MSEFC Case No.

10/2011

Maa Alloys Pvt. Ltd. Vrs. Shree Metalic Ltd.

M/s Maa Alloys (P) Ltd. Deogaon,
PO: Panposh, Rourkela-769 004 Petitioner
Versus
M/s Shree Metalic Ltd. Flat No. 809
The Acron Retreat,392/1772,
Patia Square, Bhubaneshwar-31 Opposition Party

History of the Case –

The respondent issued a purchase order on 27 th of January 2011 to the claimant who being a
manufacturer of C.I Casting. The claimant i.e., M/s Maa Alloys (P) Ltd. supplied the goods in
pursuance of the above purchase order and raised the bills relating to the supplied goods as
per the purchase order.
The respondent made a part payment of Rs. 5.00 Lakhs which made the claimant to file a a
claim application before the MSEFC Council on 09 th of September 2011, claiming total
amount of Rs. 35,15,833/- (1258047.00 – Principal + Interest). The copy of the claim petition
was forwarded to the buyer on 14th of October 2011, but the same was returned with a remark
of “plant being closed and absence of any personal.” Accordingly notice with the claim
application was again sent to the O.P for appearing before the 22nd sitting of MSEFC Council
dated 04th of November 2013 which marked the absence of the O.P. Though a seven-day
notice was again sent to the O.P to file the counter on 03 rd of November 2014, but the same
was turned back with a remark “Refused.” Though the petitioner was present, but the O.P
was still absent in the 43rd sitting of the MSEFC Council on 20th of February 2016.
While going through the case record, the council observed that the O.P did not respond to the
notices of the Council issued and decided to pass an award exparte.

Award –
The O.P was directed to pay the principal amount of Rs. 12,58,047 and interest claim of Rs.
22,57,786.00 only to be calculated up to 05th of September 2011 as per Section 15 & 16 of the
MSMED Act 2006. Further, it was also stated that compound interest with monthly rests shall
be payable at the rate of thrice the times of the Bank rate as notified by Reserve Bank of India
from time to time till the realization of dues.1

MSEFC Case No. 09/2014

1
http://dcmsme.gov.in/publications/state_ut_rules/MSEFC%20Case.pdf
Gupta Power Infrastructure Ltd. Vrs. Chhattisgarh State Power Distribution (P)
Ltd.
M/s Gupta Power Infrastructure Ltd.,
Khurda Petitioner
Versus
Chhattisgarh State Power Distribution (P) Ltd.,
Raipur. Opposition
Party

History of the Case –

The petitioner, a manufacturer of Aluminium conductors, Aluminium wire and strips copper
conductor etc. supplied the materials as per the purchase order dated 10 th of May 2010 & 25th
of October 2010 accordingly to Chhattisgarh State Power Distribution Co. Ltd. The petitioner
raised bills on different dates accordingly for the total supply value was of Rs.
21,30,94,924.93. The O.P on the other hand made a part payment leaving a balance of Rs.
1,84,21,042.28 as principal (outstanding).
The petitioner filed claim application before MSEFC on 02nd of April 2014 claiming total
amount of Rs. 5,42,29,234.25 (Rs. 1,84,21,042.28 towards Principal + Rs. 3,58,08,191.98
towards interest). The O.P filed the counter and the petitioner filed the rejoinder, on 14 th of
July 2014 and 25th of November 2014 respectively.
Further the court stated that the O.P has illegally and arbitrarily withheld the legitimate dues
of a Small-Scale Industry, the applicant’s company is entitled for recovery of the same along
with the interest in terms of MSMED Act, 2006.
On 12th of January 2015 an additional affidavit was filed by the O.P stating that the claimant
has raised higher invoice amount of Rs. 70,39,364,36 in their bills which was not admissible.
For which a prayer petitioner was filed by the petitioner on 06th of February 2015.
“The Council examined that there was delay in payment to the petitioner by the O.P.
Since payment were delayed by the O.P., the petitioner being a small-scale industry
working with limited capital investment was not able to supply the materials in due
time. Regarding higher invoice amount of Rs.70,39,364.36 in their bills as indicated
by O.P., the Council examined the invoice copies filed by the petitioner and
concluded that the petitioner has filed the invoice copies in his claim petition on
03.04.2014 which was forwarded the O.P. on 30.04.2014 and the same was accepted
by O.P. At that time the O.P. has not indicated that the petitioner has filed the higher
invoices. Further, it was made evident to the Council that the Purchase Order issued
to the petitioner contains the price variation system in its clause-2. So, it was an
afterthought to avoid the claim of outstanding dues of the petitioner.”
Award –
The O.P was directed to pay the principal amount of Rs. 1,84,21,042.28 only and interest
claim of Rs. 3,58,08,191.98 only calculated up to 28 th of February 2014 as per Section 15&16
of MSMED Act 2006. Further, it was also stated that compound interest with monthly rests
shall be payable at the rate of thrice the times of the Bank rate as notified by Reserve Bank of
India from time to time till the realization of dues.2

IN THE HIGH COURT OF DELHI AT NEW DELHI

2
http://dcmsme.gov.in/publications/state_ut_rules/MSEFC%20Case.pdf
 AVR Enterprises vs. Union of India CM(M)769/2018
AVR ENTERPRISES Petitioner
Versus
UNION OF INDIA Respondent

The Delhi High Court in this case adjudicated upon whether section 19 would apply to a
proceeding which has not been initiated as per section 18 of the MSMED Act 2006.

Facts of the Case –

The court observed that in terms of section 18 of the MSMED Act, any party to a dispute
with regard to any amount due under section 17 (recovery of amount due) of the MSMED
Act, can make a reference to the Micro and Small Enterprises Facilitation Council
(“Council”). On receipt of the reference, the Council shall, either itself conduct conciliation
in the matter or seek the assistance of any institution or centre providing alternate dispute
resolution services by making a reference to such an institution or centre for conducting
conciliation by applying the provisions under sections 65 to 81 of the Arbitration Act.
Further, where conciliation initiated under sub-section (2) of section 18 of the MSMED Act
is not successful and stands terminated without any settlement between the parties, the
Council shall, either itself take up the dispute for arbitration or refer it to any institution or
centre providing alternate dispute resolution services for such arbitration.
The court further observed that in terms of section 19 of the MSMED Act, no application for
setting aside any decree, award or other order made either by the Council itself or by any
institution or centre providing alternate dispute resolution services to which a reference is
made by the council, shall be entertained by any court unless the appellant (not being a
supplier) has deposited with it 75% of the amount in terms of the decree, award or, as the
case may be, the other order in the manner directed by such court. On deposit of the 75% of
the awarded amount, the court shall order that such percentage of the amount deposited, as it
considers reasonable, be paid to the supplier, subject to such conditions as it deems necessary
to impose.
However, the Delhi High Court while considering the facts and circumstances of the instant
case, noted that no reference was made to the Council by the petitioner and no proceedings
were conducted by the Council under section 18 of the MSMED Act. There was also, no
reference made by the Council to any institution or centre for conducting conciliation.
Further, there was no conciliation either by the Council or by any institution or centre
providing alternate dispute resolution services. The Council also did not take up any dispute
for arbitration nor did it refer any dispute to any institution or centre providing alternate
dispute resolution services for such arbitration. Therefore, as per the court, the arbitration in
the present case was not an ‘Institutional Arbitration’ as contemplated under section 18 of the
MSMED Act but was conducted under the Arbitration Act by an arbitrator privately
appointed by the respondent.3

The court held that:

“21. Since there was no arbitration conducted under the MSMED Act so there is no
question of any decree, award or other order being made either by the Council or by
any Institution or Centre providing alternate dispute resolution services to which a
reference is made by the Council thus Section 19 of the MSMED Act is not applicable
to the present case.
22. Even though the petitioner may be covered under the MSMED Act, as Petitioner
did not invoke its claim under section 18 of the MSMED Act or seek reference
thereunder, there is no question of section 19 of the MSMED Act being applicable to
the present case.”   4

Thus, as per the court, if the objection of the petitioner were to be accepted, it would imply
that even in a case where there is a civil suit for recovery filed and a decree obtained by a
supplier, section 19 of the MSMED Act would apply and the buyer would be mandated to
deposit 75% of the decreed amount as a precondition for consideration of his appeal. The
court therefore, stated that the same would be contrary to Order 41 Rule (1)(3) of the Civil
Procedure Code, 1908 (“CPC”) since under Order 41 Rule (1)(3) of CPC, the appellate court
can waive the pre-deposit subject to conditions and failure to deposit entitles the appellate
court to dismiss only the stay application but not the appeal. 
The court, also, while examining the scheme of section 19 of MSMED Act, noted that, if
section 19 of the MSMED Act, were to apply to every decree award or other order
irrespective of whether it was made by the Council, or an institution or centre to which
reference has been made by the Council or by any other court, forum or tribunal, there would
have been no necessity for the legislators to provide for the expression “made either by
Council or by any institution or centre providing alternate dispute resolution services to
which reference has been made by the Council”.
“44. In my view, Section 19 of the MSMED Act would apply only to proceedings
initiated under section 18 of the MSMED Act and would not apply to an award
published by an Arbitrator appointed by the parties otherwise than in accordance with
section 18 of the MSMED Act.  
45. In view of the above, I find no infirmity in the view taken by the Trial Court, in the
impugned order, that the provisions of the MSMED Act for deposit of 75% of the
awarded amount are not applicable.” 5

SUPREME COURT CASES

3
https://www.argus-p.com/updates/updates/delhi-hc-decides-upon-the-applicability-of-section-19-of-
msmed-act-to-proceedings-which-have-not-been-initiated-as-per-section-18-of-the-msmed-act/
4
https://indiankanoon.org/doc/6971295/
5
https://indiankanoon.org/doc/6971295/
 GOODYEAR INDIA LTD. V. NORTON INTECH RUBBERS (P) LTD.6

GOODYEAR INDIA LIMITED

Petitioner
Versus
NORTON INTECH RUBBERS PRIVATE
LIMITED AND ANOTHER
Respondent

Four special leave petitions have been filed against the judgement and order dated 10-06-
2011, passed by the Division Bench of the Madras High Court in Goodyear India Ltd. V.
Norton Intech Rubbers (P) Ltd.7
The first two appeal have been filed by M/s Goodyear India Ltd., against the order passed by
the learned Single Judge Bench on 7-4-2011, in Goodyear India Ltd. V. Norton Intech
Rubbers (P) Ltd.8
The main question was with regard to the provisions of Section 19 9 of the MSMED Act of
2006, which provides for application for setting aside the decree, awards or orders.

The Court Stated that –

“Having considered the submissions made, both on behalf of the petitioner and on
behalf of the respondents, we do not see any reasons to interfere with the views
expressed, both by the learned Single Judge, as also the Division Bench with regard
to section 19 of the 2006 Act. It may not be out of place to mention that the provisions
of Section 19 of the 2006 Act, had been challenged before the Kerala High Court in
Kerala SRTC V. Union of India10 , where the same submission was negated and,
subsequently, the matter also came up to this Court, when the special leave petitions
were dismissed, with leave to make the predeposit in the cases involved, within an
extended period of ten weeks.
Having regard to the above, the Court is not inclined to entertain the special leave
petitions filed by M/s Goodyear India Ltd. and the same are accordingly, dismissed.
However, in keeping with the other decisions rendered in these cases, the Court will
extend the time for predeposit by the petitioner by a further period of twelve weeks.”11

6
(2012) 6 SCC 345
7
(2011) 3 LW 626
8
Original Petition No. 888 of 2010, order dated 7-4-2011 (Mad)
9
https://indiankanoon.org/doc/1565179/
10
(2010) 1 KLT 65
11
(2012) 6 SCC 345