High Court
Legal Reasoning
1 wp 5162.25.odtIN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABADWRIT PETITION NO. 5162 OF 2025Priyadarshini Sahakari Soot Girni Pvt Ltd.Through It’s Managing Director Fakira Daga Patil, Age 73 years, Occ. Service, R/o Shirpur, Tq. Shirpur, District Dhule PetitionerVersusM/s PAR Advisory Services Pvt Ltd Through Its Authorized RepresentativePlot No.31, Pushpgiri Apartment,Paud Road, Rambaugh Colony,Pune – 411 038.Respondent....Advocate for Petitioner : Mr. D.S. Bagul Advocate for Respondent : Mr. A. P. Bhandari ...CORAM :S. G. CHAPALGAONKAR, J.Dated:July 03, 2025JUDGMENT :-1.Rule. Rule made returnable forthwith. Heardfinally by consent of the parties.2.Petitioner impugns the order dated 25.5.2023passed by the Micro and Small Enterprises Facilitation Council,Pune (for short referred to as ‘MSME Council’). 2 wp 5162.25.odt3.Brief facts giving rise to present writ petition areas under :-Respondent initiated proceeding against thepetitioner under section 20 of Micro, Small and MediumEnterprises Development Act, 2006 (for short ‘MSMED Act,2006’) with MSME Council, Pune, contending that respondentis engaged in providing advisory/consultation service.Petitioner being co-operative society engaged him to raisevarious Credit facilities. The terms of assignment weremodulated by agreement dated 16.8.2010. The respondentprovided his services in terms of the agreement, however,petitioner failed to pay the amount of remuneration that maderespondent to initiate the proceeding vide petition No.30 of2012 under section 20 of MSMED Act, 2006. Petitioner raisedobjection/maintainability of the petition as financial servicesrendered by respondent do not come under the scope ofMSMED Act, 2006. Further, put up a defence that respondenthad not provided services for obtaining any loan or cash credit.Amount of Rs.2.00 Lakh is already paid to respondent towardsservice charges for Credit Limit sanctioned by Dena Bank andthere are no dues as claimed. 3 wp 5162.25.odt4.On 1.8.2014 Reference Court passed an Awardunder section 18 (3) of MSMED Act, 2006 holding thatrespondent is entitled for dues for first stage as per fixedstructure given in the agreement dated 16.8.2010 andpetitioner was directed to consider payment of service chargestowards finances provided by Dena Bank, Ratnakar Bank andIDBI Bank Limited. On 18.5.2015 the decree was transferredto District Judge/Competent Designated Judge for execution.However, on 21.5.2015 respondent submitted a letter toMember, Secretary, MSME Council, Pune to modify the decreeand specify decretal amount. However, on 27.6.2015 Councilrefused to entertain the application as award was alreadytransferred for execution to Competent Court. 5.Meanwhile, respondent submitted invoicesregarding financial services provided by him towards obtainingloan of Rs.17 Crores from Ratnakar Bank. Petitioner refused toentertain such invoice. Thereafter, respondent submitted threedifferent bills before learned District Judge, Dhule in SpecialDarkhast No.50 of 2017 raising the claim of Rs.4,44,854/-,Rs.5,75,000/- and Rs.10,75,250/- and claimed an amount ofRs.32,05,134/- from petitioner. Petitioner opposed such claims 4 wp 5162.25.odtand contended that respondent is entitled for Rs.44,854/- only.Learned District Judge refused to entertain petitioner'scontention on the ground that Executing Court cannot gobeyond the decree vide his order dated 22.9.2021. Petitionerassailed said order in Writ Petition no.12003 of 2021. ThisCourt, after hearing the parties, allowed said writ petition videorder dated 23.8.2022, granting liberty in favour of respondentto approach the MSME Council, Pune for correction of orderdated 1.8.2014. Accordingly, on 3.3.2023 Respondentapproached the MSME Council. On 25.5.2023 MSME Councilpassed corrected award and directed petitioner to pay principalamount of Rs.7.00 Lakh towards first stage of paymentalongwith the interest within a period of one month.6.According to Mr. Bagul, learned advocateappearing for petitioner, quantification of the amount iswithout foundation. The order passed by MSME Council isnon-speaking and sans requisite reasons. On 31.1.2025respondent filed application for issuing warrant and same isallowed against the petitioner. Although, petitioner sought stayto the order issuing warrant, objecting calculations of theamount to be recovered, the same is not considered. 5 wp 5162.25.odt7.Per contra, Mr. Bhandari, learned advocateappearing for respondent submits that, award dated 1.8.2024passed by the MSME Council holds respondent entitled only forfirst stage payment dues and further directions were given topetitioner for payment of service charges of sanctioned loan byDena Bank, Ratnakar Bank and IDBI Bank subject tosubmission of invoices by respondent. It has attained finality.Thereafter, in pursuance to directions of this Court, respondenthad approached MSME Council for clarification of award andaccordingly, award dated 25.5.2023 is passed under provisionsof MSMED Act, 2006.8.According to Mr. Bhandari, in view of section18(3) of MSMED Act, 2006, once Arbitration proceeding istaken up by MSME Council, it would be governed byArbitration and Conciliation Act, 1996 and same can bechallenged under section 34 of said Act within limitationperiod of 90 days, as prescribed. Even, otherwise as persection 19 of the MSMED Act, 2006, remedy is available onlyon deposit of 75% of awarded amount. Petitioner failed toavail statutory remedy within time schedule. According to Mr.Bhandari, present writ petition would not be maintainable in 6 wp 5162.25.odtaforesaid legal background. Mr. Bhandari, submits thatrespondent is deprived of its claim amount for more than 13years. Entertaining present writ petition would be againstlegislative behind enacting MSMED Act, 2006. Therefore, heurges to reject the writ petition.9.Having considered submissions advanced, it canbe observed that initially Award is passed against petitioner on1.8.2014. Operative part of the said award reads thus :-ORDER“1.The Reference Petition No.30 of 2012 is partlyallowed.2.The petitioner is entitled only for the first stage ofthe payment dues under the Fees Structure givenin the Agreement dated 16.8.2010.3.The Respondent is directed to consider thepayment of the service charges of the sanctionedloan by Dena Bank, the Ratnakar Bank Ltd andIDBI Bank Ltd. If the petitioner submits invoiceswith due explanations.”10.Lateron, in pursuance to the directions given bythis Court under order dated 23.8.2022 respondentapproached for correction/rectification of the Award. TheMSME Council entertained application and passed followingorder dated 25.5.2023, which reads thus :- 7 wp 5162.25.odtO R D E R “1.The Reference Petition No.30 of 2012 is partlyallowed.2.The Respondent is hereby directed to pay principalamount of Rs.7,00,000/- (Rs. Seven Lakhs only)towards first stage of payment as per Agreement dated16.8.2010 alongwith the interest as per the provisionsof section 15 and 16 of MSMED Act, 2006 tillrealization of the amount to the petitioner.3.The principal and interest amounts are to be paidwithin one month from the date of receipt of thisaward.4.No order as to cost.”11.The aforesaid order is assailed in the present writpetition, which is presented to this Court on 15.4.2025.12.Section 18 of the MSMED Act, 2006 provides forspecial provisions to deal with the dispute with regard to theamount due towards goods supplied or services rendered bythe supplier. On reference of such dispute, the Council canconduct Mediation or refer the dispute to Mediation ServiceProvider, however, in case of unsuccessful attempt ofmediation, the dispute can be taken up by the Council itself forArbitration. On such reference, the provisions of Arbitrationand Conciliation Act, 1996 applies to the dispute as ifArbitration was in pursuance to Arbitration and Conciliation 8 wp 5162.25.odtAct. Section 19 of the Act provides for remedy againstArbitration Award passed under section 18 with non-obstanteclause that application for setting aside decree, award or ordershall not be entertained unless 75% of the amount in terms ofthe decree, award is deposited.13.It is, therefore, evident that MSMED Act, 2006provides for entire scheme/mechanism to deal with thedisputes pertaining to the dues of MSME.14.In the present case, it can be observed thatpetitioner raises challenge to award dated 25.5.2023 passed byMSME Council after 23 months without availing the alternatestatutory remedy, particularly, having lost to avail the samewithin limitation prescribed. In case of M/s. Duro Shox Pvt.Ltd. Vs. State of Maharashtra and others in Writ PetitionNo.6690 of 2024, this Court, after considering scheme of theAct and various Judgments of the Supreme Court observed inparagraph no.18 as under :-“18. Considering the above Judgments, i.e. {1}Jharkhand Urja (surpa), {2} Bhaven Construction (supra),{3} SBP & Co. (supra) and {4} M/s. India Glycols Limited(supra), the law on the subject of entertainment thepetition by the High Court under Article 226/227 of theConstitution of India to challenge an ‘Award’ or orderspassed by the Facilitation Council/Arbitral Tribunal underthe MSMED Act is summarized as under :- 9 wp 5162.25.odt{1} The power of the High Court under Article226 of the Constitution of India to issue writs /directions is a basic feature of the Constitutionand cannot be curtailed by parliamentarylegislation L. Chandra Kumar Vs. Union of India,(1997) 3 SCC 261. However, the High Courtunder Articles 226 and 227 of the Constitution ofIndia would interfere rarely in exceptionalcircumstances in the arbitral proceedings, whenthe order passed by the Facilitation Council/Arbitral Tribunal is perverse and patently lackingin inherent jurisdiction and, when there is nosemblance of ‘Award’ as contemplated underSection 18 of the MSMED Act.{2} M/s. India Glycols Limited (supra), does notoverrule Jharkhand Urja (surpa). M/s. IndiaGlycols Limited (supra), should be construed asimposing a higher bar to invoke jurisdiction of theHigh Court under Article 226 of the Constitutionof India, as it is held that entertaining a petitionunder Articles 226 / 227 of the Constitution ofIndia, in order to obviate compliance with therequirement of pre-deposit under Section 19,would defeat the object and purpose of the specialenactment which has been legislated upon byParliament. {3} When the ‘Award’ is made by the FacilitationCouncil / Tribunal by exercising jurisdictionvested in it, however erroneous the ‘Award’ maybe, the same has to be challenged only byinvoking Section 34 of the Arbitration Act, andthis court would not exercise jurisdiction underArticles 226 and 227 of the Constitution of India,only to avoid the aggrieved party from thehardship of deposit of 75% of the award amountin terms of Section 19 of the MSMED Act.”15.In light of the aforesaid exposition of law, whenMSME Facilitation Council/Tribunal has passed award undersection 18 of the MSMED Act, 2006 and petitioner could not
Decision
10 wp 5162.25.odtraise challenge to award before the Court under section 34 ofthe Arbitration Act within time span. In light of the law laiddown by the Supreme Court of India in case of M/s. IndiaGlycols Limited and anr. Vs. Micro and Small EnterprisesFacilitation Council, Medchal-Makajgiri and ors. dated6.11.2023 passed in Civil Appeal No.7491 of 2023, presentwrit petition cannot be entertained, particularly, looking to theobservations in paragraph no.14, which reads thus :- “14 …We cannot accept this submission for the simplereason that Section 18 of the MSMED Act 2006provides for recourse to a statutory remedy forchallenging an award under the Act of 1996. However,recourse to the remedy is subject to the discipline ofcomplying with the provisions of Section 19. Theentertaining of a petition under Articles 226/227 ofthe Constitution, in order to obviate compliance withthe requirement of pre-deposit under Section 19,would defeat the object and purpose of the specialenactment which has been legislated upon byParliament.”16.Hence there is no reason to entertain present writpetition. In the result, Writ Petition stands dismissed. Rule,discharged. ( S. G. CHAPALGAONKAR ) Judge.…aaa- (f)