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
5
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
6
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
9
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
26consistently 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
