Dismissed

The National Small Industries Corporation Ltd. (Nsic) v. The State of Telangana

Telangana HC16 Feb 2023WP/2358/2023

Case brief

AI extract

What is this about?

This writ petition filed to quash an award by the Telangana State Micro and Small Enterprises Facilitation Council was dismissed. The Court held that challenges to such awards must be made under Section 34 of the Arbitration and Conciliation Act, not Article 226, and noted the mandatory 75% deposit requirement. The petition was mis-conceived and dismissed with costs.

What the court decided

AI extract

The National Small Industries Corporation Ltd… — Writ and Judicial Review | Telangana HC (2023)

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction)

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THURSDAY,THE SIXTEENTH DAY OF FEBRUARY TWO THOUSAND AND TWENTY THREE

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PRESENT

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THE HONOURABLE THE CHIEF JUSTTCE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE N.TUKARAMJI

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WRIT PETITION NO: 2358 OF 2023

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Between:

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The National Small lndustries Corporation Ltd. (NSIC), A Govt. of lndia Enterprases, 203, Sri Dattasai Complex, RTC X Road, Hyderabad 500 020, TS, rep. by its Authorized Signatory and GPA Holder, Mr. S. Suresh, Senior Branch Manage

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..PETrroNER

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AND

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1 The State of Telangana, Rep by its Prl Secretary, lndustries Department, Secretariat, Hyderabad.

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2 Telangana State Micro and Small Enterprises Facilitation Council (TSMSMEFC), rep. by its Chairman, Ranga Reddy Region, Office at District lndustries Centre, S-34,1|-Floor lntegrated District - Officer Complex, Kongar Kalan village, Rangareddy-501 51 0.

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3 M/s. Brahma Teja Paper Products^(BTPP), A Proprietary Concern, Having office at 11-9-25611, Road No.3, Street No. 16, Vijayapuri Colony, Kothapet, Hyderabad-500035, rep. by its Sole Proprietor, Smt. P. Janaki, W/o Shri P. Sreedhar

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4 M/s. Om X Press Print Pack Pvt. Ltd., A Company duly registered under the Companies Act, 1913/1956 Act, having its Regd. Offlce at 10B, APllC,^Type lll, Prashanthi Nagar, Kukatpally, Hyderabad 5O0 072, rep. by its Managing Director and Authorized Signatory, Mr. Narendra Kumbala

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5 State of Andhra Pradesh, rep. by its Secretary, Social^{WelfareDepartment,} Secretariat, Amravathi, A.P.

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6 The Director of Social Welfare, Govt. of A.P., T.G. Plaza Building,^Tadepalle, Guntur District, AP 522 5O1^.

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7 AP Social Welfare Residential Educational lnstitutions^{Society (APSWREI),} Rep. by its Secretary, at D. No. 12-467^-9, Moksha Sai^{Plaza, Service Road,} Tadepalle, Guntur District, AP 522 501.

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...RES'ONDENTS

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Petition under Article 226 of lhe Constitution of lndia^{prayingthat in the} circumstances stated in the affidavit^{filedtherewith,the High Court maybe} pleased to issue an appropriate writ, order or direction more^particularly oneⁱⁿ the nature of a Writ of Certiorari calling^{for the records pertainingto the award} passed by respondent No.2 in case No. 236/MSEFC|202O dated O3-11-2022^and quash the sarne and consequently direct the respondent No. 5 to 7 to^make payment to the petitioner in terms of the arbitration award in case No.

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236iMllEFC/2020⁽ ated 03-11-2022 within such time as rray be fixed by this Hon'bk.'Court

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lA NO: 1 OF 2023

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Petition unde^' Section 151 CPC^praying that in the <;irr;unrsta nces stated in the;rffidavit filed in support of the^petition, the^High Couri^tnay be^pleasedto susperd the operat tn of the Award^passed in case No.^{236/l/1sE FCl2020 dated} 03-11-',2022 by the r :spondent No.2. Pending disposal of^{ma rt wril petition}

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geunsr:l for the Pel tioner: SRl. J. PRABHAKAR FOR M/S. l). VEINKATA PADMAJA

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Counsel for the Ret^pondent No.1: SRl,^{H. VENUGOPAL,GF FOR INDUSTRIES} COMMERCE

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Counsel for the Res pondents No.3: SRl. GOLLAKOTA SAI'A JAGANNATH

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Counserl for the Res condents No.5to7: SRl. P. GOVIND REDD'f '^SPL

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CCIUNSEL FOR A.P.

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Counsel for the Resp^,ndents No. 2&4:^None Appeared

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The Court made the following: ORDER

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HCI 6t /I{TRJ WP,No.235a of 2023

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THE HON'BLE THE CHIEF JUSTICE UJJAL BHTIYAN

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AND

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THE HON'BLE SRI WSTICE N. TUI(ARAMJI

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WRIT PETITION No.2358 of 2O23

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ORDER: (Per the Hon'ble the Chief Justice Ujjal Bhugan)

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Heard Mr. J. Prabhakar, learned Senior Counsel representing Ms. D.Venkata Padmaja, learned counsel for the petitioner. We have also heard Mr. H.Venugopal, learned Government Pleader for Industries and Commerce Department for respondent No. l; Mr. Gollakota Satya Jagannat, learned counsel for respondent No.3; and Mr. P. Govind Reddy, learned Special Counsel representing State of Andhra Pradesh (respondent Nos.S & 6).

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By hling this petition under Article 226 of the Constitution of Inclia, petitioner has prayed for setting aside of the award dated 03.11.2022 passed by the Telangana State IVIicro and Small Enterprises Facilitation Council, Ranga

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4 H()] & NTRJ

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W.P.t''lc 23:i8 of 2023

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Reddy Regic n (briefly referred to hereinaf t: r as 'the Facilitation C runcilJ in Case No.236lMSEFCI'2O),(

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Le rrned Senior Counsel for the 1>etitioner submits that petitione^' is a statutory Government of Indiet errterprise anC acts as a facilitator to Micro, Small z.n I Medium Enterprises briefly referred to hereinalr er zls 'ltdSMEs) Pet-itioner is r tt a supplier within the mealrng ol S:ec1 ion 2(n) of the Micro, Small and Medium Enterprises l)r:velopment Act., 2006 (br :fly referred to hereinafter as 'the tvlSNIE Act'). As a facilitato^', it had facilitated procurem('nt ol (.ontract by the 3.a respr ndent by entering into consortirrr r ztmongst MS MEs in res ;ect of tenders floaled br- responclerL - Nos.5 & 6 Petitioner is r ct liable to pay the amolrnt claime tl by the J.a respondent w rich are in fact recoverable from ;esltondent Nor;.S & 6. .,iabrlities of respondent Nos.S & t> cannot be fas -ened onto he cetitioner. Tl'ris being a -iurisdtr t.i rnal error, the writ petit: rn rs maintainable. Therefore, ttL:s Court in .,' exercise of ts^jurisdiction under Article 2|Zt> of the - Corrstitution r f lr:.dia mav set aside the arvzrrd iutc. direct

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HC] & NTRJ W.P.No.2358 of 2023

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respondent Nos.S, 6 & 7 to make payment to the petitioner in terms of the award.

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At the outset, we are a little perplexed by the nature of the relief sought for by the petitioner. On the one hand, petitioner seeks quashing of the award, but on the other hand, petitioner seeks a direction to respondent Nos.5, 6 & 7 to make payment to the petitioner in terms of the aforesaid award.

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Be that as it may, we are not inclined to entertain the writ petition for tlr,o reasons. Firstly it is now trite law that an award passed by the Facilitation Council under Section 18 of the MSME Act can be questioned under Section 34 of the Arbitration and Conciliation Act, 1996 (briefly referred to hereinafter as the 1996 Act,).

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1. We see no reason to by-pass the remedy provided under the 1996 Act read with the MSME Act and entertain the writ petition.

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5.2. When this was pointed out to learned Senior Counsel for the petitioner, he has placed reliance on a

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HCJ & NTRJ W.^a.t.{o.2'358 of 2023

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<lecision of the Supreme Court in Godrej Sa::it Lt:e Ltd. v. Ilxcise and Taxation Ollicer-cum-Assessing .Authorityr to oontend thz t notwithstanding the alternative r'( rr:ed r,, the writ I)etition^{wo -rld be maintainable u,hen i tr s ir question of} j urisdiction

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5.3. 'hat was a case where tht' Hi6Jr Court had cleclined to entertain the writ petition assailirrr: arr order of z-ssessment alrd had relegated the petitioner to llle remedy of eppeal unde r Section 33 of the Haryana Virlue;\clderl Tax Act, 2003. It wi s in. that context Supreme Court lr:rcl hat mere a.vailability >f an alternative remed-r, oI appeeLl ol-rcvls10n vrould not rust the jurisdiction ol the Hiq)-r^,l)otrrt ur-rder F.rticle 226 ol' the Constitution of lndia ancl rr, nder a writ petition nor -rnaintainable. Drawing a distinr:rion betu,een nraintainabi Ltv and entertainability of a r,..r-it pe tition, Supreme Cc urt has observed that cntert.rinabilitv of a writ petition is e rtirely within the realm ol discrctic rr of the High Court, writ ernedy being discretionarv. Iiven though a writ

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I 2023 S(lC Or -ir-re SC 95

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HCJ & N'TRJ W.P.No.2358 of 2O23

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petition may be rnaintainable, yet the sarne may not be entertained by the High Court for various reasons.

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5.4. We are afraid the decision of the Supreme Court in

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Godrej Sara Lee Ltd. (supra) is not an authority for the proposition that challenge to a-n award made by the Facilitation Council under the MSME Act can be made in a proceeding under Article 226 of the Constitution of India by-passing the remedy provided under Section 34 of the 1996 Act.

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As a matter of fact, Supreme Ccurt in M/s. Sterling Industries v. Jayprakash Associates Ltd.2 has clearly disapproved the stand adopted by some High Courts that any order passed by an arbitra-l tribunal is capable of being corrected by the High Court under Articles 226 or 227 of the Constitution of India. Adverting to Section 34 of the 1996 Act, Supreme Court has held that intervention by the High Court under Articles 226 or 227 of the Constitution of -'India in an arbitra-l arvard is not permissible.

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2 AIR 2019 SUPREME COURT 3558

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HI:J & NTR.I W.P..\c, 23.j8 of 2O23

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W are also not inclined to e'nterter-in the u,rit petition beca:se under Section 19 of rhe MIi,lE Act, no application i ;r setting aside an award pas s;r:d by the Facilitation C runcil shali be entertained by any (}rurt unless tht: party cha lenging the award deposits 7^-:>o/a o^' rhc amount in terms o[ th : award. No such deposit has been rrade

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B. M: ME Act is a special legislation to l,rolcct and fur ther the itterest of MSMEs. The Act pr,rvidcs for a derlicated dis >ute resolution mechanisrn lrnder l:iec[ion i 8 To ensure tha , interest of the MSME is protr:cted : nd to u eed ou frir.olous r hallenge to an award passed lry th,:^{rac:ilitation} Co:ncil unde Section 18, the statute has put l al caveat an.r challenge to such an award would be et'rte r I ain cd onll uprrn deposit t I 75Yo of the arvarded amount

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Th Lt being the position and wrthou: cxpressing an1' opinion or. rnerit, we are of the vieu, that the rlrit petition IS ,:learly mis:onr:eived. Petitioner being ,r Gorcrnrrent o[ lndia entcrprir e: s11g[1 not to have filecl such a u'rit Petition

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HCJ & NTRJ W.P.No,235B of 2023

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Accordingly, the Writ petition is dismissed. We

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impose a cost of Rs.5O,OOO.OO (Rupees fifty thousand only) to

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be paid by the petitioner to the third respondent.

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Miscellaneous applications pending, if any, in this

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Writ Petition shall stand closed

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MEMORAND^{UMOF COSTS}

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W.P.No.2358^{ol 2023}

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Rs. Ps.

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Cost Quantmed^{by Hon'ble Court (That} ,the^petitioner n'Jiin-iJ^{iiit"cted to pay with eiemplary costsof} - rihv' rnor."nJ onrvf to the 3'd ii".i Eo' obtr--'t^ni,Ji""" Respondent^.

50000 -⁰⁰

50,000 -⁰⁰

TOTAL

ASS,.??iffi:3'E+RtR

/rrRUE coPY//

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