Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Sanjib Banerjee, J.
Acts
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Sanjib Banerjee, J.
Acts
See more information ...
Smart Summary

Summary of Opinion — Writ Petition No. 18318(W) of 2012

Factual and Procedural Background

The petitioner challenged an order/award of the West Bengal State Micro and Small Enterprises Facilitation Council (the Council) that had been made under provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (the Act). The award was made in favour of respondent No. 2, who claimed to have supplied services to the petitioner in connection with a socio-economic survey of villages in Jharkhand under the "Gram Bhagirathi Yojana" programme and sought payment for those services.

The second respondent applied to the Council (the reference is recorded as having been made on February 22, 2008) claiming a principal sum of Rs. 24,29,604/- plus interest under the Act. The Council appears to have first taken up the matter in earnest on January 20, 2011 (minutes of that meeting are quoted in the award). The Council subsequently passed an award dated July 28, 2011 in favour of respondent No. 2.

The petitioner filed a writ petition (W.P No. 18318(W) of 2012) challenging that award on two primary grounds: (1) lack of jurisdiction because respondent No. 2 was not a "supplier" within the meaning of the Act (no memorandum filed under section 8), and (2) violation of the principles of natural justice and procedural infirmity in the Council's handling of conciliation/arbitration under section 18 of the Act. The High Court set aside the Council's award, directed the Council to take up the reference afresh on notice to the parties, declined to stay its order, and allowed the writ petition without costs.

Legal Issues Presented

  1. Whether the Council had jurisdiction to make the award in favour of respondent No. 2 because respondent No. 2 was or was not a "supplier" within the meaning of section 2(n) of the Act (specifically whether a memorandum under section 8 had been filed).
  2. Whether the procedure adopted by the Council violated principles of natural justice—specifically whether the Council, after an indecisive conciliation meeting, was required to give notice to the petitioner before proceeding to arbitrate and render an award under section 18 of the Act.
  3. Whether, given the alleged procedural defects and any alternative statutory remedy (e.g., section 19 of the Act or section 34 of the Arbitration and Conciliation Act, 1996), the High Court could exercise writ jurisdiction under Article 226 of the Constitution for relief.

Arguments of the Parties

Petitioner's Arguments

  • The second respondent was not a "supplier" within the meaning of section 2(n) of the Act because the statement of claim before the Council did not disclose that respondent No. 2 had filed a memorandum with the appropriate authority under section 8 of the Act; therefore the Council lacked jurisdiction.
  • The procedure adopted by the Council violated principles of natural justice. At the Council meeting of January 20, 2011 the petitioner's representatives said they could not decide on the spot and would revert to higher authorities; the petitioner did not thereafter indicate assent to conciliation, and the Council did not issue any notice that it would itself proceed to arbitrate or refer for arbitration before publishing an award.

Respondent No. 2's Arguments

  • The objection regarding respondent No. 2's status as a supplier was not raised in the written statement filed by the petitioner before the Council; consequently, the petitioner is precluded from raising that ground at this stage.
  • Respondent No. 2 contends it is a supplier within section 2(n) and that its memorandum was duly submitted to the appropriate authority.
  • The adjudication before the Council was a formality because the petitioner had, according to the Council's minutes, admitted the supplier's claim—so respondent No. 2 argued the award merely gave effect to that admission.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court proceeded by addressing the two principal grounds advanced by the petitioner in turn.

On the jurisdictional challenge (supplier status):

  • The court observed that the petitioner had not raised the objection to respondent No. 2's status as a supplier in the written statement filed before the Council. The second respondent denied the objection and affirmed that its memorandum under section 8 had been submitted.
  • The court accepted the respondent's submission that, because the petitioner did not raise this objection before the Council, it could not be permitted to raise it for the first time in the present proceedings. In short, the court treated the point as having been waived or otherwise not available on the facts before it.

On the procedural / natural justice challenge:

  • The court analysed the statutory scheme of section 18 of the Act: the Council first conducts conciliation and, if conciliation "is not successful and stands terminated without any settlement", then the Council must either itself take up the dispute for arbitration or refer it to an ADR institution and the Arbitration and Conciliation Act, 1996 will apply (the opinion quotes sub-section (3) of section 18).
  • The court noted the factual matrix at the January 20, 2011 meeting: the petitioner’s representatives stated they could not decide on the spot and would consult higher authorities; the Council's record is silent on whether the petitioner subsequently communicated consent to conciliation.
  • The court concluded that, if the petitioner’s silence after the meeting was treated as a refusal to accept conciliation, the Council was nonetheless obliged to inform the petitioner that it proposed to arbitrate the dispute itself or refer it for arbitration. The Council did not do so; the award is silent on any subsequent notification. On this basis the court found a breach of the principles of natural justice and the petitioner's right to be heard.
  • The court rejected the submission that the matter was purely a formality because of an alleged admission by the petitioner recorded in the Council's minutes. The court explained that an admission must be taken as a whole and cannot have selective parts extracted to defeat a party's opportunity to explain or defend. The minutes recorded that the petitioner "admitted the claim" but also raised an issue about the terms of payment; accordingly the admission, as recorded, could not be read as an admission of immediate liability and, in any event, admissions can be explained if the maker is afforded the opportunity.

On remedy and jurisdiction to grant relief:

  • The court considered the statutory remedies: section 19 permits a party aggrieved by a decree, award or order of the Council to apply for setting it aside; where arbitration is conducted under the Arbitration and Conciliation Act, section 34 of that Act would ordinarily be available.
  • However, the court held that where there is a gross or palpable violation of the principles of natural justice, the availability of an alternate statutory remedy does not preclude the High Court from exercising its writ jurisdiction under Article 226 of the Constitution, provided the body rendering the award is amenable to writ jurisdiction as a State or other authority within the meaning of Article 12.
  • Applying these principles to the facts, the court found the Council's failure to notify the petitioner before arbitrating (or before making an award) amounted to a significant procedural defect warranting interference by the High Court under Article 226.

Holding and Implications

Holding: The High Court set aside the order/award dated July 28, 2011 passed by the West Bengal State Micro and Small Enterprises Facilitation Council and directed the Council to take up the reference afresh, upon notice to the parties, and to proceed expeditiously and in accordance with law. The second respondent's application to stay the operation of the High Court's order was declined. The writ petition (W.P No. 18318(W) of 2012) was allowed, without any order as to costs.

Implications:

  • Direct effect on the parties: The Council's award in favour of respondent No. 2 is set aside; the Council must re-process the reference and give notice to the parties before proceeding to conciliation/arbitration or an award, thereby affording the petitioner an opportunity to be heard on the question of conciliation/arbitration and any defence on the merits.
  • The court expressly relied upon the principles that admissions must be considered in context and that procedural fairness (notice and opportunity to be heard) cannot be bypassed even where an award may appear to rest on an admission.
  • No new precedent beyond the application of settled principles was declared; the opinion does not state that it is laying down a novel legal principle. The court exercised established writ jurisdiction under Article 226 because it found a gross violation of natural justice by a body amenable to writ jurisdiction.

Administrative note in the order: urgent certified photocopies of this order will be made available to the parties if applied for, subject to compliance with requisite formalities.

SP
Show full summary ...

    Agriculture Finance Co. Ltd. v. Micro & Small Enterprises Facilitation Council

    1. The petitioner has come with a two-fold grievance against an order or award of the West Bengal State Micro and Small Enterprises Facilitation Council apparently rendered under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006.

    2. The award has been made in favour of the respondent No. 2. The respondent No. 2 claims to have supplied services to the petitioner herein in connection with the socio-economic survey of villages in Jharkhand under a programme by the name of Gram Bhagirathi Yojana. Upon the petitioner not making payment of the amount claimed by the second respondent, the second respondent applied to the Council under section J. 8 of the said Act of 2006. Section 15 of the said Act mandates that a buyer within the meaning of the said Act would pay the supplier within the meaning of the said Act within 15 days from the date of acceptance or deemed acceptance of any goods or services. The proviso to the section prohibits any agreement between a supplier and buyer to extend the period of payment beyond 45 days from the date of acceptance or deemed acceptance of the goods or services. Section 16 of the Act provides that upon the buyer failing to make the payment to the supplier in terms of section 15 of the Act, the buyer would be liable to pay compound interest with monthly rests to the supplier on the amount due from the appointed day or the relevant date at three times of the bank rate notified by the Reserve Bank. Section 17 provides that a supplier would be entitled to recover both the principal and the interest under section 16 of the Act from the buyer.

    3. A claim by any party to a dispute with regard to any amount due under section 17 of the Act is permitted to be carried to the Council under section 18 of the Act. A supplier is defined under section 2(n) of the Act as a micro or small enterprise which has filed a memorandum with the appropriate authority under section 8 of the said Act. On receipt of a reference under section 18(1) of the said Act, the Council is required to either conduct conciliation or seek the assistance of any institution providing alternate dispute resolution services by making a reference to such institution for conducting conciliation under the Arbitration and Conciliation Act. 1996. section 18(3) of the Act is of some relevance in the present context and reads as follows:—

    “Where the conciliation initiated under sub-section (2) 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 resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the disputes as if the arbitration was in pursuance of an arbitration agreement referred to in sub section (1) of section 7 of the Act.”

    4. In the instant case, the second respondent made a Terence to the Council on February 22, 2008 for a principal claim of Rs. 24,29,604/- together with the interest as admissible under the said Act. It appears that the matter was taken up in right earnest by the Council only on January 20, 2011 as would be evident from the Office notes, reports, Orders or proceedings with signature following key paragraph in the award or order of the Council dated July 28, 2011:—

    “On 20.01.11, Mr. Manish Biswas, Partner, Mr. Shyamal Roy and Mr. Kashinath Roy were present for the supplier unit and Mr. S. Dayal & Ms. A Bagchi were present for the buyer unit. The supplier unit explained his claim and reported that the buyer unit had already admitted their claim. The buyer unit also admitted the claim of the supplier unit but raised the point of terms of payment in the agreement expressing their inability to make the balance payment if they do not get it from the Govt. of Jharkhand. The Council pointed out that AFC had received Rs. 196.59 lakh from GBY as per AFC's letter dated 12.08.2008 addressed to the Council. The council requested both the parties whether they were ready for conciliation in the matter. The representatives of the buyer unit informed that they could not decide on the spot. They reported that they would inform the matter to their higher authority for a decision in this regard. Since it is a long pending issue, the council decided to make an award in this matter in the next meeting.”

    5. The two points canvassed by the petitioner arc the jurisdiction of the council and violation of the principles of natural justice. The petitioner says that the second respondent was not a supplier within the meaning of section 2(n) of the said Act since the statement of claim lodged by the second respondent before the Council did not reveal that its memorandum had been submitted to the appropriate authority under section 8 of the Act. The petitioner also suggests that the procedure adopted by the Council was in incomplete derogation of the petitioner's right to be heard and present the petitioner's version of things as would be evident from the above quoted paragraph of the order or award. According to the petitioner, an attempt at conciliation was made and it is evident that the petitioner did not get back to the Council as to whether it was agreeable to the Council conducting the conciliation. The petitioner demonstrates from the order that upon the Council perceiving the petitioner to not have got back to the Council, there was no notice issued by the Council to the petitioner that the Council would arbitrate upon the dispute between the parties and make a publish an award.

    6. As to the first point raised on behalf of the petitioner, it is submitted by the second respondent that the objection was not indicated in the written statement filed by the petitioner before the Council. The second respondent states that the second respondent is a supplier within the meaning of section 2(n) of the Act and its memorandum was duly submitted to the appropriate authority. The second respondent insists that in the light of the petitioner not having raised the objection before the Council, it is precluded from urging such ground at this stage. There is considerable substance in the submission of the second respondent and since it is evident from the written statement filed before the Council by the petitioner that the objection as to the second respondent's status as a supplier under the said Act was not raised before the Council, the petitioner cannot be permitted to urge such ground in the present proceedings.

    7. It is, however, the second ground canvassed by the petitioner which is of some substance. The scheme of section 18 of the said Act admits of a process of conciliation and, upon the conciliation failing, arbitration of the disputes between the parties. On a reading of sub-sections (2) and (3) of section 18, it is evident that upon a Council taking up the conciliation and the conciliation failing, it is for the Council to take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services. At the meeting of January 20, 2011, the petitioner did not indicate as to whether the petitioner was agreeable to a conciliation in the matter. The representatives of the petitioner at such meeting had submitted to the Council that they could not take a decision on the matter immediately. They represented to the Council that they would inform the matter to the higher authorities of the petitioner for a decision in such regard. The order or award of the Council is silent as to whether any decision as to the petitioner's participation in the conciliation was communicated by the petitioner to the Council. Assuming that the petitioner kept silent and did not communicate any decision to the Council, it was then incumbent on the Council to inform the petitioner that the arbitration would be taken up by the Council itself or the arbitration would be directed to be taken up by any institution or centre providing alternate dispute resolution services.

    8. In the context of the reference before the Council been made on February 22, 2008 and the first meaningful meeting having been held only on January 20, 2011, it would not do for the Council to rely on section 18(5) of the Act that provides for a inference to be decided within a period of 90 days from it being made.

    9. If the Council took the petitioner's silence in the matter following the meeting of January 20, 2011 to be the petitioner's refusal to accept the conciliation, the Council ought to have issued a notice to the petitioner indicating that the Council would take upon itself to arbitrate upon the disputes between the parties. In the Council not having adopted such procedure, there has been a complete violation of the principles of natural justice and the petitioner's right to be heard in the matter.

    10. It is submitted on behalf of the second respondent that the adjudication was a mere formality as would be evident from the relevant paragraph of the order or award that the petitioner herein had admitted the claim of the supplier. It is elementary that for an admission to be effective, it must be accepted as a whole and a part of something said cannot be culled out as an admission by disregarding the other part, thereof. It is evident from the third sentence of the relevant paragraph of the order or award that the petitioner had admitted the claim of the supplier unit but had raised a point as to the terms of payment in the agreement. The admission, therefore, that the second respondent relics on, may have related to the principal claim of the second respondent but the admission may not have been as to the immediate liability of the petitioner to make the payment as claimed by the second respondent. Indeed, even an unequivocal admission can be explained away; provided the maker thereof is afforded an opportunity to do so. It would not do to assume that there could be no defence in the light of an admission and proceed to pronounce judgment without affording the party likely to be affected thereby any opportunity of making out a defence.

    11. An issue as to the remedy available under section 19 of the said Act has also been raised, section 19 provides for a party aggrieved by a decree or award or order of the Council to apply for setting aside the same. Ordinarily, if the reference is concluded upon arbitration taking place, section 34 of the Act of 1996 would be available to a party aggrieved by the award. However, when the issue that is raised is one of gross or palpable violation of the principles of natural justice, the availability of an alternative remedy is no bar to the court exercising its authority under Article 226 of the Constitution if the body rendering the award is amenable to the writ jurisdiction of the Court as being a State or other authority within the meaning of Article 12 of the Constitution.

    12. The order or award dated July 28, 2011 passed by the first respondent Council cannot be sustained and is set aside and the Council is requested to take up the reference, upon notice to the parties, as expeditiously as possible in accordance with law.

    13. The second respondent seeks a stay of the operation of this order, which is declined.

    14. W.P No. 18318(W) of 2012 is allowed as above, but without any order as to costs. Urgent certified photocopies of this order, if applied for will be made available to the parties subject to compliance with all requisite formalities.

    SP

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Agriculture Finance Co. Ltd. v. Micro & Small Enterprises Facilitation Council
    (Jun 12, 2013)