High Court of Delhi

Prosafe International Pvt. Ltd. Vs. North Delhi Municipal Corporation (Neutral Citation: 2024 DHC 5840)

MANU/DE/5135/2024

06.08.2024

Commercial

Operation of a statute could not be curbed by private action of parties

The Petitioner is a company, which claims to be a 'small' enterprise under Section 2(m) of the Micro, Small and Medium Enterprises Development Act, 2006 ("MSMED Act") and is essentially aggrieved by the impugned notification dated 28th March, 2019, whereby, the erstwhile North Delhi Municipal Corporation ("MCD") unilaterally appointed a former judicial officer as the sole Arbitrator regarding the disputes/claims submitted by the Petitioner in respect of the purchase order dated 27th April, 2016 for supply of 3,29,916 pairs of shoes for use of children studying in municipal schools of MCD.

Main issue arises for consideration is whether the provisions of the MSMED Act will have precedence over the provisions of the Arbitration and Conciliation Act, 1996 ("Arbitration Act")?

The issue, however, is no longer res integra. The Supreme Court in the case of Gujarat State Civil Supply Corporation, has held that the Arbitration Act in general governs the law of arbitration and conciliation, whereas the MSMED Act governs the specific class of disputes arising between explicit categories of persons to be resolved by following a definite process through a particular forum.

The issue is settled by the authoritative pronouncements of the Supreme Court in the case of Silpi Industries v. Kerala SRTC and Gujarat State Civil Supply Corporation vs. Mahakali Foods Pvt. Ltd. Therefore, this Court unequivocally holds that the provisions of the MSMED Act will have precedence over the Arbitration Act.

The supply has been made by the Petitioner not on the basis of the LOI for the first supply agreement but on the basis of the fresh supply agreement which was specifically directed by the MCD itself to be entered into on the compliance of certain terms and conditions. Moreover, a perusal of the second LOI would indicate that it was a precursor to the second supply agreement and was meant to enjoin the petitioner with a fresh set of obligations and required various compliances for proceeding with the second agreement. In such a scenario, the MCD could not be permitted to go back and self-servingly read it as a part and parcel of the first agreement.

In the absence of there being any adverse material on record, the Court finds that the Petitioner did have the certificate as on 26.04.2016 i.e., the date of execution of the second supply agreement, which is the genesis of the entire claim in question. It is trite law that the operation of a statute could not be curbed by private action of parties. The impugned notification was bad in law, for being without legal sanction and in violation of the special enactment of MSMED Act, the applicable law in the facts and circumstances of the case. The impugned notification dated 28th March, 2019 and all consequential proceedings emanating therefrom, are set aside. Petition allowed.

Tags : Arbitrator Appointment Notification

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