IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI

APHC010372012022

WRIT APPEAL NO: 716 of 2022

along with

WRIT APPEAL Nos.657, 681, 683, 684, 700, 802, 805, 809, 811 and 820 of 2022 & W.P. Nos.36945, 36946 of 2022

WRIT APPEAL NO: 716 of 2022

Indo Engineering Works ...Appellant

Vs.

Rashtriya Ispat Nigam Limited and Others ...Respondent(s)

**********

Mr. G. Peddababu, learned Senior Counsel for Mr. Rama Chandra Rao Gurram; Mr. Koneru Prabhakar Rao, learned counsel for Dr. Challa Srinivasa Reddy; Mr. V. Ravinder Rao, learned Senior Counsel, for Mr. V. Subrahmanyam, learned counsel, for the appellants.

Learned Deputy Solicitor General, for Union of India.

Learned Government Pleader for Industries & Commerce for the State.

CORAM : THE CHIEF JUSTICE DHIRAJ SINGH THAKUR SRI JUSTICE R RAGHUNANDAN RAO

DATE : ___________

P.C:

The present batch of writ appeals has been preferred against the common judgment and order dated 26.04.2022, passed by the learned single Judge in writ petition Nos.27829 of 2021 and batch. By virtue of the judgment and order impugned, the writ petitions filed by the petitioners/Rastriya Ispat Nigam Limited (RINL)/respondent No.1 herein were allowed.

Bench Sr.No.

[3446]

2. The writ petitions were filed by RINL challenging the jurisdiction of the Andhra Pradesh Micro and Small Enterprises Facilitation Council, to entertain claims filed by the appellants under the Micro, Small and Medium Industries Development Act, 2006 (hereinafter called as "the Act").

With a view to understand the background, in the light of which the present controversy has arisen, it would be necessary to give material facts in brief:

3. The appellants are Micro and Small Enterprises engaged in manufacturing and fabrication activities. They entered into various contracts with RINL, Visakhapatnam. Disputes having arisen between the parties regarding payment, the appellants herein filed claims before the Facilitation Council, in terms of Section 18 of the Act. RINL challenged the jurisdiction of the Facilitation Council to entertain those claims in writ petitions before the learned single Judge. The main contentions raised before the learned single Judge were:

• a) That the appellants had not filed the memoranda under Section 8 of the Act at the time of entering into contracts, hence could not claim benefits under the Act.
• b) That the contracts being works contracts and not pure supply or service contracts, were outside the purview of the Act.

4. The learned single Judge allowed the writ petitions filed by RINL firstly holding that unless a memorandum was filed in terms of Section 8 of the Act,

a party cannot move the Facilitation Council. Reliance in this regard was placed upon Silpi Industries vs. Kerala SRTC¹ . It was also held that the mere fact that some of the contractors were registered as SSI units was immaterial, in view of the ratio of the Apex Court judgment as rendered in Silpi Industries (supra).

5. The learned single Judge further proceeded to hold that the contracts in question being essentially works contracts involving both supply of goods and labour services, would not fall within the ambit of the Act. It was held that the Act would apply only to contracts for supply of goods or rendering the service simpliciter by the Micro or Small Enterprises. Reliance in this regard was placed upon the judgment rendered by the Delhi High Court, in the case of Shree Gee Enterprises v. Union of India and another² and judgments rendered by the Bombay High Court, in the cases of Sterling and Wilson Private Limited vs. Union of India,³ and M/s. P.L. Adke vs. Wardha Municipal Corporation/Council⁴ . It was finally held that as the contracts were works contracts with an element of supply and not mere supply and service contracts and that the contractors had also not filed the memorandum under Section 8 of the Act as held by the Apex Court among others in Silpi Industries (supra), the writ petitions were finally allowed.

¹ (2021) 18 SCC 790

² (2015) SCC online Del 13169

³ (2017) SCC OnLine Bom 6829

⁴ Arbitration Appeal (St) No.30508 of 2019

6. Learned counsel for the appellants would submit that the view expressed by the learned single Judge was contrary to the provisions and intent of the MSMED Act, which is a beneficial legislation for Micro and Small Enterprises and that any narrow interpretation, denying the benefits of the Act to the composite works contracts, as having been entered into between the appellants and the respondents/petitioners, would defeat the object of the Act. It was urged that the finding that the works contracts are not covered under the Act, is contrary to the definition of "Supplier" under Section 2 (n) of the Act which includes "any Micro/Small Enterprise that has filed a memorandum with the authority referred to in sub-section (1) of section 8" and that the Act did not make any distinction between the contracts for mere supply of goods or services and composite works contracts and that so long as the contracts involved supply of goods or rendering of services by the Micro/Small Enterprise, the Act would apply.

7. It was further urged that the works contracts were not excluded by the MSMED Act and that the judgments relied upon by the learned single Judge were inapposite more particularly the judgment of the Apex Court in Commissioner of Central Excise & Customs Kerala v. Larsen and Tourbro Ltd.,⁵ inasmuch as the same pertained to issues relating to taxation and were not even remotely relevant to the controversy at hand.

4

⁵ 2016 (1) SCC 170

8. It was sought to be further urged that filing of memorandum under Section 8 was not mandatory for Enterprises already registered as SSI units prior to the MSMED Act coming into force.

9. Learned counsel for the respondents in the present set of appeals sought to urge that the contracts in question were in fact works contracts for civil and structural works which involved incidental supply of certain materials. Reliance was placed upon the Apex Court judgment in Kone Elevators Private Limited v. State of Tamil Nadu⁶ . It was further urged that when the contract itself was not covered under the Act, the proceedings initiated by the Council would be without jurisdiction and therefore, sought to support and buttress the views expressed by the learned single Judge.

10. Two issues arose for our consideration in the present cases.

• 1. Whether the appellants could have approached the Facilitation Council in terms of Section 18 of the Act without complying with the requirement of filing a memorandum under Section 8 of the Act and further, whether the appellants would be entitled to the beneficial provisions of the Act, if the contracts in question were entered into between the appellants and respondent No.1 before filing the memorandum under Section 8.
• 2. Whether the MSMED Act 2006, would apply only to contracts for supply of goods or rendering of services simpliciter and not to composite works contracts, which involve both the element of supply of goods as also rendering of services.

5

6 (2014) 7 SCC 1

11. After the present set of cases was reserved for judgment, it transpired that the issues which arose for our consideration in the present set of cases, were also issues which were being considered by the Apex court in the case of NBCC (India) Ltd. v. State of W.B., in Civil Appeal No.3705 of 2024. In that view of the matter, it was deemed appropriate to await the judgment of the Apex Court.

12. We are now informed that the Apex Court in NBCC (India) Ltd. v. State of W.B*.* 7 , has expressed its view on the subject as under:

"3. We have examined the text, context, and purpose of the Act to arrive at the decision that Section 18 is not restrictive and is a remedy for the resolution of disputes, and as such, it is kept open-ended to enable "any party" to refer the dispute to seek redressal. For the reasons to follow, we rejected the submission that "any party to a dispute" is confined to a "supplier" who has filed a memorandum under Section 8 of the Act. We have also explained that the issue(s) that have arisen in the decisions of this Court in Silpi Industries v. Kerala SRTC (hereinafter referred to in short as "Silpi Industries") and Gujarat State Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd. (hereinafter referred to in short as "Mahakali Foods") were very different from the issue that has arisen for our consideration. However, for clarity and legal certainty, we have directed the appeal be placed before the Hon'ble the Chief Justice of India for referring the matter to a Bench of three Judges for an authoritative pronouncement."

13.It is not out of place here to mention that in Silpi Industries v.

Kerala SRTC*⁸* , the Apex Court held:

"42. … In our view, to seek the benefit of provisions under the Msmed Act, the seller should have registered under the provisions of the Act, as on the date of entering into the contract. In any event, for the supplies pursuant to the contract made before the registration of the unit under

7 (2025) 3 SCC 440

⁸ (2021) 18 SCC 790

provisions of the Msmed Act, no benefit can be sought by such entity, as contemplated under the Msmed Act.

43. While interpreting the provisions of Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, this Court, in the judgment in Shanti Conductors (P) Ltd. v. Assam SEB has held that date of supply of goods/services can be taken as the relevant date, as opposed to date on which contract for supply was entered, for applicability of the aforesaid Act. Even applying the said ratio also, the appellant is not entitled to seek the benefit of the Act. There is no acceptable material to show that, supply of goods has taken place or any services were rendered, subsequent to registration of the appellant as the unit under the Msmed Act, 2006. By taking recourse to filing memorandum under sub-section (1) of Section 8 of the Act, subsequent to entering into contract and supply of goods and services, one cannot assume the legal status of being classified under the Msmed Act, 2006, as an enterprise, to claim the benefit retrospectively from the date on which the appellant entered into contract with the respondent.

44. The appellant cannot become micro or small enterprise or supplier, to claim the benefits within the meaning of the Msmed Act, 2006, by submitting a memorandum to obtain registration subsequent to entering into the contract and supply of goods and services. If any registration is obtained, same will be prospective and applies for supply of goods and services subsequent to registration but cannot operate retrospectively. Any other interpretation of the provision would lead to absurdity and confer unwarranted benefit in favour of a party not intended by legislation."

14. Subsequently in Gujarat State Civil Supplies Corpn. Ltd. v.

Mahakali Foods (P) Ltd*. 9* , the Apex Court held:

"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.

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."

15. In NBCC (India) Ltd. v. State of W.B*. ¹⁰*, however, the Apex Court

held that in Silpi Industries and in Mahakali Foods, the issue as to whether the reference to the Facilitation Council under Section 18 of the Act was impermissible if the enterprise was not registered by filing a memorandum under Section 8 of the Act before the contract is executed, was neither formulated, discussed nor decided. For facility of reference, paragraph 25 of

NBCC is reproduced hereunder:

"25. The question that we are called upon to answer is whether the reference to the Facilitation Council under Section 18 of the Act is impermissible if the Enterprise is not registered by filing a memorandum under Section 8 of the Act before the contract is executed. This issue was not formulated, discussed and decided in any other judgment of this Court, including the two substantive judgments under the Act i.e. Silpi Industries or Mahakali Foods. In these two judgments, it is worth mentioning, such an issue was neither formulated, nor discussed. We will explain this in detail while discussing the facts and the ratios of these judgments."

¹⁰ (2025) 3 SCC 440

Finally, the Apex Court deemed it appropriate to refer the matter to a

three-Judge bench as under:

"56. On the interpretation of the provisions of the Act we have arrived at a clear opinion and have expressed the same. Though it is possible for us to follow the precedents referred to in paras 53 and 54 to arrive at the conclusion that the judgments in Silpi Industries and Mahakali Foods coupled with the subsequent orders in Vaishno Enterprises and Nitesh Estates cannot be considered to be binding precedents on the issue that has arisen for our consideration, taking into account the compelling need to ensure clarity and certainty about the applicable precedents on the subject, we deem it appropriate to refer this appeal to a three-Judge Bench."

Since the issues which primarily arise in the present set of appeals

are pending consideration before the Apex Court, we deem it necessary

to await the outcome of the reference.

We therefore direct the Registry to list the matter after the

reference is answered by the Apex Court.

DHIRAJ SINGH THAKUR, CJ.

R RAGHUNANDAN RAO, J.

AKN