Karnataka High Court M/S. Pal Mohan Electronics Pvt. Ltd., vs The Secretary Department Of Small Scale on 27 March, 2019 1 BENGALURU DATED THIS THE 27TH DAY OF MARCH 2019 BEFORE THE HON'BLE MR. JUSTICE B.M. SHYAM PRASAD W.P. No. 9485/2017 (GM) BETWEEN: M/S PAL MOHAN ELECTRONICS PVT. LTD., MOHAN PLAZA, 40 DLF, INDUSTRIAL AREA, KIRTI NAGAR, NEW DELHI110 015, REPRESENTED BY ITS DIRECTOR GAGANPREET SINGH SACHDEVA. PETITIONER (BY SRI. K.K. SHARMA, SENIOR ADVOCATE FOR SMT. M.C. NAGASHREE A/W SMT. T.S. RAJARAJESHWARI, ADVOCATES) AND: 1. THE SECRETARY, DEPARTMENT OF SMALL SCALE INDUSTRIES, VIKASA SOUDHA, BANGALURU560 001. 2. THE KARNATAKA MICRO & SMALL ENTERPRISES FACILITATION COUNCIL, NO. 49, 2ND FLOOR, SOUTH BLOCK, KHANIJA BHAWAN, RACE COURSE ROAD, BENGALURU560 001 REP. BY CHAIRMAN. 3. M/S KALKI COMMUNICATION TECHNOLOGIES PVT. LTD., NO. 147, 5TH MAIN ROAD, SECTOR7, HSR LAYOUT, BENGALURU560 012, REP. BY ITS EVP & CFO MRS. VANISHREE GURURAJ. 2 RESPONDENTS (BY SRI. K.S. DEVARAJ, ADVOCATE FOR C/R3, SRI V. SREENATH, AGA FOR R1, NOTICE SERVED ON R2) THIS WRIT PETITION IS FILED PRAYING TO QUASH THE ORDER/ AWARD DATED 26.10.2016 PASSED BY THE R2 IN CASE NO. 10/2015 AT ANNEXB TITLED AS M/S KALKI COMMUNICATION TECHNOLOGIES PVT. LTD., VERSUS M/S PALMOHAN ELECTRONICS PVT. LTD., & ETC. THIS WRIT PETITION HAVING BEEN HEARD ON 16.01.2019 AT THE PRINCIPAL BENCH, BENGALURU AND COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, BEFORE DHARWAD BENCH THE COURT DELIVERED THE FOLLOWING: ORDER This writ petition is filed impugning the award dated 26.10.2016 by the Karnataka Micro and Small Enterprises Facilitation Council, Bengaluru (for short, 'Facilitation Council'). The Facilitation Council, by the impugned award has allowed the respondent's Reference under section 18 (1) of the Micro, Small and Medium Enterprises Development Act, 2006 (for short, "MSMED Act"), holding that the petitioner is due in a total sum of Rs.60,40,525/, including a sum of Rs.9,65,525/ as CST difference to the respondent, and the petitioner is directed to pay to the respondent, within 3 a period of 90 days from the date of the award, (i) the "CST difference" of Rs.9,65,525/ and (ii) the Invoice Due of ₹ 50,75,000/ with interest at 3 times the bank rate of interest notified by the Reserve Bank of India from the due date as per section 16 of Act. The petitioner has impugned the Facilitation Council's award dated 26.10.2016 on the short ground that the Facilitation Council, having conducted conciliation proceedings under section 18 (2) of the Act, could not have conducted arbitration proceedings under section 18 (3) of the Act; and if the Facilitation Council could not have conducted arbitration proceedings after the conduct of the conciliation proceedings, the impugned award would be impermissible in law. 2. The lis is in the following circumstances: the petitioner, who is engaged in the business of electronics, was successful in its bid with the Maharashtra State Electricity Distribution Co Ltd for supply, installation, connection and commission of "GSM and GPRS Modems for HT Consumers' Metres, LT Consumers' Metres and Feeder Metres. The petitioner, in 4 turn, invited quotations from the different vendors, including the respondent. The petitioner issued the Purchase Order dated 28.3.2011 to the respondent for supply, installation connection and commission of 1800 Data Concentrator Unit, a component of the Modems. This Purchase Order dated 28.3.2011 was modified on multiple occasions. The Maharashtra State Electricity Distribution Co Ltd terminated the contract with the petitioner alleging certain lapses in the working of the Modem. 3. The petitioner blames the respondent for the lapses in the working of the Modem, and the petitioner for this reason, and others, disputes the payment claimed by the respondent. The respondent has filed a Reference under section 18(1) of The MSMED Act for recovery of the Invoice Due (Rs.50,75,000/), CST difference (Rs.9,65,525/) and interest for the delay period (Rs.23,13,859/) asserting that it was a small enterprise registered with the Department of Industries and Commerce, Government of Karnataka and 5 engaged in software development and computer related services. 4. The Facilitation Counci