Writ Petition Filed To Bypass Pre-Deposit Requirement Under MSMED Act Is Not Maintainable: Calcutta High Court

The Calcutta High Court dismissed a petition filed under Article 227 of the Constitution challenging an award passed by the West Bengal Micro & Small Enterprises Facilitation Council (MSEFC), holding that the petition was not maintainable and was filed to evade pre-deposit requirement under section 19 of the MSMED Act, 2006. Justice Hiranmay Bhattacharyya held that the Facilitation Council had jurisdiction to entertain the reference under section 18 and the buyer (Kommoners Club & Hospitality Pvt. Ltd.) ought to have challenged the award under section 34 of the Arbitration Act subject to statutory deposit instead of invoking the court's supervisory jurisdiction. The court ultimately held that the petitioner is free to pursue other remedies but cannot circumvent the statutory framework by filing a writ/revisional petition. The opposite party, Pecon Software Ltd. had leased a commercial space to the petitioner under an agreement signed on 22 May 2018. Following disputes relating to unpaid dues, Pecon invoked the jurisdiction under section 18 of the MSMED Act. After conciliation failed, the dispute was referred to the statutory arbitration which resulted in an award dated 21 December 2023 in favor of Pecon. Instead of filing the petition under section 34 of the Arbitration Act with 75% pre-deposit requirement, Kommoners Club approached the High Court under Article 227 of the Constitution arguing that registration of Pecon subsequent to the lease agreement cannot give the opposite party the legal status of an enterprise under the MSME Act for claiming the benefits under the said Act. It was further submitted that registration of a unit will be prospective and shall apply for supply of goods and services subsequent to registration but cannot operate retrospectively and that the MSEFC lacked inherent jurisdiction therefore consequent award was a nullity. The court observed that Pecon had been registered as an MSME since 23 December 2015 well before the execution of the lease agreement in 2018. The later inclusion of real estate activities, the court ruled, was merely an amendment to an existing registration. The Court held that “Subsequent registration of the real estate activities on January 12, 2022 is nothing but an amendment of the registration certificate of an unit already registered as an MSME. This Court, therefore, holds that the subsequent registration of the certain class of activities in case of an unit already registered as an MSME would relate back to the date of registration of the unit as an MSME”. Based on the above, the court held that therefore reliance on Silpi Industries which dealt with entities registering after completion of supply was misplaced. The court further observed that while Silpi Industries remained binding on the court until overruled, its ratio was not applicable to the facts of the present case. In Silpi, the supplier was not registered when the contract was executed and registration occurred after supplies were completed, the court noted. While distinguishing the above case from the present case, the court ruled that Pecon had MSME status before the lease agreement was executed. The court noted that in NBCC (India) Ltd. v. State of West Bengal (2025), the Supreme Court had observed that the MSME reference cannot be rejected merely because registration under section 8 was not obtained before execution of the contract. Based on the above, the court said that the present case stands on a better footing than the facts of NBCC. The court while heavily relying on India Glycols Ltd. reiterated that “entertaining a petition under Article 226/227 of the Constitution of India, in order to obviate compliance with the requirement of pre-deposit under Section 19, would defeat the object and purpose of the special enactment which has been legislated upon by the parliament.” The court further observed that the challenge raised by the petitioner whether jurisdictional or legal falls squarely within grounds available under section 34 of the Arbitration Act and hence the statutory remedy must be followed. Accordingly, the court dismissed the present petition holding that the MSME had jurisdiction to entertain the reference and that the petition was filed merely to evade pre-deposit requirement under the MSMED Act. Case Title: Kommoners Club & Hospitality Pvt. Ltd. VS. Pecon Software Limited Case Number:C.O. 2178 of 2024 With CAN 1 of 2025 Judgment Date: 05/12/2025 For the Petitioner : Mr. Saptansu Basu, Sr. Adv. Mr. K.N. Jana Mr. Vishwarup Acharyya ….. advocates For the Opposite Party : Mr. Ratnanko Banerjee, Sr. Adv. Ms. Bani Ghosh Mr. Jayanta Sengupta Mr. S.K. Kanodia Click Here To Read/Download Order

Writ Petition Filed To Bypass Pre-Deposit Requirement Under MSMED Act Is Not Maintainable: Calcutta High Court

Mohd Malik Chauhan

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