MSEFC Must Decide Question On Limitation Before Adjudicating Dispute On Merits: Telangana High Court

Facts:

In a common order dated 15/06/2024, the MSEFC, in a section 16 petition filed by the petitioner, has held that the claims of the claimant were barred by limitation. The MSEFC, in order, had said the Facilitation Council should continue Arbitration Proceedings and give a final award on merits. The jurisdictional issues raised by the parties would be ascertained based on the facts established during the arbitral proceedings and would be a part of the final award.

Submissions:

The counsel for the petitioner made the following submissions:

• The Supreme Court in Silpi Industries and others v. Kerala State Road Transport Corporation and another (2023) held that the provision of the Limitation Act, 1963 would apply to the MSMED Act, 2006. In light of the revised rule of Telangana State Micro and Small Enterprises Facilitation Council Rules, 2017, Rule 10(3) bars the Council from adjudicating the disputes on merits until it has ruled on any challenges to its jurisdiction or any challenge to any of the Council's members.
• The petitioner had already objected concerning the claimant's claim being barred by limitation. The Council could not have decided on the issue at that time. Only after the limitation issue was decided against the petitioner could the Council enter into the merits of the dispute and adjudicate the same. Reliance was placed on Kvaerner Cementation India Limited v. Bajrangalal Agarwal and another (2012), Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited (2020), and SARR Freights Corporation v. Dredging Corporation of India Limited (2019).

Analysis of the Court:

The bench, despite the observations made in the petitioner's cited cases and taking into consideration the impugned decision by the MSEFC, observed that there is no illegality in the MSEFC's decision regarding the adjudication of the respondent's question on limitation alongside the claimant's claims on merit. However, when issues about the maintainability of the claims are raised, questions of limitation in particular, the Council has to decide such questions as the first issue. Thereafter, the Council, if required, can proceed to adjudicate the dispute on merits.

The bench directed the MSEFC to frame the issue of limitation as the first issue and adjudicate the said issue first. If the issue is adjudicated against the petitioner, the MSFEC would need to proceed further in the arbitration and adjudicate the dispute on merits. The bench, thereafter, disposed of the civil revision petitions.

Case Title: M/s K/12 Techno Services Pvt. Ltd. v. M/s Brahma Teja Paper

Case Number: CRP 3136/2024 and CRP 3162/2024

Counsel for the appellant: Mr. Vikram Pooserla, Senior Advocate, with Mr. P. Gautham Rao

Click Here To Read/Download The Order