Factual Background 

In the instant matter of Uniseven Engineering and Infrastructure Pvt. Ltd v. Micro and Small Enterprises Facilitation Council District The petitioner filed a petition to contest the order dated 14-09-2021 made by Micro and Small Enterprises Facilitation Council respondent under the MSMED Act, 2006, instructing the petitioner to pay Harji Engineering Works Pvt. Ltd. Rs. 9,59,66,352 for a Combined Station Works agreement dated 17-10-2019. At Paradip and Balasore Stations in Odisha, Combined Station Works were to be provided, and on October 18, 2019, a second agreement to deliver goods and services was made. The petitioner and respondent got into arguments over payments made under the contracts. The petitioner’s bank guarantee, which the respondent redeemed in accordance with the agreement, was served with a legal notice. In response to a payment delay, A reference petition application was made by the respondent in accordance with Section 18 of the MSMED Act of 2006. The petitioner was instructed to give the respondent the sum of Rs. 9,59,66,352/-.

Issue

whether the MSEFC will consider an independent claim brought by the buyer?

Analysis of Court order

According to the Delhi High Court’s Single Judge Bench, Justice Prathiba M. Singh, MSEFC is only permitted to consider claims made by suppliers against purchasers and counterclaims made by purchasers against suppliers. It is not permitted to consider independent claims made by purchasers against suppliers under the MSMED Act of 2006. 

The Court determined that parties may refer to the MSEFC for any sum owed under Section 17 under Section 18 of the MSMED Act. Only these sectors are covered by Chapter V, especially Chapter V on Delayed Payments to Micro and Small Enterprises. The Court further remarked that under Section 2(g) of the MSMED Act of 2006, Medium Enterprises are not covered by Chapter V. In accordance with Sections 15 to 17, the Buyer is accountable for making timely payments; otherwise, the Supplier would be subject to increasing interest charges. The MSMED Act of 2006 does not apply to any claims made by Buyers against Suppliers under these provisions.

According to the Court, only claims that can be recovered by Micro or Small Enterprises registered under the Act are covered under the MSMED Act, 2006. Because reverse obligations are not taken into account by the Act, the Buyer is not permitted to bring a separate claim against the Supplier. The Court threw down the contested ruling because the MSEFC had not taken into account Act provisions that limited the MSEFC’s power to hear claims from suppliers against buyers and counterclaims from buyers against suppliers.

CASE NAME – Uniseven Engineering and Infrastructure Pvt. Ltd v. Micro and Small Enterprises Facilitation Council District, WP(C) 11233/2021