Ntpc Limited – Lara Super Thermal Power … vs The Union Of India on 24 March, 2026

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    Telangana High Court

    Ntpc Limited – Lara Super Thermal Power … vs The Union Of India on 24 March, 2026

    Author: Nagesh Bheemapaka

    Bench: Nagesh Bheemapaka

    IN THE HIGH COURT OF JUDICATURE FOR THE STATE OF
                        TELANGANA
         HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA
    
                 WRIT PETITION No. 19857 OF 2025
    
                             24.03.2026
    
    Between:
    
    NTPC Limited -Lara Super Thermal Power Station,
    Tussore, Tehsil Rajgarh, Chattisgarh
                                                       ..... Petitioner
    And
    
    The Union of India,
    Rep. by Secretary,
    The Ministry of Micro Small and Medium Enterprises,
    Udyog Bhawan, Rafi Marg,
    New Delhi & others.
    
                                                    ..... Respondents
    
    O R D E R:

    Petitioner states that it is a Government of India

    Company incorporated under the provisions of the Companies

    Act, 1956; its Western Region-II Headquarters is situated at

    Raipur, Chhattisgarh, and its Super Thermal Power Station is

    located at Lara, Raigarh District, Chhattisgarh, known as NTPC

    Lara Super Thermal Power Station. Petitioner Company is

    India’s largest energy conglomerate, with its origins dating back

    to 1975, established with the object of accelerating power

    development in the country. Over the decades, they established

    themselves as a dominant public sector undertaking in the
    2

    power sector, with an integrated presence across the entire

    value chain of power generation. While its initial focus was on

    fossil fuel-based power generation, Petitioner has since

    diversified into hydro, nuclear and renewable energy sources.

    1.1. Petitioner further states that the Ministry of Micro,

    Small and Medium Enterprises, Government of India, is the

    apex executive authority responsible for formulation and

    administration of policies, rules, regulations and laws relating to

    micro, small and medium enterprises in India. With the object

    of facilitating promotion, development and enhancement of

    competitiveness of micro, small and medium enterprises, and

    for matters connected therewith or incidental thereto, the Union

    of India enacted the Micro, Small and Medium Enterprises

    Development Act, 2006, also referred to as Act 27 of 2006 or the

    MSMED Act, 2006. Under the scheme of the said Act, any

    person intending to establish a micro, small or medium

    enterprise engaged in the manufacture or production of goods

    pertaining to any industry specified in the First Schedule to the

    Industries (Development and Regulation) Act, 1951, or engaged

    in providing or rendering services, is required to file a

    memorandum in such form and before such authority as may

    be specified by the Central Government under sub-section (3) or
    3

    by the State Government under sub-section (4) of Section 8 of

    the Act. The Act also extends an option to already established

    industries, subject to fulfillment of the statutory conditions, to

    file the prescribed memorandum within the stipulated period.

    1.2. Petitioner states that the authority competent to

    receive such memorandum, the form thereof and the procedure

    for filing the memorandum in the case of medium enterprises is

    to be notified by the Central Government, while small

    enterprises may file the memorandum in the manner

    prescribed. Only upon filing such memorandum in accordance

    with Act 27 of 2006 does an enterprise come within the purview

    of the MSMED Act. Under the scheme of Sections 15, 16 and 17

    of the Act, disputes relating to amounts due for goods supplied

    or services rendered by a “supplier”, as defined under the Act,

    may be referred to the Micro and Small Enterprises Facilitation

    Council. Section 18 of Act 27 of 2006 prescribes a special and

    self-contained procedure for resolution of such disputes,

    beginning with conciliation and, upon failure thereof,

    arbitration.

    1.3. In the present case, Petitioner Company invited

    tenders for a Long-Term Contract for maintenance of equipment

    of the Coal Handling Plant at NTPC Lara Super Thermal Power
    4

    Station, Stage-I. Pursuant to the said tender process, the 4th

    respondent was awarded the long-term contract and, upon

    acceptance of the terms and conditions, entered into an

    agreement with the Petitioner Company. After completion of all

    formalities, Petitioner issued Service Purchase Order dated

    27.04.2018, followed by an amended Service Purchase Order

    dated 29.04.2021. Though the contract is termed as a “Service

    Purchase Order”, Petitioner categorically asserts that contract

    does not involve any sale of goods or rendering of stand-alone

    services. The nature of contract entrusted to the 4th respondent

    is a long-term contract for maintenance of equipment of the

    Coal Handling Plant. The said long-term contract is a Bill of

    Quantities based contract, under which payments are to be

    made strictly in accordance with actual execution of BOQ items,

    as defined in the purchase order. The provisions of Act 27 of

    2006, in particular Sections 2(d), 2(e) and 2(n)(iii), deal only with

    contracts involving supply of goods or rendering of services

    between a buyer and a supplier, whereas the contract in

    question is essentially and fundamentally a works contract.

    1.4. Petitioner has been making timely payments to the

    4th respondent by settling running account bills raised on the

    basis of actual execution of BOQ items, duly in accordance with
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    the terms and conditions of the long-term contract. There has

    been no deviation from the contractual payment mechanism

    agreed between the parties. The nature of long-term contract is

    composite, involving execution of works relating to maintenance

    of equipment of the Coal Handling Plant. It is specifically agreed

    between the parties that all disputes or differences whatsoever

    arising out of the long-term contract, whether during the

    progress of the work or after its completion, shall be resolved

    through settlement and arbitration as specified in the General

    Conditions of Contract forming part of the bid documents. The

    Petitioner submits that Act 27 of 2006 can be invoked only

    where a dispute arises between a “supplier” and a “buyer”

    within the meaning of the Act. In the present case, there is no

    relationship of buyer and seller, or buyer and supplier, between

    the Petitioner Company and the 4th respondent. In such

    circumstances, the 4th respondent is not entitled to invoke

    Section 18 of Act 27 of 2006, and the said Act has no

    application whatsoever to the contractual relationship between

    the parties.

    1.5. Petitioner states that, despite the clear statutory

    position, the 4th respondent filed a claim before the 3rd

    respondent Council by way of Claim Petition
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    No.1851/MSEFC/2022, which ultimately resulted in reference

    of the dispute to arbitration. Upon receipt of notice from the 3rd

    respondent, Petitioner was called upon to participate in the

    proceedings and to submit its statement of defence. According

    to Petitioner, the 3rd respondent has no power or authority to

    adjudicate upon or determine whether the parties before it

    stand in the relationship of buyer and supplier, or whether a

    works contract falls within the purview of the MSMED Act.

    Nonetheless, as a precautionary measure and without prejudice

    to its rights and contentions, Petitioner filed its defence before

    the 3rd respondent. It is reiterated, The Petitioner reiterates that

    the procedure contemplated under Act 27 of 2006 is distinct

    and materially different from the procedure under the

    Arbitration and Conciliation Act, 1996 and the amendments

    thereto.

    1.6. Petitioner submits that, as already stated, there is

    no buyer-seller or buyer-supplier relationship between the

    Petitioner Company and the 4th respondent. The 4th respondent

    has not rendered any stand-alone services nor supplied any

    stand-alone goods to the Petitioner under the Service Purchase

    Orders dated 27.04.2018, 29.04.2021 and 01.12.2021. The

    work entrusted to the 4th respondent is in the nature of a works
    7

    contract for maintenance of equipment of the Coal Handling

    Plant, and not a contract for supply of goods or rendering of

    services simpliciter. Consequently, the provisions of Act 27 of

    2006 are not attracted. Petitioner places reliance on the

    judgment of the Division Bench of the Bombay High Court in

    Sterling & Wilson Private Limited v. Union of India (2017

    SCC OnLine Bom 6829), wherein it was categorically held that

    the provisions of the MSMED Act, 2006 do not apply to works

    contracts which are composite in nature, involving supply of

    goods as well as labour and services.

    1.7. Petitioner further states that in similar

    circumstances, several writ petitions were filed before the

    Hon’ble High Court of Andhra Pradesh questioning the action of

    the Facilitation Council in entertaining claims under the

    MSMED Act, 2006 in respect of works contracts. By a common

    order dated 26.04.2022, the Hon’ble High Court of Andhra

    Pradesh held that works contracts, even if they involve an

    element of supply, are distinct from pure supply or service

    contracts, and that the provisions of Act 27 of 2006 are not

    applicable to such works contracts.

    1.8. It is stated, the amended main prayer in the Writ

    Petition seeks issuance of an appropriate writ, order or
    8

    direction, more particularly a writ of mandamus, declaring the

    action of the 3rd respondent Council in referring the claim of the

    4th respondent vide Letter No.1851/MSEFC/2022 dated

    22.06.2024 to the International Arbitration and Mediation

    Centre, Hyderabad, and the consequential action of the said

    Centre in referring the dispute to a Sole Arbitrator in Claim

    Petition Case No.1851/MSEFC/2022 dated 16.11.2024 under

    the MSMED Act, 2006, as illegal, arbitrary, unjust, without

    jurisdiction and contrary to the basic structure of the MSMED

    Act, 2006, and to declare the said proceedings as null and void.

    The said prayer stands amended as per Court Order dated

    09.12.2025 in I.A. No.2 of 2025.

    2. Respondents 2 and 3 filed counter stating that the

    3rd respondent has strictly discharged its statutory duties in

    accordance with the provisions of the Micro, Small and Medium

    Enterprises Development Act. 2006, which is a special

    enactment governing delayed payments to micro and small

    enterprises. It is contended that the proceedings in Case

    No.1851/MSEFC/2022 were initiated and conducted strictly in

    conformity with the statutory mandate. The Micro and Small

    Enterprises Facilitation Council, Ranga Reddy Region, is a

    quasi-judicial body constituted under Section 20 of the MSMED
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    Act, 2006 by the Government of India for the purpose of

    adjudicating disputes relating to delayed payments to micro and

    small enterprises, pursuant to G.O. Ms. No.42, Industries and

    Commerce (FP & MSME) Department, Government of

    Telangana, dated 06.07.2018. It is further contended that the

    4th respondent is a duly registered Small Enterprise, having

    obtained Udyog Aadhaar Memorandum bearing No.

    TS02E0008577 dated 23.12.2016 and subsequently UDYAM

    Registration bearing No. UDYAM-TS-02-0003062 dated

    01.09.2020, and that its status as a Small Enterprise is

    reflected in the Udyam Registration. As such, the 4th

    respondent is statutorily entitled to approach the Facilitation

    Council in respect of disputes arising under Sections 15, 16 and

    17 of the MSMED Act, 2006.

    2.1. It is stated that the 4th respondent submitted claim

    petition before the Micro and Small Enterprises Facilitation

    Council, Ranga Reddy Region, enclosing all relevant documents

    along with Form-I, as prescribed under G.O. Ms. No.39, dated

    30.06.2017. Thereafter, the 4th respondent approached this

    Court by filing Writ Petition No. 43244 of 2022 seeking a

    direction to convert the Application filed against NTPC into

    arbitration proceedings. The said Writ Petition was disposed of
    10

    with a direction to Respondent No.2 to consider the Application

    dated 23.07.2022 by following the procedure laid down under

    the MSMED Act, 2006 as well as the Arbitration and

    Conciliation Act, 1996. This Court further took note of certain

    discrepancies, namely submission of the reference on three

    occasions and uploading of the status as “Mutually Settled with

    Buyer”, and accordingly, directed Respondent No.2 to receive

    the reference physically and decide the application strictly in

    accordance with law, after putting both the petitioner therein

    and Respondent No.3 on notice and affording them an

    opportunity of hearing within the time stipulated under the Act.

    Liberty was also granted to the petitioner therein to make a

    representation for refund of fees, leaving it open to Respondent

    No.2 to consider and pass appropriate orders.

    2.2. In strict compliance with the above directions, the

    Council admitted the claim petition filed by the 4th respondent

    by following the procedure prescribed under Section 18 of Act

    27 of 2006. The documents submitted by the 4th respondent

    were duly forwarded to NTPC Limited, and a notice of

    conciliation under Section 18(2) of the MSMED Act, 2006 was

    issued. It is contended that petitioner submitted the requisite
    11

    documents necessary for admission of the claim, and thereafter

    the statutory process was set in motion.

    2.3. The procedure followed by the Council is in strict

    conformity with paragraph 6 of G.O. Ms. No.39, dated

    30.06.2017, which prescribes the detailed procedure to be

    followed by the Council in discharge of its functions. Under the

    said procedure, an aggrieved Micro or Small Enterprise is

    entitled to move a reference before the Facilitation Council

    having territorial jurisdiction in Form-I, containing particulars

    such as Udyog Aadhaar Memorandum number, mobile number

    and e mail address. Such reference is required to be

    accompanied by the prescribed fee and an undertaking that no

    reference has been moved before a civil Court on the same

    dispute. Upon receipt of the reference, the Secretariat of the

    Council is required to enter the data in the designated web

    portal and issue an acknowledgment to the applicant through

    email. The Council is empowered to examine the reference at a

    preliminary stage to verify the competency of the MSE unit and

    the completeness of the reference, and to return the reference if

    found unsatisfactory. The procedure further contemplates

    issuance of notice, conduct of meetings, engagement of experts

    under Section 26 of the Arbitration and Conciliation Act, 1996,
    12

    assistance of courts under Section 27 of the said Act, calling for

    further particulars, examination of the buyer’s response,

    conduct of conciliation under Sections 65 to 81 of the

    Arbitration and Conciliation Act, 1996, and upon failure of

    conciliation, reference of the dispute to arbitration. It is

    contended that the provisions of Sections 15 to 23 of the

    MSMED Act, 2006 have overriding effect notwithstanding

    anything inconsistent contained in any other law for the time

    being in force.

    2.4. Respondents 2 and 3 state that, in the present case,

    conciliation was conducted in accordance with Section 18(2) of

    the MSMED Act, 2006, and upon failure of conciliation, the

    dispute was referred to arbitration. Since the claim amount

    involved is Rs.3,34,26,501/-, which is in excess of Rs.3 crores,

    the matter was referred to the International Arbitration and

    Mediation Centre, Hyderabad, in accordance with G.O. Ms.

    No.32, Industries and Commerce (FP & MSME) Department,

    dated 16.05.2022, whereby the Government instructed the

    Facilitation Councils to transfer cases involving claims above

    Rs.3 crores to IAMC.

    2.5. It is further stated, the arbitration proceedings are

    presently being conducted by the International Arbitration and
    13

    Mediation Centre, Hyderabad, where the learned Arbitrator is

    examining the purchase orders, invoices and issues of

    jurisdiction, including the buyer-seller relationship, during the

    course of arbitral proceedings. It is contended that the IAMC,

    acting as the arbitral forum, is the competent authority to

    decide issues relating to the nature of the contract, including

    whether the contract is a works contract or otherwise and

    whether it falls within the purview of the MSMED Act, 2006.

    Once the matter was referred to IAMC for arbitration, the

    statutory role of Respondents 2 and 3 stood concluded.

    2.6. Respondents 2 and 3 further state that the arbitral

    proceedings have already commenced and that IAMC has

    appointed Hon’ble Justice Purnima Singh Kamble as the Sole

    Arbitrator in the present case. The matter is presently at the

    stage of filing of evidence by the petitioner herein, and the entire

    dispute is to be adjudicated by the learned Arbitrator by duly

    following the procedure prescribed under law. It is therefore,

    evident, according to Respondents 2 and 3, that the Council has

    acted strictly within the four corners of the MSMED Act, 2006

    and the applicable Government Orders, and that no illegality,

    arbitrariness or lack of jurisdiction can be attributed to the

    actions impugned in the present Writ Petition.
    14

    3. The 4th respondent also filed counter contending

    that it is engaged in the business of repair and maintenance

    services and is duly registered as a Small Enterprise under

    Section 8 of the Micro, Small and Medium Enterprises

    Development Act, 2006, with the Ministry of Micro, Small and

    Medium Enterprises, Government of India. The 4th respondent

    holds a valid Udyam Registration Certificate bearing No.

    UDYAM-TS-02-0003062, and its status as a Small Enterprise is

    not in dispute. It is contended that their principal activity is

    classified as “Services”, with National Industrial Classification

    codes NIC 3311, NIC 4220 and NIC 4311, as reflected in the

    Udyam Registration certificate. On that basis, the 4th

    respondent asserts that it squarely falls within the definition of

    “supplier” under Section 2(n) of the MSMED Act, 2006.

    3.1. The 4th respondent further contends that in 2017,

    Petitioner floated a tender bearing Tender No. 9900147019 for a

    Long-Term Contract for maintenance of the Coal Handling Plant

    of the Petitioner’s establishment at Lara Village, Raigarh

    District, Chhattisgarh State, for three years commencing from

    01.05.2018 and ending on 30.04.2021. They being engaged in

    the same line of business and having expertise in repair and
    15

    maintenance services, submitted their bid in response to the

    said tender, which was duly accepted by Petitioner. Pursuant

    thereto, Petitioner issued a Service Purchase Order dated

    27.04.2018, followed by an amended Service Purchase Order

    dated 29.04.2021. The very nomenclature adopted by Petitioner,

    namely “Service Purchase Order”, clearly demonstrates that

    contract is a service contract and not a works contract.

    3.2. The 4th respondent states that contract awarded

    and executed is purely a service contract for maintenance and

    does not involve execution of any works contract. It is

    contended that the use of a Bill of Quantities for billing

    purposes does not alter the nature of the contract, as BOQ is a

    standard billing and valuation mechanism commonly adopted

    even in pure service contracts such as annual maintenance

    contracts, manpower outsourcing contracts and operations

    contracts. According to the 4th respondent, the BOQ forming

    part of the Service Purchase Order contains only service-related

    items such as manpower deployment and maintenance

    activities, and does not contemplate supply of goods. Therefore,

    the attempt of Petitioner to characterize the contract as a

    composite works contract merely on the basis of BOQ is

    asserted to be legally-untenable and factually-misleading.
    16

    3.3. The 4th respondent contends that upon execution

    of the Service Purchase Orders, it duly rendered services in

    accordance with the contractual scope and raised invoices for

    the services rendered. Certain amounts, aggregating to

    Rs.3,34,26,501/-, allegedly remained unpaid. Consequently, on

    23.07.2022, the 4th respondent invoked the statutory remedy

    under Section 18 of the MSMED Act, 2006 by filing a reference

    before the 3rd respondent Council for recovery of the said

    amount. It is contended that the liability of the Petitioner to

    make payment arises under Section 15 of Chapter V of the

    MSMED Act, 2006, which mandates timely payment by the

    buyer to the supplier for goods supplied or services rendered,

    subject to the maximum period prescribed therein.

    3.4. The 4th respondent further contends that under

    Section 18(4) of the MSMED Act, 2006, notwithstanding

    anything contained in any other law for the time being in force,

    the Micro and Small Enterprises Facilitation Council or the

    centre providing alternate dispute resolution services has

    jurisdiction to act as an Arbitrator or Conciliator in a dispute

    between a supplier located within its jurisdiction and a buyer

    located anywhere in India. It is contended that, in exercise of
    17

    the said statutory power and in accordance with G.O. Ms.

    No.32, Industries and Commerce Department, dated

    16.05.2022, the 3rd respondent was competent to refer disputes

    involving claims above Rs.3 crores to the International

    Arbitration and Mediation Centre.

    3.5. The 4th respondent places reliance on the judgment

    of the Hon’ble Supreme Court in M/s. Harcharan Dass Gupta

    v. Union of India 1, to contend that a contractual arbitration

    clause cannot override the statutory mechanism provided under

    Section 18 of the MSMED Act, 2006, and that the Facilitation

    Council is empowered to refer disputes to arbitration through

    an institutional mechanism notwithstanding any pre-existing

    contractual stipulation. The 4th respondent further contends

    that Petitioner has actively participated in the statutory

    proceedings. It is asserted that Petitioner participated in

    conciliation, appeared before the Arbitrator appointed pursuant

    to the reference under Section 18(3) of the MSMED Act, 2006,

    filed preliminary submissions and statements of defence before

    the Arbitrator, and thereafter sought additional time for filing its

    evidence affidavit on 30.06.2025. It is contended that issues

    have already been framed in the arbitral proceedings and that

    1
    2025 INSC 689
    18

    the 4th respondent filed its evidence, with the matter having

    been scheduled for further proceedings.

    3.6. The 4th respondent states that in terms of Section

    16(2) of the Arbitration and Conciliation Act, 1996, any plea

    that the arbitral tribunal does not have jurisdiction is required

    to be raised not later than the submission of the statement of

    defence. It is further contended that under Section 4, a party

    who proceeds with arbitration without raising a timely objection

    is deemed to have waived its right to object. On that basis, it is

    asserted that the conduct of Petitioner in participating in the

    arbitration without raising jurisdictional objections at the

    earliest stage amounts to waiver and estoppel. The 4th

    respondent further contends that the present Writ Petition is a

    belated attempt by Petitioner to re-characterise the contract as a

    works contract in order to obstruct and derail the arbitral

    process initiated under the MSMED Act, 2006. It is contended

    that petitioner itself issued the tender and service work orders

    expressly classifying the engagement as a service contract, and

    such classification constitutes a jurisdictional fact for invoking

    the MSMED Act. Once jurisdiction was properly assumed by the

    Facilitation Council on the basis of Petitioner’s own documents,
    19

    Petitioner cannot subsequently resile from its representation

    and contend that the contract is a works contract.

    3.7. The 4th respondent asserts that the attempt of

    Petitioner to retrospectively reinterpret or re-label a concluded

    and acted-upon contract is impermissible in law and is barred

    by principles of estoppel, approbate and reprobate, as well as

    Section 115 of the Indian Evidence Act, 1872. It is contended

    that administrative actions such as tenders and service work

    orders cannot be retrospectively varied to defeat accrued

    statutory rights without authority of law, and that once

    petitioner issued and acted upon service work orders,

    classification of the contract as a service contract became an

    express and binding term.

    3.8. The 4th respondent further contends that under

    Sections 10, 37 and 62 of the Indian Contract Act, 1872, the

    nature and terms of a concluded contract cannot be unilaterally

    or retrospectively altered, and that the legal nature of a contract

    is determined at the time of its formation and execution, and

    not by a subsequent change in stance by one of the parties. It is

    asserted that the present attempt to invoke the doctrine of

    “substance over form” is misconceived, particularly in a
    20

    statutory context where classification of the contract itself

    triggers legal rights under the MSMED Act, 2006.

    3.9. The 4th respondent states that when a public body

    such as Petitioner officially declares an engagement as one for

    services, such declaration constitutes a jurisdictional

    foundation for proceedings under the MSMED Act, 2006.

    Permitting a buyer to later contend that the contract was

    misclassified would defeat the remedial object of the Act and

    enable evasion of statutory obligations. It is contended that the

    form of the contract in the present case was not a disguise, but

    a conscious and deliberate classification adopted by the

    Petitioner, which was never objected to before the Facilitation

    Council and was even acknowledged in the Petitioner’s

    preliminary submissions before the Arbitrator.

    3.10. The 4th respondent further contends that the issues

    sought to be raised by Petitioner in the present writ petition,

    namely whether the 4th respondent qualifies as a supplier and

    whether the contract is a service contract or a works contract,

    are matters involving contractual interpretation and factual

    adjudication. Such issues, according to the 4th respondent, fall

    squarely within the domain of the arbitral tribunal and cannot

    be adjudicated in writ jurisdiction under Article 226 of the
    21

    Constitution of India, in the absence of any patent lack of

    jurisdiction, violation of principles of natural justice or

    infringement of fundamental rights.

    3.11. The 4th respondent therefore, submits that

    invocation of writ jurisdiction, at this stage, undermines the

    authority of the Sole Arbitrator, defeats the statutory dispute

    resolution mechanism under the MSMED Act, 2006, and

    constitutes an abuse of process. No case is made out for grant

    of any relief, interim or final, inasmuch as there is no imminent

    or irreparable prejudice demonstrated, and the disputes

    between the parties are already seized of by the competent

    arbitral forum in accordance with law.

    4. Petitioner filed reply to the counter of Respondent

    No. 4 stating that statements relating to identity, designation

    and formal particulars of the 4th respondent are merely formal

    in nature and do not require any specific rebuttal. Likewise, the

    assertions regarding the activities claimed to be undertaken by

    the 4th respondent and its registration under the Udyam

    framework are matters of record and, by themselves, do not

    advance the case of the 4th respondent under the MSMED Act,

    2006. The claim of the 4th respondent that it is a “supplier”

    within the meaning of Section 2(n) of the Micro, Small and
    22

    Medium Enterprises Development Act, 2006 is wholly

    misconceived in the context of the present contractual

    arrangement. Even assuming, without admitting, that the 4th

    respondent holds a registration under the MSMED Act, such

    registration does not automatically render every contract

    entered into by it amenable to the provisions of Act 27 of 2006.

    Petitioner reiterates that, having regard to the nature of the

    contract between the parties, the 4th respondent cannot be

    treated as a “supplier” under the Act, and consequently, the

    claim before the Facilitation Council and the reference to

    arbitration are not maintainable.

    4.1. Petitioner states that factual assertions relating to

    the issuance of the tender and the Service Purchase Orders

    dated 27.04.2018 and 29.04.2021 are matters of record.

    However, the nomenclature used in the purchase orders cannot

    determine the true nature of the contract, which, in substance

    and in law, is a composite works contract for maintenance of

    the Coal Handling Plant. It is true that it participated in the

    arbitral proceedings and sought two weeks’ time on 30.06.2025

    for filing its evidence affidavit. However, such participation was

    purely without prejudice and cannot be construed as an

    admission of jurisdiction. Petitioner asserts that participation
    23

    under compulsion of circumstances cannot cure an inherent

    lack of jurisdiction.

    4.2. Petitioner emphatically denies any liability to pay

    the amounts claimed by the 4th respondent. The assertion that

    any sum is due and payable is specifically denied, and the 4th

    respondent is put to strict proof thereof. Petitioner reiterates

    that Section 15 of Act 27 of 2006 applies only to delayed

    payments arising out of supply of goods or rendering of services

    by a supplier to a buyer. As the contract in question is a works

    contract and does not involve a buyer-supplier relationship, the

    claim does not fall within the ambit of Section 15, and no

    liability arises under the MSMED Act, 2006. Reliance placed by

    the 4th respondent on Section 18(4) of Act 27 of 2006 is wholly

    misplaced. The jurisdiction of the Facilitation Council under

    Section 18 arises only when a dispute exists between a supplier

    and a buyer as defined under the Act. In the absence of any

    such relationship between the Petitioner and the 4th

    respondent, the assumption of jurisdiction by the Facilitation

    Council and the consequent reference to arbitration are

    contrary to Chapter V of Act 27 of 2006 and are without

    authority of law.

    24

    4.3. Petitioner states that reference to G.O. Ms. No.32

    dated 16.05.2022 is not disputed as a matter of record.

    However, the applicability of the said Government Order

    presupposes a valid assumption of jurisdiction under the

    MSMED Act, 2006, which is conspicuously absent in the

    present case. There is no dispute with the general proposition

    laid down by the Hon’ble Supreme Court in M/s Harcharan

    Dass Gupta v. Union of India that the MSMED Act overrides

    contractual arbitration clauses. However, petitioner asserts that

    the said principle has no application to the present case, as

    Petitioner’s challenge is not founded on any conflict between the

    MSMED Act and the Arbitration and Conciliation Act, 1996. The

    core contention of Petitioner is that the MSMED Act itself is

    inapplicable to the present contract, there being no buyer-seller

    relationship and the contract being one for maintenance of the

    Coal Handling Plant for a fixed period of three years, amounting

    to a works contract. Consequently, the 3rd respondent

    inherently lacked jurisdiction to entertain the claim or to refer it

    to arbitration, rendering the arbitral proceedings without

    jurisdiction.

    4.4. Petitioner asserts that the contention of the 4th

    respondent that contract is a pure service contract is absolutely
    25

    false and untenable. The 4th respondent has sought to take

    undue advantage of the nomenclature “Service Purchase Order”

    to bring the dispute within the fold of Act 27 of 2006. In

    substance, the contract is a composite works contract based on

    Bill of Quantities, and such works contracts are excluded from

    the applicability of the MSMED Act, 2006. It is further stated

    that works contracts are also excluded from the Public

    Procurement Policy for Micro and Small Enterprises Order,

    2012 and are governed by the General Financial Rules, 2017

    issued by the Ministry of Finance, Department of Expenditure,

    including Rules 130, 143, 177 and 197.

    4.5. Petitioner states that the Hon’ble Supreme Court in

    its judgment reported in CCE & Customs v. Larsen & Toubro

    Ltd. 2, particularly in paragraph 18, while referring to the earlier

    judgment reported in Larsen & Toubro Ltd. v. State of

    Karnataka 3, has elaborately explained the essential

    characteristics of works contracts and held that even where a

    contract involves supply of goods, labour and services along

    with additional obligations, it does not cease to be a works

    contract. Several High Courts across the country have

    2
    (2016) 1 SCC 170
    3
    (2014) 1 SCC 708
    26

    consistently examined similar issues and held that Act 27 of

    2006 has no application to works contracts.

    4.6. It is also stated, reliance placed by the 4th

    respondent on the decision of this Court in Writ Petition No.956

    of 2025 is wholly misconceived. The said decision dealt with a

    situation where the Facilitation Council declined jurisdiction

    and the aggrieved party was relegated to the appellate remedy

    under Section 37(2) of the Arbitration and Conciliation Act,

    1996. In the present case, Petitioner is not challenging any

    order passed by the Arbitral Tribunal under Sections 16 or 17 of

    the Arbitration Act, but is assailing the very action of the 3rd

    respondent in referring the claim to the Sole Arbitrator under

    Act 27 of 2006. Therefore, the said decision has no application

    to the facts of the present case.

    4.7. Petitioner further states that the Hon’ble Supreme

    Court in M/s Tamil Nadu Cements Corporation Limited v.

    Micro and Small Enterprises 4, has referred the issue of

    maintainability of writ petitions under Article 226 of the

    Constitution against proceedings under Section 18 of Act 27 of

    2006 to a Constitution Bench of five Hon’ble Judges. The issues

    referred include whether a writ petition is completely barred

    4
    (2025) 4 SCC 1
    27

    against any order or award of the Facilitation Council and, if

    not, the circumstances under which the rule of alternative

    remedy would not apply. As the said issues are pending

    consideration before the Hon’ble Supreme Court, Petitioner

    states that the present Writ Petition is maintainable and cannot

    be dismissed on the ground of availability of an alternative

    remedy.

    4.8. The Petitioner submits that the proceedings

    initiated pursuant to the reference made by the 3rd respondent

    suffer from an inherent lack of jurisdiction. Where an authority

    acts without jurisdiction, the existence of an alternative remedy

    does not operate as a bar to the exercise of writ jurisdiction

    under Article 226 of the Constitution of India. The Petitioner

    also submits that unless and until the fundamental issue of

    jurisdiction of the Facilitation Council and the learned

    Arbitrator is adjudicated, continuation of the arbitral

    proceedings would cause grave and irreparable prejudice to the

    Petitioner.

    5. Heard Sri V. Ravinder Rao, learned Senior Counsel

    assisted by Sri K. Sai Ram Murthy, learned counsel for

    petitioner, Sri Sricharan Telaprolu, learned Senior Counsel

    assisted by Sri Jai Kishan Solanki, learned counsel for
    28

    Respondent No.4, Sri Mohan Karoor, learned Standing Counsel

    for Central Government on behalf of Respondent No.1 and

    learned Assistant Government Pleader for Industries on behalf

    of Respondents 2 and 3.

    6. The issue that arises for consideration in this Writ

    Petition is whether the 3rd respondent – Micro and Small

    Enterprises Facilitation Council had jurisdiction under Section

    18 of the 2006 Act to entertain the claim of the 4th respondent

    and to refer the dispute to arbitration, and whether the present

    Writ Petition challenging such reference is maintainable at this

    stage, particularly when arbitral proceedings have already

    commenced.

    7. From the admitted and undisputed facts, it emerges

    that the dispute has its genesis in a tender floated by petitioner

    for a long-term engagement relating to maintenance of the Coal

    Handling Plant at NTPC Lara Super Thermal Power Station.

    Pursuant thereto, Service Purchase Orders dated 27.04.2018

    and 29.04.2021 were issued in favour of the 4th respondent. It is

    also not in dispute that the 4th respondent is registered as a

    Small Enterprise under the MSMED Act, 2006, and that a claim

    of Rs.3,34,26,501/- was raised alleging non-payment of
    29

    amounts said to be due under invoices raised during the

    subsistence of the contract.

    8. Section 18 of the 2006 Act provides a special

    statutory mechanism for resolution of disputes relating to

    amounts due under Section 17 of the Act. The jurisdiction of the

    Facilitation Council under Section 18 is predicated upon the

    existence of a dispute between a “supplier” and a “buyer” arising

    out of supply of goods or rendering of services. Existence of

    such a supplier-buyer relationship in respect of goods supplied

    or services rendered thus constitutes the jurisdictional fact for

    assumption of authority by the Facilitation Council.

    9. Petitioner’s main contention is that the contract in

    question is, in substance and in law, a composite work contract

    for maintenance of equipment, therefore, falls outside the

    purview of the 2006 Act. The 4th respondent, on the other hand,

    asserts that contract is a pure service contract, as evidenced by

    the nomenclature adopted in the tender and the purchase

    orders, and that use of a Bill of Quantities does not detract from

    the essential character of the contract as one for services.

    10. It is to be noted, determination of true nature and

    character of the contract, namely, whether it constitutes a

    works contract or a service contract, cannot be undertaken in
    30

    isolation or on the basis of nomenclature alone. Such

    determination necessarily requires a detailed examination of the

    contractual terms, scope of work, manner of execution,

    obligations of the parties, method of billing and payment, and

    the factual matrix surrounding performance of the contract.

    These are matters involving appreciation of evidence and

    adjudication of disputed facts.

    11. It is well-settled that when disputed questions of

    fact arise, particularly those involving contractual interpretation

    and factual execution, the writ court ordinarily does not

    undertake such an exercise under Article 226 of the

    Constitution. In the present case, arbitral proceedings have

    already been initiated pursuant to the reference made under

    Section 18(3) of the 2006 Act, issues have been framed and

    matter is at the stage of leading evidence. The arbitral tribunal

    is competent to examine all the issues, including the nature of

    the contract and the applicability of the 2006 Act. It is also

    relevant to note that Clause 21 of the contract provides that all

    disputes arising out of the contract shall be resolved through

    settlement or arbitration in accordance with the General

    Conditions of Contract forming part of the bid documents,
    31

    thereby reinforcing that the agreed and appropriate forum for

    adjudication is arbitration rather than writ proceedings.

    12. It is also borne out from the record that petitioner

    participated in the proceedings before the arbitral tribunal, filed

    statements of defence and sought time for filing evidence.

    Sections 16 and 4 of the Arbitration and Conciliation Act, 1996

    embody the principle of kompetenz-kompetenz and waiver.

    Under Section 16, the arbitral tribunal is competent to rule on

    its own jurisdiction, including objections with respect to the

    existence or validity of the arbitration agreement or the scope of

    its authority. Section 4 provides that a party who proceeds with

    arbitration without stating its objection without undue delay

    shall be deemed to have waived its right to object.

    13. Petitioner contended that its participation in the

    arbitral proceedings is without prejudice and does not amount

    to acquiescence. While such a contention may be raised before

    the arbitral tribunal itself, the statutory scheme clearly

    envisages that jurisdictional objections are to be raised and

    decided within the framework of the arbitration proceedings.

    Interference by this Court, at this stage, would result in

    truncation of the statutory process and parallel adjudication of

    issues which the arbitral tribunal is competent to decide.
    32

    14. The contention of Petitioner that Facilitation

    Council inherently lacked jurisdiction is not lightly brushed

    aside by this Court. However, once the Council, acting under

    Section 18(3) of the 2006 Act, has referred the dispute to

    arbitration, the statute expressly provides that the provisions of

    the Arbitration and Conciliation Act, 1996 shall apply “as if” the

    arbitration were in pursuance of an arbitration agreement. The

    legislative intent is thus clear that, after such reference, the

    arbitral tribunal becomes the forum for adjudication of all

    disputes arising between the parties, including jurisdictional

    objections.

    15. This Court also takes note of the submission that

    the Hon’ble Supreme Court has referred certain questions

    relating to the maintainability of writ petitions against orders of

    the Facilitation Council to a larger Bench. However, as on date,

    there is no declaration of law imposing an absolute bar on the

    exercise of writ jurisdiction in such matters. Equally, there is no

    mandate requiring the High Court to interdict ongoing arbitral

    proceedings in every case where jurisdiction is questioned. The

    rule of alternative remedy, though not an absolute bar, is a rule
    33

    of prudence and self-restraint, particularly where a specialised

    statutory mechanism exists and is already in motion.

    16. In the present case, the statutory mechanism under

    the 2006 Act read with the Arbitration and Conciliation Act,

    1996 is not only available but has been invoked and acted

    upon. The arbitral tribunal is seized of the dispute and is

    competent to adjudicate all issues, including the applicability of

    the MSMED Act, the nature of the contract, and the existence or

    otherwise of a supplier-buyer relationship. Entertaining the

    present Writ Petition, at this stage, would require this Court to

    render findings on disputed questions of fact and contractual

    interpretation, which may potentially prejudice the arbitral

    proceedings and lead to conflicting determinations. Such an

    exercise is neither warranted nor desirable in the exercise of

    writ jurisdiction under Article 226 of the Constitution.

    17. For all the aforesaid reasons, this Court is of the

    considered opinion that the issues raised by Petitioner are more

    appropriately and effectively adjudicated by the arbitral tribunal

    in accordance with law. No exceptional circumstance of patent

    lack of jurisdiction, violation of principles of natural justice, or

    manifest arbitrariness is made out so as to justify interference

    by this Court at this stage. Consequently, it is to be held that
    34

    the present Writ Petition does not merit interference under

    Article 226 of the Constitution.

    18. Accordingly, the Writ Petition is dismissed. It is

    made clear that this Court has not expressed any opinion on the

    merits of the claims, counterclaims or defences of either party.

    All contentions raised by Petitioner and respondents, including

    those relating to jurisdiction, maintainability and applicability of

    the MSMED Act, 2006, are left open to be urged before the

    learned Arbitrator, who shall adjudicate the same independently

    and strictly in accordance with law, uninfluenced by any

    observations made herein. No costs.

    19. Consequently, the miscellaneous Applications, if

    any shall stand closed.

    ————————————-

    NAGESH BHEEMAPAKA, J

    24th March 2026

    ksld



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