Arbitration Request No.57 of 2018

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE SATHISH NINAN** ## **TUESDAY, THE 21[ST] DAY OF JUNE 2022 / 31ST JYAISHTA, 1944** ## **AR NO. 57 OF 2018** ## **PETITIONER/S:** KERALA STATE ELECTRONICS DEVELOPMENT CORPORATION (KELTRON) REPRESENTED BY ITS CHIEF GENERAL MANAGER,SURESH KUMAR.S,KELTRON EQUIPMENT COMPLEX,KARAKULAM,THIRUVANANTHAPURAM,KERALA-695564. BY ADV SMT.M.A.ZOHRA, SC, KELTRON ## **RESPONDENT/S:** - 1 M/S OPTIMAL POWER SYNERGY INDIA PVT LTD. 197 12TH MAIN,3RD PHASE,PRENIA INDUSTRIAL AREA,BENGALURU,KARNATAKA-560058. - 2 ASHOK PRAKASH CHIEF TECHNICAL OFFICER,M/S OPTIMAL POWER SYNERGY INDIA PVT LTD,197,12TH MAIN,3RD PHASE,PRENIA INDUSTRIAL AREA,BENGALURU,KARNATAKA-560058. - 3 THE WEST BENGAL STATE MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL(DELETED) REPRESENTED BY ITS CHAIRMAN,NEW SECRETARIAT BUILDINGS(9TH FLOOR),NO.1,KIRAN SHANKAR ROY ROAD,BBD BAGH,KOLKATA,WEST BENGAL-700001. THE 3RD RESPONDENT IS DELETED FROM THE PARTY ARRAY OF AR.57/2018 AS PER ORDER DATED 23.11.2021 IN IA.1/2021 IN AR.57/2018. BY ADVS. K.SHAJ RENJIT GEORGE ## **THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION ON** ## **21.06.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Arb.Request No.57 of 2018 2 ## **SATHISH NINAN, J.** ## **==================================== Arbitration Request No.57 OF 2018** **=====================================** Dated this the 21[st] day of June, 2022 ## **O R D E R** The petitioner entered into a contract with the first respondent for the supply and installation of Solar Photo Voltaic Modules, Solar Power Conditioning Units and Batteries. Annexure A1 series is the contract with the purchase orders. As per the terms of the contract, 10% of the purchase price is liable to be retained as retention amount to secure performance etc. The first respondent had agreed to provide warranty for the goods and services for a period of five years. The petitioner alleges that the materials supplied malfunctioned. They issued various demands to the first respondent seeking rectification of the same, but of no avail. While so, the first respondent approached the West Bengal Micro Small Enterprises Facilitation Council in terms of Section 18 of the Micro, Small & Medium Enterprises Development Act, 2006 (in short 'MSMED Act') claiming return of the retention amount. Pending the same, the petitioner has approached this Court under Section 11 of the Arbitration and Conciliation Act, 2006 (in Arb.Request No.57 of 2018 3 short 'Arbitration Act') seeking appointment of an arbitrator in terms of the agreement between them. 2. Heard Smt.M.A.Zohra, the learned Standing Counsel for the petitioner and Sri.K.Shaj, the learned counsel for the respondents. 3. The existence of an arbitration clause in the agreement between the petitioner and the first respondent is not disputed. However, the first respondent contends that, the provisions of the MSMED Act having already been invoked and the proceedings being pending there, it is not open for the petitioner to seek an appointment of an arbitrator in terms of Section 11 of the Arbitration Act. The MSMED Act prevails over the right for arbitration provide under the agreement it is contended. 4. Learned counsel appearing for the petitioner raises the apprehension that, the claims of the petitioner as against the first respondent would not be permitted to be urged or considered before the Facilitation Council under the MSMED Act. 5. The issue is no longer _res integra_ and is covered by the judgment of the Apex court in _**M/s.Silpi Industries and Others v. Kerala State Road Transport Corporation and Others (2021(4) KLT 242).**_ Therein, the Apex Court held thus : Arb.Request No.57 of 2018 4 _“........ When the provisions of Section 15 to 23 are given overriding effect under Section 24 of the Act and further the 2006 Act is a beneficial legislation, we are of the view that even the buyer, if any claim is there, can very well subject to the jurisdiction before the Council and make its claim/ counter claim as otherwise it will defeat the very objects of the Act which is a beneficial legislation to micro, small and medium enterprises. Even in cases where there is no agreement for resolution of disputes by way of arbitration, if the seller is a party covered by Micro, Small and Medium Enterprises Development Act, 2006, if such party approaches the Council for resolution of dispute, other party may approach the civil court or any other forum making claims on the same issue. If two parallel proceedings are allowed, it may result in conflicting findings. At this stage, it is relevant to notice the judgment of this Court in the case of Edukanti Kistamma (Dead) through LRs. v. S. Venkatareddy (Dead) through LRs. & Ors.4 where this Court has held that a special Statute would be preferred over general one where it is beneficial one. It was explained that the purport and object of the Act must be given its full effect by applying the principles of purposive construction. Thus, it is clear that out of the two legislations, the_ Arb.Request No.57 of 2018 5 _provisions of MSMED Act will prevail, especially when it has overriding provision under Section 24 thereof. Thus, we hold that MSMED Act, being a special Statute, will have an overriding effect visà-vis Arbitration and Conciliation Act, 1996, which is a general Act. Even if there is an agreement between the parties for resolution of disputes by arbitration, if a seller is covered by Micro, Small and Medium Enterprises Development Act, 2006, the seller can certainly approach the competent authority to make its claim. If any agreement between the parties is there, same is to be ignored in view of the statutory obligations and mechanism provided under the 2006 Act. Further, apart from the provision under Section 23(2A) of the 1996 Act, it is to be noticed that if counter-claim is not permitted, buyer can get over the legal obligation of compound interest at 3 times of the bank rate and the "75% pre- deposit" contemplated under Sections 16 and 19 of the MSMED Act._ _24. For the aforesaid reasons and on a harmonious construction of Section 18(3) of the 2006 Act and Section 7(1) and Section 23(2A) of the 1996 Act, we are of the view that counter-claim is maintainable before the statutory authorities_ Arb.Request No.57 of 2018 6 ## _under MSMED Act. "_ In the light of the above, the apprehension expressed by the petitioner is misconceived. Necessarily, the petitioner can raise a counter claim in the proceedings initiated by the first respondent before the Council under the MSMED Act. Leaving open the right of the petitioner to urge their claims as against the first respondent before the Facilitation Council and the further proceedings thereunder in terms of Section 18 of the MSMED Act, the Arbitration Request is closed. Sd/- **SATHISH NINAN, JUDGE** amk Arb.Request No.57 of 2018 7 ## **APPENDIX** ## **PETITIONER'S ANNEXURES :** |**ANNEXURE A1**|**:**|**TRUE COPY OF PURCHASE ORDERS AND WORK**| |---|---|---| |||**ORDERS ISSUED WITH THE ANNEXURES.**| |**ANNEXURE A2**|**:**|**LIST OF CORRESPONDENCE BETWEEN THE**| |||**APPLICANT AND THE IST RESPONDENT**| |||**WITH REGARD TO THE FAILURE OF THE**| |||**SOLAR UNITS.**| |**ANNEXURE A3**|**:**|**TRUE COPY OF THE REGISTERED LETTER**| |||**SENT BY THE APPLICANT TO THE 2ND**| |||**RESPONDENT ON 25-09-2017.**| |**ANNEXURE A4**|**:**|**TRUE COPY OF THE COMPLAINT FILED BY**| |||**THE IST RESPONDENT BEFORE THE 3RD**| |||**RESPONDENT DATED 6-11-2017 (WITH**| |||**AFFIDAVIT).**| |**RESPONDENTS' **|**ANNEXURES**<br>**:**|| |**ANNEXURE R1A**|**:**|**THE TRUE COPY OF THE CORRESPONDENCE BY**| |||**THE APPLICANT COMPANY WITH THE**| |||**RESPONDENTS 1 & 2 IN THE FORM OF E-MAIL**| |||**DATED 31-01-2018**| |**ANNEXURE R1B**|**:**|**THE TRUE COPY OF APPLICATION DATED**| |||**16-10-2017 SEEKING REFERENCE UNDER**| |||**SECTION 18 OF THE MSMED ACT MADE BY THE**| |||**FIRST RESPONDENT BEFORE THE THIRD**| |||**RESPONDENT.**| Arb.Request No.57 of 2018 8 - **ANNEXURE R1C : THE TRUE COPY OF NOTICE DATED 1-2-2018 ISSUED BY THE THIRD RESPONDENT TO THE APPLICANT.** - **ANNEXURE R1D : THE TRUE COPY OF NOTICE DATED 4-5-2018 ISSUED BY THE THIRD RESPONDENT TO THE APPLICANT.** - **ANNEXURE R1E : THE TRUE COPY OF NOTICE DATED 14-06-2018 ISSUED BY THE THIRD RESPONDENT TO THE APPLICANT.** - **ANNEXURE R1F : THE TRUE COPY OF NOTICE DATED 9-7-2018 ISSUED BY THE THIRD RESPONDENT TO THE APPLICANT.** - **ANNEXURE R1G : THE TRUE COPY OF THE MINUTES OF THE MEETING DATED 17-7-2018 HELD BEFORE THE THIRD RESPONDENT.** - **ANNEXURE R1H : THE TRUE COPY OF THE STATEMENT DATED 13-07-2018 FILED BY THE APPLICANT BEFORE THE THIRD RESPONDENT.** - **ANNEXURE R1I : THE TRUE COPY OF THE ACKNOWLEDGEMENT CERTIFICATE DATED 21-12-2012 ISSUED TO THE IST RESPONDENT BY THE GENERAL MANAGER, OFFICE OF THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, BARASAT, WEST BENGAL.**