Orissa High Court
Case Details
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No.28880 of 2024 M/s Gayatri Agency, Khurda …. Petitioner(s) Represented By Mr. Satya Smruti Mohanty, Adv. -versus- Micro and Small Enterprise Facilitation Council, Cuttack & Ors. …. Opposite Party(s) Represented By Mr. Bibhu Prasad Mohanty (for MSMEC) CORAM: DR. JUSTICE S.K. PANIGRAHI ORDER 27.03.2025 Order No. 04. 1. This matter is taken up through hybrid arrangement. 2. In this Writ Petition, the Petitioner challenges the order dated 29.08.2024 passed by the Micro and Small Enterprises Facilitation Council, Cuttack (hereinafter referred to as ’’MSEFC’) in MSEFC Case No.30 of 2023 dismissing the case of the Petitioner stating that it has no jurisdiction. The said order is arbitrary and against the provision of Micro Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “MSMED Act”) 3. Heard learned counsel for the Parties and perused the materials placed on record. Page 1 of 12
Legal Reasoning
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 4. The brief facts of the case, as outlined in the Writ Petition, are that the Petitioner is a proprietorship concern engaged in Electrical Engineering for HT & LT line off Construction, Erection, and Transmission of line duly registered as a Small Scale Enterprises in the State of Odisha. It is a service provider within the meaning of Section 2 (n) of the MSMED, Act having Udyam Aadhar Number (UAM) UDYAM-OD- 07-0001962 and Udyam Aadhar Memorandum (UAM) UDYAM07E0009355. 5. During the course of business activities, the Petitioner was awarded with a work order for Rs.1,51,65,395.00 (One Crore Fifty-One Lacs Sixty- Five Thousand Three Hundred Ninety-Five Only) vide No.TCPL/C/WO/Proj/3600 dated 17.04.2019 and, subsequent, amendment order vide No.TCPL/C/W0/Proj/3600AA dated 23.05.2019 for Construction of 5.7 K.M. 33KV line from Choudwar Sub-Station to the Factory of Toshali Cements Private Limited/ Opposite Party No. 2, at in village Indranipatna, Tangi- Choudwar Tahasil, Cuttack District, Odisha. 6. As per the work order, the Petitioner duly supplied and executed the works as specified in the work order issued by the Opposite Party No.2. But, some portion of the work remained incomplete due to failure on the part of the Opposite Party No.2 in obtaining NHAI clearance for conductor stringing across Kalinga Chhak market portion. In the meantime, the Petitioner raised running bills against each of the completed portions of work and got the entire payment except 10% retention amount of Rs.16,02,409.00 (Sixteen Lacs Two Thousand Four Page 2 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 Hundred Nine Only). The Opposite Party No.2 received the goods and services from the Petitioner for which the bills were approved and cleared. 7. The Petitioner made several requests through mail for payment of the aforesaid retention amount. But, the Opposite Party No.2 gave a deaf ear to the same. The Petitioner firm being a registered small-scale unit is facing difficulty due to withholding of the retention amount by the Opposite Party No.2. 8. Owing to such nonchalant behaviour of the Opposite Party No.2, the Petitioner filed a complaint on 14.12.2022 in “MSME SAMADHAN”. Though the hearing was held on 05.04.2023 through VC, but the Opposite Party No.2 did not appear. 9. Further, the Petitioner filed a case under Section 18 of the MSMED, Act bearing MSEFC Case No.30 of 2023 on 10.07.2023 before the Micro and Small Enterprises Facilitation Council, Odisha, Cuttack. The Council initiated conciliation proceeding under Section 18(2), whereby both the parties made their submissions on several occasions. The Petitioner in its claim statement prayed for a direction to the Opposite Party No.2 to make payment of the principal amount of Rs.16,02,409.00 (Sixteen Lacs Two Thousand Four Hundred Nine Only) along with interest for delayed payment of Rs.7,30,098.00 (Rupees Seven Lacs Thirty Thousand Ninety-Eight only) calculated up to 30.06.2023 amounting to Rs.23,32,507.00 (Rupees Twenty-Three Lacs Thirty-Two Thousand Five Hundred Seven Only) to the Petitioner. Further, the Petitioner also Page 3 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 sought for a direction to the Opposite Party No.2 to make payment of the pendente lite and future interest at the rate of 3 times of the Bank rate as notified by RBI from 01.07.2023 till the date of payment 10. Subsequently, the Opposite Party No.2 entered appearance and filed its counter affidavit denying the claims made by the Petitioner, on the ground that the entire scope of the work under the work order is still incomplete. Hence, the Petitioner is not entitled to the retention amount. Thereafter, the Petitioner filed its rejoinder reiterating that the work could not be completed due to failure on the part of the Opposite Party No.2 in obtaining clearance from NHAI 11. Thereafter, on 29.08.2024, during the 113th Sitting of the Micro Small and Medium Enterprise Council, Cuttack, the Petitioner produced a statutory letter of Special Notice served on it as Creditors by the Opposite Party No. 2, in pursuance of Rule 30(5)(b) of the Companies Rules, 2014 on account of proposed shifting of Registered Office of the Opposite Party No.2 from the State of Andhra Pradesh to the State of Uttar Pradesh. The Petitioner stated that in the said letter the Opposite Party No.2 has clearly admitted that it owes a debt of Rs.10,57,539/- (Rupees Ten lacs Fifty-seven Five Hundred Thirty-Nine Only) after deduction of GST. 12. However, the MSEFC has passed the order dated 29.08.2024 dismissing the case of the Petitioner on the basis of submission of the Opposite Party No.2, that the amount stated by the Opposite Party No.2 in its Page 4 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 Special Notice to Creditor is the cost of the work which has not been executed. Hence, this Writ Petition.
Legal Reasoning
13. Learned counsel for the Petitioner submits that the Claimant- Petitioner, in its claim statement had sought only for the payment of the amount which is due against the completed work and not against the work that could not be completed. He further submits that the claim of the Petitioner is limited to the retention amount of 10% of the total value amounting to Rs.16,02,409.10 which was withheld against the work already completed and the bills were raised. 14. It is further submitted that out of the said amount of Rs.16,02,409.10/-, 10% of the total value towards retention i.e. an amount of Rs.5,44,869.00/- was deducted by the Opposite Party No.2 towards compensation for delay in filing of GST returns by the Petitioner. Therefore, after considering all such deductions the total amount that is due and payable by the Opposite Party No.2 to the Petitioner is Rs.10,57,539/- (Rs. 16,02,409.10/- Rs. 5,44,869.00/-). 15. It is further reiterated that the amount due and payable by the Opposite Party No.2 to the Petitioner as stated in the calculation above was admitted by the Opposite Party No.2 in the statutory letter issued under Rule 30(5)(b) of the Companies Rules, 2014. 16. Therefore, the MSEFC has erred in dismissing the case of the Petitioner under the misconception that the amount claimed by the Petitioner was for the work is yet to be completed, which is violative of Section 18(4) of the MSMED Act, 2006. Moreover, the MSEFC did not carry out the Page 5 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 conciliation proceeding in an appropriate manner and hurriedly dismissed the case without proper application of mind and under gross misconception of the factual position. Moreover, the learned MSEFC was wrong in law by dismissing the case of the Petitioner and the same is violative of Section 18(3) of the MSMED, Act 2006 as the Council neither took up the matter for arbitration by itself nor did it refer it to any other institution for arbitration. In order to substantiate his contention, learned counsel for the Petitioner relies upon a judgment of the Supreme Court in the case of Vijetha Construction v. Indus Smelters Ltd.1. 17. Therefore, it is contended that the impugned order dated 29.08.2024 passed by the ’MSEFC in MSEFC Case No.30 of 2023 may be set aside and the prayer of the Petitioner may be allowed. 18. Learned counsel for the Opposite Party No.2 submits that there is no cause of action to file the present proceeding and for suppressing the material facts, the present Writ Petition deserves to be dismissed. He further submits that it is equally important to bring certain facts into record for effective adjudication of the matter which are as follows: (i) It is the case of the Opposite Party No.2 that in order to sort out uninterrupted power supply to its plant and to operate the plant continuously, it invited quotation from different agencies for construction of 5.7 km 33 kv line from Choudwar substation to its plant (M/s Toshali Cements Pvt. Ltd.) At- Village- 1 2021 SCC OnLine SC 3436 Page 6 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 Indranipatna , Tangi- Choudwdar, P.O-Chasapada , Dist. Cuttack -754027) . (ii) Pursuant to the said invitation, the Petitioner submitted its quotation by GA/2019-20/01 dated 01.04.2019 and also submitted its quotation through Email dated 10.04.2019 and 12.04.2019. (iii) After scrutinizing the proposal, the Opposite Party No.2 finalized the quotation of the present Petitioner i.e. M/s. Gayatri Agency and, accordingly, issued work order for construction of 5.7 km 33 kv line from Choudwar substation to its plant (M/s Toshali Cements Pvt. Ltd.) on the terms and conditions as fixed in the work order dated 17.04.2019. The principal work order as proposed by the Petitioner was further amended on 14.05.2019 and 23.05.2019. (iv) As per the terms and conditions of the principal work order, the deadline for execution and completion of the work was within 6 months from the date of issuance of the work order i.e. 17.04.219 and in case of delay beyond 6 months for the same, there shall be liquidated damages that is to be paid up to 5 %, @ 0.5% per week of the total contract value from the date of receipt of work order. (v) The original work order for execution of the work was issued for an amount of Rs.97,29,688/- which was enhanced from time to time to the tune of Rs.1,51,65,395/- and out of the same, the Page 7 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 claimant already received the payment raised against the running bills against each completed portion of work to the tune of Rs.1,44,69,768/- till 30/03/2021. (vi) However in spite of receipt of the considerable amount (the above-said amount) , the Petitioner failed to execute the work within the time stipulated in the work order or even beyond the same and till date construction of 5.7 km 33 kv line from Choudwar substation to its plant (M/s Toshali Cements Pvt Ltd) is incomplete. (vii) The Petitioner after the stipulated period, by taking different pleas, left the work unattended and due to non-completion of the work, the Opposite Parties have not only failed to get uninterrupted power supply to their plant but many of its electric poles, cables, conductors are found missing and stolen. As a result, the Opposite Parties sustained the entire loss of the work order. (viii) In spite of all request to supply line from Choudwar substation to its plant (M/s Toshali Cements Pvt. Ltd.) made by the Opposite Party No.2 on the condition to clear all their outstanding dues once the power supply will be done the same is still in-complete till date and the Petitioner has no intention to complete the work order. (ix) If the execution of the work was completed within the stipulated time, the subsequent development such as road Page 8 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 expansion, NHI permission, theft of electric poles, cables, conductors would not have arisen at all. (x) However, the Petitioner filed MSEFC Case No.30 of 2023 under Section 18 of the Act, before the Micro and Small Enterprise Facilitation Council, Cuttack (Opp. Party No-1) by suppressing the material facts. (xi) In pursuance to the notice issued by the Opposite Party No.1 in the aforesaid proceeding i.e. MSEFC Case No.30 of 2023, the Opposite Party No.2 entered appearance through its Advocate and filed reply along with all the connected documents on 04.01.2024 before the Opposite Party No.1. (xii) The Opposite Party No.1 has given ample opportunity of hearing to both the parties to settle the dispute. But, as the Petitioner having no intention to execute the work order, the Chairman, Micro and Small Enterprises Facilitation Council, Cuttack (MSEFC) vide order dated 12.08.2024 holding that “xx xx the dispute is on execution of work and since the work has not been executed, Council has no jurisdiction to interfere with” has dismissed the aforesaid case. (xiii) It is submitted that Section 15 of the MSMED Act, 2006 described about DELAYED PAYMENTS TO MICRO AND SMALL ENTERPRISES: Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment Page 9 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 therefore on or before the date agreed upon between him and the supplier in writing or, where there is no agreement on 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. (xiv) But in the instant case, the Petitioner failed to execute the work within the time stipulated in the work order or even beyond the same and till date the construction of 5.7 km 33 kv line from Choudwar substation to its plant (M/s Toshall Cements Pvt. Ltd.) is incomplete. Therefore, the above proceeding before the Chairman, Micro and Small Enterprises Facilitation Council, Cuttack (MSEFC) was not at all primarily maintainable. In view of the same, the Opposite Party No.1 has rightly dismissed the MSEFC Case No.30 of 2023 by holding “xx xx the dispute is on execution of work and since the work has not been executed, Council has no jurisdiction to interfere with” (xv) So far as the judgment of the Apex Court i.e. Vijetha Construction (supra) relied upon by the Petitioner, it is contended that the said judgment is completely different from the instant case. In the said case the Apex Court held that “as per the scheme of the MSMED Act, the facilitation council has a dual role to play, one as a conciliator as per Section (2) of Section 18 and, thereafter, in case the conciliation is unsuccessful as an Arbitrator as Page 10 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 per Sub-section (3) of Section 18”. But in the present case, the Petitioner failed to execute the work within the time stipulated in the work order, and till date the construction of 5.7 km 33 kv line from Choudwar substation to its plant (M/s Toshali Cements Pvt. Ltd.) is incomplete, and the Petitioner raised the running bills against each completed portion of work and got the entire payment to the tune of Rs.1,44,69,768/- till 30.03.2021, except Rs.16,02,409.00 towards 10% retention value. So, the proceeding of the Petitioner was dismissed by the Opposite Party No.1. Hence, the ratio decided by the Supreme Court in Vijetha Construction (supra) is not at all applicable to the present case. 19. Therefore, it is submitted that this Writ Petition filed by the Petitioner is liable to be dismissed. 20. Considering the submissions made by the learned counsel for the Parties and upon bare perusal of the materials available on record especially the impugned order dated 29.08.2024 passed by the Micro and Small Enterprises Facilitation Council, Cuttack in MSEFC Case No.30 of 2023, this Court is of the view that the dispute involved in this case relates to an arbitrable matter. Hence, this matter is required to be remitted back to the Micro and Small Enterprises Facilitation Council, Cuttack, as any dispute arising out of non-payment has to be referred to the Micro and Small Enterprises Facilitation Council. Accordingly, the impugned order dated 29.08.2024 passed by the Micro and Small Page 11 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 07-Apr-2025 15:00:16 Enterprises Facilitation Council, Cuttack in MSEFC Case No.30 of 2023 is set aside and the matter is remitted back to the Micro and Small Enterprises Facilitation Council, Cuttack for consideration afresh.
Decision
21. Accordingly, this Writ Petition is disposed of. 22. Interim order, if any, passed earlier stands vacated. Judge ( Dr. S.K. Panigrahi) B. Jhankar Page 12 of 12