PIYA BAJWA  Vs MICRO AND SMALL ENTERPRISES FACILITION CENTRE AND ANR.

W.P.(C) 1134/2021 Page 1 of 6$~23
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 29thJanuary, 2021
+ W.P.(C) 1134/2021 & CM APPL. 3201/2021
PIYA BAJWA ….. Petitioner
Through: Mr. Nikilesh R., Advocate. (M:
9810460429)
versus
MICRO AND SMALL ENTERPRISES FACILITION CENTRE
AND ANR. ….. Respondents
Through: Mr. Ramesh Singh and Mr. Shok
Chandra, Advocates.
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. This hearing has been done by video conferencing.
2. The Petitioner has impugned letter dated 31stDecember, 2020 issued
by the Micro and Small Enterprises Facilitation Council (hereinafter,
‘Facilitation Council’) by which the Petitioner has been called to participate
in the conciliation process and also file a reply.
3. The impugned communication issued by the Facilitation Council
dated 31stDecember, 2020 reads as under:
“The MSEF Council, Delhi is in receipt of a
reference filed u/s 18(1) of the MSMED Act, 2006
by the Claimant M/s Sharp Travels (India) Ltd.,
Application/Temp No. DL08E0001555/S/00122
against the outstanding dues of Rs. 308307 which
is to be paid by you to the Claimant.
I am directed to inform you that the MSEF
Council, Delhi has decided that the conciliation
process should be taken up first before release of
outstanding dues to the Claimant, failing which a
Notice to personally appear before the Council
2021:DHC:347W.P.(C) 1134/2021 Page 2 of 6will be served to you for taking further necessary
action in the matter.
Further, I am to inform you that as per
Section 16 of the MSMED Act, 2006 the
Respondent will be liable to pay the compound
interest with monthly rests to the supplier on that
amount from the appointed day or, as the case
may be, from the date immediately following the
date agreed upon, at three times of the bank rate
notified by the Reserve Bank.
It is therefore requested to file the reply of
outcome of the conciliation process held between
both of you within 30 days.”
4. Ld. counsel for the Petitioner emphasizes on the words “decided
that” to argue that the Facilitation Council has taken a decision in the matter
that the Petitioner ought to release the outstanding dues. According to the
Petitioner, since the claim is time barred, such a decision could not have
been taken without hearing the Petitioner.
5. The submission of Mr. Nikilesh R., ld. counsel appearing for the
Petitioner is that the claim of Respondent No.2 is time barred and before
embarking on the conciliation process, the question as to whether the claim
is even maintainable should be considered by the Facilitation Council.
Without doing the same, deciding that the conciliation process should be
initiated would be premature.
6. Mr. Ramesh Singh, ld. counsel, on the other hand, submits that the
Facilitation Council has merely called the parties for exploring conciliation
in terms of Sections 18(1) and 18(2) of the Micro, Small and Medium
Enterprises Development Act, 2006 (hereinafter, ‘MSME Act’). If the
conciliation process fails then the remedies of the Petitioners are available in
2021:DHC:347W.P.(C) 1134/2021 Page 3 of 6terms of Sections 18(3) and (4) of the MSME Act. The conciliation process
is meant to resolve the disputes between the parties in an amicable manner.
7. The apprehension of the Petitioner is that the Petitioner may be forced
to enter into a settlement with Respondent No.2 though, according to the
Petitioner, the claim is time-barred.
8. The scheme of the MSME Act has been discussed in detail in the
judgment of a ld. Single Judge of this Court in BHEL vs. The Micro and
Small Enterprises Facilitation Centre & Anr., [W.P.(C) 10886/2016,
decided on 18thSeptember, 2017] . The Court observed therein as under:
“9. At the outset, it is relevant to observe that the
Act was enacted with the object of facilitating the
promotion, development and enhancing the
competitiveness of small and medium enterprises…
…
10. Section 18(1) of the Act contains a non obstante
clause and enables any party to a dispute to make a
reference to the Micro and Small Enterprises
Facilitation Council (MSEFC).
…
14.A plain reading of Section 18(2) of the Act
indicates that on receipt of a reference under
Section 18(1) of the Act, the Council [MSEFC]
would either conduct conciliation in the matter or
seek assistance of any institution or centre
providing alternate dispute resolution services. It
also expressly provides that Section 65 to 81 of the
A&C Act would apply to such a dispute as it
applies to conciliation initiated under the Part III
of the A&C Act.
15.It is clear from the provisions of Section 18(2)
of the Act that the legislative intention is to
incorporate by reference the provisions of Section
65 to 81 of the A&C Act to the conciliation
proceedings conducted by MSEFC.
2021:DHC:347W.P.(C) 1134/2021 Page 4 of 616.Section 18(3) of the Act expressly provides that
in the event the conciliation initiated under Section
18(2) of the Act does not fructify into any
settlement, MSEFC would take up the disputes or
refer the same to any institution or centre providing
alternate dispute resolution services for such
arbitration.
17.It is at once clear that the provision of Section
18(3) of the Act do not leave any scope for a non-
institutional arbitration. In terms of Section 18(3)
of the Act, it is necessary that the arbitration be
conducted under aegis of an institution-either by
MSEFC or under the aegis of any “Institution or
Centre providing alternate dispute resolution
services for such arbitration”.”
9. The issue that had arisen in BHEL (supra) was as to whether the
arbitration clause contained in the General Conditions of Contract would
prevail or the Facilitation Council could refer the disputes to arbitration by a
recognized institution or centre providing ADR services. What is, relevant in
the context of the present petition is the communication dated 31st
December, 2020 wherein, in the opinion of this Court, the Facilitation
Council has merely observed that the conciliation process should be taken
up first. The Petitioner has been asked to explore conciliation and report the
outcome of the same within 30 days. The scheme of the MSME Act and
setting up of a Facilitation Council is to ensure that small and medium
enterprises are not forced to litigate for long durations in Courts and avail of
expensive legal remedies. A perusal of Section 18 of the MSME Act clearly
shows that upon a reference being made to the Facilitation Council, the
Facilitation Council may conduct conciliation or seek assistance of any
institution for providing ADR services. The mere fact that the Facilitation
2021:DHC:347W.P.(C) 1134/2021 Page 5 of 6Council has given notice for starting a conciliation process does not mean
that there is a pre-judging of issues by the Facilitation Council or that the
claim is within limitation. Conciliation is a process in which both parties
would be called and made to sit across the table to amicably resolve their
disputes. If there is no amicable resolution, the parties are permitted to avail
of the remedies provided under Section 18(3) and (4) of the MSME Act.
10. From the impugned communication it is also clear that if the
conciliation process between the parties fails, the Facilitation Council would
itself be conducting the conciliation proceedings. Exploring of conciliation
or mediation prior to invoking arbitration or litigation is the scheme not only
in the MSME Act but also in various other enactments. For example,
Section 89 of the CPC, as amended in 2002, laid enormous emphasis on
exploring settlement where there existed an element of settlement which
may be acceptable to the parties. This process of pre-litigation mediation has
achieved statutory recognition in the Commercial Courts Act, 2015 where
under Section 12A pre-institution mediation and settlement has been
provided for. Merely because notice for exploring conciliation has been
issued does not mean that the legal defence of limitation would be wiped out
in case the dispute is not resolved.
11. The apprehension expressed by the Petitioner that the Petitioner may
be forced to resolve a time-barred claim would be assuaged by clarifying
that in the conciliation process, the Petitioner would be entitled to place its
case in an informal manner, along with recording therein that the claim itself
is time barred. If the conciliation fails, then the parties can avail of their
remedies in accordance with law under Section 18 of the MSME Act.
2021:DHC:347W.P.(C) 1134/2021 Page 6 of 6Participation in the conciliation process shall be without prejudice to the
rights and contentions of the parties concerned.
12. The time to file the reply before the Facilitation Council is extended
till 15thFebruary 2021.
13. With these observations the present petition, along with all pending
applications, is disposed of.
14. Copy of this order be sent to the Deputy Commissioner, Micro and
Small Enterprises Facilitation Council, Udyog Sudan, 419, FIE, Patparganj
Industrial Area, Delhi-110092.
PRATHIBA M. SINGH
JUDGE
JANUARY 29, 2021
dj/T
(Corrected and released on 2ndFebruary, 2021)
2021:DHC:347