Application for review/recall of the order - COMMERCIAL ARBITRATION APPEAL
Mathews J Nedumpara
98205 35428
26.09.2023
High Court of Bombay
RP NO. __/2023
IN
COMMERCIAL ARBITRATION APPEAL
IN
COMMERCIAL ARBITRATION
SATIATE V. SIEMENS
Application for review/recall of the order dated 26.9.2023 of the D.B of the Hon’ble Court preferred under Article 215 of the Constitution r/w Order 47 Rule 1 CPC
1. It is a fundamental principle of law that no Court has the jurisdiction to err on law and bind the parties by its decision, whereas on the contrary, on facts it can, even by a grossly erroneous decision. In other words, a review, so too, an appeal will lie, provided that the statute has provided one, where a judgment is vitiated by errors apparent on the face of record. It is equally well settled that an error apparent on the face of record is always a legal error, and not one on facts.
2. The Review Petitioner no. 1 is an MSME engaged in the manufacture of sheet metal enclosures for electrical application. It has registered itself under the MSMED Act and therefore, is entitled to the protection under the MSMED Act of 2006 and the notification dated 29.5.2015.
3. The MSMED Act is not merely a remedial, benevolent, welfare legislation. More than that, it is a preventive legislation. The object of the Act is to prevent and protect MSMEs from becoming sick and eventually dying. The provisions of the Act and the notification dated 29.5.2015 is, therefore, entitled to the most liberal, benevolent interpretation, to give effect to the Act and the legislative intention. The notification dated 29.5.2015 which has received the assent of both Houses of Parliament and, therefore is a statutory rule, nay, a statute, mandates that no recovery proceedings including recovery of statutory dues such as provident fund, tax, etc. against an MSME shall lie, except in the manner permitted by the Committee which the Bank or financial institution is mandated to constitute. The plea of the Petitioner is that it has availed of credit facilities from Axis Bank, so too, Siemens __ and other NBFCs. The Axis Bank violated the mandate of the statute and failed to constitute a committee and even invoked proceedings under the SARFAESI. The Review Petitioner no. 1 had challenged the said act on the part of the bank in WP no. ___/2023 in the Bombay High Court. The said petition is tagged with a batch of similar petitions, and are heard but reserved for orders sine die on 9.8.2023. While the division bench of this Court is in seisin of this Writ Petition, nay, has adjourned the case for pronouncement of orders, M/s. Siemens, which was not arrayed as a Respondent in the aforesaid writ petition, invoked Section 9 of the Arbitration and Conciliation Act before a Ld. Single judge of this Hon’ble Court.
4. The instant Review Petitioner no. 1 and others resisted Siemen’s plea for Police protection to remove the machinery which the instant Review Petitioner no. 1 had purchased from Siemens on a credit basis. If what is to be looked is the substance and not form, then the said transaction was a loan and not lease. The Review Petitioner no.1 was to repay the same in 84 monthly installments. In the agreement, in certain places it is referred to as a loan and in certain others as rent. According to Siemens, it is lease of machinery and according to the Petitioner it is nothing but a loan availed of for the purpose of purchase of machinery. At any rate, the relationship is that of a debtor and creditor. Review Petitioner no. 1 took the plea that the MSMED Act being a preventive and remedial legislation, a construction in consonance of the objective and legislative intention would not permit Siemens to take back the machinery, without which the Petitioner MSME cannot carry out its activities. The plea of the Review Petitioner is that the Act is akin to the SICA (since repealed), nay, the BIFR. The Committee is a judicial tribunal invested of the statutory obligation to resolve the incipient stress of MSMEs and to allow recovery if the resolution of stress is not possible. The word ‘creditor’ used in the notification, therefore, ought to be given the widest possible meaning, to subserve the legislative objective. The obligation to constitute a committee is mandatory, because the MSMED Act is a preventive legislation. What comes within the ambit of the Act is not merely banks and financial institutions, operational creditors, taxes, statutory dues, but every form of recovery, which if permitted will defeat the resolution of stress. The legislative mandate is that an MSME shall not be allowed to turn sick and die without at least one opportunity being afforded for the resolution of the stress.
5. The Ld. Single judge without discussing or recording the contention of the Petitioner, came to an ipso dixit that the transaction in question is not a credit transaction, but a lease, and what is due is not a loan amount, but rent, and therefore, the Petitioner is not entitled to the benefit of the Act and notification.
6. The instant Review Petitioner no. 1, institute the above appeal challenging the order of the Ld. Single judge on the premise that the Ld. Single judge did not at all even record the contentions of the Petitioner as aforesaid, much less consider it.
7. The Division bench of this court by its order dated 26.9.2023, which is sought to be reviewed in the instant application happened to commit, to a great extent, the very same error which the Ld. Single Judge happened to commit. The only difference is that in the judgment under review, this Hon’ble Court, unlike in that of the Ld. Single judge, recorded the contention of the Petitioner that the MSMED Act is a remedial and beneficial legislation and ought to be given the widest possible interpretation to achieve the objective of the Act. the Court however, committed the very same error which the Ld. Single judge committed in holding, at paragraph 11(A) that:
“Respondent no. 1 (Siemens) is neither a Bank nor a creditor, and hence the provisions of both the said notifications as also the MSMED Act would be wholly inapplicable to Respondent no. 1.”
The Court failed to record the contention of the Petitioner that the Act and the notification is even applicable even in respect of statutory dues, for instance, provident fund, taxes, etc.
8. EPF Act is a remedial, welfare legislation. It is also a penal legislation because an employer who fails to comply with the provisions of the Act will be liable to pay damages under Section 14, so also will be liable to face criminal prosecution. The notification dated 29.5.2015 expressly protects the MSMEs against failure to pay statutory dues and taxes. Therefore, the applicability of the MSMED Act is not confined to creditors. Its scope is far beyond. The counsel for Review Petitioner no. 1 elaborately argued this aspect, but this Hon’ble Court failed to even record the said contention, much less deal with the same. The Review Petitioner’s counsel also argued that the word “creditor” as used in the notification has to be given the widest, most benevolent interpretation and it cannot be given a restrictive meaning, confining it to banks and financial institutions alone. The legal and commercial meaning of the word ‘creditor’ anyone to whom an entity owes money. The order of this Hon’ble Court under review has, however, failed to record the said contention, much less deal with the same. The entire proceedings initiated by Siemens is for the recovery of the money which they have lent, no matter whether it is termed as a lease or a loan. The order of this Hon’ble Court is therefore one vitiated by errors apparent on the face of record.
9. The unkindest cut of all in the order under review is the observation at paragraph 11(B) that: “We find that the present case is a classic example on the part of the Appellant to abuse and misuse the MSMED Act.” This Court further went on to even hold thus: “In the facts of the present case, to permit the Appellants to press into service the provisions of the MSMED Act would in fact not only amount to putting a premium on dishonesty, but also result in a gross abuse of the statutory provisions of the MSMED Act.” The Review Petitioner no. 1 is afraid to say that, so far as his knowledge goes, in every case where an MSME has sought benefits under the provisions of the Act, be it before the DRTs or the High Courts, relief is rejected on the ground of “dishonestly” or “unclean hands”. There cannot be a greater travesty of justice than to presume that every MSME that seeks the protection of the MSMED Act is dishonest and not entitled to relief. Nemo praesumitur malus, that nobody is presumed to be bad, is a fundamental principle.
Lastly, as, Lord Mansfield, the very father of equity, said in Thompson v. Church, 1 Root (Conn.) -312 (1791), “the business of the Court is to try the case, and not the man; and a very bad man may have a very righteous cause”. If the Parliament has ordained certain rights in favour of the Petitioner, the duty of the Court is to give effect to the same and not deny it holding him to be dishonest without even an allegation or material against him.
Grounds
The grounds have been elaborated in paragraph 1 to 9 above at great length and are hence not repeated.