Petitioner challenged a reference to arbitration under the MSMED Act, arguing the respondent was not a registered 'supplier' at the time of the contract. The Court rejected this, holding registration only needs to exist on the date of the reference.
Petition dismissed; parties to bear their own costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
$~15
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision : 05.02.2020
..... Petitioners
Through: Mr. Pradeep Kumar Mathur & Mr. Chiranjeev Joshi, Advocates
versus
TULIP CONTRACTORS & ANR. ..... Respondents Through: Mr.Sahil Garg, Adv.for R-1. Mr.Ramesh Singh, SC, Mr.Ankur Chhibbar, Mr.Chirayu Jain and Mr.Ishan Agarwal, Advs. for R-2.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA NAVIN CHAWLA, J. (Oral)
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Allahabad. The said petition was dismissed by an order dated 14.11.2017 observing that the proper remedy for the respondent no.1 is by means of a suit and not by means of a winding up petition. The respondent no.1, instead of filing a suit, filed the reference before the Centre and therefore, such reference was not maintainable.
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“31. There is no doubt that the above provisions apply only to the services rendered and goods supplied by a „supplier‟ as defined under Section 2(n) of the Act. The focus under Section 15 of the MSMED Act is on the actual act of providing services and supplying goods. If a small scale industry or micro or small enterprise undertakes the above tasks, then the buyer is bound under Section 15 of the MSMED Act to make payment by the appointed date which cannot exceed 45 days from the date of acceptance or deemed acceptance in terms of the proviso thereof.
32. A unit that is not registered as a supplier does not cease to be one. The registration as a supplier under the MSMED Act makes the availing of the benefit much easier. Section 8(1) of the MSMED Act which requires the filing of a memorandum by such unit reads as under:
xxxx
33. Section 8 of the MSMED Act envisages two possible situations; one is where a unit which has not yet come into existence, and the second is where the unit is in existence. Where a unit is yet to be established, Section 8(1) requires filing of the memorandum in the manner specified by the State or the Central Government, as the case may be. Where a unit has already been established prior to the commencement of the MSMED Act, then the proviso applies and the memorandum has to be applied within 180 days from the date of commencement.
34. It, however, does not mean that a third category i.e., a unit that is established after the commencement of the Act cannot seek registration as a supplier. That could never
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have been the intention of the legislature as is evident from the Statement of Objects and Reasons of the MSMED Act.
35. The case on hand falls in the third category where a supplier is already in existence at the time of commencement of the Act but has not obtained any registration till then. It is registered as a supplier beyond 180 days from the date of the commencement of the Act i.e., after 180 days from 2nd October, 2006. Clearly, such a unit can also seek registration as a supplier. That is precisely what has happened in the present case. The certificate issued to the REPM is dated 4th April, 2012, but importantly, it notifies that the date of commencement of the activities as 1st February, 2009.
36. The question that next arises is whether having been registered on 4th April, 2012, can REPM take advantage of the MSMED Act? For this purpose, it is necessary to refer to Section 18 which requires REPM to be a „supplier‟ as on the date of making such reference. Clearly, that condition stood satisfied. Secondly, even according to the Petitioner, the supplies made by REPM pursuant to the PO dated 8th September, 2009 continued even under the Section PO dated 27th November, 2012. From the point of view of the Petitioner, it is seeking to rely on the Second PO having been validly issued. The supplies made by REPM to Alstom in terms of the PO dated 8th September, 2009 continued even after REPM's registration as supplier as is evident from the two MoMs dated 1st May, 2013 and 28th December, 2013. The result is that REPM can seek the application of the beneficial provisions of MSMED Act as far as its claims against Alstom arising from the said First PO are concerned.” (Emphasis supplied)
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“8. The contention whether Driplex can still claim benefit under the MSMED Act, notwithstanding that it had filed its Memorandum after entering into the Contract with Neyveli, is squarely covered by the decision of a coordinate Bench of this Court in GE T & D India Limited v. Reliable Engineering Projects and Marketing (supra). In that case, the Court observed that:
“A unit that is not registered as a supplier does not cease to be one. The registration as a supplier under the MSMED Act makes the availing of the benefit much easier.”
9. The Court further held that a supplier, which was already in existence at the time of the commencement of the MSMED Act but had not obtained the registration, could do so even beyond the period of one hundred and eighty days. In that case, the respondent (Reliable Engineering Projects and Marketing) had obtained a registration on 04.04.2012, but had also specified that its activities had commenced much prior to the said date. It is relevant to note that in that case, the disputes between the parties arose in respect of a purchase order dated 08.09.2009, however, the supplier continued to make supplies even thereafter. In that context, the Court held that the supplier could take recourse to the beneficial provisions of the MSMED Act, even in respect of the first purchase order dated 08.09.2009. This was, notwithstanding, that the Memorandum under Section 8 of the MSMED Act was registered on 04.04.2012. In the present case, Driplex obtained the registration of its Memorandum
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under Section 8 on 09.12.2011; however, the said registration clearly indicates that Driplex had commenced services on 27.08.1974. Thus, notwithstanding that Driplex had filed the Memorandum under section 8 of the MSMED Act after entering into the Contract with Neyveli it could, nonetheless, seek recourse to the beneficial provisions of the MSMED Act.”
(Emphasis supplied)
“26. As noticed above, there is no dispute that GCIL would fall within the definition of micro/small enterprise even at the material time when it had executed the contract with RIL. GCIL is a company and the services provided by GCIL are clearly services rendered by a micro/small enterprise and, therefore, GCIL – being engaged in supply of services rendered by a micro/small enterprise – would fall within the fourth category of entities that are included as a „supplier‟: that is, a company, co-operative society, trust or a body engaged in selling goods produced by micro or small enterprises or rendering services provided by such enterprises. It is not necessary for
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such entities to have filed the Memorandum under Section 8(1) of the Act.
27. The contention that the entities falling under Section 2(n)(iii) of the Act are only those entities that source goods/services from other micro/small enterprises, is not persuasive as it is difficult to accept that an entity sourcing goods/services from a third party micro/small enterprise would be „supplier‟ but would cease to be one if it sources the same from its undertaking.”
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NAVIN CHAWLA, J
FEBRUARY 05, 2020/Arya
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3 issues framed by the court
Whether the jurisdiction of the Centre under Section 18 of the MSMED Act is barred when the supplier was not registered at the time the contract was performed.
Whether a supplier registered after the commencement of the Act can maintain a reference for disputes arising prior to its registration.
Whether an entity not registered under the Act can be considered a 'supplier' within the meaning of Section 2(n).
Colour shows how this judgement treated each authority
Easun Reyrolle Limited v. Nik San Engineering Co. Ltd.Distinguished¶15
Easun Reyrolle Limited v. Nik San Engineering Co. Ltd.
GE T&D India Limited v. Reliable Engineering Projects and MarketingRelied on¶23
GE T&D India Limited v. Reliable Engineering Projects and Marketing, 2017(238) DLT 79 · Who else cites this
The Chief General Manager (Contracts), M/s Nevyeli Lignite Corporation Ltd. v. Driplex Water Engineering Ltd.Relied on¶23
The Chief General Manager (Contracts), M/s Nevyeli Lignite Corporation Ltd. v. Driplex Water Engineering Ltd. & Anr., WP(C) 9670/2016
Ramky Infrastructure Pvt. Ltd. v. Micro and Small Enterprises Facilitation Council and Ors.Relied on¶23
Ramky Infrastructure Pvt. Ltd. v. Micro and Small Enterprises Facilitation Council and Ors., MANU/DE/2341/2018
2 provisions across 1 enactments
M/S Godwin Construction Pvt Ltd
Tulip Contractors
Navin Chawla
As recorded by the court registry
A petition under Article 226 of the Constitution asking a High Court to issue a writ against the State or a public authority in a civil matter.
Judgements on the same questions, provisions and authorities, from every court
