Corrtech International Pvt Ltd vs. Delhi International Arbitration Center & Ors.

$~34
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ LPA 975/2024, CM.APPL. Nos. 57502-04/2024

CORRTECH INTERNATIONAL PVT. LTD .....Appellant
Through: Mr. Rajshekhar Rao, Sr. Advocate
with Ms. Anushree Kapadia, Mr.
Ajay Sabharwal and Ms. Ekta
Kundu, Advocates.

versus

DELHI INTERNATIONAL ARBITRATION
CENTER & ORS .....Respondents

Through: Mr. Shreesh Chadha, Mr. Aman
Singh Bakshi and Mr. Divjot
Singh Bhatia, Advocates for R-3
with Mr. Harvinder Singh
Bhakshi, Director of R-3.

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% Date of Decision: 30 September, 2024

CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE TUSHAR RAO GEDELA
JUDGMENT

MANMOHAN, CJ : (ORAL)
1. Present appeal has been preferred under Clause X of the Letters
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Patent Act, 1866, assailing the judgment dated 25 September, 2024,
passed by the learned Single Judge of this Court in W.P.(C) 13469/2024
titled “Corrtech International Pvt. Ltd. vs. Delhi International
Arbitration Center & Ors” , filed by the appellant, whereby the learned
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Signing Date:03.10.2024
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Single Judge dismissed the writ petition as non-maintainable.
2. It is the case of the appellant that it was awarded a contract by Gas
Authority of India Ltd., for services of HDD works at
Kochi-Koottanad-Banglore-Manglore (for short ‘KKBMPL’), Phase II
Section VIIB. The appellant further awarded work to its Sub-contractor
M/s Harji Engineering Pvt Ltd. (for short ‘HEWPL’) for installation of
24 PE coated pipe + 6 Dia Pipe with HDD works from Singasndra
Bangalore to Krishnagiri Section for RLNG Gas Pipeline Project
(Phase-II). It is stated that HEWPL further placed on the respondent
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no.3/claimant, a purchase order dated 10 July, 2018 for installation of
the aforesaid Project. The appellant asserts that there is no purchase
order/contract/agreement between the appellant and the respondent
no.3/claimant.
3. The respondent no.3/claimant claims that HEWPL sent a letter

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dated 30 November, 2018 to the appellant, stipulating as under:-
“Subject: Payment arrangement for HDD Service provider. With
Reference to above subject and rigorous discussion over the payment
issue in presence of Mr. Y A Kumar (GM projects, GAIL) where it
was decided for the R A bills of M/S knock pro infra Pvt Ltd to be
directly paid by M/S CIPL from the R A bill raised by HEWPL for
which a settlement sheet will accompany with all/any credit/debit
notes duly signed and agreed upon by both HEWPL and knock pro.
It is requested to put this in procedure for further on coming bills,
Please do the needful and oblige.”

4. As per the material on record, it appears that a settlement sheet
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dated 14 December, 2018 delineating a ‘Direct Payment Arrangement’
for the HDD services being provided by the respondent no.3/claimant,
was executed between HEWPL and respondent no.3/claimant. The said
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settlement sheet was sent to the appellant via email dated 20 January,
2019. The respondent no.3/claimant is stated to have filed a case
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bearing no. DL/06/M/NWC/00781 dated 19 May, 2022 before the
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respondent no.2/ SAMADHAN, Micro and Small Enterprise Facilitation
Council (for short ‘MSEFC’) alleging non-payment of dues by the
appellant. The conciliation proceedings between the appellant and the
respondent no.3/claimant were unsuccessful. Consequently, the
respondent no.2/MSEFC made a reference under section 18(3) of the
Micro, Small and Medium Enterprises Development Act, 2006 (for short
‘MSMED Act’) to the respondent no.1/Delhi International Arbitration
Center (for short ‘DIAC’), to initiate proceedings in accordance with the
Arbitration and Conciliation Act, 1996 (for short ‘the Act’).
5. Pursuant to the aforesaid reference, the respondent no.1/DIAC,
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through communication dated 13 May, 2024, called upon the parties to
file their respective Statement of Claims, in Case Ref. No.
nd
DIAC/5674-0/11-22, in line with an earlier communication dated 22
November, 2022. The parties were cautioned that failure to file the
Statement of Claims would result in the closure of the proceedings.
Subsequently, the respondent no.1/DIAC, through communications dated
nd nd
2 July, 2024 and 2 August, 2024, directed the parties to deposit the
arbitrator’s fee and miscellaneous expenses with the respondent
no.1/DIAC.
6. In the aforesaid background, Mr. Rajshekhar Rao, learned senior
counsel appearing for the appellant states that the first date of notice to
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the respondent no.3/claimant being 22 November, 2022, as per section
23(4) of the Act, the parties were to mandatorily complete their
pleadings within six (6) months from the date of appointment of the
arbitrator. By referring to section 25(a) of the Act, he states that on
failure to comply with the provisions contained therein, the arbitral
proceedings would terminate. He states that in the present case,
admittedly no Statement of Claim was filed by the respondent
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no.3/claimant within the stipulated time reckoned from 11 November
2022. Thus, the said arbitration is deemed to have terminated. On that
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basis, he states that the notice dated 13 May, 2024 issued by the
respondent no.1/DIAC is without jurisdiction and violative of the
provisions of the Act.
7. Apart from the above, he contends that the total time of eighteen
(18) months’ including the extension of six (6) months’, which can be
granted for completion of the arbitral proceedings as per section 29A(1)
& 29A(3) of the Act respectively, has also expired. In such
circumstances, he contends that the respondent no.1/DIAC could not
have extended the limitation on its own since neither the Act nor the
DIAC Rules confer any such authority or jurisdiction. He relies upon a
judgement of the Supreme Court in Rohan Buildtech vs. Berger Paints
India Limited , 2024 SCC OnLine SC 2494 in support of the said
submission.
8. Learned senior counsel for the appellant also contends that there
being no privity of contract with the respondent no.3/claimant, no
reference of disputes by arbitration could at all be maintainable. He
states that it is not disputed that as on the date of awarding of the
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sub-contract by the appellant to HEWPL i.e., 10 July, 2018, the
respondent no.3/claimant was not registered under the MSMED Act. He
states that it is trite that where a party is not registered under the
MSMED Act, reference of disputes under section 18(3) of the said Act
by the respondent no.2/MSEFC for arbitration between the parties is not
permissible. He relies upon a judgement of the Supreme Court in
Gujarat State Civil Supplies Corporation Ltd vs. Mahakali Foods Pvt.
Ltd. , (2023) 6 SCC 401 . He also states, by relying upon the said
judgement that the provisions of the MSMED Act would apply
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prospectively from the date of registration. Hence, once the respondent
no.3/claimant has got registered after the date of award of contract by
HEWPL, it is not permissible for the respondent no.2/MSEFC to
exercise jurisdiction under section 18(3) of MSMED Act. He states as
per the settled principle of law, when the claimant is not registered as an
MSME on the date of the contract under which goods / services are
supplied, such claimant is not entitled to make any claim under the
MSMED Act. In support of his submission, he relies upon the
judgements of the Supreme Court in Silpi Industries Etc. vs. Kerala
State Road Transport Corporation & Anr., 2021 SCC OnLine SC 439
and Vaishno Enterprises vs. Hamilton Medical AG & Anr. , 2022 SCC
OnLine SC 355 .
9. Learned senior counsel for the appellant relies upon a judgement

of the Supreme Court in Bhaven Constructions vs. Executive Engineer,
Sardar Sarovar Narmada Nigam Ltd. & Anr. , (2022) 1 SCC 75 to
submit that though interference under Article 226/227 of the Constitution
of India in arbitral process is not permissible, yet, in exceptionally rare
circumstances, the High Court can interfere. Referring to the facts and
the legal position narrated above, he states that the present case is one
such exception and that the writ petition be declared to be maintainable.
10. That apart, learned senior counsel for the appellant handed over
the Bench, a judgement of this Court in HFCL Ltd. (Formerly
Himachal Futuristic Communications Ltd.) vs. Micro and Small
Enterprises Facilitation Council & Ors. , 2024 SCC OnLine Del 5462
passed by the learned Single Judge in another matter, wherein, according
to him, a diametrically opposite view was taken by the learned Single
Judge. He states that in similar circumstances, the learned Single Judge
held the writ petition filed therein to be maintainable. He states that the
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Signing Date:03.10.2024
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learned Single Judge could not have taken contrary view on the same
subject matter while deciding the underlying writ petition.
11. Per contra , Mr. Shreesh Chadha, learned counsel appears for the
respondent no.3/claimant and states that the appellant has argued only
disputed questions of fact and is seeking to project as if the whole issue
pertains only to the lack of jurisdiction either on the part of the
respondent no.2/MSEFC or the respondent no.1/DIAC. He states that
there are documents to show that the appellant was to make direct
payments to the respondent no.3/claimant which can be proved in
arbitration proceedings. He also states that in any case the arguments
raised by the appellant can be subject matter of an application under
section 16 of the Act. He also states that, even otherwise, to the extent of
the services rendered and bills raised subsequent to the registration under
the MSMED Act, there cannot possibly be any quarrel that the disputes
can be referred to arbitration under section 18(3) of MSMED Act. He
states that now that the arbitrator has been appointed, the appellant can
avail of all remedies before the arbitrator.
12. This Court has heard the arguments of learned counsel appearing
for the parties. The law regarding locus of the respondent no.2/MSEFC
to refer disputes of MSMEs registered under the MSMED Act to
arbitration and its applicability is no more res integra as it has been
settled by the Supreme Court in Gujarat State Civil Supplies
Corporation Ltd. (supra) . It is also not disputed that the reference to
arbitration can only be prospective from the date the party is registered
as MSME with the Competent Authority under the MSMED Act. The
Supreme Court has also observed that the same would be applicable only
to supply of goods and services which are rendered subsequent to such
registration alone. The relevant paragraphs of Gujarat State Civil
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Signing Date:03.10.2024
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Supplies Corporation Ltd. (supra) are reproduced hereunder:
“51. Following the abovestated ratio, it is held that a party who was not
the “supplier” as per Section 2(n) of the MSMED Act, 2006 on the date
of entering into the contract, could not seek any benefit as a supplier
under the MSMED Act, 2006. A party cannot become a micro or small
enterprise or a supplier to claim the benefit under the MSMED Act, 2006
by submitting a memorandum to obtain registration subsequent to
entering into the contract and supply of goods or rendering services. If
any registration is obtained subsequently, the same would have the
effect prospectively and would apply for the supply of goods and
rendering services subsequent to the registration. The same cannot
operate retrospectively. However, such issue being jurisdictional issue, if
raised could also be decided by the Facilitation Council/Institute/Centre
acting as an Arbitral Tribunal under the MSMED Act, 2006.

xxx xxx
xxx

52.6. A party who was not the “supplier” as per the definition contained
in Section 2(n) of the MSMED Act, 2006 on the date of entering into
contract cannot seek any benefit as the “supplier” under
the MSMED Act, 2006. If any registration is obtained subsequently the
same would have an effect prospectively and would apply to the supply of
goods and rendering services subsequent to the registration.”

(emphasis supplied)
13. It is clear that in the present case, the possibility of supply of

goods or services by the respondent no.3/claimant, after the registration
but before the work awarded had concluded, cannot be ruled out. It also
appears that there is a dispute as to whether the appellant was informed
about direct payment settlement arrived at between the HEWPL and the
respondent no.3/claimant and as to whether there were earlier payments
made to the respondent no.3/claimant by the appellant directly. Thus,
there appears to be a number of disputed questions of facts, apart from
other legal issues.
14. The argument of learned senior counsel for the appellant regarding
the jurisdiction and authority of the respondent no.1/DIAC to the
purported extension of limitation for filing the Statement of Claim; the
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Signing Date:03.10.2024
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validity of reference of disputes by the respondent no.2/MSEFC to the
respondent no.1/DIAC; and as to whether the arbitral proceedings have
terminated in the interregnum due to supervening circumstances, are
issues intrinsically intertwined with the facts arising in the appeal and
thus cannot be examined de hors such facts. Thus, the learned Single
Judge has rightly held that such facts cannot be considered by a
Constitutional Court under Article 226 of the Constitution of India. Even
otherwise, the Supreme Court in Bhaven Construction (supra) has
categorically held that interference in arbitral proceedings in exercise of
jurisdiction under Articles 226/227 of the Constitution of India, can be
permissible only and only in ‘exceptional circumstances’ . We do not
find any such exceptional circumstance in the present appeal. The
relevant paragraph of Bhaven Construction (supra) is reproduced
hereunder:-
“18. In any case, the hierarchy in our legal framework, mandates that a
legislative enactment cannot curtail a constitutional right. In Nivedita
Sharma v. COAI [Nivedita Sharma v. COAI, (2011) 14 SCC 337 , this
Court referred to several judgments and held : (SCC p. 343, para 11)
“11. We have considered the respective arguments/submissions.
There cannot be any dispute that the power of the High Courts to
issue directions, orders or writs including writs in the nature of
habeas corpus, certiorari, mandamus, quo warranto and
prohibition under Article 226 of the Constitution is a basic feature
of the Constitution and cannot be curtailed by parliamentary
legislation — L. Chandra Kumar v. Union of India [L. Chandra
Kumar v. Union of India, (1997) 3 SCC 261 : 1997 SCC (L&S)
577] . However, it is one thing to say that in exercise of the power
vested in it under Article 226 of the Constitution, the High Court
can entertain a writ petition against any order passed by or action
taken by the State and/or its agency/instrumentality or any public
authority or order passed by a quasi-judicial body/authority, and it
is an altogether different thing to say that each and every petition
filed under Article 226 of the Constitution must be entertained by
the High Court as a matter of course ignoring the fact that the
aggrieved person has an effective alternative remedy. Rather, it is
settled law that when a statutory forum is created by law for
redressal of grievances, a writ petition should not be entertained
ignoring the statutory dispensation.”
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By:MADHU SARDANA
Signing Date:03.10.2024
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(emphasis supplied)
It is therefore, prudent for a Judge to not exercise discretion to
allow judicial interference beyond the procedure established under the
enactment. This power needs to be exercised in exceptional rarity,
wherein one party is left remediless under the statute or a clear “bad
faith” shown by one of the parties. This high standard set by this Court
is in terms of the legislative intention to make the arbitration fair and
efficient .”

(emphasis supplied)
15. It is also clear that under section 16 of the Act, the Arbitral
Tribunal is empowered to consider issues of its own jurisdiction and
other legal objections that the appellant possibly may have. The
framework envisaged under the Act confers independent power upon the
Tribunal to independently assess the merits of the claims and legal issues
too. Thus, the grievances of the appellant can suitably be redressed
within the provisions of the Act, which is a complete code in itself. To a
specific query put by this Court on approaching the Arbitral Tribunal
under section 16 of the Act, the learned senior counsel for the appellant
submitted that once the application under section 16 is dismissed, no
appeal is provided in the statute and the challenge to section 16
application being dismissed must await the passing of a final award to
file an appeal under section 34 of the Act. It must be noted that section
16 of the Act mandates that the issue of jurisdiction must be dealt first by
the Arbitral Tribunal, before the Court examines the same under section
34 of the Act. Therefore, the appellant is not left remediless as the statute
provides him a chance of appeal. Under section 34 of the Act, the
aggrieved party has an avenue for adjudicating its grievances against the
award including any orders that might have been passed by the Arbitral
Tribunal acting under section 16 of the Act. This Court is fortified in its
view taken by the Supreme Court in Deep Industries Ltd. vs. Oil and
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Signing Date:03.10.2024
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Natural Gas Corporation Ltd & Anr. , (2020) 15 SCC 706 . The same is
extracted hereunder:-
“22. One other feature of this case is of some importance. As stated
hereinabove, on 9-5-2018, a Section 16 application had been dismissed
by the learned arbitrator in which substantially the same contention
which found favour with the High Court was taken up. The drill of
Section 16 of the Act is that where a Section 16 application is dismissed,
no appeal is provided and the challenge to the Section 16 application
being dismissed must await the passing of a final award at which stage it
may be raised under Section 34.”

16. This Court also agrees with the liberty granted by the learned
Single Judge to the appellant to raise all legal and other objections
available to it without the Tribunal being influenced in any way with the
observations made in the impugned order or by this Court in this order.
17. With the aforesaid observations, the appeal is disposed of granting
the aforesaid liberty to the appellant. The contentions of both the parties
are kept reserved.
18. Pending applications, if any, stands disposed of.



CHIEF JUSTICE


TUSHAR RAO GEDELA, J
SEPTEMBER 30, 2024/ rl
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Digitally Signed
By:MADHU SARDANA
Signing Date:03.10.2024
17:03:05