Allahabad High Court Bharat Heavy Electricals Ltd. vs M/S Northern Power Erectors Ltd. on 25 October, 2024 HIGH COURT OF JUDICATURE AT ALLAHABAD Neutral Citation No. 2024:AHC:171545DB Reserved Chief Justice's Court Case : APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. 252 of 2024 Appellant : Bharat Heavy Electricals Ltd. Respondent : Northern Power Erectors Ltd. Counsel for Appellant : Aarushi Khare Counsel for Respondent : Alok Kumar Yadav Hon'ble Arun Bhansali,Chief Justice Hon'ble Vikas Budhwar,J. (Per : Arun Bhansali, CJ) 1. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 ('the A&C Act') is directed against judgment dated 30.09.2019, passed by the Commercial Court, Kanpur Nagar, whereby the application filed by the appellant under Section 34 of the A&C Act against arbitral award dated 26.12.2014 passed by the U.P. State Micro and Small Enterprises Facilitation Council, Kanpur ('the Council'), has been dismissed. 2. The appellant floated expression of interest in the form of an open tender on 09.02.2012 for executing the work of overhauling/ refurbishment of 2 x 65 MW Subernarekha Hydel Power Plant at VillageSikidiri, DistrictRanchi, Jharkhand. On 12.03.2012, the bid given by the respondent was found to be lowest and a MoU was signed on 16.03.2012, a letter of intent was issued by the appellant on 24.03.2012 for a contract value of Rs. 15.32 crores. On 26.04.2012, the work order was issued and on the same day, contract was executed between the parties. 3. During the course of the execution of the work, the respondent raised invoice for 20% advance payment of Rs. 3,44,22,104/, which was paid by the appellant, another sum of Rs. 3,00,27,200/ was paid on 02.05.2012. The respondent raised first running bill dated 09.04.2012 for Rs. 1,72,13,552/ and second running bill was raised on 23.05.2012 for Rs. 3,44,27,104/. However, the running bills were not paid. The work was completed and handed over in August, 2012 and final bill was raised for Rs. 14,21,08,320/ on 03.09.2012. A completion certificate was issued by the appellant on 22.08.2012. 4. When the appellant failed to pay the balance amount, in spite of requests and reminders, the respondent approached the Council by filing claim under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 ('the MSMED Act'). The appellant raised preliminary objections with reference to the maintainability of the claim before the Council, inter alia, based on territorial jurisdiction and in view of presence of an arbitration agreement between the parties. 5. A reply to the claim was also filed by the appellant. The Council, by its order dated 27.06.2014, rejected the objections pertaining to territorial jurisdiction based on the fact that before supply of goods, memorandum was filed before the District Industries Center, Ghaziabad and acknowledgement dated 12.05.2010 was received and therefore, being supplier, the respondent was eligible to make a claim before the Council at Kanpur. On the aspect of arbitration agreement, it was indicated that in view of provisions of Section 24 of the MSMED Act, which gives overriding effect to the provisions of Sections 15 to 23 of the said Act, there was no substance in the objections and consequently, dismissed the preliminary objections. 6. It was further ordered that parties would enter into conciliation and if conciliation is not possible, then matter be placed for factual disposal on the next date, whereafter by award dated 26.12.2014, the Council allowed the claim petition along with interest. 7. Feeling aggrieved, the appellant filed application under Section 34 of the A&C Act before the Commercial Court seeking setting aside of the award dated 26.12.2014. 8. Before the Commercial Court, objections were raised pertaining to territorial jurisdiction of the Council to entertain the claim, on account of its failure to give effect to the arbitration agreement between the parties, composition of the Council being even number, failure to attempt conciliation before deciding the dispute on merits, on account of respondent concealing the fact from the appellant that it was registered as a small enterprise and failure of the Council in giving effect to Clauses 6.1 of the tender document and 3.4 of the MoU indicating the contract on back to back basis. 9. The submissions made were contested by the respondent. The Commercial Court, by its impugned judgment, came to the conclusion that in view of provisions of Section 18(4) of the MSMED Act, as the respondentEnterprise is located at Ghaziabad within the State of U.P., the same confers jurisdiction on the Council at Kanpur to decide the dispute in accordance with provisions of the MSMED Act. 10. The plea regarding concealment of fact that the respondent was registered as a sm