# TBEA (India) Transformer Pvt. Ltd., Gujarat v. U.P. Micro & Small Entp. Facilitation Council Kanpur Nagar & Anr

- **Citation:** (2020) 9 ILRA 481
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2020-04-22
- **Case number:** WRIT - C No. 8038 of 2020
- **Bench:** Sudhir Agarwal, Rajiv Misra
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/tbea-india-transformer-pvt-ltd-gujarat-v-u-p-micro-small-entp-facilitation-45978
- **Pages:** 12

## Headnote

A. Civil Law - Arbitration and Conciliation
Act,1996 - Section 80 & Micro Small and
Medium
Enterprises
Development
Act,2006-Section
18-Section
80
of
482 INDIAN LAW REPORTS ALLAHABAD SERIES
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 11 to
45)

The Petition is dismissed. (E-6)
List of Cases cited: -

## Text

9 All. TBEA (India) Transformer Pvt. Ltd., Gujrat Vs. U.P. Micro & Small Entp. Facillitation
Council Kanpur Nagar & Ors.
481
सींख्या-१ द्वारा कराना सुबनबित करे और
अनुपालन आख्या एक माह के भ तर फोरम को
भेज जाये |

७. ए०ओ०ए० द्वारा उपभोक्ताओीं से
वसूल धनराबश तथा लाईसेंस को भुगतान क
गय धनराबश क गणना प्रत्येक छः माह में
करके उपभोक्ताओीं को उपलब्ध कराया जायेगा
|"

6. Aforesaid order of ECGRF was
challenged by petitioner before Electricity
Ombudsman, Lucknow in Representation
No.79 of 2019 but the same was rejected vide
order dated 31.01.2020 and order of ECGRF
passed on 04.02.2019 was confirmed.

7. Now both these orders have been
challenged by petitioner before this Court
on the ground that Tariff framed by
Electricity Supplier with approval of
UPERC cannot govern the charges leviable
by petitioner i.e. AOA from ultimate
consumers i.e. Flat Owners and Fixed
Charge paid to electricity supplied by
PVVNL cannot be a guiding factor.

8. In our view, this submission is
thoroughly misconceived. Petitioner is not
holding any license of distribution of
electricity to anyone. It is an Association of
individual Flat Owners and modus operandi of
supply of electricity is that Distribution
Licensee i.e. PVVNL gives a single point
supply to one set of Flat Owners through
either Builder i.e. Promoter of flats or where
Resident Welfare Association i.e. Flat Owners
Association have been formed, to them.
Payment to Electricity Department is made by
Apartment Promotor/ Builder or AOA, as the
case may be, but individually supply to Flat
Owners is given by them and charges paid to
PVVNL stand collected proportionately as per
individual meter readings of flats from flat
owners. Builder or AOA neither can frame
their own tariff nor can charge the flat owners
on a rate higher than what is prescribed in the
Tariff approved by UPERC for the area
concerned. The basis of charges of individual
owners is tariff of Distribution License since in
respective area, no other individual having no
license can distribute electricity to anyone and
charge in the manner it likes. Therefore,
contention of petitioner that Fixed Charge
rates prescribed in Tariff cannot be a guiding
factor for realization of electricity charges
from Flat Owners by petitioner is thoroughly
misconceived and illegal.

9. We find no manifest error in the
impugned orders assailed in this writ petition.

10. Writ petition lacks merit and is
dismissed accordingly.
----------
(2020)09ILR A481
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 22.04.2020

BEFORE

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

WRIT - C No. 8038 of 2020

TBEA
(India)
Transformer
Pvt.
Ltd.,
Gujarat ...Petitioner
Versus
U.P. Micro & Small Entp. Facilitation Council
Kanpur Nagar & Anr. ..Respondents

Counsel for the Petitioner:
Sri Sarvanand Pandey, Sri Alexander Iqbal,
Sri Akshay Saprey

Counsel for the Respondents:
-----

A. Civil Law - Arbitration and Conciliation
Act,1996 - Section 80 & Micro Small and
Medium
Enterprises
Development
Act,2006-Section
18-Section
80
of
482 INDIAN LAW REPORTS ALLAHABAD SERIES
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 11 to
45)

The Petition is dismissed. (E-6)
List of Cases cited: -

1. Swastik Gases Pvt. Ltd. Vs IOC (2013) 9 SCC
32

2. Indus Mobile Distribution Pvt. Ltd. Vs
Datawind Innovation Pvt. Ltd. & ors. (2017) 7
SCCd 678

3. M/s Steel Authority of India Ltd. & anr. Vs
Micro,Small Enterprises Facilitation Council,Nagpur
AIR (2012) Bob.178.

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

1. Heard Sri Akshay Saprey, holding
brief of Mr. Sarvanand Pandey, learned
counsel for petitioner and perused the
record.

2. This writ petition under Article 226
of Constitution of India has been filed by
petitioner,
TBEA
(India)
Transformer
Private Limited having its registered Office
at Revenue Survey No.745-Lot 3, TBEA
Green Energy Park, N.H.-8, VillageMiyagam
Karjan
Vadodara,
Gujarat
(hereinafter referred to as 'petitioner') with
a prayer to issue a writ of certiorari to
quash order dated 23.12.2019 passed by
respondent-1 i.e. U.P. Micro and Small
Enterprises
Facilitation
Council
(hereinafter
referred
to
as
"MASEF
Council") having its Office at Udyog
Bhawan, Kanpur Nagar and also to issue a
writ of mandamus to call for record of
Claim Petition No. 216 of 2019 on the
ground that parties have agreed to settle
their dispute through arbitration under the
provisions of Arbitration and Conciliation
Act, 1996 (hereinafter referred to as "Act,
1996") and Council has no jurisdiction to
proceed with arbitration.

3. Facts in brief giving rise to this
petition are that petitioner is a Private
Limited
Company
incorporated
under
Companies Act, 2013 (hereinafter referred
to as "Act, 2013"). It is engaged in the
business of design, manufacture as well as
service of Transformers and Reactors.
Respondent-1 is a body established by
Government of State of U.P. under Section
20 of Micro Small and Medium Enterprises
Development
Act,
2006
(hereinafter
referred to as "MSMED Act, 2006").
Respondent-2, M/S Osama Engineering
Works having its registered office at 96B
DAUD Nagar Naini, Prayagraj is also a
Private Limited Company incorporated
under Companies Act, 1956 (hereinafter
referred to as "Act, 1956") and continued to
function under Act, 2013 being an existing
company. It is also allegedly registered as
Micro Enterprise under MSMED Act, 2006
and engaged in the business of manufacture
of Transformer tanks, Yoke clamp, RTCC
panels and Marshaling box etc.

4. For supply of certain work
components
of
Transformer
being
manufactured by respondent-2, a letter of
intent was issued by petitioner vide E-Mail
dated 16.10.2018. Respondent-2 was to
supply 42 Transformer Tanks as per above
letter of intent. The delivery was to be
made
by
05.12.2018.
Respondent-2
committed default in supply of goods and
thus committed breach of contract. Even
9 All. TBEA (India) Transformer Pvt. Ltd., Gujrat Vs. U.P. Micro & Small Entp. Facillitation
Council Kanpur Nagar & Ors.
483
the items supplied were not of requisite
specifications
or
quality.
Consequently,
petitioner issued a cancellation order dated
21.12.2018 and terminated purchase order.
Respondent-2 instead of realizing its mistake,
issued a legal notice dated 12.03.2019 upon
petitioner requiring it to pay Rs. 4,79,009.70
along with interest which was computed to Rs.
4,10,803/-. Petitioner submitted his reply dated
20.04.2019 to the aforesaid notice disputing
claim of respondent-2.

5. Thereafter, respondent-2 moved an
application/representation dated 26.07.2019
before
MASEF
Council
stating
that
petitioner is liable to pay in respect of
goods supplied by respondent-2 in terms of
provisions of MSMED Act, 2006 and since
payment has been delayed, therefore
application under Section 18(1) is being
filed by Supplier to direct petitioner to pay
to pay Rs. 4,79,009/- and interest thereon.

6. The claim of respondent-2 was
contested by petitioner by submitting reply
dated 04.11.2019 stating that entire claim was
false and in fact petitioner himself has suffered
huge loss which are to be liquidated by
respondent-2 and required respondent-2 to
withdraw its claim which is based on erroneous
presentation of facts. Reply was submitted by
petitioner
after
receiving
notice
from
respondent-1 for conciliation under Section
18(1) but after receiving reply of petitioner,
respondent-1 concluded that parties have failed
to conciliate the matter and thereafter by
impugned order it has directed to proceed for
arbitration.

7.

Petitioner
pleaded
before
respondent-1
that
since
there
is
an
arbitration clause in the agreement and
parties themselves have resolved to refer
the matter to arbitration to the person
nominated by petitioner, respondent-1 has
no jurisdiction to proceed under Section 18
but that issue has not been decided, hence
present writ petition.

8. It is not disputed before us that there is
an arbitration clause, i.e., Clause-10 in the
purchase order whereby dispute, if any, was to
be referred to an Arbitrator appointed by
petitioner, but respondent-2 did not avail the
aforesaid remedy and moved application under
Section 18(1) before respondent-1.

9. Learned counsel for petitioner
submitted that once parties have agreed to have
their dispute, if any, resolved through an
arbitration, respondent-1 in such a case will have
no jurisdiction to enter into a dispute either for
conciliation or for arbitration and Section 18
shall not prevail over agreement between the
parties whereby parties have mutually chosen a
Forum for settlement of their dispute. Hence
respondent-1 has proceeded illegally and failing
to decide this objection of petitioner has
committed manifest error.

10. However, we find no force in the
submission.

11. In our view, remedy under Section
18 read with Section 24 of MSMED Act, 2006
has been given overriding effect over any
other law enforced for the time being in force.
The arbitration clause, if any, in the agreement
between the parties will not prevail over the
provisions of Section 18 and respondent-1 is
well within its jurisdiction.

12. We hereby formulate the question,
which is to be adjudicated by us, as under:

"Whether MASEF Council can
act as 'Arbitrator' for adjudication of
dispute between the parties or must direct
parties to relegate remedy of arbitration
484 INDIAN LAW REPORTS ALLAHABAD SERIES
settled between them in an agreement and
Section 18(3) read with Sub-section (4) will
have
to
sub-serve
to
such
private
agreement of the parties?"

13. For promoting, developing and
also enhancing competitiveness of Micro,
Small and Medium Enterprises, MSMED
Act, 2006 was enacted by Parliament and
came into force on 02.10.2006.

14. 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 economy 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.

15. 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 plant 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
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
9 All. TBEA (India) Transformer Pvt. Ltd., Gujrat Vs. U.P. Micro & Small Entp. Facillitation
Council Kanpur Nagar & Ors.
485
interest of delayed payments to Small Scale
Ancillary undertaking Act, 1993 and
making that enactment part of proposed
legislature and to repeal that enactment.

16. 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;

17. 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 sub-clause (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,

18.

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.

19. 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
486 INDIAN LAW REPORTS ALLAHABAD SERIES

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

20. 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
provides an adjudicatory forum in case of a
dispute between Buyer and Supplier.

21. Section 15 deals with liability of
buyer to make payment; Section 16
provides the date from which rate of
interest shall be 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.

22. Section 18 is relevant for the
controversy in 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
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)

23. 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
9 All. TBEA (India) Transformer Pvt. Ltd., Gujrat Vs. U.P. Micro & Small Entp. Facillitation
Council Kanpur Nagar & Ors.
487
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."

24. 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)

25. 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.

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

27. Part-I, Chapter-I has Sections 2 to
6; Chapter-II has Sections 7 to 9; ChapterIII 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
488 INDIAN LAW REPORTS ALLAHABAD SERIES
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.

28. 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.

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

30. First of all Sub-section (1) of
Section 18 begins 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.

31. 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.

32. 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
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
9 All. TBEA (India) Transformer Pvt. Ltd., Gujrat Vs. U.P. Micro & Small Entp. Facillitation
Council Kanpur Nagar & Ors.
489
conciliation
under
Section
18(2)
of
MSMED Act, 2006 by making provision of
Act, 1996 applicable by legislative reforms.

33. Section 61 of Part-III of Act, 1996
deals with "Application and scope" of PartIII. 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.

34.

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 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.

35. 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
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.

36. 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 a settlement in
490 INDIAN LAW REPORTS ALLAHABAD SERIES
Conciliation proceedings under sub-section
(2) the conciliation proceedings shall stand
terminated. It is thereafter that the next
stage of arbitration will arise. For this
purpose, sub-section (3) provides 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.

37. 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 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.

38. 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.

39. In the present case, it is not in
dispute that respondent-2 is Supplier and he
is located in the jurisdiction of MASEF
Council and petitioner, the Buyer, is
located in State of Gujarat, satisfying the
requirement of sub-section (4) of Section18 so as to make it applicable in case in
hand.

40. 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.

41. 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
9 All. TBEA (India) Transformer Pvt. Ltd., Gujrat Vs. U.P. Micro & Small Entp. Facillitation
Council Kanpur Nagar & Ors.
491
goes contrary to what has been specifically
provided in Section 18(3) and (4) of
MSMED Act, 2006.

42. 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.

43. Learned counsel for petitioner has
placed
reliance
on
Supreme
Court's
judgment in Swastik Gases Private
Limited Vs. Indian Oil Corporation
(2013) 9 SCC 32 and Indus Mobile
Distribution
Private
Limited
Vs.
Datawind Innovations Private Limited
and others (2017) 7 SCC 678 but having
gone through the aforesaid judgments
carefully, we find no application of the
same to the dispute involved in the present
matter. The provisions of MSMED Act,
2006 were not at all involved in both the
aforesaid authorities, therefore, the general
provisions of Act, 1996 read with C.P.C.
have been examined which have no
application to the present case. Both the
judgments, therefore, do not help the
petitioner in any manner.

44. Learned counsel for petitioner
also placed reliance on a Division Bench
judgment of Bombay High Court delivered
by Hon'ble S.A. Bobde, J. (as His Lordship
then was) in M/s Steel Authority of India
Limited and another Vs. Micro, Small
Enterprises Facilitation Council, Nagpur
AIR 2012 Bob. 178. Having gone through
the same, we find that therein Section 18 is
applicable only when there is delay in
payment in respect to supply made or
service rendered by Supplier but if there is
any other dispute, Section 18 is not
applicable and the matter will be covered
by arbitration clause, if any, existing in
agreement
between
the
parties.
This
judgment also does not help the petitioner
for the reason that in the present case,
respondent-2 delayed payment and no other
dispute has been raised, therefore, dispute
raised in the present case is squarely
covered by Section 18(1) read with Section
17 of MSMED Act, 2006 and hence the
aforesaid authority also does not help the
petitioner in any manner.

45. In view of above discussion, we
are clearly of the view that MASEF
Council having acted as Conciliator is not
barred from working as Arbitral Tribunal
to arbitrate the dispute under Section 18(3)
and such 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 same. The argument,
therefore, advanced otherwise by learned
counsel for petitioner is hereby rejected.
The
question,
formulated
above,
is
answered against petitioner and we hold
that MASEF Council is not prohibited
from working as Arbitrator itself for
adjudication of dispute between the parties
and it is not obliged to refer the matter to
any other body.

46. No other point has been argued.

47. The writ petition lacks merits.
Dismissed, accordingly.
----------
492 INDIAN LAW REPORTS ALLAHABAD SERIES
(2020)09ILR A492
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 17.03.2020

BEFORE

THE HON'BLE GOVIND MATHUR, C.J.
THE HON'BLE AJIT KUMAR, J.

WRIT - C No. 8874 of 2020

Narayan Verma & Anr. ...Petitioners
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioners:
Sri Agnihotri Kumar Tripathi

Counsel for the Respondents:
C.S.C., Sri Ram Bhahadur Singh

A. Uttar Pradesh Kshettra Samitis and Zila
Parishads
Work
Rules,1984
-
Rule
18,19,21-challenge to -Government Order
regarding all the contractors. with any of
the
government
departments
in
participation of tender process-while rule
18,1984 does not permit a contractor not
registered to participate in tender process
and to have work of district panchayat on
contract-while
Rule
18
prescribes
procedure for registration of contractors. -
it nowhere mentions that only approved
contractors. shall be entitled to have
work-however, rule 18 says approved
contractor is require to deposit a definite
sum for executing the work of district
panchayat but that does not mean other
contractors.
shall
not
eligible-Moreso,
Rule 19 provides for affixing notice
inviting tenders at several places-it shows
that other contractors. may aware of the
works available on contract and may
participate therein-intention of the Rule
framing Authority was not to create
monopoly in grant of work on contractfinding arrived by Division Bench is
apparently in ignorance of the other
relevant provisions of the Rules,1984.
(Para 1 to 19)
The Petition is dismissed. (E-6)

List of Cases cited: -

1. Ashok Kumar Singh & ors. Vs St. Of U.P. &
ors., W.P. No. 6025 of 2020

(Delivered by Hon'ble Govind Mathur, C.J.
 & Hon'ble Ajit Kumar, J.)

1. Challenge in this petition for writ is
given to the direction of the Government of
Uttar Pradesh circulated under a letter
dated 16th August, 2019 to the effect that
all the contractors registered with any of
the government department shall entitled to
participate in tender process relating to any
work pertaining to the district panchayat.
The decision aforesaid was taken with an
object to have a better and broader choice
of contractors to undertake civil works
available with district panchayats.

2. The argument advanced by learned
counsel appearing on behalf of the
petitioners is that the Uttar Pradesh
Kshettra Samitis and Zila Parishads Works
Rules, 1984 (hereinafter referred to as the
Rules of 1984) does not permit a contractor
not registered as per Rule 18 of the Rules
of 1984 to participate in tender process and
to have work of district panchayat on
contract.

3. It is stated that a Division Bench of
this Court at Lucknow in Ashok Kumar
Singh & others Vs. State of U.P. and
others (Writ Petition (MB) No.6025 of
2020) has already adjudicated the issue and
declared the decision impugned illegal. The
relevant part of the judgment aforesaid
reads as follows:-

"The Government Order dated
16.08.2019 has been issued in ignorance of