Kerala Medical Services Corporation Ltd. v. Kerala Micro Small and Medium Enterprises Facilitation Council; M/s. JIT & JIT Gloves

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN MONDAY, THE 27[TH] DAY OF SEPTEMBER 2021 / 5TH ASWINA, 1943 WP(C) NO. 17361 OF 2019** ## **PETITIONER:** KERALA MEDICAL SERVICES CORPORATION LTD. (REPRESENTED BY ITS MANAGING DIRECTOR), REGISTERED OFFICE, THYCAUD, THIRUVANANTHAPURAM, PIN - 695 014 BY ADV M.AJAY ## **RESPONDENTS:** 1 KERALA MICRO SAMLL AND MEDIUM ENTERPRISES FACILITATION COUNCIL (REPRESENTED BY ITS CHAIRMAN, THE DIRECTOR OF INDUSTRIES AND COMMERCE), DIRECTORATE OF INDUSTRIES AND COMMERCE, 3RD FLOOR, VIKAS BHAVAN, THIRUVANANTHAPURAM, PIN - 695 033 2 M/S.JIT & JIT GLOVES (REPRESENTED BY ITS MANAGING PARTNER K.P. PRAJITH KUMAR), IV/258 P, KANIYATTUNIRAPPU, THIRUVANIYOOR, KUZHIYARA, ERNAKULAM, PIN - 682 312 BY ADVS. SRI.SHAJI THOMAS SRI.JEN JAISON SRI.BINU PAUL ## **OTHER PRESENT:** SMT.RASHMI.K.M, SR.GP **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 27.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **W.P.(C).No.17361/2019** **2** ## **P.V.KUNHIKRISHNAN, J. -------------------------------W.P.(C).No.17361 of 2019** **---------------------------------------------Dated this the 27[th] day of September, 2021** ## **JUDGMENT** Petitioner is the Kerala Medical Services Corporation Limited (for short, the KMSCL). The KMSCL is wholly owned by the Government of Kerala, which procures and distributes medicines, drugs and other supplies to the public health institutions in the State of Kerala. The 1[st] respondent is the Kerala Micro and Small Enterprises Facilitation Council (for short, the MSE Council). The 2[nd] respondent supplied gloves to the KMSCL under separate tenders invited during the financial years 2015-16 and 2016-17. Alleging that there is delay in payment as well as challenging various penal impositions incurred by it under the tender conditions, the 2[nd] respondent filed Exts.P1 and P2 before the MSE Council, which issued notice to the KMSCL in Exts.P1 and P2 as **W.P.(C).No.17361/2019** **3** provided under Rule 5 of the Kerala Micro and Small Enterprises Facilitation Council Rules, 2006 (for short, the MSE Council Rules). On 26.05.2018, the case was posted for hearing before the MSE Council. The KMCL was present and the 2[nd] respondent was also present. Thereafter the case was adjourned. In the proceedings sheet it is also stated that 'issue fresh notice to both parties for appearance'. Thereafter the matter came up for consideration on 30.10.2018 and the matter was posted to 30.11.2018. Again the matter came up on 27.02.2019. On 27.02.2019, the KMCL informed that the 2[nd] respondent has approached the High Court. Therefore the MSE Council directed the KMSCL to produce proof of the same. It is the case of the KMSCL that the officers of the KMSCL and its Standing Counsel were informed that the next date of hearing would be 08.04.2019. On 05.04.2019, the office of the KMSCL was informed on SMS by an officer of the MSE Council that the hearing scheduled on 08.04.2019 was being adjourned and that a fresh date of hearing would be intimated in due course. It is the further case of the KMSCL that on Sunday, 12.05.2019 at about 2.45 pm, the General Manager of the KMSCL received an SMS on his mobile phone **W.P.(C).No.17361/2019** **4** intimating that OA Nos.35/18 and 36/18 would be considered for passing orders at 10.30 am on Monday 13.05.2019. It is the case of the KMSCL that no other communication except this SMS was received by any officer of the KMSCL prior to 12.05.2019 about the hearing fixed on 13.05.2019. The officers of the KMSCL frantically contacted the Standing Counsel of the KMSCL in Kochi. The Standing Counsel informed them that he was out of station because it was summer vacation. Pursuant thereto, the Managing Director of the KMSCL issued a letter dated 12.05.2019 intimating about the late receipt of the notice of hearing, its Standing Counsel's inability to reach Thiruvananthapuram by 10.30 am by next morning and the KMSCL's inability to arrange alternate representation at the late hour and requested an adjournment to be granted with the sufficient notice to the KMSCL failing which it was stated that it would suffer irreparable harm and the interest of justice will be defeated. The officers of the KMSCL appeared before the MSE Council on 13.05.2019 at 10.30 am and handed over the communication from the Managing Director of the KMSCL addressed to the Chairman of the MSE Council which was acknowledged as received on **5** ## **W.P.(C).No.17361/2019** 13.05.2019. Ext.P9 is the communication. It is the further case of the KMSCL that the officers of the KMSCL were informed that the MSE Council would pass orders and intimate them about the next date of hearing. It is stated in the writ petition that subsequently on 24.05.2019, the KMSCL was served with an order dated 13.05.2019 issued by the MSE Council. Ext.P10 is the award. In Ext.P10, it is stated that though many opportunities were given for filing objection if any on the argument made by the 2[nd] respondent herein, the KMSCL failed to submit the same. Hence the award is passed, which is impugned in this writ petition. 2. Heard the Standing Counsel for the KMSCL and the Standing Counsel for the 2[nd] respondent. I also heard the Government Pleader for the MSE Council. 3. This Court instructed the Government Pleader to produce the entire file which leads to Ext.P10 award and the same was made available by the Government Pleader. I perused the same. 4. The Standing Counsel for the KMSCL reiterated his contentions in the writ petition. The counsel submitted that Ext.P10 is not an award in the eye of law and therefore, no **6** ## **W.P.(C).No.17361/2019** appeal is maintainable. It is the further case of the KMSCL that an opportunity is not given to the KMSCL to defend the case. The counsel takes me through Rule 5 of the MSE Council Rules. The counsel submitted that there is an elaborate procedure to be followed by the MSE Council. In this case, conciliation step or other procedures are not followed by the MSE Council and Ext.P10 is not an award in accordance to law. The counsel also takes me through the proceedings sheet of the MSE Council. The counsel submitted that the 2[nd] respondent filed a writ petition before this Court with substantially the same relief for the period of 2015-16 as W.P.(C).No.11836 of 2018. That writ petition was filed when Ext.P1 application was pending. This Court directed the Managing Director of the KMSCL to consider the representation and pass appropriate orders. When that direction from this Court is pending, Ext.P10 award is passed. The counsel submitted that Ext.P10 is not an award and it is an order passed without giving sufficient opportunity to the KMSCL. The counsel also argued on the merit of the case and submitted that Ext.P10 is liable to be set aside. 5. The counsel for the 2[nd] respondent seriously **W.P.(C).No.17361/2019** **7** opposed the submissions of the KMSCL. The counsel submitted that Ext.P10 is an award passed as per the Micro, Small and Medium Enterprises Development Act, 2006 (for short, the MSME Act) and it is appealable under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act 1996) which are incorporated in the MSME Act. The counsel also takes me through paragraph 6 of the judgment of this Court in **Sajith Kumar M.S. v. State of Kerala and Others [2019 (2) KHC 570]** and submitted that when there is an alternative remedy to the KMSCL as per Section 34 of the Act 1996, the writ petition is not maintainable. The counsel also relied on paragraphs 11, 12 and 13 of the judgment of the Apex Court in **Commissioner of Income Tax and Others v. Chhabil Dass Agarwal [2014 (1) SCC 603]** and contended that when there is an alternative remedy, this Court cannot entertain a writ petition under Article 226 of the Constitution of India. The counsel also takes me through the MSME Act and the object of the Act itself. The counsel submitted that the MSME Act is an Act to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected **8** ## **W.P.(C).No.17361/2019** therewith or incidental thereto. The counsel also submitted that the MSE Council is bound to pass orders within 90 days as per Section 18(5) of the MSME Act. Therefore the counsel submitted that this Court may not entertain this writ petition when there is an alternative remedy available to the KMSCL. 6. I considered the contentions raised by the parties. The Apex Court in **M/s.Popcorn Entertainment and Another v. City Industrial Development Corporation and Another [2007 KHC 3233]** considered the maintainability of a writ petition when an alternative remedy is available. It will be better to extract the relevant portion of the judgment: “16. He invited our attention to the Whirlpool Corporation case (supra) wherein this Court has held that there are three clear cut circumstances wherein a writ petition would be maintainable even in a contractual matter. 17. Firstly, if the action of the respondent is illegal and without jurisdiction, 18. Secondly, if the principles of natural justice have been violated and 19. Thirdly, if the appellants' fundamental rights have been violated. 44. We have given our careful consideration to the rival submissions made by the respective counsel appearing on either side. In our opinion, the High **W.P.(C).No.17361/2019** **9** Court has committed a grave mistake by relegating the appellant to the alternative remedy when clearly in terms of the law laid down by this Court, this was a fit case in which the High Court should have exercised its jurisdiction in order to consider and grant relief to the respective parties. In our opinion, in the instant case, 3 of the 4 grounds on which writ petitions can be entertained in contractual matter were made out and hence it was completely wrong by the High Court to dismiss the writ petitions. In the instant case, 3 grounds as referred to in Whirlpool Corpn. (supra) has been made out and accordingly the writ petition was clearly maintainable and the High Court has committed an error in relegating the appellant to the civil court.” 7. I perused the proceedings sheet of the MSE Council which leads to Ext.P10. It is very difficult to read the proceedings sheet from the original records. The counsel for the KMSCL supplied a typed copy of the proceedings sheet, which I verified with the original. The said proceedings sheet is extracted hereunder: “26.05.2018 Applicant present for hearing. Respondent present for hearing. Applicant supplied gloves worth 10 crores. They have to pay deductions as per the contract (1.30 Crores). Respondent say that they are **10** ## **W.P.(C).No.17361/2019** mandatory deductions. Issue fresh notice to both parties for appearance. ## 30.10.2018 Petitioner present for hearing. Respondent present of hearing. The amount is to be given in time. Issue order on 30.11.2018. Principal + interest ## 27.02.2019 Respondent informed that the applicant has approached the High Court in the same case. Respondent has to produce the proof of High Court case. Adjourned to hear on 08.04.2019. ## 25.04.2019 Applicant present for hearing. Respondent absent for hearing. This case is taken up once again based on a representation given by the petitioner that a wrong information was given by KMSCL regarding the status of the High Court. The High Court disposed the petitioner in WP(C) No 11836 5[th] April 2018. The defendant was asked to hear the petitioner and dispose the case in 2 months for refund of LD and penalty. The petitioner has asked for the delayed payment for the year 2016-17 and 2015-16. The total amount due. **W.P.(C).No.17361/2019** **11** - 2015-16 50,18,694 - 2016-17 80,90,825 The application was given on March 2018. As these are 2 different payments to be made. Therefore orders are to pass for the delayed payments + interest payable der own Notice served for appearance. Issue order for delayed payments for the years 2015-16 and 2016-17. ## 13.05.2019 Petitioner present for hearing. Asst Manager Finance KMSCL present for hearing. order issued for effecting payment.” 8. On a perusal of Ext.P10 order, it is clear that Ext.P10 award is passed before filing any objection from the KMSCL on the argument made by the 2[nd] respondent. It is stated in Ext.P10 that several opportunities were given to the KMSCL to file an objection and the KMSCL failed to submit the same. I considered the pleadings in paragraphs 10 to 13 in the writ petition. I once again perused the proceedings sheet. There is only 4 hearing dates as per the proceedings sheet. I don’t want to make any further opinion about the same. **12** ## **W.P.(C).No.17361/2019** According to me it is a case in which the MSE Council passed an order without giving a proper opportunity to the KMSCL to defend their case. Moreover, there is nothing to show that the procedures as per Rule 5 is followed by the MSE Council. It will be better to extract Rule 5 of the MSE Council Rules: - “5.Procedures to be followed by the Council. In discharging the functions, the Council shall follow the procedures, namely.- - (i) The Council may appoint/or engage the services of one or more experts in terms of Section 26 of the Arbitration and Conciliation Act, 1996. - (ii) The Council, or a party to the dispute with the approval of the council, may apply to the court under section 27 of the Arbitration and Conciliation Act, 1996 for assistance in taking evidence. - (iii) The reference/application of the aggrieved micro or small enterprise supplier shall be in Form No.A appended to these Rules and shall contain full, particulars of the supplier and its status, supplied goods or services, terms of payment, if any, agreed between the supplier and buyer, actual payment received with date, amount due and the interest duly calculated under section 16 of the Act, supported by an affidavit, with necessary court fee stamp affixed thereon. The Chairperson of the Council may require any **13** ## **W.P.(C).No.17361/2019** petitioner to provide further particulars of the claim or any relevant documents in support of the claim, as he may consider necessary for the purpose of the proceedings. If the petitioner fails or omits to do so within fifteen days of receipt of such communication or within such further time as the Chairperson may, for sufficient cause, allow, the Council may terminate the proceedings without prejudice to the right of the petitioner to make fresh reference if he is otherwise entitled to do so. The petitioner shall also simultaneously send a copy of the reference to the buyers against whom the reference is directed. - (iv) The reference/application shall be acknowledged forthwith if it is delivered at the office of the Council. Where the reference/application is received by registered post, its receipt shall be duly acknowledged on the same day. The Chairperson shall cause the buyer to furnish his detailed response to the reference within 15 days of receipt of the reference by the buyer or within such further time not exceeding 15 days as he may, for sufficient cause, allow. A notice to the buyer shall be in Form B. - (v) On receipt of a reference under section 18 of the Act, the Chairperson of the Council shall cause the reference and the buyers response thereto be examined and, on being satisfied with the **14** ## **W.P.(C).No.17361/2019** reference to be placed before the Council at its next immediate meeting for consideration. The Chairperson shall also ensure that each reference received within two weeks of the date of the last proceedings meeting of the Council is examined and, it found in order, is placed for consideration of the Council at its next immediate meeting. - (vi) The Council shall either itself conduct conciliation in each reference placed before it or seek the assistance of any institute, or centre providing alternate dispute resolution service by making reference to such an institution or centre, for conducting conciliation. The provisions of section 65 to 81 of the Arbitration and Conciliation Act, 1996 shall apply to such reference as if the conciliation was initiated under Part-III of the Act. - (vii) The Council or the institute to which it has been referred for conciliation shall require the supplier and the buyer concerned to appear before it by issuing notices to both parties in this behalf. On appearance of both parties, the Council or the institute shall first make efforts to bring about conciliation between the buyer and the supplier. The institute shall submit its report to the Council within fifteen days of reference from the Council or within such period as the Council may specify. **15** ## **W.P.(C).No.17361/2019** - (viii)When such conciliation does not lead to settlement of the dispute, the Council shall either itself act as an Arbitrator for final settlement of the dispute or refer it to an institute for such arbitration, in accordance with the provisions of the sub-rule (3) of section 18 of the Arbitration and Conciliation Act, 1996. The supplier or the buyer may, either in person or through his lawyer registered with any court, present his case before the Council or the institute during the arbitration proceedings. The institute shall submit its report to the Council within such time as the Council may stipulate. - (ix) Any decision of the Council shall be made by a majority of its members present and voting at the meeting of the Council. - (x) The Council shall make an arbitral award in accordance with section 31 of the Arbitration and Conciliation Act, 1996 and within the time specified in sub-section (5) of section 18 of the Act. - (xi) The Award shall be stamped in accordance with the relevant law in force. Copies of the Award shall be made available within seven days of filing of an application. - (xii) The Award shall be pronounced in the open Council on a day to be fixed thereof. - (xiii)The Chairperson or any other officer authorized by the Chairperson shall forward the proceedings **16** ## **W.P.(C).No.17361/2019** of every meeting of the Council including annual progress report of the Council to the MemberSecretary of the Advisory Committee constituted under sub-section (3) of the section 7 of the Act.” 9. According to me, Rule 5 is to be followed by the MSE Council while passing awards. Even though the counsel for the 2[nd] respondent relied on several judgments of the Apex Court and this Court that when alternative remedy is available, this Court need not interfere in an award, I think, in the facts and circumstances of the case, this Court has to intervene especially in the light of the judgment of the Apex Court in **M/s.Popcorn Entertainment‘s case** (supra). Paragraph 44 of the said judgment discussed the matter in detail. This is a case in which admittedly Ext.P10 award is passed without an objection from the KMSCL to the argument made by the 2[nd] respondent. The KMSCL submitted that they were not given an opportunity to file an objection and to argue the matter on merit. I perused Rule 5 of the MSE Council Rules also and the proceedings sheet of the MSE Council in this case. According to me the procedure prescribed in the MSE Council Rules is not properly followed by the MSE **17** ## **W.P.(C).No.17361/2019** Council. In such circumstances, according to me, Ext.P10 can be set aside without expressing any opinion on merit. the MSE Council is free to pass appropriate orders in accordance to law after giving an opportunity of hearing to the KMSCL. A time limit also can be fixed for passing final orders. Therefore, this writ petition is allowed in the following manner: 1. Ext.P10 is set aside. 2. The 1[st] respondent - MSE Council is directed to reconsider Exts.P1 and P2 applications in accordance with the Kerala Micro and Small Enterprises Facilitation Council Rules, 2006, and pass appropriate orders in it, after giving an opportunity of hearing to the KMSCL and the 2[nd] respondent. 3. The above exercise should be completed by the - 1[st] respondent - MSE Council, as expeditiously as possible, at any rate, within 90 days from the date of receipt of a copy of this judgment. 4. All the contentions of the KMSCL and the 2[nd] respondent are left open and they are free to **18** ## **W.P.(C).No.17361/2019** raise their contentions before the MSE Council. I once again make it clear that I have not considered the merit of the case. Sd/- **P.V.KUNHIKRISHNAN JUDGE** JV **19** ## **W.P.(C).No.17361/2019** ## **APPENDIX OF WP(C) 17361/2019** ## PETITIONER EXHIBITS |EXHIBIT P1|A TRUE COPY OF OA 35/18 IN RESPECT OF| |---|---| ||FY 2015-16 FILED BY THE SECOND| ||RESPONDENT BEFORE THE FIRST RESPONDENT| |EXHIBIT P2|A TRUE COPY OF OA 36/18 IN RESPECT OF| ||FY 2016-17 FILED BY THE SECOND| ||RESPONDENT BEFORE THE FIRST RESPONDENT| |EXHIBIT P3|A TRUE COPY OF THE NOTICE NO.| ||TC/TI/8252/18 ISSUED BY THE FIRST| ||RESPONDENT TO THE PETITIONER DATED| ||15.5.18| |EXHIBIT P4|A TRUE COPY OF THE NOTICE NO.| ||TC/TI/8253/18 ISSUED BY THE FIRST| ||RESPONDENT TO THE PETITIONER DATED| ||15.5.18| |EXHIBIT P5|A TRUE COPY OF THE NOTICE ISSUED BY| ||THE FIRST RESPONDENT TO THE PETITIONER| ||DATED 8.10.18| |EXHIBIT P6|A TRUE COPY OF THE LETTER DATED| ||29.10.18 SUBMITTED BY THE PETITIONER| ||TO THE FIRST RESPONDENT ON 30.10.18| |EXHIBIT P7|A TRUE COPY OF THE NOTICE ISSUED BY| ||THE FIRST RESPONDENT TO THE PETITIONER| ||DATED 15.11.18| |EXHIBIT P8|A TRUE COPY OF THE NOTICE ISSUED BY| ||THE FIRST RESPONDENT TO THE PETITIONER| ||DATED 8.2.19| |EXHIBIT P9|A TRUE COPY OF THE COMMUNICATION OF| ||THE MANAGING DIRECTOR OF THE| ||PETITIONER DATED 12.5.19| |EXHIBIT P10|A TRUE COPY OF THE AWARD ISSUED BY THE| ||FIRST RESPONDENT DATED 13.5.19| |EXHIBIT P11|A TRUE COPY OF THE SCREENSHOT OF THE| ||MESSAGES SAID TO BE SENT AND RECEIVED| ||FROM THE GM OF THE PETITIONER|