms of Section 80 of Act,
1996.

2. Facts in brief, as pleaded in writ
petition, are, that, petitioner is a Company
incorporated under Companies Act, 1956
(hereinafter referred to as "Act, 1956"),
validly existing and continuing under
Provisions
of
Companies
Act,
2013
(hereinafter referred to as "Act, 2013").
Petitioner is a Subsidiary Company and its
Holding Company is "M/s Cummins Inc".
462 INDIAN LAW REPORTS ALLAHABAD SERIES

3. Cummins Inc which is an
American Fortune 500 Company, has its
Headquarter at Columbus, Indiana, United
States. Holding Company is engaged in
designs, manufactures, and distribution of
Engines, Filtration and Power Generation
products. It has its presence approximately
in 190 countries and territories through a
network of more than 600 Companies. It
also own independent distribution through
approximately 6,000 dealers.

4. The present writ petition has been
filed by M/s Cummins Technologies India
Private Limited through Mr. Zoheb Hasan,
an Authorized Representative in terms of
Letter of Authority dated February 25,
2020.

5. Respondent-1 is Micro and Small
Enterprises
Facilitation
Council,
Directorate of Industries, Kanpur, which is
an executive arm of respondent-2, engaged
in discharging functions entrusted to it
under
Micro,
Small
and
Medium
Enterprises
Development
Act,
2006
(hereinafter referred to as "MSMED Act,
2006"). It acts for implementation of
Government
Policies
for
all
round
development of industries in State of U.P.

6. Respondent-2 is State of U.P.
through Chief Secretary, Department of
MSMED
and
Export
Promotion,
responsible for economic development of
State of Uttar Pradesh.

7.

Respondent-3
preferred
an
application under Section 18 of MSMED
Act, 2006 before respondent-1 seeking
recovery of Rs. 84,80,577/- (Principal
amount
Rs.40,61,228
+
interest
Rs.44,19,349), claiming it, a dispute
between parties as contemplated under
Chapter V of MSMED Act, 2006. Earlier
thereto, Conciliation proceedings were
initiated, which remained unsuccessful.
Petitioner also moved an application under
Section 16 of Act, 1996 on 7.2.2020,
praying that respondent-1 should refer the
dispute
between
parties
to
any
Institution/Arbitrator or Centre providing
alternate dispute resolution services for
Arbitration
on
account
of
lack
of
jurisdiction with respondent-1 to act as an
Arbitrator for resolving the dispute between
parties in the light of Section 80 of Act,
1996, which has not been adjudicated upon
by respondent-1 on the last date of hearing
i.e. 17.02.2020, despite the fact that
jurisdiction issue goes to the root of the
matter and was expressly pressed by
petitioner on 17.02.2020. Respondent-1
even did not issue notice and call for reply
from respondent-3, thereby acting in
complete derogation of the mandate of
Section 16 of Act, 1996.

8. The case set up by petitioner is that
after
respondent-1
has
attempted
to
conciliate between parties, it cannot act as
an 'Arbitrator' for adjudication of the
dispute. Reliance is placed on Section 18 of
MSMED Act, 2006 and Section 80 of Act,
1996.

9. The short question up for
consideration is, "whether respondent-1 can
adjudicate the dispute between parties as an
'Arbitrator' or it has no such jurisdiction?"

10. Record shows that M/S Cummins
Technologies India Private Limited is a
private Company incorporated under Act,
1956. It is registered as a Small Enterprise
under provisions of MSMED Act, 2006
with
Director
of
Companies,
Noida,
Gautam Budha Nagar, Uttar Pradesh and
allotted Entrepreneur No. 09/010/12/03128
dated 29.09.2009. It is also registered with
9 All. M/S Cummins Technologies India Private Limited, Pune Vs. Micro & Small Enterprises
Facilllitation Council, Kanpur & Ors.
463
District Industries Centre, Noida, U.P.,
Gautam Budha Nagar (hereinafter referred
to as "DIC"), under Small Scale Industy
vide
Registration
No.20/78/3597/PMT/SSI/12
dated
08.12.2004. Recently under new scheme of
the State Government, respondent-3 is
registered
as
"Udyog
Aadhaar"
vide
Registration
No.UAN-UP28B0011387
dated 02.12.2017.

11. Respondent-3 was awarded a
work supply contract for "Supply &
Installation of Ventilation System" for
QSK project at District Satara (State of
Maharashtra), as per requirement of M/S
Cummins
Technologies
India
Private
Limited, SEZ Unit, Plot No. B3-1, Village
Surwadi Nandal, Talphaltan, District Satara
(State of Maharashtra). Respondent-3 was
given multiples orders for supply and
services. The cost of basic work was Rs.
407.62 Lacs (i.e. Supply Rs. 380.49 Lacs
and Services Rs.27.13 Lacs) (Excluding
Duty and Taxes), in view of work orders
dated
10.12.2012,
23.09.2013
and
15.01.2016 as amended from time to time.
Respondent-3 supplied all the materials and
executed job within time. It claimed to
have violated no condition of Work Order.
Time to time invoices were raised but a
sum of Rs. 40,61,227.55/- has remained
outstanding,
besides
interest
thereon.
Claiming Rs.40,61.227.55 as principal
amount
and
Rs.44,19,349/-
towards
interest,
respondent-3
filed
an
Application/Claim Petition under Section
18
of
MSMED
Act,
2006,
dated
09.02.2018 before respondent-1 claiming
that petitioner is liable to pay the aforesaid
claim under Sections 16 and 17 of MSMED
Act, 2006 and claim is maintainable before
respondent-1 since buyer is located within
India as per Section 18(4) of MSMED Act,
2006.

12. Respondent-1 after receiving
claim, issued notice to petitioner requiring
it to submit reply. By order dated
27.02.2018 it also called upon parties for
settlement. Consequently, notices were
issued by respondent-1 vide letter dated
05.04.2018
to parties
to
appear
on
17.04.2018 for settlement. Respondent-1 on
17.04.2018 passed following order:

"mDr
lUnHkZ
vkt
fnukad
17&04&2018 dks dkSafly ds le{k lqyg gsrq
izLrqr fd;k x;kA vkosnd i{k dh vksj ls Jh
jkethou] vf/kd`r izfrfuf/k ,oa foi{kh dh vks ls
Jh fgeka'kq diwj] vius odkyrukek ds lkFk
mifLFkrA i{kdkjksa }kjk voxr djk;k x;k fd
muds e/; lqyg le>kSrs dh okrkZ py jgh gSA

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Hkqxrku dk fookn fu?kkZfjr le; ls vkilh lqyg
ls djrs gq, dkmfUly dks voxr djkuk
lqfuf'pr djsaA vU;Fkk i{kdkjksa ds e/; lqyg
le>kSrk u gksus n`f"Vxr vkfcZV~s'ku ,.M
dUlhfy;s'ku ,DV&1996 dh /kkjk 76 ds
izkfo/kkukuqlkj lUnHkZ esa py jgh lqyg dh
dk;Zokgh Lor% lekIr ekuh tk;sxhA i{kdkjksa }kjk
lUnHkZ lqyg ls fuLrkfjr u fd;s tkus dh fLFkfr
esa lUnHkZ vkxkeh cSBd esa vkfcZV~s'ku ls fuLrkfjr
fd;s tkus gsrq lwphc) fd;k tk;sA bl vkns'k
dh izekf.kr izfr i{kdkjksa dks bZ&esy@ LihM
iksLV
ls
izsf"kr
dh
tk;sA^^
(Emphasis added)

13. On 29.08.2018, a notice was
issued
to
petitioner
by
respondent-1
directing it to make payment within 15
days from date of receipt of notice, failing
which
reference/petition
filed
by
respondent-3 shall be registered. The
parties could not settle the matter, hence
vide order dated 16.09.2019 respondent-1
directed petitioner to file objection/written
statement, so that matter may be decided on
464 INDIAN LAW REPORTS ALLAHABAD SERIES
merits as per provisions of MSMED Act,
2006.

14. Petitioner filed its objection/reply
dated
19.10.2019.
It
also
filed
an
application/petition
dated
01.02.2020,
requesting respondent-1 to refer the dispute to
any Institution/Arbitrator or Centre providing
alternate dispute resolution services in terms of
Section 18(3) of MSMED Act, 2006
observing that since MASEF Council itself
has conducted conciliation proceedings, it is
prohibited from acting as Arbitrator by virtue
of Section 80 of Act, 1996. It is this
application, on which no order has been
passed by respondent-1, hence present writ
petition has been filed stating that respondent1 is disqualified to proceed to adjudicate
dispute as an 'Arbitrator' and instead it has to
refer dispute to another body.

15. Heard Sri Himanshu Kapoor and
Sri Prateek Dhanda, Advocates, appearing
for petitioner and learned Standing Counsel
representing respondent no.2.

16. The question raised before this
Court is "whether MASEF Council can act
as 'Arbitrator' for adjudication of dispute
between the parties or it is obliged to refer
the matter to another body and cannot
decide on its own ?"

17. A pure legal question has been
raised, therefore, with the consent of
counsel for petitioner and learned Standing
Counsel appearing for respondent-2, we
proceed to decide writ petition finally at the
stage of admission.

18. For promoting and developing
and also enhancing competitiveness of
Micro, Small and Medium Enterprises,
since there was no statutory provisions
dealing with the problem in detail;
MSMED Act, 2006 was enacted by
Parliament and came into force on
02.10.2006.

19. The Statement of Object and
Reasons show that "Small Scale Industry" was
defined by Notification issued under 11(b) of
Industries Development and Regulation Act,
1951 (hereinafter referred to as "IDR Act,
1951"). Section 29-B of IDR Act, 1951
provided for notifying reservation of items for
excluding manufacture in Small Scale Industry
Sector. Besides above, there existed no legal
framework to deal with the Small Scale
Industry Sector, which played major role in
the economic of the Country. Time to time
need for a comprehensive Central enactment
to provide an appropriate legal framework in
the sector to facilitate its growth and
development was felt necessary, particularly,
when in many other Countries, similar Statutes
were already framed.

20. Keeping with the pace of
globalization and showing due concern for
the development of Small and Medium
Enterprises, MSMED Act, 2006 was enacted
with an intention to provide Statutory
definition of "Small Enterprises and Medium
Enterprises"; for establishment of a National
Small and Medium Enterprise Board, High
Level Forum consisting Stake Holders for
participative
revenue
and
making
recommendations
on
the
policies
and
programmes for development of Small and
Medium Enterprises; for classification of
Small and Medium Enterprises on the basis
of investment in planned machinery or
equipment and establishment of an Advisory
Committee to recommend in the related
matter; empower Central Govt. to notify
programmes, guidelines or instructions for
facilitating promotion and development and
enhancing competitiveness of Small and
Medium Enterprises; to empower State Govt. to
9 All. M/S Cummins Technologies India Private Limited, Pune Vs. Micro & Small Enterprises
Facilllitation Council, Kanpur & Ors.
465
specify by notification that provision of Labour
Laws specified in Clause 9(2) will not apply to
Small and Medium Enterprise employing up to
50 employees with a view to facilitate
upgradation of Small Enterprises into Medium
Enterprises; make provisions for ensuring timely
smooth flow of credit to Small and Medium
Enterprises to minimize the instances of sickness
amongst
the
industries
and
enhance
competitiveness
of
such
Enterprises
in
accordance with guidelines or instructions of
Reserve Bank of India (hereinafter referred to as
"RBI");
empowers
Central
and
State
Governments to notify preference policies in
respect of procurement of goods and service
products of profits by Small Enterprises by the
Ministry/Department
and
public
sector
enterprises; empower Central Govt. to create
fund or funds for facilitating promotion and
development and enhancing competitiveness of
Small Enterprises and Medium Enterprises; to
prescribe harmonious example of stream line
procedures for inspection of Small and Medium
Enterprises under Labour Laws enumerated in
Clause-15 having regard to the need of
permitting self registration or self certification by
such enterprise; prescribe for maintenance of
records and filing of return of Small and Medium
Enterprises with a view to reduce multiplicity of
even overlapping type return be filed; and further
improvement in interest of delayed payments to
Small Scale Ancillary undertaking Act, 1993 and
making that enactment part of proposed
legislature and to repeal that enactment.

21. The term "Board" has been
defined in Section 2(c) of MSMED Act,
2006 and it reads as under :-

(c)"Board" means the National
Board for Micro, Small and Medium
Enterprises established under section 3;

22. Other relevant terms defined in
Section 2 are, 'Buyer', 'Enterprise', 'Medium
Enterprise',
'Micro
Enterprise',
'Small
Enterprise' and 'Supplier' and the relevant
provisions of MSMED of Act, 2006
defining above terms in clauses (d), (e), (g),
(h), (m), and (n) read as under:-

(d) "Buyer" means whoever buys
any goods or receives any services from a
supplier for consideration;

(e)
"Enterprise"
means
an
industrial undertaking or a business
concern or any other establishment, by
whatever name called, engaged in the
manufacture or production of goods, in any
manner, pertaining to any industry pacified
in the First Schedule to the Industries
(Development and Regulation) Act/ 1951 or
engaged in providing or rendering of any
service or services;

(g) ''Medium Enterprise" means
an enterprise classified1aS such under subclause (ii) of clause (a) or sub-clause (iii)
of clause (b) of sub-section (1) of section 7;

(h) "Micro Enterprise" means an
enterprise classified as such under subclause (1) of clause (a) or sub-clause (1) of
clause (b) of sub-section (1) of section 7;

(m) "Small Enterprise" means an
enterprise classified as such under subclause (it) of clause (a) or sub-clause (ii) of
clause (b) of sub-section (1) of section 7;

(n) "Supplier" means a micro or
small
enterprise,
which
has
filed
a
memorandum with the authority referred to
in sub-section (1) of section 8, and includes,

23.

Section
3
provides
for
establishment
of
Board
by
Central
Government by Notification known as
"National Board for Micro, Small and
Medium Enterprises" (hereinafter referred
to as "NBMSME"). Head office of the
Board is to be at Delhi. Constitution of the
Board is provided in Section 3(3), which
we are skipping for the time being.
466 INDIAN LAW REPORTS ALLAHABAD SERIES

24. Functions of the Board are
provided in Section 5, which reads as
under:-

"5. Functions of Board - The
Board shall, subject to the general
directions of the Central Government,
perform all or any of the following
functions, namely:-

(a) examine the factors affecting
the promotion and development of micro,
small and medium enterprises and review
the policies and programmes of the Central
Government in regard to facilitating the
promotion and development and enhancing
the competitiveness of such enterprises and
the impact thereof on such enterprises;

(b) make recommendations on
matters referred to in clause (a) or on any
other matter referred to it by the Central
Government which, in the opinion of that
Government, is necessary or expedient for
facilitating the promotion and development
and enhancing the competitiveness of the
micro, small and medium enterprises; and

(c)
advise
the
Central
Government on the use of the Fund or
Funds constituted under section 12."

25. With regard to delayed payment
of Micro and Small Enterprises, Chapter 5
contains Sections 15 to 25, imposing an
obligation upon Buyer to pay. It also
provide an adjudicatory forum in case of a
dispute between Buyer and Supplier.

26. Section 15 deals with liability of
buyer to make payment; Section 16
provides the date from which rate of
interest is payable; Section 17 makes the
buyer liable to pay amount with interest for
any goods or services rendered by Supplier
and Section 18 deals with 'Reference' a
dispute
for
adjudication
to
MASEF
Council.

27. Section 18 is relevant in the
present writ petition and is reproduced as
under:

"18. Reference to Micro and
Small Enterprises Facilitation Council -

(1) Reference : Notwithstanding
anything contained in any other law for
the time being in force, any Party to a
dispute may, with regard to any amount
due. under section -17, make a reference
to the Micro and Small Enterprises
Facilitation Council.

(2) Conciliation : On receipt of a
reference
under
sub-section
(1),
the
Council
shall
either
itself
conduct
conciliation in the matter or seek the
assistance of any institution or centre
providing alternate
dispute
resolution
services by making a reference to such an
institution
or
centre,
for
conducting
conciliation and the provisions of Sections
65
to
81
of
the
Arbitration
and
Conciliation Act, 1996 shall apply to such
a dispute as if the conciliation was
initiated under Part Ill of that Act.

(3) Arbitration : Where the
conciliation initiated under sub-section (2)
is not successful and stands terminated
without
any
settlement
between
the
parties, the Council shall either itself take
up the dispute for arbitration or refer it to
any
institution
or
centre
providing
alternate dispute resolution services for
such arbitration and the provisions of the
Arbitration and Conciliation Act, 1996 (26
of 1996) shall then apply to the dispute as
if the arbitration was in pursuance of an
arbitration agreement referred to in subsection (1) of section 7 of that Act.

(4) Notwithstanding anything
contained in any other law for the time
being in force, the Micro and Small
Enterprises Facilitation Council or the
centre
providing
alternate
dispute
9 All. M/S Cummins Technologies India Private Limited, Pune Vs. Micro & Small Enterprises
Facilllitation Council, Kanpur & Ors.
467
resolution services shall have jurisdiction
to act as an Arbitrator or Conciliator
under this section in a dispute between the
supplier located within its jurisdiction and
a buyer located anywhere in India.

(5) Every reference made under
this section shall be decided within a
period of ninety days from the date of
making such a reference." (Emphasis
added)

28. Composition of MASEF Council
is provided in Section 21 of MSMED Act,
2006. The aforesaid Council is to be
established by State
Government by
Notification as provided in Section 20.
Both Sections 20 and 21 read as under:

"20. Establishment of Micro and
Small Enterprises Facilitation Council -
The
State
Government
shall,
by
notification, establish one or more Micro
and
Small
Enterprises
Facilitation
Councils, at such places, exercising such
jurisdiction and for such areas, as may be
specified in the notification."

"21. Composition of Micro and
Small Enterprises Facilitation Council -
(1) The Micro and Small Enterprises
Facilitation Council shall consist of not
less than three but not more than five
members to be appointed from amongst the
following categories, namely:-

(i) Director of Industries, by
whatever name called, or any other officer
not below the rank of such Director, in the
Department of the State Government
having administrative control of the small
scale industries or, as the case may be,
micro, small and medium enterprises; and

(ii) one or more office-bearers or
representatives of associations of micro or
small industry or enterprises in the State;
and

(iii) one or more representatives
of banks and financial institutions lending
to micro or small enterprises; or ·

(iv) one or more persons having
special knowledge in the field of industry,
finance, law, trade or commerce.

(2) The person appointed under
clause (i) of sub-section (1) shall be the
Chairperson of the Micro and Small
Enterprises Facilitation Council.

(3) The composition of the Micro
and Small Enterprises Facilitation Council,
the manner of filling vacancies of its
members and the procedure to be followed
in the discharge of their functions by the
members shall be such as may be
prescribed by the State Government."

29. Section 24 says that Sections 15
to 23 shall have effect notwithstanding
anything contained in any other law for the
time being in force and this provision is
also of utmost importance in this petition,
hence reproduced as under:-

"24.
Overriding
effect
-
The,provisions of sections 15 to 23 shall
have effect notwithstanding anything
inconsistent therewith contained in any
other law for the time being in force."
(Emphasis added)

30. Act, 1996 was enacted to
consolidate and amend the laws relating to
domestic
arbitration,
international
commercial arbitration and enforcement of
foreign arbitral awards as also to define the
law relating to conciliation and for matters
connected therewith or incidental thereto.
The Scheme of Act shows that it has four
Parts; i.e. Part-I dealing with Arbitration;
Part-II dealing with Enforcement of Certain
Foreign Awards; Part-III Conciliation and
Part-IV having Supplementary Provisions.
468 INDIAN LAW REPORTS ALLAHABAD SERIES

31. Part-I is further divided in ten
Chapters, while Part-II has two Chapters
and Part-III and IV have no Chapters
separately.

32. Part-I, Chapter-I has Sections 2 to
6; Chapter-II has Sections 7 to 9; Chapter-III
contains Sections 10 to 15; Chapter-IV has
Sections 16 and 17; Chapter-V has Sections
18 to 27; Chapter-VI deals with Sections 28
to 33; Chapter-VII has single Section, i.e., 34;
Chapter-VIII deals with Sections 35 and 36;
Chapter-IX has single Section 37 and
Chapter-X has within its ambit Sections 38 to
43. Similarly, Part-II Chapter-I deals with
Sections 44 to 52 and Chapter-II deals with
Sections 53 to 60. Part-III deals with Sections
61 to 81 and Part-IV deals with Sections 82
to 86. There are three Schedules appended to
Act, 1996. The First Schedule deals with
"Convention
on
the
Recognition
and
Enforcement of Foreign Arbitral Awards".
The Second Schedule deals with "Protocol on
Arbitrations Clauses" and Third Schedule
deals with "Convention of the Execution of
Foreign Arbitral Awards". Further details of
Act, 1996, we propose to consider at later
stage whenever it would be appropriate.

33. Now reverting back to MSMED
Act, 2006, we propose to deal with Section
18 threadbare to find out the scope and
ambit of aforesaid provision and the extent
to which provisions of Act, 1996 have been
made applicable thereto or are superseded
by MSMED Act, 2006 due to "nonobstante" clause contained in Section 18(1)
and (4) as also Section 24.

34. Interestingly, we find that there
are two sub-sections in Section 18 which
commences with non-obstante clause.

35. First of all Sub-section (1) of
Section 18 commences with non-obstante
clause. It says that irrespective of anything
contained in any other law for the time
being in force, any party to a dispute with
regard to any amount due under Section 17
can make a Reference to MASEF Council.
It confers a right upon a party, who is
entitled to claim certain amount under
Section 17, which is not being paid by
other party, who is liable to pay, to raise
dispute by making a Reference to MASEF
Council. The right under Section 17 talks
of right of Supplier to claim payment in
respect of goods supplied and services
rendered and also lays a corresponding
obligation upon buyer that he is liable to
pay such amount as due, to Supplier along
with interest which is to be computed as
per Section 16 of MSMED Act, 2006. This
right of making a Reference has been given
an overriding effect on any contrary
available law.

36. When a Reference is made under
sub-section (1) of Section 18; then subsection-(2) provides procedure, which shall
be followed by MASEF Council. Subsection (2) of Section 18 of MSMED Act,
2006 shows that Council either shall itself
proceed with the Reference by conducting
'Conciliation' in the matter or seek
assistance of any Institution or Centre
providing
alternate
dispute
resolution
services. Where such assistance is sought
by MASEF Council from any Institution or
Centre, it shall make a 'Reference' to such
Institution
or
Centre
for
conducting
Conciliation.

37. Therefore, sub-section (2) of
Section 18 leaves it open to discretion of
MASEF Council to either itself proceed on
the
Reference
by
first
conducting
Conciliation or refer the matter to an
Institution or Centre providing alternate
dispute resolution services to conduct
9 All. M/S Cummins Technologies India Private Limited, Pune Vs. Micro & Small Enterprises
Facilllitation Council, Kanpur & Ors.
469
Conciliation. In either case, Reference
made under sub-section (1) shall first
proceed for conciliation and when such
Conciliation is proceeded, for the purpose
of procedure, Sections 65 to 81 of Act,
1996 shall apply as if conciliation was
initiated under Part-III of Act, 1996. As we
have already said, Part-III of Act, 1996
deals with 'Conciliation'. It takes into its
ambit Sections 61 to 81. For the purpose of
sub-section (2), entire Part-III has not been
made applicable and it is only Sections 65
to 81, which have been made applicable by
virtue of sub-section (2) of Section 18 of
MSMED Act, 2006. The obvious reason is
that
these
provisions deal
with
the
procedure for Conciliation after application
for Conciliation is made and Conciliators
are appointed under Act, 1996. This
procedure has been applied by conciliation
which is to be made under Section 18(2) of
MSMED Act, 2006. This is called
legislation by Reference. Sections 65 to 81
of Act, 1996 have been made applicable for
conciliation
under
Section
18(2)
of
MSMED Act, 2006 by making provision of
Act, 1996 applicable by legislative reforms.

38. Section 61 of Part-III of Act, 1996
deals with the "Application and scope" of
Part-III. It says that save as otherwise
provided by any law for the time being in
force and unless the parties have otherwise
agreed, Part-III shall apply to conciliation
of disputes arising out of legal relationship,
whether contractual or not and to all
proceedings relating thereto. Sub-section
(2) further says that if under some other
law for the time being in force certain
disputes are not to be submitted to
conciliation then Part-III shall not be
applicable. Part-III in general, on its own
has application subject to any other law and
also to the extent, parties have not agreed
otherwise. It saves the procedure, otherwise
provided, under any law or by parties by
mutual agreement and subject to that only,
Part-III of Act, 1996 is applicable in
general. For the purpose of Section 18(3) of
MSMED Act, 2006, however, Section 61
has not been applied, therefore, the
subsequent procedure of Part III is not to be
read for the purpose of Section 18(3) of
MSMED Act, 2006.

39.

Section
62
deals
with
Commencement
of
conciliation
proceedings and provides that the party
initiating conciliation shall send to the
other party a written invitation to conciliate
under Part-III, briefly identifying the
subject of the dispute. As per sub-section
(2)
Conciliation
proceedings
shall
commence when the other party accepts in
writing the invitation to conciliate. If other
party refuses or rejects invitation, there will
be no conciliation proceedings. Sub-section
(4) deals with situation where other party
fails to submit reply either way. In such a
case, after thirty days from the date on
which invitation was sent by one party, it
shall have an election either to treat failure
of reply as ''rejection of invitation' and if he
so elects, information shall be given to
other party. Then Section 63 deals with
number of conciliators providing that one
conciliator is mandatory but if the parties
so agree there may be 2 or 3 conciliators.
Section 64 deals with appointment of
'Conciliators'. These provisions of Act,
1996 have also not been made applicable
for conciliation under Section 18(2) of
MSMED Act, 2006.

40. Sections 61 to 64 have not been
made
applicable
to
the
Conciliation
proceedings as contemplated in Section
18(2) of MSMED Act, 2006 for the reason
that when a Reference is made, MASEF
Council shall proceed with the conciliation
470 INDIAN LAW REPORTS ALLAHABAD SERIES
either itself or refer the matter to an
Institution or Centre and therefore, stage up
to appointment of 'Conciliator' is already
covered by Section 18 sub-sections (1) and
(2). That is why, only further procedure
provided under Sections 65 to 81 has been
made applicable for Conciliation under
Section 18(2) of MSMED Act, 2006.
Sections 65 o 81 have been made applicable
by Section 18(2) of MSMED Act, 2006 with
respect to Conciliation as contemplated under
sub-section (2) and not for arbitration
contemplated by sub-section (3). Therefore,
applicability of Sections 65 to 81 will be
confined only to the Conciliation proceedings
under Section 18(3) and not beyond that.

41. Sub-section (3) will come into
operation when Conciliation initiated under
sub-section (2) remains unsuccessful and
stands terminated without any settlement
between the parties. Meaning thereby,
when parties fail to reach to a settlement in
the Conciliation proceedings under subsection (2) the conciliation proceedings
shall stand terminated. Then next stage of
arbitration will arise. For this purpose, subsection (3) provides the method that
arbitration can be taken up by MASEF
Council itself or it may refer it to any
Institution or Centre providing alternate
dispute resolution services. Here also we
find that sub-section (3) of Section 18 of
MSMED Act, 2006 empowers MASEF
Council to itself act as an 'Arbitrator' to
take up the arbitration and adjudicate or it
may refer the same to be adjudicated by
any
Institution
or
Centre
providing
alternate dispute resolution services.

42. For such arbitration, whether
taken up by Council itself or referred to any
Institution or Centre, for the purpose of
procedure, the entire Act, 1996 has been
made applicable as if arbitration was
pursuant to an arbitration agreement
referred to in Section 7 of Act, 1996. Subsection (4) re-enforces and makes the
authority to enter upon the arbitration. Subsection (3) is made mandatory by providing
that notwithstanding anything provided in
any other law otherwise, MASEF Council
itself or Centre or Institution providing
alternate dispute resolution services shall
have jurisdiction to act as an 'Arbitrator' or
'Conciliator' under Section 18 in a dispute
between 'Supplier' located within
its
jurisdiction and a 'Buyer' located anywhere
in India, Therefore in the contingencies
referred to in sub-section 4 of Section 18 of
MSMED Act, 2006, jurisdiction to act as
arbitrator has been conferred upon Council
as well as an Institution, as the case may
be. This provision prevails over any
otherwise provision in any other law. The
only condition to attract sub-section (4) is
that
Supplier
is
located
within
the
jurisdiction of the Council or the Institution
or Centre, which enter upon the dispute as
an Arbitrator and Buyer is located in India.

43. Even otherwise, by virtue of
Section 61 of Act, 1996 the provisions of
Part-III would be applicable so long as
otherwise it is not provided by any other
law or parties have decided or agreed and
therefore, the provisions of Part-III will not
prevail over otherwise provisions of
MSMED Act, 2006 and, on the contrary,
will have to sub-serve and surrender to the
provisions of MSMED Act, 2006.

44. In the present case, it is not in
dispute that respondent-3 is Supplier and he
is located in the jurisdiction of MASEF
Council and petitioner, the Buyer, is
located in State of Maharashtra, satisfying
the requirement of sub-section (4) of
Section-18 so as to make it applicable in
case in hand.
9 All. M/S Cummins Technologies India Private Limited, Pune Vs. Micro & Small Enterprises
Facilllitation Council, Kanpur & Ors.
471

45. Both sub-sections 3 and 4 of
Section 18 of MSMED Act, 2006, when read
together, even otherwise, make it abundantly
clear and mandatory that MASEF Council, if
itself has entered into dispute as an
Arbitrator, it shall have jurisdiction to do so
and if it refers the matter to any Institution or
Centre that will also have jurisdiction
irrespective of otherwise law provided in any
other Statute and that will also override
Section 80 of Act, 1996.

46. Moreover, Section 80 of Act,
1996 by virtue of Section 61 of said Act,
cannot override provisions of MSMED
Act, 2006 and therefore, it cannot be said
that Section 80 of Act, 1996 will exclude
MASEF Council to act as Arbitrator, since
it has been Conciliator in the dispute and
arbitration therefore cannot be proceeded
by it. This argument in fact suppresses and
goes contrary to what has been specifically
provided in Section 18(3) and (4) of
MSMED Act, 2006.

47. When read conjointly Section 24 is
further clarificatory and fortifies what we have
said earlier. Again it provides that Sections 15
to 23 of MSMED Act, 2006 shall have effect
over any otherwise law. This is an overall
overriding effect given by Section 24 to
Section 18 of MSMED Act, 2006 and in that
view of matter Section 18 of MSMED Act,
2006 cannot be read so as to render
subordinate to Section 80 of Act, 1996. The
counsel for petitioner advancing argument
otherwise, in our view, is not correct and the
same is accordingly rejected.

48. Now we proceed to consider the
authorities relied by counsel for petitioner
in support of his submissions.

49. The first is a Division Bench
judgment of Bombay High Court in
Gujarat State Petronet Ltd. Vs. Micro
and
Small
Enterprises
Facilitation
Council and others, AIR 2018 Bom. 265.
Therein M/s Gujarat State Petronet Ltd.
(hereinafter referred to as "GSPL") floated
a
tender
for
supply,
installation,
construction, testing, commissioning and
development of Fire Fighting System at its
gas receiving station in June, 2007. Several
bidders including respondent-3 participated
in the tender process and upon evaluation
of
bids,
respondent-3
was
declared
successful bidder. Work Order/Purchase
Order was issued. After completion of
work, there arose a dispute regarding
completion of work, quality of work and
payment
of
money.
Respondent-3
approached MASEF Council by making a
Reference under Section 18(1) of Act, 2006
seeking payment of Rs.36,60,054.64/-.
GSPL filed its reply raising an objection
that MASEF Council has no jurisdiction to
try and entertain Reference in view of
Arbitration Agreement in the Purchase
Order.