# Marson's Electrical Indus v. Chairman, M.P. Electricity Board & Anr

- **Citation:** (2024) 1 ILRA 310
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-12-12
- **Bench:** Mahesh Chandra Tripathi, Prashant Kumar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/marson-s-electrical-indus-v-chairman-m-p-electricity-board-anr-50918
- **Pages:** 16

## Headnote

A. Civil Law - Arbitration and Conciliation
Act, 1996-Section 34-Micro, Small and
Medium
Enterprises
Development
Act,
2006-Section 18(1)- MSMED Act, 2006
being special Act will have overriding effect
over Arbitration and Conciliation Act, 1996judgment of commercial court which was
passed placing reliance on Clause 20 of
agreement wherein it was stated that only
courts at Jabalpur will have jurisdiction , is
incorrect-Since proceeding was initiated
under MSMED Act, 2006 and was filed
before Facilitation Council, Kanpur, hence
Commercial
court
Kanpur
will
have
jurisdiction
to
entertain
section
34
application-Parties to an arbitration have
an autonomy to decide not only on
procedural law to be followed but also on
substantive
law-Private
agreement
between

parties
cannot
obliterate
statutory
provisions-Once
statutory
mechanism under section 18(1) of MSMED
Act, 2006 is triggered by any party it would
override
any
agreement
entered
into
between parties-Commercial court has not
considered provisions of MSMED Act, 2006
and has held that only Courts at Jabalpur
would jurisdiction-impugned order is set
aside-Award passed by Facilitation Council
restored.(Para 45 to 48)

The appeal is allowed. (E-6)

List of Cases cited:

## Text

_Characters 0–39,936 of 54,194. This is a partial read: ask again with offset=39936 for what follows._

310 INDIAN LAW REPORTS ALLAHABAD SERIES
head under Section 3-G (7) (b) (c) and (d)
read with Section 28 and 29 of the LARA
Act of 2013 has not been appropriately
considered, hence, this also needs a re-look.

55. This Court in exercise of powers
under Section 37 of the Act of 1996 is not
empowered
to
enter
into
factual
methodology
for
computing
the
compensation nor can it correct the award.
If the the Court is not satisfied with the
orders impugned and the award it can set
aside the same and remit the matter for reconsideration.[See NHAI v. M. Hakeem
and Another (2021) 9 SCC 1 and P.
Nagaraju (supra).] Hence, the award and
the order of the District Judge in Section 34
of the Act of 1996 is not tenable and the
same is liable to be set aside.

56. Lastly, turning to the submission
of the learned counsel for the appellant
regarding non-payment of interest, this
Court finds that the interest has been
awarded from the date of notification under
Section 3-A of the Act of 1956 till the date
of award passed by the Competent
Authority and hence it cannot be said to be
bad. No statutory provision has been
pointed out under which the appellant can
get interest for a larger period than already
provided. Accordingly, this Court is not
inclined to accept the submission of the
learned counsel for the appellant for grant
of inadequate interest.

57. In view of the aforesaid, the
instant appeal is allowed. The judgment
passed
by
the
District
Judge dated
03.11.2022 in Civil Misc. Case No. 156 of
2018 and the award made by the Arbitrator
dated 23.03.2018 are set aside to the extent
as mentioned herein. The Arbitrator shall
re-determine the compensation afresh in
light of the observations made by this Court
including taking note of the relevant
clauses of the Collector's rate list and
relating provisions and its applicability
including considering the evidence already
produced and placed on record by the
parties and shall also take into account the
specific provision contained in Section 3-G
(7) (b) (c) & (d) of the National Highways
Act, 1956 along with Sections 28, Section
29 of the LARA Act of 2013 in respect of
the constructions as applicable to the
commercial
building
and
shall
also
determine whether the appellant is entitled
to damages as provided in the above quoted
provisions and for the aforesaid purpose,
aid shall be taken of the Collector's rate list
and
the
matter
be
decided
afresh,
expeditiously, preferably within a period of
six months from the date, a certified copy
of this order is placed before the Authority
concerned. It is clarified that the appellants
shall not be permitted to lead any fresh
evidence. Subject to the aforesaid, the
appeal shall stands allowed in the aforesaid
terms.
In
the
aforesaid
facts
and
circumstances, there shall be no order as to
costs. The records of the Court below shall
be returned forthwith.
----------
(2024) 1 ILRA 310
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 12.12.2023

BEFORE

THE HON'BLE MAHESH CHANDRA
TRIPATHI, J.
THE HON'BLE PRASHANT KUMAR, J.

Appeal U/s 37 of Arbitration & Conciliation Act
1996 No. 701 of 2023

Marson's Electrical Indus. ...Appellant
Versus
Chairman, M.P. Electricity Board & Anr.
 ...Respondents
1 All. Marson's Electrical Indus. Vs. Chairman, M.P. Electricity Board & Anr.
311
Counsel for the Appellant:
Sri Alok Kumar Yadav, Sri Shantanu Srivastava

Counsel for the Respondents:
Sri Varun Srivastava, Sri Aditya Khandekar

A. Civil Law - Arbitration and Conciliation
Act, 1996-Section 34-Micro, Small and
Medium
Enterprises
Development
Act,
2006-Section 18(1)- MSMED Act, 2006
being special Act will have overriding effect
over Arbitration and Conciliation Act, 1996judgment of commercial court which was
passed placing reliance on Clause 20 of
agreement wherein it was stated that only
courts at Jabalpur will have jurisdiction , is
incorrect-Since proceeding was initiated
under MSMED Act, 2006 and was filed
before Facilitation Council, Kanpur, hence
Commercial
court
Kanpur
will
have
jurisdiction
to
entertain
section
34
application-Parties to an arbitration have
an autonomy to decide not only on
procedural law to be followed but also on
substantive
law-Private
agreement
between

parties
cannot
obliterate
statutory
provisions-Once
statutory
mechanism under section 18(1) of MSMED
Act, 2006 is triggered by any party it would
override
any
agreement
entered
into
between parties-Commercial court has not
considered provisions of MSMED Act, 2006
and has held that only Courts at Jabalpur
would jurisdiction-impugned order is set
aside-Award passed by Facilitation Council
restored.(Para 45 to 48)

The appeal is allowed. (E-6)

List of Cases cited:

1. M/s Silpi Indus. Vs KSRTC (2021) SCC Online
SC 439

2. Edukanti Kistamma (Dead) thru LRs Vs 9.
Venkatareddy (Dead) thru LRS & ors. (2010) 1
SCC 756

3. Guj. St. Civil Supply. Corp. Ltd Vs Mahakali
Foods Pvt. Ltd. (2023) 6 SCC 401

4. Bharat Heavy Elec. Ltd Vs Vector Engg. Co.
(2021) SCC Online Mad 11701
5. Bajaj Auto Ltd Vs St. of Mah. (2022) AIR
Online BOM 1200

6. Konkan Rail Corp. Ltd Vs Chenab Bridge
Project Undertaking (2023) SCC Online SC 1020

7. Lion Engg. Consultants Vs St. of M.P. &
ors.(2018) 16 SCC 758

8. Vaishno Enterprises Vs Hamilton Medical AG
& anr.(2022) SCC Online SC 355

9. Dhule Municip. Corp. Vs Microvision Technos.
& anr. (2021) SCC Online Bom

(Delivered by Hon'ble Mahesh Chandra
Tripathi, J.)

1. Heard Sri Alok Kumar Yadav and
Sri Shantanu Srivastava, learned counsel
for the appellant and Sri Aditya Khandekar,
Advocate along with Sri Varun Srivastava,
learned counsel for the respondent.

FACTUAL MARTIX OF THIS
CASE

2. The appellant was engaged in the
business of manufacturing transformers of
various capacities. The appellant initially
was a Proprietorship Firm known as MEI
Power Private Limited. However, it was
registered as a Private Limited Company
with the name of Marsons Electrical
Industries but it is now changed to MEI
Power Private Limited.

3. The appellant has set up a small
scale manufacturing industry in Agra and
the same was acknowledged by the
Director of Industries as the "small scale
industry" and a certificate to that effect was
also issued on 9.2.1971. This certification
was given under the provisions of the
Industrial Development and Regulation
Act, 1951. The appellant claims that he has
312 INDIAN LAW REPORTS ALLAHABAD SERIES
been working as small scale industry since
then.

4. The Parliament in its wisdom in the
year 1993 had promulgated an Act called
'Interest on Delayed Payments to Small
Scale and Ancillary Undertakings Act,
1993' (hereinafter referred to as '1993
Act'). This Act was later on repealed and a
new Act known as 'Small Scale Industries
Act, 2006' was promulgated in the year
2006.

5. The appellant, who already had a
certificate of a small scale industry and
was running since 1971 as a small scale
industry, after the promulgation of the
new Act, applied for certificate, which
was issued to the appellant on 29.10.2007
as per the provisions of Micro, Small and
Medium Enterprises Development Act,
2006 (hereinafter referred to as 'MSMED
Act, 2006'). The appellant submitted that
the certificate issued in 2006 was actually
a continuation of the certificate issued in
1971. Later, the Central Government
again modified the rule for small scale
industries
and
all
the
small
scale
industries registered under the 2006 Act
were supposed to get a Udyog Adhaar
Number. The appellant applied for the
same and a fresh Udyog Adhaar Number
was issued on 10.5.2016. This Udyog
Adhaar Certificate clearly showed that it
was in continuation of the original
certificate of Small Scale Industry, which
was issued to the appellant on 9.2.1971.

6. A contract was entered into
between appellant and the respondent,
M.P. State Electricity Board. Thereafter,
various work orders had been issued to
the appellant for supply of transformers.
The details of the work orders are as
follows:-
S.
No
.
Dates
Work Order Numbers
1.
14-101993
06-01/Ord/14998
2.
03-031994
Extn. Order No.06-01/CE(S & P)/SE(PI)/EE(P-II)/15240
3.
10-021995
06-01/CE(S
&
P)/SEP-I/EEP-II/15719
Extn.15837
4.
11-011996
Extn. Order No.06-01/CE(S & P)/ORD/SEPI/EEP-II)/16266
5.
27-061996
06-01/CE(S&P)/ORD/SEP-I/EEP-III/16482
6.
10-091996
06-01/CE(S&P)/ORD/SEP-I/EEP-III/ExtnI/16551
7.
13-091996
06-01/CE(S&P)/ORD/SE(P-I)/EE(PII)/Extn.116575
8.
03-121998
06-01/CE(S&P)/ORD/SE(P-IV)/EE(PII)/17723
9.
10-111997
06-01/CE(S&P)/ORD/SEP-I/EEP-III)/Extn.-
I/17094
10. 03-071998
06-01/CE(S&P)/ORD/SEP-I/EEP-III)/ExtnII/17514
11. 22-081997
06-01/CE(S&P)/SE(P-IV)/ORD/SE(PI)/EE(P-II)/16957
12. 29-061998
6-01/CE(S&P)/SE(P-IV)/EE(P-II)/17458

7. The relevant clauses of the contract
are being reproduced hereinunder for ready
reference:-

Clause 8 laid down the mode of
payment, which reads as under:-

"8. TERMS OF PAYMENT:-

8.1 The supplier shall forward the
original RR/MTR and Excise gate pass
directly to consignee alongwith copies of
following documents:-

(i) A copy of bill

(ii) Delivery challan

(iii) Original copy of excise duty
gate pass alongwith photocopy

(iv) The inspection and or T.C.
approval

(v) Detailed packing list
1 All. Marson's Electrical Indus. Vs. Chairman, M.P. Electricity Board & Anr.
313

8.2 The original bills should be
forwarded to the paying authority and
should be marked "ORIGINAL". The bill
should indicate the Sales Tax Registration
Certificate Number and date allotted to him
under the Sales Tax Act.

8.3 The following documents will
have to be forwarded to the paying
authority alongwith bills in triplicate:-

(i) Bill/Invoice-Each invoice shall
carry the endorsement that there has been
no negative price variation in the month; in
the absence of this endorsement, it shall be
presumed that there has been negative
price variation in the month.

(ii) Xerox copy of despatch
documents i.e. RR/MTR.

(iii)
Inspection
and
Test
Certificate approval or despatch clearance.

(iv) Detailed packing list.

(v) Photocopy of Excise Duty
gate pass.

8.4
The
Material
Receipt
Certificate will be forwarded by the
consignee
to
the
paying
authority
alongwith certificate of payment of ED or
attested copy of ED Gate pass for payment
under intimation to the supplier towards
acknowledgement of receipt of material.

Clause
8.5
100%
payment
alongwith
excise
duty
and
taxes
corresponding to the consignment shall be
paid generally within 45 days after
acceptance of material at stores/site in
good
condition
against
MATERIAL
RECEIPT CERTIFICATE issued by the
consignees on direct basis and not through
bank.

(ii) For payment the invoice in
triplicate with relevant documents such as
Material Receipt Certificate in good
condition etc. should be submitted to the Sr.
AO(Bills), MPEB, Jabalpur for value more
than Rs.60,000/- and to concerned Sr.
A.O./RAO for bills upto Rs.60,000/- as the
case may be.

(iii) Price Variation claims, if
any, as per contract will be paid separately
on faithful completion of Contract after due
verification within reasonable time by
Sr.A.O.(Bills) on submission of necessary
documents.

Clause 14 laid down the arbitration
clause which is as under: ARBITRATION
:-

If, at any time, question of dispute
or difference whatever shall arise between
the Purchaser and the supplier upon, or in
relation to, or in connection with the
Contract, either party may forthwith give to
the other a notice in writing of the
existence of such question, dispute or
difference, and the same shall be referred
to the adjudication of two arbitrators, one
to be nominated by the Purchaser and the
other to be nominated by the supplier or in
the case if said arbitrators not agreeing,
then to .....adjudication of the Umpire to be
appointed by
the Arbitrators,
whose
decision shall be final and binding on the
parties and the provisions of the Indian
Arbitration Act 1940, and of the rules
thereunder and any statutory modification
thereof shall be deemed to apply. The
arbitrators or the Umpire, as the case may
be, are bound to give a detailed speaking
award assigning reasons for the findings.

Supplies under the contract shall
be continued by the Contractor during the
arbitration proceedings, unless otherwise
directed in writing by the Purchaser or
unless the matter is such that the work
cannot possibly be continued until the
decision of the arbitrators or of the
Umpire, as the case may be, is issued.

Clause
20
laid
down
the
jurisdiction clause which is as under:

20. JURISDICTION:-
314 INDIAN LAW REPORTS ALLAHABAD SERIES

Any dispute or difference, arising
under, out of, or in connection with this
tender/contract order shall be subject to
exclusive jurisdiction of competent court at
Jabalpur only.

8. The appellant as per work order
given by the respondent had supplied the
goods in 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 on 23.8.1999,
1.9.1999, 11.9.1999, 16.10.1999 and
30.10.1999 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 1993
Act. On demand of the interest made by
the
appellant,
the
appellant
was
blacklisted by the respondents. Feeling
aggrieved
by
the
blacklisting,
the
appellant filed a writ petition before
Jabalpur High Court. The same was
numbered as Writ Petition No.742 of
2008, which is still pending before
Jabalpur High Court.

9. However, on 22.1.2000 the State
of U.P. had notified establishment of U.P.
Industry Facilitation Council at Kanpur
(hereinafter referred to as 'Council'),
which was under the 1993 Act. When the
appellant felt that the respondent 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 and
the same was numbered as Claim Petition
No.25 of 2001 before the Council at
Kanpur for payment of the interest on the
delayed payment made by the opposite
party, as per the provisions of 1993 Act.

10. This claim petition was contested
by the respondent by filing a preliminary
objection. During pendency of the claim
petition an offer was made by the
respondent that in case the appellant enters
into a compromise the claim of the
appellant would be considered by the
respondent. The same would be considered
only after the appellant withdraws the
claim
petition
and
only
then
the
respondents would be ready to negotiate.
Having fallen for the bait of compromise,
as suggested by the respondent, the
appellant made an application on 17.5.2002
for withdrawal of the claim petition.
However, no order was passed on the said
withdrawal application and the same
remained pending. During the pendency of
this application, the MSMED Act, 2006
was enacted, which repealed and replaced
the earlier Act of 1993. Since, respondent
neither honoured the compromise nor
settled the account, so the appellant was
left with no other alternative, but to again
make an application on 19.12.2006 before
the Council to restart the proceedings of
aforesaid claim petition. On 19.6.2007, the
Facilitation Council, established under the
MSMED Act, 2006, rejected the claim
petition filed before the erstwhile Council
under the 1993 Act, however, giving liberty
to the appellant to file a fresh claim before
the newly established Facilitation Council
under the MSMED Act, 2006. Accordingly,
the appellant preferred a fresh claim
application
on
31.7.2007
before
the
Facilitation Council requesting to restart
the proceedings of the said claim. The
respondent opposed the petition on the
ground that, once the order dated 19.6.2007
was passed, the Council cannot reopen and
restart the proceedings. This objection was
rejected by the Council vide its order dated
4.2.2008 and the Council proceeded with
the matter on merits and asked the
1 All. Marson's Electrical Indus. Vs. Chairman, M.P. Electricity Board & Anr.
315
respondents to file a reply. The matter was
heard by the Council on various dates and
both the parties appeared before the
Council. After considering the evidence on
record and the arguments advanced by the
parties, the Facilitation Council passed an
award on 2.7.2009, which was signed on
9.7.2011 and published on 3.2.2012.

11. The respondents herein being
aggrieved by the award dated 2.7.2009,
which was signed on 7.9.2011 and
published on 3.2.2012, challenged the same
by filing an application under Section 34 of
the Arbitration and Conciliation Act, 1996
(hereinafter referred to as 'Act, 1996')
before the District Judge, Kanpur Nagar.
This was registered as Arbitration Case
No.76/70/12, which was transferred to the
Commercial Court, Kanpur when the
Commercial Court was established. In
response to this Section 34 application, the
appellant herein had filed his reply
submitting therein that the
appellant
submitted that as per Section 19 of the
MSMED Act, 2006, the respondent was
supposed to deposit 75% of the awarded
amount, which was thereafter deposited by
the respondent out of which the appellant
was allowed to withdraw 65% of the
amount (which was Rs.1.49 crores), which
the appellant did.

12. The Commercial Court vide its
order dated 23.6.2023 was pleased to allow
the Section 34 application filed by the
respondent on the ground of jurisdiction.
Aggrieved by which the appellant has filed
the instant appeal under Section 37 of the
Act, 1996.

13. The impugned order herein was passed
on the ground of jurisdiction. The learned
Commercial Court had come to the
conclusion
that
as
per
the
contract/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
Courts
having
jurisdiction of the place can only entertain a
petition. In this case, since the parties had
agreed that all the disputes would be
subject to the jurisdiction of Jabalpur
Court, hence the Commercial Court in
Kanpur would have no jurisdiction to
entertain such a case. The Court had further
held that the ground of jurisdiction was
raised before the Council but the Council
has given no finding on the jurisdiction. As
regards the second issue as to whether
award passed by the Council is liable to the
rejected, the Commercial Court has held
that the Council has passed an award
without considering that the agreement
between the parties clearly lays down that
Council has no jurisdiction to entertain
such claim, since, the claim was without
jurisdiction and hence the award passed by
the Council dated 2.7.2009, signed on
7.9.2011 and published on 3.2.2012, is
liable to be rejected and accordingly, the
same was rejected.

SUBMISSIONS OF APPELLANT

14. Learned counsel for the appellant
submits as follows:-

(a) The contract cannot prevail over
the provisions of the MSMED Act, 2006
and hence, the finding that the Court at
Jabalpur alone will have the jurisdiction, is
incorrect and will not be applicable for the
reasons that it had not considered the
provisions of Sections 2(b), 2(d) and 2(n)
of the MSMED Act, 2006. It also did not
consider the provisions of Section 15 of the
MSMED Act, 2006. Further it had also
316 INDIAN LAW REPORTS ALLAHABAD SERIES
failed to consider the provisions of Sections
18(1), 18(2) and 18(4) of the MSMED Act,
2006. The relevant provisions of the
MSMED Act, 2006 are being reproduced
hereunder for ready reference:-

"Section 2(b) "appointed day" means
the day following immediately after the
expiry of the period of fifteen days from the
day of acceptance or the day of deemed
acceptance of any goods or any services by
a buyer from a supplier.

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

(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,-

(i) the National Small Industries
Corporation, being a company, registered
under the Companies Act, 1956;

(ii)
the
Small
Industries
Development Corporation of a State or a
Union territory, by whatever name called,
being a company registered under the
Companies Act, 1956;

(iii) any company, co-operative
society, trust or a body, by whatever name
called, registered or constituted under any
law for the time being in force and engaged
in selling goods produced by micro or
small enterprises and rendering services
which are provided by such enterprises;

Section 15. Liability of buyer to make
payment.-Where any supplier, supplies
any goods or renders any services to any
buyer, the buyer shall make payment
therefor on or before the date agreed upon
between him and the supplier in writing or,
where there is no agreement in this behalf,
before the appointed day: Provided that in
no case the period agreed upon between the
supplier and the buyer in writing shall
exceed forty-five days from the day of
acceptance
or
the
day
of
deemed
acceptance.

"Section 18. Reference to Micro and
small Enterprises Facilitation Council.

(1)
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) 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 (26 of 1996) shall
apply to such a dispute as if the
conciliation was initiated under Part III 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
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."

15. Counsel for the appellant
submitted that, no objection was ever
raised, about the appellant being not
registered under the provision of Section
8(1) of the Act, either before the Industry
Facilitation Council at Kanpur or in
application under Section 34 of the Act,
therefore, no fresh objections can be raised
for the first time, before this Court by
means of the objection filed in the
1 All. Marson's Electrical Indus. Vs. Chairman, M.P. Electricity Board & Anr.
317
abovementioned
Arbitration
Appeal.
However, it is clarified that the appellant
was registered as small scale industry with
Director of Industries at Agra on 9.2.1971
under the provisions of Act of 1951 and
thereafter as per provisions of Section 8(1)
of the MSMED Act, 2006.

16. A bare perusal of Section 18(4) of
the MSMED Act, 2006 provides that, the
Facilitation Council shall have jurisdiction
to decide the dispute between the parties as
an Arbitrator, in a dispute where the
supplier is located within its jurisdiction
and the buyer can be located anywhere in
India. As per the provisions of this Act
since the supplier, who is appellant herein,
is situated within the jurisdiction of
Facilitation Council and hence the award
passed by the Facilitation Council was
within jurisdiction.

17. Counsel for the appellant further
submits that Section 24 of the MSMED
Act, 2006 provides that the provisions of
Section 15 to 23 of the MSMED Act, 2006
shall have overriding effect on any other
law for the time being enforced. Hence,
MSMED Act, 2006 being a special Act will
have an overriding effect on any other Act
even over the provisions of Arbitration and
Conciliation Act, 1996. For ready reference
Section 24 of MSMED Act, 2006 is quoted
below:-

"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."

18. Counsel for the appellant further
submits that units registered as small scale
industry can claim under Section 18(1) of
the MSMED Act, 2006, the benefits of
MSMED Act, 2006 before the Facilitation
Council within whose jurisdiction it is
registered.
Since
the
appellant
was
registered with Director of Industries at
Agra
which
falls
within
Facilitation
Council at Kanpur and is registered
continuously with effect from 9.2.1971,
therefore, he is entitled to get all the
benefits of the MSMED Act, 2006 and the
amendments introduced in the Act.

19. Counsel for the appellant submits
that buyer and supplier have been defined
in Section 2(d) and 2(n) of the MSMED
Act, 2006. Clearly, the appellant falls
within definition of "supplier" and the
respondent also falls within ambit of
definition of the "buyer". A plain reading of
the Section 15 of the MSMED Act, 2006
makes it very clear that, supplies of any
good or service, the buyer is duty bound to
make payment before the date accorded
between them and if there is no such
agreement on the date of payment then the
payment has to be made within 45 days
from the date of acceptance or from the
date of due acceptance.

20. Section 16 lays down the rate of
interest which a buyer has to pay in case of
default. The provisions of Section 16 are
being reproduced hereinunder for ready
reference:-

"16. Where any buyer fails to
make payment of the amount to the
supplier, as required under section 15, the
buyer
shall,
notwithstanding
anything
contained in any agreement between the
buyer and the supplier or in any law for the
time being in force, be liable to pay
compound interest with monthly rests to the
supplier on that amount from the appointed
day or, as the case may be, from the date
immediately following the date agreed
318 INDIAN LAW REPORTS ALLAHABAD SERIES
upon, at three times of the bank rate
notified by the Reserve Bank."

21. A plain reading of Section 16
makes it very clear that if there is delay in
payment by the buyer then he is liable to
pay the bank interest with monthly rates
from appointed day, which would be three
times the bank rate of interest as notified by
the Reserve Bank of India.

22. Learned counsel for the appellant
further submits that during course of
arguments the respondents had taken
ground of limitation, though the same was
never taken before the Council or before
the Commercial Court. However, that being
a legal question the appellant in response to
the objection raised by the respondents
submitted that the issue of limitation is
misconceived as the last payment made by
the respondents against various supplies of
transformers was on 31.12.1998 and the
claim petition was filed on 2.7.2001 under
the 1993 Act before the Director of
Industries, Facilitation Council at Agra,
which was well within time. This claim was
never withdrawn. The claim was rejected
by the Council on the ground that since a
new Act has been introduced, so liberty
was given to the appellant to withdraw the
same and file it afresh. Accordingly, the
appellant taking liberty filed a fresh claim
petition under the MSMED Act, 2006.

23. Counsel for the appellant further
submits that, no objections were ever raised
by the respondent claiming that, the
appellant was not registered under the
provisions of Section 18(1) of the MSMED
Act, 2006 before the Council, nor was
raised in their Section 34 application.
However, a feeble objection has been raised
by the respondent on this issue. The
appellant clarifies that he was registered as
the small scale industry with the Director of
Industries, Agra way back on 9.2.1971
under the provisions of 1951 Act and
thereafter as per provisions of Section 8(1)
of the MSMED Act, 2006. He still
continues as a small scale industry.

24. As per Section 18(4) of the
MSMED Act, 2006, the appellant, who has
been registered as "Small Scale Industry"
can approach the Facilitation Council. The
Commercial Court in its order (which is
impugned herein) did not discuss or
consider the provisions of Section 18 of the
MSMED
Act,
2006.
In
fact,
the
Commercial Court only relied upon Section
20(2) of the Arbitration and Conciliation
Act, 1996 which is incorrect as the
provisions of Section 18(2) of the MSMED
Act,
2006
would
prevail
over
the
provisions of Arbitration and Conciliation
Act, 1996.

25. Section 18(2) of the MSMED Act,
2006 provides that the Act adopts Section
65 to 81 of the Arbitration and Conciliation
Act, 1996 only and, therefore, Section 20
of the Act, 1996 cannot be relied upon.
Counsel for the appellant further submitted
that all the judgments relied on by the
Commercial Court in the impugned order
which are 2015(3) SCC 49, 2006(4) SCC
45, 2003(5) SCC 705 and 2020 (7) SCC
167, all are related to Section 20 of the Act,
1996, since the provisions of Section 20 of
the Act, 1996 is not applicable in this case.
Hence, all the authorities relied by the
Commercial Court has no relevance in this
case.

26. Counsel for the appellant further
submitted that the Commercial Court in the
impugned judgment has wrongly concluded
that "the contract would prevail over the
provision of the MSMED Act, 2006,
1 All. Marson's Electrical Indus. Vs. Chairman, M.P. Electricity Board & Anr.
319
therefore, the Court at Jabalpur alone will
have jurisdiction". While coming to this
conclusion, the Commercial Court did not
look into the provisions of Sections 2(b),
2(d) & 2(n), 15 and 18(1), (2) and (4) of the
MSMED Act, 2006. He further submitted
that any industry registered with MSME
can file claim under Section 18(1) of the
MSMED Act, 2006 before the Facilitation
Council within whose jurisdiction it is
registered.

27. Counsel for the appellant further
submits that his case is squarely covered by
judgment of M/s Silpi Industries vs.
Kerala
State
Road
Transport
Corporation1 wherein Hon'ble Supreme
Court in paragraph 23 has held as follows:-

23. The obligations of the buyer to make
payment, and award of interest at three
times of the bank rate notified by Reserve
Bank in the event of delay by the buyer and
the mechanism for recovery and reference
to Micro and Small Enterprises Facilitation
Council and further remedies under the
2006 Act for the party aggrieved by the
awards, are covered by Chapter V of the
2006 Act. The provisions of Section 15 to
23 of the Act are given overriding effect
notwithstanding
anything
inconsistent
therewith contained in any other law for the
time being in force. From the Statement of
Objects and Reasons also it is clear that it
is a beneficial legislation to the small,
medium and micro sector. The Arbitration
and Conciliation Act, 1996 is a general law
whereas the Micro, Small and Medium
Enterprises Development Act, 2006 is a
special beneficial legislation which is
intended to benefit micro, small and
medium enterprises covered by the said
Act. The Act of 2006 contemplates a
statutory arbitration when conciliation
fails. A party which is covered by the
provisions of 2006 Act allows a party to
apply to the Council constituted under the
Act to first conciliate and then arbitrate on
the dispute between it and other parties.
There are fundamental differences in the
settlement mechanism under the 2006 Act
and the 1996 Act. The first difference is, the
Council constituted under the 2006 Act to
undertake mandatory conciliation before
the arbitration which is not so under the
1996 Act. Secondly, in the event of failure
of conciliation under the 2006 Act, the
Council or the centre or institution is
identified by it for arbitration. The 1996
Act allows resolution of disputes by agreed
forum. The third difference is that, in the
event of award in favour of seller and if the
same is to be challenged, there is a
condition for pre-deposit of 75% of the
amount awarded. Such is not the case in the
1996 Act. When such beneficial provisions
are there in the special enactment, such
benefits cannot be denied on the ground
that counter-claim is not maintainable
before the Council. In any case, whenever
buyer wish to avoid the jurisdiction of the
Council, the buyer can do on the spacious
plea of counter-claim, without responding
to the claims of the seller. When the
provisions of Sections 15 to 23 are given
overriding effect under Section 24 of the
Act and further the 2006 Act is a beneficial
legislation, we are of the view that even the
buyer, if any claim is there, can very well
subject to the jurisdiction before the
Council and make its claim/ counter claim
as otherwise it will defeat the very objects
of the Act which is a beneficial legislation
to micro, small and medium enterprises.
Even in cases where there is no agreement
for resolution of disputes by way of
arbitration, if the seller is a party covered
by Micro, Small and Medium Enterprises
Development Act, 2006, if such party
approaches the Council for resolution of
320 INDIAN LAW REPORTS ALLAHABAD SERIES
dispute, other party may approach the civil
court or any other forum making claims on
the same issue. If two parallel proceedings
are allowed, it may result in conflicting
findings. At this stage, it is relevant to
notice the judgment of this Court in the
case
of
Edukanti
Kistamma
(Dead)
through LRs. v. 9. Venkatareddy (Dead)
through LRS. & Ors.2, where this Court
has held that a special Statute would be
preferred over general one where it is
beneficial one. It was explained that the
purport and object of the Act must be given
its full effect by applying the principles of
purposive construction. Thus, it is clear
that out of the two legislations, the
provisions of MSMED Act will prevail,
especially when it has overriding provision
under Section 24 thereof. Thus, we hold
that MSMED Act, being a special Statute,
will have an overriding effect vis-à-vis
Arbitration and Conciliation Act, 1996,
which is a general Act. Even if there is an
agreement
between
the
parties
for
resolution of disputes by arbitration, if a
seller is covered by Micro, Small and
Medium Enterprises Development Act,
2006, the seller can certainly approach the
competent authority to make its claim. If
any agreement between the parties is there,
same is to be ignored in view of the
statutory
obligations
and
mechanism
provided under the 2006 Act. Further, apart
from the provision under Section 23(2A) of
the 1996 Act, it is to be noticed that if
counter-claim is not permitted, buyer can
get over the legal obligation of compound
interest at 3 times of the bank rate and the
"75% pre- deposit contemplated under
Sections 16 and 19 of the MSMED Act.

28. Counsel for the appellant further
submits that he is bound by the law laid
down by Hon'ble Supreme Court in the
matter of Gujarat State Civil Supplies
Corporation Ltd. vs. Mahakali Foods
Private Ltd3 in which Hon'ble Court has
held that, there cannot be any disagreement
to the proposition of law laid down in
various decisions of the Hon'ble Supreme
Court. The Court has to read the agreement
as it is and cannot rewrite or create a new
one, and that the parties to an arbitration
agreement have an autonomy to decide not
only on the procedural law to be followed
but also on the substantive law. However, it
is equally settled legal position that no
agreement entered into between the parties
could be given primacy over the statutory
provision. When the Special Act i.e.
MSMED Act, 2006 has been created for
ensuring timely and smooth payment to the
suppliers, who are the micro and small
industries,
and
to
provide
a
legal
framework for resolving the dispute with
regard to the recovery of dues between the
parties under the Act, also providing an
overriding effect to the said law over any
other law for the time being in force, any
interpretation in derogation thereof would
frustrate the very object of the Act.

29. Counsel for the appellant further
submitted that the provisions of MSMED
Act, 2006, shall, therefore, prevail over the
Arbitration and Conciliation Act, 1996 and
the
impugned
order
passed
by
the
Commercial Court is liable to be set aside.

SUBMISSIONS OF RESPONDENT

30. Per contra, Sri Aditya Khandekar,
Advocate assisted by Sri Varun Srivastava,
learned counsel for the respondents very
vociferously argued that the appellant was
not the supplier as per Section 2(n) of the
MSMED Act, 2006. The work orders were
issued
by
the
respondent
between
14.3.1998 to 29.6.1998 which was much
prior to coming into force of the MSMED
1 All. Marson's Electrical Indus. Vs. Chairman, M.P. Electricity Board & Anr.
321
Act, 2006. The claim petition was filed
before the Facilitation Council under the
1993 Act. The claimant registered itself as a
small scale industry as per Section 8(1) of
the MSMED Act, 2006, on 10.5.2016
which goes to show that he was not
registered under the MSMED Act, 2006, on
the date the claim was made and also on the
date when the award was passed, signed
and published. Since, he was not registered
on the date and it is trite law that the
benefits of small scale industry cannot be
given under the MSMED Act, 2006,
retrospectively.

31. Counsel for the respondent further
submitted that the Facilitation Council
under the MSMED Act, 2006 had no
jurisdiction to entertain the claim as the
claimant was not the supplier on the
relevant date and was not a small enterprise
as per MSMED Act, 2006.

32. Counsel for the respondent further
relied on para 51 of the judgment passed in
Gujarat
State
Civil
Supplies
Corporation Ltd. vs. Mahakali Foods
Private Ltd (supra). He further relied on
para 12 of the judgment passed in Bharat
Heavy
Electricals
Ltd
vs.
Vector
Engineering Company4. Counsel for the
respondent has also relied on judgment
passed by Bombay High Court in the
matter of Bajaj Auto Limited vs. State of
Maharashtra5. Counsel for the respondent
further claimed that an application was
made by the appellant to withdraw his
claim on 17.5.2002 along with the
undertaking that the appellant will not
pursue the claim petition and the case was
closed by the Council vide its order dated
13.5.2003. Thereafter the Council in its
meeting dated 19.6.2007 rejected the prayer
of restoring the proceedings and directed
that if aggrieved the appellant may file a
fresh claim. Hence, the subsequent claim
could not have been filed by the appellant.

33. Counsel for the respondent further
submitted that the claim of the appellant is
time barred. He submitted that the work
order has been issued on 14.10.1993 to
29.6.1998 but the claim was filed on
2.7.2001 i.e. after a period of three years.
Counsel for the respondent further relied on
para 26 of the judgment passed in M/s Silpi
Industries
(supra)
wherein
Hon'ble
Supreme Court has held that if any
registration is obtained then the benefit
would
be
given
to
the
industries
prospectively and cannot get benefit
retrospectively.

34. Counsel for the respondent further
argued that the scope of interference under
Section 37 of the Act, 1996 is limited and
for which he had relied on the judgment
passed in Konkan Railway Corporation
Ltd.
vs.
Chenab
Bridge
Project
Undertaking6
and Lion Engineering
Consultants vs. State of M.P. and others7.

ANALYSIS,
REASONING
AND
CONCLUSIONS

35. We have carefully considered the
submissions advanced by learned counsel
for the respective parties. With their able
assistance, we have perused the pleadings,
grounds taken in the petition, annexures
thereto and reply filed by the concerned
respondent.

36.