Tariq Khan.A bench of the Delhi High Court has finally settled the law on the long-pending issue regarding the applicability of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in cases where the entities were not registered under the MSMED Act at the time of execution of the contract..Justice Vibhu Bakhru of the Delhi High Court has passed a judgment on April 7, 2018, in the matter of M/S Ramky Infrastructure Private Limited v. Micro and Small Falicitation Council & Anr. W.P.(C) 5004/2017, wherein it has been held that an entity which falls within the definition of the micro/small enterprise will be treated as a ‘supplier’ under Section 2(n) of the MSMED Act even if it has not filed a Memorandum as required under Section 8(1) of the MSMED Act..In this case, two work orders were awarded by the Petitioner Ramky Infrastructure Limited (RIL) to the Respondent Goel Constructions India Limited (GCIL) in the year 2009-2010..On July 4, 2015, GCIL got registered with the Commissioner of Industries, Govt of NCT of Delhi under ‘Small Enterprises’ category. Thereafter, GCIL made a reference to the Council under Section 18 of the MSMED Act, claiming its outstanding dues including interest as per MSMED Act, 2006. The Council referred the case to Delhi International Arbitration Centre for initiating arbitration proceedings as conciliation proceedings failed. The said reference was challenged by the Petitioner before the high court..The contention of the Petitioner was that the disputes between RIL and GCIL had arisen in respect of work orders that were entered into in the year 2010 and at that time GCIL was not registered under the MSMED Act therefore, it cannot be treated as a ‘supplier’ as defined under Section 2(n) of the MSMED Act, 2006..Respondent contended that it is not mandatory to be registered under the MSMED Act at the time of rendering services or supplying products in order to qualify for making a reference under Section 18 of the MSMED Act..The main issue before the court was whether at the time of execution of the contract it was mandatory for the Respondent to be registered under Section 8(1) of the MSMED Act in order to fall within the definition of a supplier under Section 2(n) of the Act and to avail the benefits of the MSMED Act..Relying on the decision of the Supreme Court in the case of Thalappalam Service Cooperative Bank Limited and Others, the Court held that Section 2(n) of the Act indicates that it is in two parts..The first limb defines a supplier to mean a micro or small enterprise which has filed a memorandum with the authority referred to in sub-section (1) of Section 8 of the MSMED Act, and the second limb refers to (i) National Small Industries Corporation; (ii) the Small Industries Development Corporation of a State or a Union territory; and (iii) a company, co-operative society, trust or a body engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises. Thus, the two limbs of Section 2(n) of the MSMED Act are required to be read to exhaust all categories..For the foregoing reasons, the Court held that filing the Memorandum under Section 8(1) of the MSMED Act is not mandatory for a company, co-operative society, trust or a body which is engaged in selling goods produced by micro or small enterprises or rendering services provided by such enterprises. The petition was, therefore, dismissed..Read the judgment:
Tariq Khan.A bench of the Delhi High Court has finally settled the law on the long-pending issue regarding the applicability of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in cases where the entities were not registered under the MSMED Act at the time of execution of the contract..Justice Vibhu Bakhru of the Delhi High Court has passed a judgment on April 7, 2018, in the matter of M/S Ramky Infrastructure Private Limited v. Micro and Small Falicitation Council & Anr. W.P.(C) 5004/2017, wherein it has been held that an entity which falls within the definition of the micro/small enterprise will be treated as a ‘supplier’ under Section 2(n) of the MSMED Act even if it has not filed a Memorandum as required under Section 8(1) of the MSMED Act..In this case, two work orders were awarded by the Petitioner Ramky Infrastructure Limited (RIL) to the Respondent Goel Constructions India Limited (GCIL) in the year 2009-2010..On July 4, 2015, GCIL got registered with the Commissioner of Industries, Govt of NCT of Delhi under ‘Small Enterprises’ category. Thereafter, GCIL made a reference to the Council under Section 18 of the MSMED Act, claiming its outstanding dues including interest as per MSMED Act, 2006. The Council referred the case to Delhi International Arbitration Centre for initiating arbitration proceedings as conciliation proceedings failed. The said reference was challenged by the Petitioner before the high court..The contention of the Petitioner was that the disputes between RIL and GCIL had arisen in respect of work orders that were entered into in the year 2010 and at that time GCIL was not registered under the MSMED Act therefore, it cannot be treated as a ‘supplier’ as defined under Section 2(n) of the MSMED Act, 2006..Respondent contended that it is not mandatory to be registered under the MSMED Act at the time of rendering services or supplying products in order to qualify for making a reference under Section 18 of the MSMED Act..The main issue before the court was whether at the time of execution of the contract it was mandatory for the Respondent to be registered under Section 8(1) of the MSMED Act in order to fall within the definition of a supplier under Section 2(n) of the Act and to avail the benefits of the MSMED Act..Relying on the decision of the Supreme Court in the case of Thalappalam Service Cooperative Bank Limited and Others, the Court held that Section 2(n) of the Act indicates that it is in two parts..The first limb defines a supplier to mean a micro or small enterprise which has filed a memorandum with the authority referred to in sub-section (1) of Section 8 of the MSMED Act, and the second limb refers to (i) National Small Industries Corporation; (ii) the Small Industries Development Corporation of a State or a Union territory; and (iii) a company, co-operative society, trust or a body engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises. Thus, the two limbs of Section 2(n) of the MSMED Act are required to be read to exhaust all categories..For the foregoing reasons, the Court held that filing the Memorandum under Section 8(1) of the MSMED Act is not mandatory for a company, co-operative society, trust or a body which is engaged in selling goods produced by micro or small enterprises or rendering services provided by such enterprises. The petition was, therefore, dismissed..Read the judgment:
