The Writ Petition is directed against the Award passed by the 1st respondent, the Andhra Pradesh Micro and Small Enterprises Facilitation Council, Hyderabad on 05.10.2013 in the proceedings initiated before it by the 2nd respondent company.


W.P. No.13639 of 2014


State Water and Sanitation Mission,  Erramanzil, Hyderabad rep. by its Project
Director. .Petitioner

The A.P. Micro and Small Enterprises Facilitation Council, Hyderabad &

Counsel for the petitioner: GP for Panchayat Raj & Rural
                             Development (TG)

Counsel for the Respondents : Sri S. Dwarakanath



? Cases referred

WRIT PETITION No. 13639 OF 2014  
O R D E R:
      The State Water and Sanitation Mission is the petitioner
herein.  The Writ Petition is directed against the Award passed by
the 1st respondent, the Andhra Pradesh Micro and Small
Enterprises Facilitation Council, Hyderabad on 05.10.2013 in the
proceedings initiated before it by the 2nd respondent company.
      The 2nd respondent company is a small-scale industry.  It
has filed a claim petition before the 1st respondent initially seeking
Rs.47,24,823/-.  It is the case of the 2nd respondent that pursuant
to the e-procurement for work, supply, delivery, installation and
commissioning of stand alone water purification systems at various
government schools in rural areas, its bid was accepted and the
necessary agreement for execution of the work in five districts has
been entered into by and between the parties on 26.02.2010. It is
the case of the 2nd respondent that in spite of the execution of the
works, it has not been paid for the works so turned out.  It is
therefore, claimed by the 2nd respondent that an amount of
Rs.33,29,881/- was, in fact, due and payable by the petitioner
herein and since there was an inordinate delay in settling the
payments, interest of Rs. 13,94,942/- was also claimed thereon,
thus totalling to Rs.47,24,823/-.
      The 1st respondent has been established by the State
Government, in exercise of the power available under Section 20
read with Section 21 of the Micro, Small and Medium Enterprises
Development Act, 2006 (henceforth referred to as the Act). The
Parliament has noticed that small-scale industry is facing lots of
difficulties to stay put in the competitive industrial environment
and for it to flourish, settlement of its disputes and dues must be
attended to on priority basis, so that the small-scale industrial
entrepreneurs  can be developed duly enhancing their
competitiveness with rest of the entrepreneurs. Chapter IV of this
Act provided for various measures for promotion, development and
enhancement of competitiveness of Micro, Small and Medium
Enterprises. Chapter V dealt with the delayed payments to Micro
and Small Enterprises. Section 15 of the Act has thrust that where
any supplier supplies any goods, or renders any services to any
buyer, the buyer shall make payment therefor on or before the date
agreed upon between him and the supplier in writing or where
there is no agreement in this behalf, before the appointed date,
provided that in no case the period agreed upon between the
supplier and the buyer in writing shall exceed forty-five days from
the day of acceptance or the day of the deemed acceptance.  The
expression appointed day has been defined in Section 2(b) of the
Act as the day following immediately after the expiry of the period
of 15 days from the day of acceptance or the day of deemed
acceptance of any goods or any services by a buyer from a
supplier.  It was explained therein that the day of acceptance
means the day of the actual delivery of goods or rendering of
services.  Thus, Section 15 of the Act has attempted at a tight
time-frame limit within which the payments are required to be
made to small-scale entrepreneurs. Section 16 has thrust a further
liability on the defaulting party making him liable to pay
compound interest with monthly rests at three times of the bank
rate notified by the Reserve Bank of India. Under Section 18,
notwithstanding anything contained in any other law for the time
being in force, any party to a dispute may make a reference to the
Micro and Small Enterprises Facilitation Council for recovery of the
monies due.  Section 20 of the Act required the State Government
to establish one or more Micro and Small Enterprises Facilitation
Councils and Section 21 of the Act dealt with the composition of
such a Council.  The Director of Industries in the Department of
the State Government having administrative control over small-
scale industries is made the Chair-person of the Facilitation
      The 2nd respondent herein has made a reference under
Section 18 of the Act for recovery of the aforementioned sum of
Rs.47,24,823/-.  It appears, it has filed on 04.10.2013 a revised
claim claiming a sum of Rs.1,46,99,714/-, but however, the 1st
respondent Facilitation Council passed orders the very next day
i.e. on 05.10.2013 directing the petitioner herein to pay a sum of
Rs.68,29,506/- towards principal and Rs.59,93,743/- towards
interest as on 30.09.2013, totalling to Rs.1,28,23,249/-.  Further
interest with monthly rests at three times the bank rate prevailing
as on the date of the Award was also made as payable. It is this
Award, which is challenged in this Writ Petition.
      It is not in dispute that the 2nd respondent has revised its
claim and filed it on 04.10.2013 before the Council and the
Council has passed its Order the very next day, namely
05.10.2013.  It is now urged before me specifically that the
petitioner herein had not been provided with a proper opportunity
to meet the revised claim of the 2nd respondent and bring out as to
how it is not tenable.  Therefore, it is urged that the order of the
Council dated 05.10.2013 is bad for violation of the principles of
natural justice.
      The learned counsel for the 2nd respondent Sri Karthik had
raised two-fold objection for entertaining this Writ Petition; the first
is that Section 19 of the Act sets out that no application for setting
aside any decree, award or other order made by the Council shall
be entertained by any Court unless the appellant has deposited
with it 75% of the amount in terms of the decree, award or the
order in the manner directed by such Court.  Sri Karthik therefore,
would submit that unless this pre-condition is met with, the Court
has no power to entertain this Writ Petition.  The learned counsel
would further submit that the Order of the 1st respondent Council
is liable to be challenged under Section 34 of the Arbitration  and
Conciliation Act, 1996 and that being an effective alternative
remedy, the petitioner could not have bypassed the same.
      It is important to notice that the provisions contained in
Sections 15 to 23 of the Act have been given overriding effect by
the Parliament, notwithstanding anything inconsistent therewith
contained in any other law for the time being in force.  It is,
undoubtedly, true that by providing for such an overriding effect to
the provisions contained in Sections 15 to 23 of the Act, the
Parliament intended to protect the interests of Micro, Small and
Medium Enterprises and promote the competitiveness of theirs, so
that they can stay afloat with other industries.  But these
provisions, in my opinion, cannot be read as excluding the judicial
review power of the High Court under Article 226 of the
Constitution.  For the present, I am not pronouncing any final
opinion on such an issue, in view of the conclusion to which I have
arrived, as set out herein below.  Judicial review power vested with
the constitutional Courts springs from the very Constitution.
Therefore, even by a statutory exercise, no Legislature can seek to
curtail or diminish that power totally.  It may be a different aspect
as to when the Court should really be called upon to exercise such
power.  However, where principles of natural justice are breached,
it is only appropriate that the error should be set right
immediately.  Lest, the very exercise of power carried out in
flagrant violation of the principles of natural justice would hold the
field unjustly.  This is one major reason that is weighing with my
mind when I generated a debate in this regard at the Bar.  I have
also suggested that the matter should be sent back to the Council
for a proper consideration duly hearing the petitioner herein.  This
apart, the Award has not assigned any specific reasons.  As is too
well-known, reasons are the live links, which bring out the
application of mind by the decision-maker.  The reasons offer
clarity and fairness of approach adopted while deciding the issue.
It is one thing to say that very exhaustive reasons may not have
been required to be spelt out like a well-trained Court would have
while adjudicating a lis brought before it, but however, the 1st
respondent Council, which has been clothed with the power to
adjudicate and pronounce upon an order relating to payment of
arrears and its recovery, it is essentially required of it to assign
reasons as to why it has reached the conclusion to which it did.
Lest, whole exercise would turn itself into an arbitrary fiat.
Therefore, for sheer violation of the principles of natural justice in
providing a fair and effective opportunity to the petitioner to meet
the case set up by the 2nd respondent in the form of a revised
claim, the Award passed by the 1st respondent on 05.10.2013
deserves to be set aside.
      I must also necessarily place on record my appreciation of
the efforts made by Sri Karthik, learned counsel for the 2nd
respondent.  The Managing Director of the 2nd respondent has filed
a sworn affidavit yesterday.  It is agreed that without prejudice to
the 2nd respondents objections with respect to entertainability or
maintainability of the Writ Petition and also without prejudice to
the merits of the claim of the 2nd respondent, dated 04.10.2013, for
a sum of Rs.1,46,99,714/- before the 1st respondent and interest
thereon, the 2nd respondent is agreeable for the matter to be
remanded to the 1st respondent.  The affidavit of the 2nd
respondent has been taken on record.
      Accordingly, the Order dated 05.10.2013 passed by the 1st
respondent is set aside.  The claim of the 2nd respondent is
restored to the 1st respondent and the 1st respondent shall provide
an opportunity to the petitioner herein to file its statement in
defence of the claim of the 2nd respondent in a time span not
exceeding 15 days to do so and thereafter, provide an opportunity
of hearing to both the petitioner as well as the 2nd respondent
herein who is the claimant and then pass an Award setting out
briefly the reasons why the conclusions have been arrived at by it.
It is made clear that the monies paid to the 2nd respondent,
pursuant to the interlocutory order passed by this Court on
16.12.2014, will abide by the result of the claim now to be decided
by the 1st respondent.  The 1st respondent is further directed to
complete the entire exercise in as quicker time as is possible,
preferably within a maximum period of two months from the date
of receipt of a copy of this order.
      With this, the Writ Petition stands allowed. No costs.
          Consequently, the miscellaneous applications, if any shall
stand disposed of.
25th June 2015


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