Gannon Dunkerley And Co. Limited Through Authorized Signatory Ramesh Mishra vs. Micro And Small Enterprises Facilitation Council

Held

The Court held that the MSME Act applies not only to the supply of goods but also to services rendered by a supplier, as indicated by Section 17 of the Act. The Act was enacted to facilitate, promote, develop, and enhance the competitiveness of MSMEs, ensuring a timely flow of credit. Therefore, where an issue arises concerning the recovery of money by an MSME for goods supplied or services rendered, the remedy under Section 17 of the MSME Act is available. The Court noted that the appellant had already resorted to the remedies available under the MSME Act and the Arbitration and Conciliation Act, 1996, by filing an application under Section 19 of the MSME Act read with Section 34 of the Arbitration and Conciliation Act, 1996. Citing the Supreme Court's decision in M/s India Glycols Limited, the Court reiterated that a writ petition under Articles 226/227 of the Constitution is not maintainable to circumvent the mandatory deposit requirement under Section 19 of the MSME Act when challenging an award. Consequently, the Writ Court was correct in dismissing the writ petition as not maintainable. The appeals were dismissed.

Facts

The appellant, Gannon Dunkerley and Co. Limited, a civil construction company, was awarded a railway construction project. They awarded a sub-contract to Respondent No. 2, a registered MSME, for specific work. Respondent No. 2 approached the Micro and Small Enterprises Facilitation Council, claiming Rs. 4,30,31,721/- plus interest for non-payment of RA Bills and retention money. The appellant objected, arguing the MSME Act did not apply as the contract was a works contract, not for goods or services. The Facilitation Council rejected this objection and passed an award in favour of Respondent No. 2 on 07.07.2023. The appellant filed a writ petition challenging this award, which was dismissed by the Writ Court on 09.01.2024 as not maintainable, citing Section 19 of the MSME Act and Section 34 of the Arbitration and Conciliation Act, 1996. This led to the present writ appeal.

Key Issues

1. Whether the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act) is applicable to a works contract where no goods were supplied, and the appellant does not qualify as a 'buyer' under the Act? (Question of law) Contentions: Petitioner/Appellant: Argued that the MSME Act lacks jurisdiction to entertain claims related to works contracts. They pointed to sub-contract conditions indicating no goods were supplied, thus the appellant was not a buyer. Relied on Bombay High Court's decision in Sterling and Wilson Private Limited, and Supreme Court decisions in Executive Engineer, Southern Electricity Supply Company of Orissa Limited and Larsen and Toubro Limited. Respondent/State: Submitted that the petitioner had already challenged the award before the Commercial Court by filing an application under Section 19 of the MSME Act read with Section 34 of the Arbitration and Conciliation Act, 1996, on 20.06.2024. The judgment records no further arguments from the respondent regarding the applicability of the MSME Act to works contracts.