Telangana High Court M/S Merrito Polymers India Private ... vs The State Of Telangana on 14 October, 2024 HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA WRIT PETITION No. 24139 OF 2023 O R D E R: Petitioner seeks to set aside the Award passed by the 2nd respondent Micro & Small Enterprises Facilitation Council in Case No.21C/IFC/2018/52181, dated 06.07.2023, duly declaring the same as null and void on the ground that it was passed under repealed Telangana State Micro, Small Enterprises Facilitation Council Rules(TSMSEFC) 2014, with effect from 03.07.2017. 2. The brief facts of the case are : petitioner Micro Medium SmallScale Industry which involved in manufacturing Poly Vinyl Chloride (PVC) film used in Pharmaceutical packaging industry, accepted the quotation of the 3rd respondent to construct a clean room, on which, the purchase order was issued on 17.05.2017 for a total amount of Rs.55,08,000/ + excise duty @12.5% to the tune of Rs.6,00,000/ and CST @ 2% to the tune of Rs. 1,08,000/, which are mandatory. Rs. 10,00,000/ was given along with the purchase order and it was agreed that 65% of amount would be given against delivery of material and balance of 10% only after completion i.e., installation of the clean room, with all specifications. It was 2 clearly stipulated that clean room has to be installed within 20 days from the date of issuance of purchase order. Thus the 3rd respondent having accepted the above, started supplying goods from 24.05.2017 onwards till 04.10. 2017. Though supply and installation should have been completed by 06.06.2017, the 3rd respondent breached the contract. In spite of many reminders, the 3rd respondent did not install the clean room even till today, due to which, petitioner company was made to suffer loss of more than Rs.40,00,000/. Resultantly, production of Films got delayed and purchasers also delayed payments and Petitioner Company, in turn, had to raise a dispute before the MSME Council against those companies. It is stated that demand notice was got issued by the 3rd respondent on 29.10.2018 demanding balance payment under Insolvency and Bankruptcy Code 2016 (under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016) in Forms 3 and 4, for which a suitable reply was issued clearly stating that alleged balance payments due to the tune of Rs. 15,40,268/are liable to be released only on successful completion of construction of clean room. It is further clearly stated that even though many pharma 3 companies are visiting unit to observe manufacturing of film/give orders, as they are dissatisfied with the end film, have not issued purchase orders only due to nonmaintenance of the temperature in the clean room. In fact, as the expected turnover was not there, EMIs. due to Andhra Pradesh State Financial Corporation were not cleared, which resulted in issuance of Notice under Sec.29 of Andhra Pradesh State Financial Corporation (APSFC) Vijayawada, vide Ref: AFC/VJA/SEC.29Notice/Vj603902/202223/1694, dated 16.01.2023. Therefore, they were constrained to file four writ petitions and paid the amounts by barrowing, to save the manufacturing unit. The 3rd respondent, without rectifying the installation of clean room, to make it functional, appeared to have approached the MSME Facilitation Council on 09.05.2018 itself even before sending notice dated 28.10.2018, complaining that Rs. 15,40,268/ remained unpaid and that they are entitled to Rs.1,30,931/@ 3 times bank rate i.e. 6.25 X 3 18.75%, as on 09.05.2018. Notice was sent to petitioner on 20.10.2021 to pay Rs. 2,257/ towards Arbitration fees and to attend the meeting of council on 30.10.2021 @ 2.30p.m. at Cherlapally Industries Association office complex. It is stated, 4 when the Council directed petitioner to pay the alleged dues, they stated that the 3rd respondent did not complete the work entrusted and they incurred more than Rs.40 Lakhs loss. Their representative was directed to endorse the same on the notice, dated 14.02.2022, accordingly, he did so which clearly shows that there is no amicable settlement. Another notice dated 08.03.2023 was issued directing the company to depute a person who is capable of taking decisions in the matter to attend the meeting on 24.03.2023, as the case is taken up under ARBITRATION. If amicable settlement fails, as per Section 18(3) of the MSME Act, conciliation stands terminated. Thereafter, the Council shall either itself take up the dispute for Arbitration or refer it to any institution or centre providi