Disposed

M/S. Atc Telecom Infrastructure Pvt. Ltd., v. the State of Karnataka

Karnataka HC1 Aug 2024WP/49974/2017

Case brief

AI extract

What is this about?

Writ petitions filed to quash proceedings before the Micro and Small Enterprises Facilitation Council. The Court directed the Council to first adjudicate preliminary issues regarding jurisdiction and eligibility before proceeding on merits, remitting the matter without expressing views on the underlying merits.

What did the court decide?

Petitions disposed of; Matter remitted to the Council to adjudicate on jurisdiction and qualifier status within 60 days.

M/S. Atc Telecom Infrastructure Pvt… — Contract and Commercial Disputes | Karnataka HC (2024)

¶1

¶2

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶3

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

¶4

DATED THIS THE 1^ST DAY OF AUGUST, 2024

¶5

BEFORE

¶6

THE HON'BLE MR JUSTICE M.G.S. KAMAL WRIT PETITION NO. 49974 OF 2017 (GM-RES)

¶7

C/W

¶8

WRIT PETITION NO. 49814 OF 2017 (GM-RES) WRIT PETITION NO. 49975 OF 2017 (GM-RES) WRIT PETITION NO. 49976 OF 2017 (GM-RES)

¶9

IN WRIT PETITION NO.49974/2017

¶10

BETWEEN:

¶11

M/S. ATC TELECOM INFRASTRUCTURE PVT. LTD., (FORMERLY VIOM NETWORKS LIMITED), HAVING ITS CIRCLE OFFICE AT HM TOWERS, 1^ST FLOOR, MAGRATH ROAD JUNCTION, BRIGADE ROAD, ASHOK NAGAR, BENGALURU-560 001,

¶12

Digitally signed by SUMA B N Location: High Court of Karnataka

¶13

REPRESENTED BY ITS CIRCLE HEAD, MR. ANIL PRASAD.

¶14

(BY SRI. ASHOK HARANAHALLI SENIOR COUNSEL FOR

¶15

SRI. PRASANNA KUMAR P., ADVOCATE)

¶16

…PETITIONER

¶17

AND:

¶18

THE STATE OF KARNATAKA BY ITS SECRETARY, DEPARTMENT OF INDUSTRIES AND COMMERCE, NO.49, 2^ND FLOOR, SOUTH BLOCK, KHANIJA BHAVAN, RACE COURSE ROAD, BANGALORE-560 001.

¶19

¶20

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017

¶21

AND 1 OTHER

¶22

THE DIRECTORATE OF INDUSTRIES AND COMMERCE BY ITS ADDITIONAL DIRECTOR (MSME), NO.49, 2^ND FLOOR, SOUTH BLOCK, KHANIJA BHAVAN, RACE COURSE ROAD, BANGALORE-560 001.

¶23

MV COMMUNICATION HAVING ITS REGISTERED OFFICE AT NO.323, MV HOUSE, 13^TH MAIN, 18^TH CROSS, NARAYANA NAGAR, 1^ST BLOCK, BOOHBCS, KANAKPURA MAIN ROAD, DODDAKALLASANDRA POST, BENGALURU-560 060.

¶24

…RESPONDENTS

¶25

(BY SRI. RAGHAVENDRA S.H. AGA FOR R1 AND R2; SRI. PRAKASH M.H., ADVOCATE FOR R3)

¶26

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN CASE NO.12/2017 PENDING ON THE FILE OF THE MICRO, SMALL ENTERPRISES FACILIATION COUNCIL, R-2 HEREIN [PRODUCED VIDE ANNEXURE-L].

¶27

IN WRIT PETITION NO. 49814 OF 2017

¶28

BETWEEN:

¶29

M/S. ATC TELECOM INFRASTRUCTURE PVT. LTD., (FORMERLY VIOM NETWORKS LIMITED) HAVING ITS CIRCLE OFFICE AT HM TOWERS, 1^ST FLOOR, MAGRATH ROAD JUNCTION, BRIGADE ROAD, ASHOK NAGAR, BENGALURU-560 001,

¶30

REPRESENTED BY ITS CIRCLE HEAD, MR. ANIL PRASAD, AGED ABOUT 51 YEARS

¶31

…PETITIONER

¶32

(BY SRI. ASHOK HARANAHALLI SENIOR COUNSEL FOR SRI. PRASANNA KUMAR P., ADVOCATE)

¶33

AND:

¶34

THE STATE OF KARNATAKA BY ITS SECRETARY, DEPARTMENT OF INDUSTRIES AND COMMERCE,

¶35

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶36

¶37

NO.49, 2^ND FLOOR, SOUTH BLOCK, KHANIJA BHAVAN, RACE COURSE ROAD, BANGALORE-560 001.

¶38

THE DIRECTORATE OF INDUSTRIES AND COMMERCE BY ITS ADDITIONAL DIRECTOR (MSME), NO.49, 2^ND FLOOR, SOUTH BLOCK, KHANIJA BHAVAN, RACE COURSE ROAD, BANGALORE-560 001.

¶39

KMC ENTERPRISES

¶40

HAVING ITS REGISTERED OFFICE AT 90/2A, VIDYAPEETHA MAIN ROAD, KENGERI KOTTE ROAD, BENGALURU-560 060 REPRESENTED BY ITS AUTHORISED REPRESENTATIVE

¶41

…RESPONDENTS (BY SRI. RAGHAVENDRA S.H. AGA FOR R1 AND R2; SRI. SANDESH C.R., ADVOCATE FOR SRI. D.S. JAYARAJ, ADVOCATE FOR R3)

¶42

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN CASE NO.9/2017 PENDING ON THE FILE OF THE MICRO, SMALL ENTERPRISES FACILIATION COUNCIL, R-2 HEREIN [PRODUCED VIDE ANNEXURE-M]

¶43

IN WP.NO. 49975/2017

¶44

BETWEEN:

¶45

M/S. ATC TELECOM INFRASTRUCTURE PVT. LTD., (FORMERLY VIOM NETWORKS LIMITED), HAVING ITS CIRCLE OFFICE AT HM TOWERS, 1^ST FLOOR, MAGRATH ROAD JUNCTION, BRIGADE ROAD, ASHOK NAGAR, BENGALURU-560 001,

¶46

REPRESENTED BY ITS CIRCLE HEAD, MR. ANIL PRASAD.

¶47

…PETITIONER

¶48

¶49

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017

¶50

AND 1 OTHER

¶51

(BY SRI. ASHOK HARANAHALLI SENIOR COUNSEL FOR SRI. PRASANNA KUMAR P., ADVOCATE)

¶52

AND:

¶53

THE STATE OF KARNATAKA BY ITS SECRETARY, DEPARTMENT OF INDUSTRIES AND COMMERCE, NO.49, 2^ND FLOOR, SOUTH BLOCK, KHANIJA BHAVAN, RACE COURSE ROAD,

¶54

BANGALORE-560 001.

¶55

THE DIRECTORATE OF INDUSTRIES AND COMMERCE BY ITS ADDITIONAL DIRECTOR (MSME), NO.49, 2^ND FLOOR, SOUTH BLOCK, KHANIJA BHAVAN, RACE COURSE ROAD,

¶56

BANGALORE-560 001.

¶57

MS INFRA SERVICES PRIVATE LIMITED HAVING ITS REGISTERED OFFICE AT NO.323, MV HOUSE, 13^TH MAIN, 18^TH CROSS, NARAYANA NAGAR, 1^ST BLOCK BOOHBCS, KANAKPURA MAIN ROAD, DODDAKALLASANDRA POST, BENGALURU-560 060.

¶58

REP. BY ITS AUTHORISED REPRESENTATIVE.

¶59

…RESPONDENTS

¶60

(BY SRI. RAGHAVENDRA S.H. AGA FOR R1 AND R2; SRI. PRAKASH M.H., ADVOCATE FOR R3)

¶61

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN CASE NO.11/2017 PENDING ON THE FILE OF THE MICRO, SMALL ENTERPRISES FACILIATION COUNCIL, R-2 HEREIN [PRODUCED VIDE ANNEXURE-L]

¶62

IN WP NO. 49976/2017

¶63

BETWEEN:

¶64

M/S. ATC TELECOM INFRASTRUCTURE PVT. LTD., (FORMERLY VIOM NETWORKS LIMITED), HAVING ITS CIRCLE OFFICE AT

¶65

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶66

¶67

HM TOWERS, 1^ST FLOOR, MAGRATH ROAD JUNCTION, BRIGADE ROAD, ASHOK NAGAR, BENGALURU-560 001,

¶68

REPRESENTED BY ITS CIRCLE HEAD, MR. ANIL PRASAD.

¶69

…PETITIONER

¶70

(BY SRI. ASHOK HARANAHALLI SENIOR COUNSEL FOR SRI. PRASANNA KUMAR P., ADVOCATE)

¶71

AND:

¶72

THE STATE OF KARNATAKA BY ITS SECRETARY, DEPARTMENT OF INDUSTRIES AND COMMERCE, NO.49, 2^ND FLOOR, SOUTH BLOCK, KHANIJA BHAVAN, RACE COURSE ROAD, BANGALORE-560 001.

¶73

THE DIRECTORATE OF INDUSTRIES AND COMMERCE BY ITS ADDITIONAL DIRECTOR (MSME), NO.49, 2^ND FLOOR, SOUTH BLOCK, KHANIJA BHAVAN, RACE COURSE ROAD, BANGALORE-560 001.

¶74

M/S. CHAITANYA ELECTRICALS HAVING ITS REGISTERED OFFICE AT NO.24, KANNURAMMA LAYOUT, KANNURAMMA TEMPLE RAOD, DEVINAGAR, RMV 2^ND STAGE, BANGALORE-560 094.

¶75

REP. BY ITS AUTHORISED REPRESENTATIVE.

¶76

…RESPONDENTS

¶77

BY SRI. RAGHAVENDRA S.H. AGA FOR R1 AND R2; SRI. HEMANTH BHARADWAJ ADVOCATE FOR SRI. SARAVANA S., ADVOCATE FOR R3(VK NOT FILED)

¶78

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN CASE NO.10/2017 PENDING ON THE FILE OF THE MICRO, SMALL ENTERPRISES FACILIATION COUNCIL, R-2 HEREIN [PRODUCED VIDE ANNEXURE-N]

¶79

6 - NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶80

THESE PETITIONS, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

¶81

CORAM: HON'BLE MR JUSTICE M.G.S. KAMAL

¶82

ORAL ORDER

¶83

Common petitioner in these petitions is before this Court seeking quash of proceedings in case Nos.12/2017, 9/2017, 11/2017, 10/2017 filed by the private respondents before the Micro and Small Enterprises Facilitation Council (hereinafter referred as 'the Council'), invoking the provisions of The Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred as 'the Act, 2006').

¶84

Sri.Ashok Haranhalli, learned senior counsel appearing for Sri.Prasanna Kumar P, learned counsel for the petitioner taking this Court through the petition averments and the Annexures enclosed therewith submits that the petitioner is before this Court seeking quash of above proceedings on four primary grounds:

¶85

(i). That the facts involved in the matter are ridden with the tales of fraud, mischief and misrepresentation, preceded with filing of criminal complaints resulting in filing of the charge sheet

¶86

¶87

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶88

against some of the employees of the petitioner as well as the employees and Managing Directors of the private respondents pertaining to the very same transactions over which claims and counter claims have been made by the parties. As such the Council is incompetent to deal with the same.

¶89

(ii). That a suit in O.S.No.3436/2015 has already been initiated by the petitioner against the private respondents seeking recovery of the amounts which were received by the private respondents fraudulently on the basis of fabricated invoices.

¶90

(iii). That the respondent who appeared in the said suit have not whispered anything about their entitlement of seeking remedy under the provisions of the Act, 2006 by filing necessary application under Section 8 as contemplated under the Arbitration and Conciliation Act, 1996. That being so, they have forfeited their right to

¶91

pursue the remedy before the Micro and Small Enterprises Facilitation Council.

¶92

8 - NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶93

(iv). That even on merits the transaction pertaining to the period between the years 2012 and 2014 and that the private respondents had not even registered themselves as Small Scale industries as mandatorily required under the provisions of the Act, 2006. Thereby the Council lacks complete jurisdiction.

¶94

In support of these primary grounds learned senior counsel appearing for the petitioner relied upon following judgments:

¶95

(1). Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods (P) Limited reported in (2023) 6 SCC 401.

¶96

(2). United Machinery and Appliances Vs. Greaves Cotton Limited reported in ( 2024) SCC Online Cal 2802.

¶97

(3). Vidya Drolia and Others Vs. Durga Trading Corporation reported in (2021) 2 SCC 1.

¶98

Thus he submits that the law with regard to maintainability/entertainability of the dispute which involved consideration of allegation of fraud, completely bars the jurisdiction of the Arbitration/Tribunal/Council, as that of the respondent No.2 and therefore, coercing the petitioner to

¶99

¶100

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶101

submit itself to the jurisdiction is an exercise in futility. Hence, seeks for allowing of the petitions.

¶102

In response, Sri.Prakash M.H, learned counsel for the private respondents submit that:

¶103

(i) The proceedings before the Micro and Small Enterprises Facilitation Council has been initiated by them on 18.04.2017 and the suit in question was filed by the petitioner on 11.04.2017, that is, much prior to receipt of any notice/summons in the suit.

¶104

(ii) That the petitioner herein has submitted itself the jurisdiction of the Council by filing detailed statement of objections, in that apart from denying the claim of the petitioner they have also raised issue of jurisdiction and also issue with regard to maintainability of the proceedings on the count of respondents not having qualified themselves to avail the remedies under the said Act, 2006.

¶105

(iii) As regards the consideration of allegation of fraud, it is submitted that it is for the Council to decide, considering the material/pleading made available by the parties, whether or

¶106

10 -

¶107

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶108

not it has jurisdiction to proceed with the matter and since the petitioner has already raised this issue, without even waiting for the adjudication on the issue of jurisdiction, has rushed to this Court which is premature in nature.

¶109

Referring to the judgment of the Apex in the case of Gujarat State Civil Supplies Corporation Limited , learned counsel for the respondents submits that even the issue with regard to whether or not private respondents fit into the definition of "supplier" also required to be considered by the Council as it is a mixed question of fact and law and cannot be gone into in the Writ proceedings. Hence, seeks for dismissal of the Petition.

¶110

Sri.S.H.Raghavendra, learned AGA appearing for the respondent Nos.1 and 2 justifying the proceeding initiated before the Council submits that the Council which is an instrumentality of the state is exercising its jurisdiction strictly in terms of Sections 18 and 21 of the Act, 2006 and it has jurisdiction to decide even on the issue of maintainability and the same cannot be gone into in the Writ proceedings. Hence, seeks for dismissal of the Petition.

¶111

11 - NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶112

Heard and perused the records.

¶113

The primary ground on which the petitioner is before

¶114

this Court is that the claim being made by the Private respondents is based on the forged and fabricated invoices which were allegedly prepared in collusion with its own employees and that the petitioner has initiated criminal proceedings punishable for the offences under various sections of Indian Penal Code and that the charge sheet in this regard has already been filed and the said matter is pending consideration. That a suit in O.S.No.3436/2015 is filed by the petitioner seeking recovery of the certain amounts against the private respondents on the premise of petitioner having been made to pay the said amount on the basis of false and fabricated documents. Thus there is no doubt, there seems to be serious allegations and counter allegations with regard to fabrication, fraud and forgery of the documents. The said allegations have been reiterated in the statement of objections which is already filed before the Council. Question of arbitrability of dispute involving serious allegations of fraud and forgery is no more res integra . Such allegations or the

¶115

12 -

¶116

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶117

case involving consideration of such allegations, no doubt excludes the jurisdiction of Arbitral Tribunal as it is not competent to deal with such allegations. However, such decision on jurisdiction and maintainability needs to be taken by the Arbitral Tribunal which is seized of the matter considering the allegation made in the pleadings before it, which stage admittedly has not reached before the Council in this matter yet.

¶118

As regards the maintainability of the claim petition by the respondents for want of they qualifying themselves to be called as ''Suppliers'' as defined under Section 2(n) of the Act, 2006 on the ground of they purportedly not complying Section 8 of the Act, 2006 as contended by the learned senior counsel appearing for the petitioner, is concerned the same is a mixed question of law and fact, which needs to be considered based on requirement and conditions contemplated under Section 8 of the Act, 2006. The said mixed question of fact and law cannot be gone into in the proceedings under Article 226 of the Constitution of India.

¶119

13 - NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶120

As rightly pointed out by the learned Counsel appearing for the respondents the judgment of the Apex Court in the case of Gujarat State Civil Supplies Corporation

¶121

Limited (Supra) at paragraph No.51 is held as under:

¶122

"51. Following the abovestated ratio, it is held that a party who was not the "supplier" as per Section 2(n) of the MSMED Act, 2006 on the date of entering into the contract, could not seek any benefit as a supplier under the MSMED Act, 2006. A party cannot become a micro or small enterprise or a supplier to claim the benefit under the MSMED Act, 2006 by submitting a memorandum to obtain registration subsequent to entering into the contract and supply of goods or rendering services. If any registration is obtained subsequently, the same would have the effect prospectively and would apply for the supply of goods and rendering services subsequent to the registration. The same cannot operate retrospectively. However, such issue being jurisdictional issue, if raised could also be decided by the Facilitation Council/Institute/Centre acting as an d Arbitral Tribunal under the MSMED Act, 2006."

¶123

Thus, the Council is also not having any legal impediment to adjudicate on this issue as well.

¶124

As regards the contention of petitioner filing the suit and the respondents not filing application under Section 8 of the Arbitration and Conciliation Act, 1996 is concerned, on a query by this Court, it was clarified that the suit filed by the petitioner is based on the allegation of fabricated invoices and not based on any agreement containing arbitration clause. On

¶125

14 -

¶126

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶127

the other hand, the claim being raised by the respondent before the Council is on the basis of they claiming to be the "suppliers" within the meaning of Act, 2006 and in view of the statutory/fictional arbitration-provided under Section 18 of the Act, 2006.

¶128

For the aforesaid reasons and analysis, without expressing any view on the merits and demerits of the claim being made by the parties, this Court is of the considered view that matter may be remitted to the Council to first adjudicate on the following issues before proceeding further in the matter:

¶129

(i). Whether in view of the allegations made by the petitioner of fraud, fabrication and collusion, can the Council proceed further in the matter in the light of the judgment of the Apex Court in the case of Vidya Drolia and Others Vs. Durga Trading Corporation reported in (2021) 2 SCC 1?

¶130

(ii). Whether or not the respondents qualify themselves to be the "Suppliers" within the meaning of Section 2(n) of the Act 2006 and to seek remedies as provided under the Act, 2006?

¶131

The Council shall determine these issues after affording sufficient opportunity to the parties, keeping open all

¶132

NC: 2024:KHC:30452 WP No. 49974 of 2017 C/W WP No. 49814 of 2017 WP No. 49975 of 2017 AND 1 OTHER

¶133

15 -

¶134

contentions to be urged including the contention with regard to respondents not seeking leave by filing application under Section 8 of the Arbitration and Conciliation Act, 1996, within period of 60 (Sixty) days from the date of receipt of certified copy of this order.

¶135

With the above observation, petitions are disposed

¶136

of .

¶137

Since the parties are represented by the respective counsel they shall appear before the Council on 28.08.2024, without any further notice. On such appearance, the Council shall take up the matter and adjudicate on the aforesaid issues before proceeding further in the matter.

¶138

Sd/(M.G.S. KAMAL) JUDGE

¶139

RL/List No.: 1 Sl No.: 21

M/S. Atc Telecom Infrastructure Pvt. Ltd., v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

M/S. Atc Telecom Infrastructure Pvt. Ltd., v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Sarvodaya Memorial Foundation Vs the Commissioner

M/S. Shree Veer Enterprises Vs the Commissioner

M/S Renaissane Design Build Vs Karnataka Industrial Area Development Board

Sri. Lokeshwaraiah Vs the State of Karnataka

Sri.H.R.Suryanarayana Vs Union of India

M/S. Royal Wood Industries Vs the State of Karnataka