1IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.

CMPMO Nos. 439, 442 and 444 of 2018

Decided on 06.11.2018

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1. CMPMO No. 439 of 2018
M/s Brijsons Hetreat …..Petitioner
Versus
The Himachal Pradesh Micro, Small and Medium Enterprise, Facilitation

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Council and Anr. …..Respondents
2. CMPMO No. 442 of 2018
Himachal Wire Industries Pvt. Ltd. …..Petitioner

of
Versus
The Himachal Pradesh Micro, Small and Medium Enterprise, Facilitation
Council and Anr. …..Respondents
3. CMPMO No. 444 of 2018
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M/s TCM Steels (India) …..Petitioner
Versus
The Himachal Pradesh Micro, Small and Medium Enterprise, Facilitation
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Council and Anr. …..Respondents
Coram:
Hon’ble Mr. Justice Sandeep Sharma, Judge
Whether approved for reporting? 1 Yes.
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For the petitioner(s) : Mr. Atul Jhingan, Advocate.

For the respondent(s) : Mr. S.C. Sharma and Mr. Sanjeev Sood,
Additional Advocate Generals, for the
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State.
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Sandeep Sharma, Judge (oral):

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By way of above captioned petitions, filed under Article

227 of the Constitution of India, challenge has been laid to orders

dated 23.8.2018 and 25.4.2018, passed by the H.P. Micro, Small and

Medium Enterprise, Facilitation Council, H.P., (in short “the Council”) in

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Whether the reporters of the local papers may be allowed to see the judgment?

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reference No. 35/2017, titled M/s Brijsons Hetreat V.P.O., Badroya, Tehsil

Nurpur, Distt. Kangra H.P. v. The Executive Engineer, Flood Protection

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Division, IPH Department, Gagret, District Una, H.P., reference No.36 of

2017 titled M/s Himachal Wire Industries (P) Ltd. G.T. Road, Damtal,

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Distt. Kangra, H.P. v. Executive Engineer, Flood Protection Division, IPH

Department, Gagret, District Una, H.P and reference No. 51 of 2017

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titled M/s TCM Steels (India) v. Executive Engineer, Flood Protection

Division, IPH Department, Gagret, District Una, H.P, whereby Council

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dropped the reference from the proceedings.
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2. Before adverting to the factual matrix of the case, it may

be noticed that vide orders dated 30.10.2018, 31.10.2018 and

1.11.2018, this Court afforded opportunity to the learned Additional

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Advocate General to file reply or have instructions in the matters.

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Pursuant to aforesaid orders, Mr. Sanjeev Sood, learned Additional

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Advocate General, has placed on record instructions dated 5.11.2018,

received by him from the office of Deputy Director of Industries, H.P.

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Micro Facilitation Council, H.P., which has been taken on record.

3. In nutshell, case of the petitioners as projected in the

aforesaid petitions, is that Controller of Stores, H.P. Directorate of

Industries, Udyog Bhawan, Bemloe, Shimla-1, issued rate contract

number 4-IND/SP-3(M-02)37/2013/43 dated 19.2.2014 valid upto

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29.5.2015 for supply of Hot Dip Galvanized Mild Steel Wire on annual

rate contract basis (Annexure P-2). Rate of contract was further

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extended upto 31.8.2015 vide letter No. 4-IND/SP-3(M-02) 37/2013

dated 29.5.2015. While issuing the rate contract in favour of the

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petitioners-company, following clause No.2, was reflected in the terms

and conditions of rate contract reads as under; clause No.2: “100 %

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payment will be made within 21 days against physical delivery of

inspected/accepted stores duly supported with satisfactory inspection

note and after

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receipt of correct goods at consignee’s
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site/destination.

4. The Engineer-in-Chief (Projects) Irrigation and Public Health

Department, H.P., placed various purchase orders with the petitioners

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for supply of Hot Dip Galvanized Mild Steel Wire @ Rs. 59050/- per
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metric ton, exclusive of Excise Duty and VAT. As per the petitioners,
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material was duly inspected and approved as per procedure by the

IPH Department and thereafter, it made prompt supply and requisite

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material was dispatched to Executive Engineer, Flood Protection

Division, Gagret and Amb. As per the terms and conditions of the rate

contract and supply order, the payment with respect to the materials

supplied was to be made to the supplier by the department within a

period of 21 days from the receipt of the material. But since in the

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case at hand, payment qua the material supplied by the petitioners

never came to be made within the stipulated period, it approached

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the High Court of HP by way of CWP No. 4235 of 2015 (along with

connected matters), which came to be decided on 23.2.2016

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(Annexure P-5 colly.), whereby Division Bench of this Court having

taken note of the statement made by the proxy counsel on behalf of

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the petitioners that petitioners have received the entire payment and

their grievance stands redressed, disposed of the writ petition along

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with the connected matters.
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5. Since pursuant to filing of aforesaid writ petitions by the

present petitioners before the Division Bench of this Court, only the

principal amount was paid, it vide communication dated 4.2.2017

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(Annexure P-6), requested the Executive Engineer Flood Protection

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Division Gagret and Amb, to make payment of interest for delay in

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payment under the Micro, Small and Medium Enterprises Development

Act, 2006 ( in short “the Act”), however fact remains that aforesaid
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authority failed to accede to the aforesaid request having been made

by the petitioners and as such, petitioners vide communications dated

28.7.2017 and 8.12.2017, made a reference under Section 18 of Act, to

Council, praying therein for issuance of appropriate direction to the

department to pay interest for delay in payment under the Act against

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various supplies. Council by way of notice called for reply of

respondent-department, who by way of filing reply (Annexure P-9)

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disputed the claim of the petitioner on the ground that since counsel

representing the petitioner had made a statement before the High

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Court that entire payment stands received and grievance of the

petitioner stands redressed, nothing remains to be paid to the

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petitioner.

6. I have heard the learned counsel representing the parties

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and gone through the records of the case.
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7. Having taken note of the aforesaid reply filed by the

respondent-department, the Council vide orders dated 23.8.2018 and

25.4.2018, ordered that reference may be dropped. In the aforesaid

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background, petitioners have approached this Court in the instant

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proceedings, praying therein to issue direction to the council to refer

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the matter to the arbitrator for adjudication of the dispute with regard

to the payment of interest inter-se parties.

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8. Mr. Atul Jhingan, learned counsel representing the

petitioners while inviting attention of this Court to Sections 15, 16 and 18

of the Act as well as award passed by the sole arbitrator in similar case

i.e. reference No. 29.2017 dated 12.6.2018 (Annexure P-10), wherein

similar kind of objection was raised by the department, contended

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that respondent-department cannot be allowed to adopt the policy

of pick and choose. Mr. Jhingan argued that in case titled M/s Partap

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Industrial Products v. The Executive Engineer, Flood Protection Division

Gagret, District Una, H.P., similar kind of objection was raised by the

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department before the learned Arbitrator, but learned Arbitrator in

para-13 of the award categorically stated that as per Section 16 of the

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Act, petitioners are entitled to interest for delayed payments. Mr.

Jhingan while referring to the impugned order passed in case of the

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petitioners, contended that statement, if any, given by the counsel
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representing the petitioner before the Division Bench, could not be a

ground for the Council to reject reference, especially, when Section 16

of the Act, provides for payment of interest on account of delay in

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payment.
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9. Question whether petitioner is entitled to interest on

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account of delay in payment or not, is definitely not to be decided in

the instant proceedings, rather same is required to be decided in the

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proceedings, if any, before the Council under Section 18(1) or before

the Arbitrator to be appointed in terms of Section 18 (3) of the Act. But

question which needs to be decided by this Court in the instant

proceedings is that whether action of council in dropping the

reference made by the petitioners vide orders dated

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23.8.2018/25.4.2018, is justified in light of reasoning recorded in the

same or not.

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10. Careful perusal of judgment dated 23.2.2016, passed by

the Division Bench of this Court in CWP No. 4235 of 2015, clearly

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suggests that proxy counsel appearing on behalf of the petitioners had

made a statement before the court that payment stands received,

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which fact was otherwise acknowledged by the learned Additional

Advocate General representing the State but definitely, there is no

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mention, if any, with regard to the interest, which is being claimed in
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terms of Section 16 of the Act on account of delay. Section 16 of the

Act specifically provides for interest in the event of delay in payment.

Careful perusal of order dated 23.8.2018, nowhere suggests that

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council while passing order dealt with issue of payment of interest on

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account of delay, rather it simply having taken note of the fact that
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the statement was made by the learned counsel for the petitioners

that entire payment stands received, dropped the reference, whereas

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as has been taken note herein above in similar facts and

circumstances, the case of another firm, who had also approached

the High Court and had made similar kind of statement before the

Court, was referred to the Arbitration under the Act. At this stage, it

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would be apt to take note of Sections 15, 16 and 18 of the Act, which

read as under:-

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“15.Liability of buyer to make payment.—Where any
supplier supplies any goods or renders any services to any
buyer, the buyer shall make payment therefor on or before
the date agreed upon between him and the supplier in

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writing or, where there is no agreement in this behalf,
before the appointed day:
Provided that in no case the period agreed upon between
the supplier and the buyer in writing shall exceed forty-five
days from the day of acceptance or the day of deemed

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acceptance.
16.Date from which and rate at which interest is payable.—
Where any buyer fails to make payment of the amount to
the supplier, as required under section 15, the buyer shall,
notwithstanding anything contained in any agreement
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between the buyer and the supplier or in any law for the
time being in force, be liable to pay compound interest
with monthly rests to the supplier on that amount from the
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appointed day or, as the case may be, from the date
immediately following the date agreed upon, at three
times of the bank rate notified by the Reserve Bank.
18.Reference to Micro and Small Enterprises Facilitation
Council.—(1) Notwithstanding anything contained in any
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other law for the time being in force, any party to a dispute
may, with regard to any amount due under section 17,
make a reference to the Micro and Small Enterprises
Facilitation Council. (2) On receipt of a reference under
sub-section (1), the Council shall either itself conduct
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conciliation in the matter or seek the assistance of any

institution or centre providing alternate dispute resolution
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services by making a reference to such an institution or

centre, for conducting conciliation and the provisions of
sections 65 to 81 of the Arbitration and Conciliation Act,
1996 (26 of 1996) shall apply to such a dispute as if the
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conciliation was initiated under Part III of that Act. (3)

Where the conciliation initiated under sub-section (2) is not
successful and stands terminated without any settlement
between the parties, the Council shall either itself take up
the dispute for arbitration or refer it to any institution or
centre providing alternate dispute resolution services for
such arbitration and the provisions of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall then apply to the
dispute as if the arbitration was in pursuance of an
arbitration agreement referred to in sub-section(1) of
section 7 of that Act. (4) Notwithstanding anything
contained in any other law for the time being in force, the

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Micro and Small Enterprises Facilitation Council or the

centre providing alternate dispute resolution services shall
have jurisdiction to act as an Arbitrator or Conciliator under
this section in a dispute between the supplier located

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within its jurisdiction and a buyer located anywhere in

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India. (5) Every reference made under this section shall be
decided within a period of ninety days from the date of
making such a reference.”

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11. Careful perusal of Section 15 of the Act clearly provides

that where any supplier supplies any goods or renders any services to

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any buyer, the buyer shall make payment on or before the date

agreed upon between him and the supplier but in no case, the period
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agreed upon between the supplier and buyer shall exceed 45 days

from the day of acceptance or the day of deemed acceptance.

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Section 16 clearly provides that where any buyer fails to make the

payment amount to the supplier, as required under Section 15, the

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buyer shall, notwithstanding anything contained in any agreement

between the buyer and the supplier or in any law for the time being in
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force, shall be liable to pay compound interest with monthly rests to

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the supplier on that amount from the appointed day or, as the case
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may be, from the date immediately following the date agreed upon,

at three times of the bank rate notified by the Reserve Bank. Similarly,

Section 18 of the Act provides that in the event of dispute, if any, inter-

se parties with regard to the amount due, if any, under Section 17 of

the Act, parties to dispute shall make a reference to the Council, who

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on receipt of reference under Sub-Section (1) shall either itself conduct

conciliation in the matter or seek assistance of any institution or centre

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providing alternate dispute resolution services by making reference to

such an institution or centre for conducting conciliation. Section 18 (3)

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of the Act, further provides that where the conciliation initiated under

sub-section (2) is not successful and stands terminated without any

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settlement between the parties, the Council shall either itself take up

the dispute for arbitration or refer it to any institution or centre providing

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alternate dispute resolution services for such arbitration and the
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provisions of the Arbitration and Conciliation Act shall then apply to the

dispute as if the arbitration was in pursuance of an arbitration

agreement referred to in sub-section(1) of section 7 of that Act.

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12. Undisputedly, in the case at hand, dispute inter-se parties

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is with regard to payment of interest on account of delay in payment

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and as such, parties approached the council in terms of Section 18 of

the Act but as has been taken note herein above, council without
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application of mind in hot haste manner, dropped the reference. At

this stage, it would be appropriate to take note of instructions dated

5.11.2018, whereby council has made an endeavor to justify its

decision by stating:-

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2. Whereas the Council in its 32nd meeting held on

22.9.2017 called the case/reference. Sh. Atul
Jhingan, Advocate appeared on behalf of supplier.

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Sh. Sudhir Kumar, EEFPWD appeared on behalf of
buyer. Advocate appeared on behalf of the supplier

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informed the Council that principal amount has been
paid however interest portion is still pending. The
representative of buyer also asked by Council about

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the payment of interest due however he could not
ensure whether interest amount would be paid or not
due to non-availability of budget. Council took note
of the same and it seems that buyer is not willing to

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solve the matter amicably and all efforts of
conciliation have failed and broken down and there
seems no scope for reconciliation. Accordingly, the
decision was unanimously taken by the Council to
refer this matter to arbitration and adopted the
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procedure under Section 18 (3) of the MSMED Act,
2006, by referring the matter to an arbitrator out o the
panel notified by the State Government.
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3. Whereas the State Government vide letter No.
Ind.A (F) 19-21/2005-I dated 18.09.2015 has issued
notification regarding empanelment of Arbitrators for
the expeditious disposal of arbitration cases.
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13. Aforesaid justification having been rendered on record by

the council cannot be accepted being totally unreasonable and

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erroneous. Interestingly, in the aforesaid instructions, there is no

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reference/discussion, if any, with regard to case of the present

petitioners, whose reference admittedly came to be dropped on flimsy

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grounds. No plausible explanation has been rendered on record by

the respondent-department that why only case of M/s Partap Industrial

Products, was referred to arbitration, whereas references of other

similarly situate persons like present petitioners were dropped.

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14. Having perused reasoning recorded by the council in its

orders dated 23.8.2018 and 25.4.2018, this Court has no hesitation to

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conclude that authority concerned has decided reference petition of

the petition in slip shod manner without proper application of mind as

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such, same cannot be allowed to sustain.

15. Consequently, in view of the above, present petitions are

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allowed and impugned orders dated 23.8.2018 and 25.4.2018, passed

by the H.P. Micro & Small Facilitation Council, H.P., Himachal Pradesh,
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are quashed and set-aside and respondent-council is directed to refer
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the matter of present petitioners to the Arbitrator in terms of Section 18

(3) of the Act, as has been done in the case of similarly situate person

for adjudication of dispute with regard to payment of interest on

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account of delay. Petitions stand disposed of, so also pending

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application(s) if any.
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6th November, 2018 (Sandeep Sharma),

manjit Judge
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