Usually, the supplier approaches judicial forumto seek relief under the Micro Small and Medium Enterprises Development Act, 2006 (hereinafter the MSMED Act). Uniseven Engineering v. Micro and Small Enterprises Facilitation Council District (South) & Anr. is a curious case where the buyer itself went under the MSME Act to seek relief. Thus, the main question which arose here was whether an independent claim can be entertained by the MSEFC at the instance of the Buyer.

The buyer sought a reference under Section 18 of the MSMED Act of its claims against the Supplier, as an independent claim. No claim was filed by the Supplier against the Buyer and nor was it a counter claim. The MSEFC advised the Petitioner to pay a sum of Rs. 9,59,66,352/- to the Buyer.

Respondent no. 2 entered into an agreement for providing COmbiined Social Works (CSW) works at Paradip and Balasore stations to the Petitioner. The Petitioner was to provide various services including supply of labour requirement, material, tools, tackles etc. for carrying out the work. Thereafter, the Respondent No.2/ Buyer issued a legal notice alleging that the work of the Petitioner /Supplier was not satisfactory and was, in fact abandoned due to which it suffered huge damage to its reputation with IOCL. It is further claimed that various sub-contractors engaged by the Petitioner /Supplier its own risk and costs, demanded their unpaid dues from the Respondent No.2/ Buyer. It is submitted on behalf of the Respondent No.2/ Buyer that it suffered a loss of more than Rs. 8 crores due to the aforesaid defaults. Allegations and counter allegations were made by the parties. Despite repeated meetings being held, the issues could not be resolved.

The Petitioner submitted that Respondent no. 2 was the Buyer and not the Supplier. Therefore, it cannot seek the relief under Sections 17 and 18 of the MSME Act. Moreover, it argued that jurisdiction of the MSEFC would not exist as there is no amount due. It also cited Section 23(2)(a) of the Arbitration and Conciliation Act, 1996 to say that a counter claim would only be entertainable where a claim was already made.

Respondent no. 2 (the Buyer) relied on Shilpi Industries v. Kerala State Road Transport Corporation & Anr. which stated that claims and counter claims are both maintainable under the MSEFC. Steel Authority of India Ltd. v. Micro, Small Enterprise Facilitation Council, a Buyer can also approach the MSEFC.

Justice Prathiba M. Singh of the Delhi HIgh Court analyzed the Shilpi Industries case and stated that the use of the word claim/counter claim in the said judgment would relate only to circumstances where a Supplier has already approached the MSEFC and the Buyer wishes to raise claims against the Supplier thereafter. Thus, the decision in M/s Shilpi Industries (Supra) does not deal with the question as to whether an independent claim by the Buyer against the Supplier which is registered under the MSMED Act, 2006 can be maintained or not. In view of the same, the said judgement of the Supreme Court would not be applicable to the present case.

Thus, it clarified that the language in Section 18 i.e., “any party to a dispute” cannot be extended to a claim by a Buyer against the supplier as the same is qualified as being only in respect of the amount due under Section 17.