Jharkhand High Court
Divakar Kumar Singh vs Jharkhand Micro And Small Enterprises ... on 10 June, 2025
Bench: Sujit Narayan Prasad, Rajesh Kumar
( 2025:JHHC:15000-DB )
IN THE HIGH COURT OF JHARKHAND AT RANCHI
L.P.A. No. 28 of 2024
----
Divakar Kumar Singh, M/s Jagapati Engineers Pvt. Ltd,
aged about 53 years, S/o Ram Nandan Singh, R/O A-15,
T.R.F., Co-operative Colony, Harharguttu, Jamshedpur,
P.O.: Harhargutu, P.S. Baghbera, Distt: East Singhbhum,
Jharkhand.
... Respondent/ Appellant
Versus
1.Jharkhand Micro and Small Enterprises Facilitation
Council (JHMSEFC) through its Under Secretary-cum-
Member Secretary having its office at Nepal House, P.O.:
Doranda, P.S.: Doranda, Distt: Ranchi, Jharkhand.
... ... Respondent/Respondent
2.M/s TRF Limited, a TATA Enterprise and Company
incorporated under the Companies Act, 1956, having its
registered office at 11, Station Road, Burmamines, P.O.:
Burmamines, P.S.: Burmamines, Distt: Jamshepdur, East
Singhbhum, Jharkhand through its authorized signatory,
namely, Srehan Siddhartha, aged about 33 years, S/o Sri
Deepak Kumar Singh, R/o Bhadraghat, P.O. Gulzarbagh,
P.S. Alamganj, Distt: Patna, 800007.
...Petitioner/Respondent
with
L.P.A. No. 29 of 2024
----
Divakar Kumar Singh, M/s Jagapati Engineers Pvt. Ltd;,
aged about 53 years, S/o Ram Nandan Singh, R/O A-15,
T.R.F. Co-operative Colony, Harharguttu, Jamshedpur, P.O.:
Harharguttu, P.S. Baghbera, Distt: East Singhbhum,
Jharkhand.
... Respondent/Appellant
Versus
1.Jharkhand Micro and Small Enterprises Facilitation
Council (JHMSEFC) through its Under Secretary-cum-
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Member Secretary having its office at Nepal House, P.O.:
Doranda, P.S.: Doranda, Distt: Ranchi, Jharkhand.
... ... Respondent/Respondent
2.M/s TRF Limited, a TATA Enterprise and Company
incorporated under the Companies Act, 1956, having its
registered office at 11, Station Road, Burmamines, P.O.:
Burmamines, P.S.:Burmamines, Distt: Jamshepdur, East
Singhbhum, Jharkhand through its authorized signatory,
namely, Shrehan Siddhartha, aged about 33 years, S/o Sri
Deepak Kumar Singh, R/o Bhadraghat, P.O. Gulzarbagh,
P.S. Alamganj, Distt: Patna, Bihar-800007.
...Petitioner/Respondent
with
L.P.A. No. 30 of 2024
----
Divakar Kumar Singh, M/s Jagapati Engineers Pvt. Ltd;,
aged about 53 years, S/o Ram Nandan Singh, R/O A-15,
T.R.F., Co-operative Colony, Harharguttu, Jamshedpur,
P.O.: Harhargutu, P.S. Baghbera, Distt: East Singhbhum.,
Jharkhand. ...Respondent/Appellant
Versus
1.The State of Jharkhand through its Secretary, Department
of Industries having its office at 3rd Floor, Nepal House, P.O.
& P.S: Doranda, Distt: Ranchi, Jharkhand.
... ... Respondent/Respondent
2.Jharkhand Micro and Small Enterprises Facilitation
Council (JHMSEFC) through its Under Secretary-cum-
Member Secretary having its office at Nepal House, P.O.:
Doranda, P.S.: Doranda, Dist.: Ranchi, Jharkhand.
... ... Respondent/Respondent
3.M/s TRF Limited, a TATA Enterprise and Company
incorporated under the Companies Act, 1956, having its
registered office at 11, Station Road, Burmamines, P.O.:
Burmamines, P.S.:Burmamines, Distt: Jamshepdur, East
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Singhbhum, Jharkhand through its authorized signatory,
namely, Shrehan Siddhartha, aged about 33 years, S/o Sri
Deepak Kumar Singh, R/o Bhadraghat, P.O. Gulzarbagh,
P.S. Alamganj, Distt: Patna, Bihar-800007.
...Petitioner/Respondent
-------
CORAM: HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD
HON'BLE MR. JUSTICE RAJESH KUMAR
------
For the Appellant(s) : Mr. Ajit Kumar, Sr. Advocate
Mr. Anil Kumar, Advocate
Mr. Arpit Kumar, Advocate
Mr. Divyanshu Singh, Advocate
For the Res. No. 2 : Mr. Indrajit Sinha, Advocate
Mr. Ankit Vishal, Advocate
--------
C.A.V. on 30.04.2025 Pronounced on 10 /06/2025
Per Sujit Narayan Prasad, J.
1. All the appeals since arises out of the common order/judgment dated 22.12.2023 passed in W.P.(C) No. 928 of 2023; W.P.(C) No. 923 of 2023; and W.P.(C) No. 925 of 2023; as such they were tagged together and have been heard together and are being disposed of by this common order/judgment.
Prayer:
2. The instant intra-court appeals, under Clause 10 of the Letters Patent, have been directed against common order/judgment dated 22.12.2023 passed by learned Singh Judge in W.P.(C) No. 923 of 2023 [subject matter of LPA No. 28 of 2024]; W.P.(C) No. 925 of 2023 [subject matter of LPA No. 29 of 2024] and W.P.(C) No. 928 of 2023 [subject matter of LPA No. 30 of 2024] whereby and -3- ( 2025:JHHC:15000-DB ) whereunder the writ petitions preferred by the writ petitioner (respondent no. 2 herein i.e. M/s TRF Limited) have been disposed of by setting aside the Award dated 12.09.2022 passed by Jharkhand Micro and Small Enterprise Facilitation Council (in short ‗Facilitation Council') and the matter was remitted back to the Facilitation Council to pass order/Award afresh within three months with a direction to the writ petitioner(s) [TRF Limited] and respondent no. 2-Divakar Kumar Singh to appear before the Jharkhand MSME Facilitation Council on 8th January, 2024 and present their written submissions, as directed vide order dated 12.09.2022 by the Facilitation Council.
Factual Aspect:
3. Since the issues involved in all these Letters Patent Appeals are identical in nature, as such, for the sake of convenience and with the consent of learned counsel for the parties, the fact involved in one of the cases, i.e W.P.(C) No. 923 of 2023 [subject matter of LPA No. 28 of 2024] is being taken up.
4. The facts, in brief, as mentioned in the writ petition, are that the Petitioner-Company (TRF) [respondent no. 2 herein] issued purchase orders towards Fabrication & Erection Work DVC, -4- ( 2025:JHHC:15000-DB ) Raghunathpur, Purulia, West Bengal. The purchase orders mandated Respondent No. 2 to take all necessary precaution/care in ensuring that no financial loss is caused to the petitioner due to the act of Respondent and further, it provided that the bill raised should be supported by documentary proof bearing the joint signature of both the parties.
5. It is stated that pursuant to the issuance of the work order by the petitioner (respondent no.2 herein), the respondent no.2 (appellant herein) did not act in terms of the purchase orders.
6. The Respondent No. 2-M/s Jagpati Engineers Pvt.
Ltd. through its Director Divakar Kumar Singh (appellant herein) filed an online application before the Jharkhand Small and Medium Enterprises Facilitation Council (Established under Section 20 of Micro, Small and Medium Enterprises Development Act, 2006) on 12.12.2020 for the realization of the outstanding payment balance of Rs 62,14,082.38/- plus accrued interest against Purchase Orders being 4640001643/0811/BMHS, 4740001564, 4640003092/60/BMHS & 4640001346/93/BMHS dated 11.04.2016, 28.06.2016, 12.09.2018 and 01.07.2016 -5- ( 2025:JHHC:15000-DB ) respectively towards Fabrication and Erection work at DVC, Raghunathpur Purulia, West Bengal.
7. It is stated that the reference filed by Respondent No. 2 (Jagapati Engineers Pvt. Ltd. (JEPL)) before the Council was registered as Case No. JHMSEFC-09/2021 (New Case No. JH/06/M/JKH/00261).
8. The Director of Industries, Government of Jharkhand-cum-Chairman, JHMSEFC informed the writ Petitioner (TRF) about the case and directed them to appear in the matter.
9. Pursuant to the aforesaid notice, the petitioner appeared in Case No. JHMSEFC-09/2021 (New Case No. JH/06/M/JKH/00261) before the Council and disputed the claim of the Appellant herein as there is allegedly no outstanding payable.
10. It is further stated that the case was admitted by the Facilitation Council on 23.02.2021. Thereafter, on 17.08.2021 the Council directed both the parties to jointly reconcile the dues and dispute within 15 days. Again on 15.12.2021, the Council directed the matter to be referred to Conciliation in terms of Section 18(2) of MSMED Act and the matter was deferred by the Council awaiting the conciliation report between the parties. -6-
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11. It is further stated that on 12.09.2022, the Council held that mediation has failed and the conciliation process has also failed. Time was granted to submit written submission within fifteen (15) days and after the given time frame, the award may be passed. The petitioner filed a reply dated 27.09.2022 before the Facilitation Council in Case No. JHMSEFC-09/2021 (New Case No. JH/06/M/JKH/00261).
12. It is the case of the petitioner that on 12.09.2022, the writ petitioner appeared with the belief that since the attempt made by the parties to reconcile the dispute among themselves has failed the Facilitation Council would initiate steps in terms of the Arbitration & Conciliation Act, 1996 to conciliate the disputes between them in terms of Part III of the above said Act of 1996. But without resorting to the provisions of Part III of the Arbitration and Conciliation Act, 1996 and also without following the procedure established by Part I, Chapter V of the Arbitration and Conciliation Act, 1996, the Council informed the parties that since the dispute has not been settled, necessary order will be passed on the materials available on record.
13. It has further been stated that no further date of hearing was given and the Council, in gross -7- ( 2025:JHHC:15000-DB ) contravention of the Statute, passed order granting the claim of Respondent No 2/Appellant herein.
14. It is alleged that the Facilitation Council without considering the fact that in order to conduct an arbitration proceeding the provisions of Chapter V, Part 1 of the Arbitration & Conciliation Act, 1996, have to be followed and the parties must file the statement of claim and defence and then hearing in terms of section 24 of the Arbitration & Conciliation Act, 1996, has to be conducted, passed the impugned award without there being any statement of claim and statement of defence or without permitting any party to lead evidence.
15. The petitioner stated that the MSME Council passed the impugned award/decree dated 12.09.2022 in Case No. JHMSEFC-09/2021 (New Case No. JH/06/M/JKH/00261) as contained in Memo No. 28 dated 05.01.2023 issued by the Under Secretary-cum- Member Secretary, MSME Council whereby and whereunder, the petitioner was directed to pay the principal outstanding amount along with the accrued interest thereon to be compounded by the Claimant/Respondent No. 2 (Appellant) through a Chartered Accountant, within 30 days from the date of receipt of the order, failing which the -8- ( 2025:JHHC:15000-DB ) Claimant/Respondent No. 2 would be entitled to realize the amount through the process of law.
16. The petitioner aggrieved thereof has approached the writ Court questioning the act of the Facilitation Council in passing the impugned award without following the procedure established by law.
17. Before the learned writ Court, the writ petitioner/respondent no.2 has taken the ground that the Facilitation Council did not follow the provisions of Chapter V, Part-I of the Arbitration and Conciliation Act, 1996, which requires the statement of claim and defence and then hearing in terms of Section 24 of the Arbitration & Conciliation Act, 1996. Further ground has been taken that the manner in which the award under challenge has been passed by the Facilitation Council cannot be said to be an award in terms of the Arbitration & Conciliation Act, 1996 and hence, the recourse against the said award cannot be taken under Section 34 of the Arbitration & Conciliation Act, 1996. Further, the arbitration proceedings before the Council has been followed in perfunctory manner in which on one day, 21 matters were disposed of, in a span of one and half hours.
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18. Further ground has been taken that under Section 25 of the Arbitration and Conciliation Act, 1996, after failure of the conciliation, it was incumbent on the part of the Council to have entered into arbitration proceedings in terms of Section 18 of the MSMED Act, 2006.
19. The respondent/appellant has appeared before the writ Court has taken the ground that in the Award itself there is specific reference vide Letter No.22 dated 04.01.2022 whereby, the matter was referred to JHALSA for fresh conciliation and mediation under Section 18(2) of the MSMED Act and on its failure, arbitration was taken up by the Council. JHALSA vide Letter Nos.1990 &1991, dated 25.07.2022 intimated about the failure of conciliation/ mediation. This has been noted in the said Award that conciliation process had failed and accepted by the parties on which they were asked to submit their written submissions within 15 days. Further, the stand of the writ petitioner has been recorded in details in the said Award which will go to show that petitioner(s) had sufficient opportunity to present its case in the arbitral proceeding, therefore, it is not correctly stated on the part of the writ petitioner that procedure has not been followed.
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20. The learned writ Court while taking into consideration the aforesaid factual aspect has disposed of the writ petition vide order dated 22.12.2023 and set aside the award dated 12.09.2022 and has observed that before invoking Section 19 of the said Act, 2006, there should be a formal arbitral award. The writ Court further directed both the writ petitioner/respondent and respondent/appellant to appear before the MSME Council and filed their written submission.
21. The order dated 22.12.2023 passed by the learned writ Court has been challenged by filing the instant appeals.
22. It is evident from the factual aspect that the appellant-Divakar Kumar Singh, Director, M/s Jagapati Engineers Pvt. Ltd., entered into agreement with respondent no. 2-M/s TRF Limited for purchase orders towards Fabrication & Erection Work DVC, Raghunathpur, Purulia, West Bengal. The dispute arose with respect to the stale monetary claim, which having not been resolved, the Respondent No. 2 [appellant herein] filed an online application before the Jharkhand Small and Medium Enterprises Facilitation Council on 12.12.2020 for the realization of the outstanding payment balance plus accrued interest against Purchase
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( 2025:JHHC:15000-DB ) Orders. The reference filed by Respondent No. 2 (JEPL) before the Council was registered as Case No. JHMSEFC- 09/2021 (New Case No. JH/06/M/JKH/00261).
23. Accordingly, the Director of Industries, Government of Jharkhand-cum-Chairman, JHMSEFC directed them to appear. Pursuant to the aforesaid notice, the writ petitioner appeared before the Council and disputed the claim of the appellant herein as there is allegedly no outstanding payable.
24. Thereafter, again on 17.08.2021 the Council directed both the parties to jointly reconcile the dues and dispute within 15 days and on 15.12.2021, the Council directed the matter to be referred to Conciliation in terms of Section 18(2) of MSMED Act and the matter was deferred by the Council awaiting the conciliation report between the parties.
25. It is alleged that on 12.09.2022, the Council held that mediation has failed and the conciliation process has also failed. Time was granted to submit written submission within fifteen (15) days. The petitioner filed a reply dated 27.09.2022 before the Facilitation Council.
26. However, it is stated that without resorting to the provisions of the Arbitration and Conciliation Act, 1996, the MSME Council passed the impugned award/decree
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( 2025:JHHC:15000-DB ) dated 12.09.2022 whereby and whereunder, the petitioner was directed to pay the principal outstanding amount along with the accrued interest thereon to be compounded by the Claimant/Respondent No. 2 (appellant) through a Chartered Accountant, within 30 days from the date of receipt of the order, failing which the Claimant/Respondent No. 2 would be entitled to realize the amount through the process of law.
27. Accordingly, the writ petitions were filed under Article 226 of the Constitution of India questioning the said award on the ground of procedural lapses since opportunity of hearing is required to be there, has not been followed.
28. The respondent no. 2 (appellant herein) appeared before the writ Court and has though raised the issue of maintainability of the writ petitions, as would be evident from order 18th July, 2023 passed by this Court and has defended the order passed by the Council and submitted that there is no error in the Award passed by the Council since all the procedures, as down under the statutory provision, has been followed. The proceeding commenced after sending the matter before the JHALSA for its conciliation and when conciliation failed thereafter the award was passed.
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29. The learned Single Judge, however, has disagreed with the grounds taken by the respondent no.2/ appellant on the ground that the award cannot be said to be award in the eye of law and disposed of the writ petitions by quashing and setting aside the order/award and the matter was remitted back to the Facilitation Council to pass order/Award afresh within three months from the date of passing of said order with a direction to the writ petitioner/respondent and respondent no. 2/ appellant to appear before the Jharkhand MSME Facilitation Council on 8th January, 2024 and present their written submissions, as directed vide order dated 12.09.2022 by the Facilitation Council, which is the subject matter of present intra-court appeals. Submission on behalf of appellant-respondent no. 2:
30. Mr. Ajit Kumar, learned senior counsel assisted by Mr. Anil Kumar, learned counsel for the appellants has assailed the impugned order on the following grounds.
31. Submission has been made that it is incorrect on the part of the writ petitioner-respondent to take the ground that the procedure as laid down under Section 18 of the Micro, Small and Medium Enterprises
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( 2025:JHHC:15000-DB ) Development Act, 2006 [in short ‗Act, 2006'] has not been followed.
32. It has been contended that the award has been passed in strict compliance of provision as contained under Section 18 of the Act, 2006 i.e., when the reference was drawn, then after appearance of the parties, the same was sent for conciliation in view of provision of Section 18(2) of the Act, 2006 by sending the party before JHALSA for providing alternate dispute resolution. But the conciliation failed, as resorted to under Section 18(2) of the Act, 2006, the Council proceeded for adjudication of the matter. The writ petitioner-respondent did not raise any grievance before the Council rather as directed has filed written notes of argument thereafter the Award has been passed. Hence, before passing award in the light of provision as contained under Section 18(3) of the Act, 2006, the process as laid down under Section 18(2) of the Act, 2006 was followed, therefore, the ground cannot be taken that the award in the eye of law is not the award, i.e., is in terms of Act, 2006.
33. But the learned Single Judge has not appreciated the aforesaid fact and come to the conclusion that the Award cannot be said to be award in the eye of law, hence, the writ petition has been entertained without
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( 2025:JHHC:15000-DB ) relegating the party before the appellate forum in view of provision as contained under Section 19 of the Act, 2006.
34. It has further been contended that the appeal could have been filed in view of the provision of Section 19 of the Act, 2006 but purposely the appeal has not been filed since there is pre-requisite condition under the provision of Section 19 of the Act, 2006 for deposit of 75% of the decreetal award. But the learned Single Judge did not consider the aforesaid facts into consideration while passing the impugned order and ignored the law laid down in the case of Tirupati Steels Vs. Shubh Industrial Component & Ors [(2022) 7 SCC 429] and Gujarat State Disaster Management Authority Vs. Aska Equipments Ltd. [(2022) 1 SCC 61].
35. It has also been contended that the issue of maintainability has not been decided by the learned writ court, however, the specific ground has been agitated by filing Interlocutory Application being I.A. No. 7319 of 2023, so far writ petition being W.P. (C) No. 928 of 2023 is concerned taking the ground that without exhausting the alternate and efficacious statutory remedy, as available under Section 19 of the Act, 2006, the writ petition has been filed. Therefore, submission has been made that the learned Single Judge has erred in
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( 2025:JHHC:15000-DB ) entertaining the writ petition in utmost disregard of the binding and statutory remedy provided under Section 34 of the Arbitration and Conciliation Act, 1996 [in short ‗Act, 1996'] in particular Section 34(2)a(iii).
36. Argument has been advanced that the learned Single Judge has travelled on the premise that the award is not an award in the eye of law and has come to the conclusion on the presumption that the process as stipulated under Section 18(3) of the Act, 2006 has not been followed.
37. Learned counsel for the appellant in support of its case has referred the judgments rendered by Hon'ble Apex Court in the case of India Glycols Limited and Another Vs. Micro and Small Enterprises Facilitation Council & Ors. [(2023) SCC OnLine SC 1852]; Bhaven Construction Vs. Sardar Sarovar Nigam Limited & Anr. [(2022) 1 SCC 75] and Deep Industries Ltd. Vs. ONGC & Anr. [(2020) 15 SCC 706].
Submission behalf of writ petitioner/respondent no. 2
38. Per contra, Mr. Indrajit Sinha, learned counsel for the respondent-writ petitioner has taken the following grounds in defending the order passed by the learned Single Judge.
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39. Submission has been made that there is no error in the order/judgment passed by the learned Single Judge on the ground that after sending the matter for conciliation in the light of provision as contained under section 18(2) of the Act, 2006, thereafter proper procedure as stipulated under section 18(3) of the Act, 2006 has not been followed rather without providing an opportunity of hearing, the award has been prepared, said to be passed in the light of provision as contained under Section 18 of the Act, 2006.
40. The writ petition therefore was filed on the ground that if any award has been passed under the provisions of Act, 2006 and if it is not in consonance with the provisions as contained under Section 18 of the Act, 2006, on being referred in view of provision as contained under Section 18 of the Act 2006 before the Council, then the writ petition will be maintainable.
41. The learned Single Judge on the aforesaid premise has entertained the writ petition and after taking into consideration the entire aspect of the matter, the award has been quashed and set aside.
42. It has been contended that the award is dated 12.09.2022 while on the same date the Council has
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( 2025:JHHC:15000-DB ) proceeded to adjudicate the issue after receiving failure report of conciliation from the JHALSA.
43. It has further been contended that the learned Single Judge has also taken into consideration the fact that before invoking Section 19 of the said Act, 2006, there should be a formal arbitral award and in the instant case, on 12.09.2022, the Council directed both the parties to submit their final written submissions within 15 days and on the very same day, the Award has been passed.
44. The argument has been advanced that the written submission was also filed on 12.09.2022 but the award itself was prepared on 12.09.2022. Hence, the procedure as stipulated on the one hand has not been followed while on the other hand, the Council has not considered the written note of submission filed on behalf of writ petitioner.
45. Hence, the mandate of Section 18 as stipulated in Act 2006 has not been followed in entirety and further the Council has not considered the written note of submission filed on behalf of writ petitioner/respondent which is in utter violation of principle of natural justice.
46. Learned counsel has argued that since herein the provision as contained under Section 18(3) of the Act
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( 2025:JHHC:15000-DB ) 2006 has not been followed and further in view of the Judgment passed by Hon'ble Apex Court in the case of JUVNL Limited vs. State of Rajasthan and Ors,2021 SCC OnLine SC 1257, the award has been confined to be not proper, hence, if in that premise, the writ petition has been entertained, the same cannot be said to suffer from an error.
47. Mr. Sinha, learned counsel for the respondent- writ petitioner has further submitted that the in the present pretext, the issue of maintainability of the writ petition, has though been considered in the case of India Glycols Limited & Anr. Vs. Micro and Small enterprises Facilitation Council (supra) but in the facts of the present case, the ratio of the said judgment is not applicable herein.
Response by learned counsel for the appellant:
48. Mr. Ajit Kumar, learned senior counsel appearing for the appellant-in response has submitted that the factual aspect of India Glycols Limited & Anr. Vs. Micro and Small Enterprises Facilitation Council (supra), upon which, reliance has been placed on behalf of appellant is very much applicable, if the factual aspect revolving the said case will be taken into consideration, then it would be evident that the writ petition would not
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( 2025:JHHC:15000-DB ) lie since it has been dealt with in the aforesaid judgment that the writ petition can be entertained if the award is depending upon the circumstances whether the award has been passed without asking the parties for conciliation in the light of provision as contained under Section 18(2) of the Act, 2006.
49. Herein, the factual aspect is quite different since the recourse has been asked to be taken by the parties by relegating them for conciliation in view of provision of Section 18(2) of the Act, 2006. Hence, only in order to giving go by to the statutory command of deposit of statutory amount, as provided under Section 19 of the Act, 2006, the writ petition has been preferred as such it is not to be entertained.
50. The argument has been advanced that the said issue has also been dealt with by the Hon'ble Apex Court in the case of Jharkhand Urja Vikas Nigam Limited Vs. State of Rajasthan & Ors. [(2021) 19 SCC 206]; Duro Shox Private Limited Vs. State of Maharashtra & Ors. [2024 OnLine Bom 3416] and the State Trading Corporation of India Ltd. Vs. Micro and Small Enterprises Facilitation Council and Anr. [2024 SCC OnLine Del 979].
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( 2025:JHHC:15000-DB ) Analysis
51. This Court has heard learned counsel for the parties and gone through the rival submissions advanced on behalf of parties as also the pleading available in the memo of appeal(s) and the writ petition(s).
52. The issue which has been raised in the facts and circumstances of the present case is with respect to the issue of maintainability of the writ petition, which has been entertained by the learned Single Judge by interfering with the award.
53. It is evident from the record that admittedly herein the issue of maintainability has been raised on behalf of appellant by filing Interlocutory Application but the same has not been decided by the learned Single Judge rather the learned Single Judge after allowing the writ petition has only passed order on the Interlocutory Application to the effect that pending Interlocutory Application stands disposed of.
54. It is bounden duty of the court that if any issue said to be the preliminary in nature has been agitated by either of the party then it is to be decided first. Particularly herein the issue of maintainability has been raised but the same has not been considered, since, no finding is available on the face of the order passed by
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( 2025:JHHC:15000-DB ) learned writ court and simply the Interlocutory Application has been said to be disposed of. The learned Single Judge ought to have taken into consideration the issue of maintainability first.
55. Since the aforesaid issue has specifically been raised by the appellant; as such, the issue is being considered herein.
56. Learned Single Judge has interfered with the impugned award and as would be evident from the finding so recorded that there should be a formal arbitral award and only then the Court or Council has to be approached in the light of the provision as contained under Section 19 of the Act, 2006 by fulfilling the statutory requirement of depositing 75% of the award amount. But according to learned Single Judge, the conciliation having been failed and on 12.09.2022, the direction was there by the Council to both the parties to submit their written note of submission within 15 days and on the very same day the award was pronounced, hence, the learned Single Judge has come to the conclusion that the same cannot be said to be an arbitral award, against which, an appeal can be preferred.
57. The learned Single Judge on the aforesaid premise has entertained the writ petition.
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58. This Court in view of aforesaid finding needs to refer herein that even the learned Single Judge has not disagreed with the issue of maintainability of writ petition rather the writ petition is to be entertained under Article 226 of the Constitution of India against the award said to be passed by the Council, if such award is not construed to be an arbitral award in the light of the provision as contained under Section 18(3) of the Act, 2006.
59. This Court before proceeding further needs to refer herein Section, 17, 18 and 19 of the Act, 2006, which reads as under:
Section 17: Recovery of amount due:
For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16.
Section 18: Reference to Micro and small Enterprises Facilitation Council.
(1) Notwithstanding anything contained in any 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 conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution 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
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( 2025:JHHC:15000-DB ) dispute as if the 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 ittoany 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 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 within its jurisdiction and a buyer located anywhere in 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.
Section 19: Application for setting aside decree, award or order.
No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent. of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court:
Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of
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( 2025:JHHC:15000-DB ) the case, subject to such conditions as it deems necessary to impose.
60. It is evident from Section 17 that for any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16.
61. Section 18 in particular sub-section (1) thereof provides that 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. Sub-section (2) provides that the Council, on receipt of a reference under sub-section (1), shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution 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 conciliation was initiated under Part III of that Act. Section 18(3) of the Act, 2006 provides that 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
- 26 -
( 2025:JHHC:15000-DB ) 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. Sub- Section (4) provides 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 shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. Sub-Section (5) of Section 18 of the Act, 2006 provides that every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.
62. Section 19 of the Act, 2006 provides that no application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it
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( 2025:JHHC:15000-DB ) seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court.
63. Meaning thereby the forum available to the party aggrieved not being a supplier to approach the court against the arbitral award passed under Section 18(3) of the Act, 2006, which can be only be taken recourse subject to deposit of 75% of amount in terms of the decree. The stipulation so made in Section 19 of the Act, 2006 clarifies that the aforesaid provision is mandatory since the word begins that „....no application shall be entertained by any court unless the appellant deposits 75 of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court‟. The significance of the word decree, award or, as the case may be, the other order in the manner directed by such court is having bearing.
64. It is, thus, evident that the Act, 2006, which has primarily made to protect the interest of small-scale industries in order to extent policy support for the small- scale enterprises so that they are enable to grow into medium once, got better and higher level of technology and achieve higher productivity to remain competitive in fast globalization area.
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( 2025:JHHC:15000-DB )
65. The MSME bills, so enacted, aims at facilitating the promotion, development and enhancement of the competitiveness of small and medium enterprises and seeks to (a) provides for statutory definition of small enterprises and even medium enterprises; (b).provides for full establishment of a national board for micro, small and medium enterprises, high level forum consisting of stake holders for participating review of and making recommendations on the policy and programme for the development of small and medium enterprises;
(c).provides for classification of micro, small and medium enterprises on the basis of investment in the plant and machinery or equipment and establishment of advisory committee to recommend on the related matter;
(d).empower the central government to notify programme, guideline or instructions for facilitating the promotion and development and enhancing the competitiveness of small and medium enterprises.
66. The expeditious disposal of the money dispute has also been considered to be one of the basic object and that is the reason the Act, 2006 has been enacted, which would be evident from sub-section (5) of the Section 18 of the Act, 2006 wherein time-frame has been given of final decision to be taken on reference to be
- 29 -
( 2025:JHHC:15000-DB ) made, which is directed to be decided within a period of ninety days from the date of making such reference.
67. The MSME Act 2006 is the special legislation to protect and further the interest of the MSME that provide for a dedicated dispute resolution mechanism under Section 18 of the Act, 2006 to ensure that the interest of the MSME be protected and without previous challenge to an award passed by the Facilitation Council under Section 18 of the Act, 2006 the statute has put in a caveat; any challenge to such an award is entertained only upon deposit of 75% of the awarded amount.
68. It also requires to refer herein that the provision as contained in MSME Act, 2006 with the aid of Act, 1996 are self-contained Act, providing therein the detailed mechanism for conciliation and arbitration. It is also provided therein that the award passed by the Facilitation Council shall be deemed to be an award passed by the Arbitration Tribunal and the same can be assailed under the MSME Act read with the provision of Act, 1996.
69. This Court also thought it proper to refer the object and aim of Arbitration and Conciliation Act, 1996 [hereinafter referred to as ‗Act, 1996']. The main objectives of the Arbitration and Conciliation Act, 1996
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( 2025:JHHC:15000-DB ) are to consolidate and amend the law relating to domestic and international arbitration, to define the law of conciliation, and to ensure enforcement of arbitral awards. The Act also aims to create a fair, efficient, and flexible procedure for arbitration, minimizing court intervention and encouraging amicable settlement through mediation or conciliation.
70. The day when the Arbitration and Conciliation Act, 1996 was enacted the issue of disposal of the money claim, which is to be adjudicated by the arbitral tribunal under the provision of Act, 1996 was not available and therefore to make the system more effective and further, in order to decide the commercial dispute at an early date, the Commercial Courts Act, 2015 was enacted.
71. The difference in between the MSME, 2006 and Arbitration and Conciliation Act, 1996 read with the Commercial Courts Act, 2015 is that if the claim has been referred before the Facilitation Council, the same is to be decided within a period of 90 days from the date of framing reference so as to take care of early disposal of claim in order to protect the interest of the small enterprises.
72. The other underlying principle to protect the interest of the small enterprises is the specific provision
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( 2025:JHHC:15000-DB ) having been inserted by way of Section 19 providing a forum to challenge the arbitral award before the court of law, which has been made mandatory to be entertained by any court subject to deposit of 75 % of the claim amount. The deposit of 75% of the claim amount is primarily to secure the money which is to be paid depending upon the final adjudication of the lis in favour of the small enterprises.
73. The reference of that is available in paragraph 9 and 10 of the judgment by Hon'ble Apex Court in the case of India Glycols Limited & Anr. Vs. Micro and Small Enterprises Facilitation Council, Medchal- Malkajgiri and Others (supra). For ready reference, paragraph 9 and 10 of the said judgment is quoted as under:
"9. Section 19 provides recourse against an award of the Facilitation Council in the following terms:
"19. Application for setting aside decree, award or order-- No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent. of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court:
- 32 -
( 2025:JHHC:15000-DB ) Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose."
10. In terms of Section 19, an application for setting aside an award of the Facilitation Council cannot be entertained by any court unless the appellant has deposited seventy- five per cent of the amount in terms of the award. In view of the provisions of Section 18(4), where the Facilitation Council proceeds to arbitrate upon a dispute, the provisions of the Act of 1996 are to apply to the dispute as if it is in pursuance of an arbitration agreement under sub-section (1) of Section 7 of that Act. Hence, the remedy which is provided under Section 34 of the Act of 1996 would govern an award of the Facilitation Council. However, there is a super added condition which is imposed by Section 19 of MSMED Act, 2006 to the effect that an application for setting aside an award can be entertained only upon the appellant depositing with the Council seventy-five per cent of the amount in terms of the award. Section 19 has been introduced as a measure of security for enterprises for whom a special provision is made in the MSMED Act by Parliament. In view of the provisions of Section 18(4), the appellant had a remedy under Section 34 of the Act of 1996 to challenge the award which it failed to pursue."
74. The issue of entertaining a writ petition has also been taken into consideration by Hon'ble Apex Court in the case of Jharkhand Urja Vikas Nigam Limited Vs. State of Rajasthan & Ors. [(2021) 19 SCC 206].
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( 2025:JHHC:15000-DB )
75. In the said case it has been stated therein that the reference had been made in the Council and thereafter, notice was issued but the respondent has not responded to the said notice, as such the Council issued summons for appearance of the appellant, namely, Jharkhand Urja Vikas Nigam Limited before the Council on a particular date but the Jharkhand Urja Vikas Nigam Limited-the appellant of the said case has again not appeared and in the aforesaid situation the order was passed on 06.08.2012 directing the appellant- Jharkhand Urja Vikas Nigam Limited to make payment to the 3rd respondent, as claimed within a period of 30 days.
76. The said order was challenged before the High Court by filing writ petition which was dismissed; hence, the intra-court appeal was preferred which was also dismissed, hence, the appeal before the Hon'ble Apex Court.
77. The Hon'ble Apex Court in the light of the aforesaid factual background has taken into consideration the purport of Section 18 of the Act, 2006 and while considering the aforesaid, it has been referred at paragraph 14 that Section 18(2) and 18(3) of the Act, 2006, the Council is obliged to conduct conciliation for
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( 2025:JHHC:15000-DB ) which the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 would apply, as if the conciliation was initiated under Part III of the said Act. Under Section 18(3), when conciliation fails and stands terminated, the dispute between the parties can be resolved by arbitration.
78. It has further been held at paragraph 15 of the said judgment, by referring the fundamental difference in between the conciliation and arbitration, that in conciliation, the conciliator assists the parties to arrive at an amicable settlement, in an impartial and independent manner. In arbitration, the Arbitral Tribunal/arbitrator adjudicates the disputes between the parties. The claim has to be proved before the arbitrator, if necessary, by adducing evidence, even though the rules of the Civil Procedure Code or the Evidence Act may not apply. Unless otherwise agreed, oral hearings are to be held.
79. The Hon'ble Apex Court considering the facts revolving the said case has held at paragraph 16 of the said judgment that if the appellant had not submitted its reply at the conciliation stage, and failed to appear, the Facilitation Council could, at best, have recorded the failure of conciliation and proceeded to initiate arbitration proceedings in accordance with the relevant
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( 2025:JHHC:15000-DB ) provisions of the Arbitration and Conciliation Act, 1996, to adjudicate the dispute and make an award. Proceedings for conciliation and arbitration cannot be clubbed. For ready reference, paragraphs 15 to 18 of the judgment are quoted as under:
"15. There is a fundamental difference between conciliation and arbitration. In conciliation, the conciliator assists the parties to arrive at an amicable settlement, in an impartial and independent manner. In arbitration, the Arbitral Tribunal/arbitrator adjudicates the disputes between the parties. The claim has to be proved before the arbitrator, if necessary, by adducing evidence, even though the rules of the Civil Procedure Code or the Evidence Act may not apply. Unless otherwise agreed, oral hearings are to be held."
16. If the appellant had not submitted its reply at the conciliation stage, and failed to appear, the Facilitation Council could, at best, have recorded the failure of conciliation and proceeded to initiate arbitration proceedings in accordance with the relevant provisions of the Arbitration and Conciliation Act, 1996, to adjudicate the dispute and make an award. Proceedings for conciliation and arbitration cannot be clubbed."
17. In this case, only on the ground that the appellant had not appeared in the proceedings for conciliation, on the very first date of appearance, that is, 6-8-2012, an order was passed directing the appellant and/or its predecessor Jharkhand State Electricity Board to pay Rs 78,74,041 towards the principal claim and Rs 91,59,705 odd towards interest. As it is clear from the records of the impugned proceedings that the Facilitation Council did not initiate arbitration proceedings in accordance with the relevant provisions of the Arbitration and Conciliation Act, 1996.
18. The order dated 6-8-2012 is a nullity and runs contrary not only to the provisions of the MSMED Act but contrary to various mandatory provisions of the Arbitration and
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( 2025:JHHC:15000-DB ) Conciliation Act, 1996. The order dated 6-8-2012 is patently illegal. There is no arbitral award in the eye of the law. It is true that under the scheme of the Arbitration and Conciliation Act, 1996, an arbitral award can only be questioned by way of application under Section 34 of the Arbitration and Conciliation Act, 1996. At the same time, when an order is passed without recourse to arbitration and in utter disregard to the provisions of the Arbitration and Conciliation Act, 1996, Section 34 of the said Act will not apply. We cannot reject this appeal only on the ground that the appellant has not availed the remedy under Section 34 of the Arbitration and Conciliation Act, 1996."
80. It also appears from the judgment rendered by Hon'ble Apex Court in the case of India Glycols Limited & Anr. Vs. Micro and Small Enterprises Facilitation Council, Medchal-Malkajgiri and Others (supra) passed by three-judges Bench of Hon'ble Apex Court, wherein also the issue has been taken into consideration regarding the maintainability of the writ petition.
81. The Hon'ble Apex Court in the said case has laid down the proposition while taking into consideration the factual aspects of the said case wherein the Facilitation Council decreed the claim in the principal sum of Rs. 40,29,862/- along with interest. The aforesaid award was challenged by filing writ petition in exercise of power conferred under Articles 226/227 of the Constitution.
82. The learned Single Judge of the High Court of Telengana vide judgment and order dated 14th September
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( 2025:JHHC:15000-DB ) 2022, allowed the writ petition and set aside the award on the ground that the claim was barred by limitation. The second respondent preferred intra-court before the Division Bench. The Division Bench reversed the view of learned Single Judge by coming to the conclusion that the writ petition instituted by the appellant was not maintainable in view of the specific remedies which are provided under the special statute. The High Court has further held that the appellant ought to have taken recourse to the remedy under Section 34 of the Arbitration and Conciliation Act, 1996 and having failed to do so, a writ petition could not be entertained.
83. The matter travelled before the Hon'ble Apex Court. The Hon'ble Apex Court, after hearing the parties, has referred the provisions of Section 18 (3) and 19 of the Act, 2006 and held that in terms of Section 19, an application for setting aside an award of the Facilitation Council cannot be entertained by any court unless the appellant has deposited seventy-five per cent of the amount in terms of the award. In view of the provisions of Section 18(4), where the Facilitation Council proceeds to arbitrate upon a dispute, the provisions of the Act of 1996 are to apply to the dispute as if it is in pursuance of an arbitration agreement under sub-section (1) of Section
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( 2025:JHHC:15000-DB ) 7 of that Act. Hence, the remedy which is provided under Section 34 of the Act of 1996 would govern an award of the Facilitation Council. However, there is a super added condition which is imposed by Section 19 of MSMED Act, 2006 to the effect that an application for setting aside an award can be entertained only upon the appellant depositing with the Council seventy-five per cent of the amount in terms of the award. Section 19 has been introduced as a measure of security for enterprises for whom a special provision is made in the MSMED Act by Parliament. In view of the provisions of Section 18(4), the appellant had a remedy under Section 34 of the Act of 1996 to challenge the award which it failed to pursue.
84. The Hon'ble Apex Court has also considered the judgment rendered in the case of Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods Private Limited (Unit 2) & Anr. [(2023) 6 SCC 401], a two-Judge Bench of the Hon'ble Apex Court wherein, it has been held that :..―The proceedings before the Facilitation Council/institute/centre acting as an arbitrator/Arbitral Tribunal under Section 18(3) of the MSMED Act, 2006 would be governed by the Arbitration Act, 1996.‖
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( 2025:JHHC:15000-DB )
85. The Hon'ble Apex Court has come to the conclusion that the appellant failed to avail the remedy under Section 34. If it were to do so, it would have been required to deposit seventy-five per cent of the decretal amount. This obligation under the statute was sought to be obviated by taking recourse to the jurisdiction under Articles 226/227 of the Constitution, which was held to be impermissible.
86. The argument which was raised on behalf of appellant to the effect that the provisions of Limitation Act, 1963 has no application, which has been affirmed by the Division Bench in the impugned judgment suffers from perversity and hence a petition under Article 226 of the Constitution could have been entertained. The aforesaid submission was not accepted by Hon'ble Apex Court for the reason that Section 18 of the MSMED Act, 2006 provides for recourse to a statutory remedy for challenging an award under the Act of 1996. However, recourse to the remedy is subject to the discipline of complying with the provisions of Section 19 of the Act, 2006. The entertaining of a petition under Articles 226/227 of the Constitution, in order to obviate compliance with the requirement of pre-deposit under Section 19, would defeat the object and purpose of the
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( 2025:JHHC:15000-DB ) special enactment which has been legislated upon by Parliament.
87. Accordingly, the Hon'ble Apex Court affirmed the impugned judgment of the High Court of Telangana by affirming the finding that the petition which was instituted by the appellant to challenge the award of the Facilitation Council was not maintainable, in view of the provisions of Section 34 of the Act of 1996.
88. For ready reference, the paragraph 11 to 17 of the judgment is quoted as under:
"11. In the judgment of this Court in Gujarat State Civil Supplies Corporation Limited (supra), a two-Judge Bench of the Court has observed, in the course of drawing its conclusions, that:
"The proceedings before the Facilitation Council/institute/ centre acting as an arbitrator/Arbitral Tribunal under Section 18(3) of the MSMED Act, 2006 would be governed by the Arbitration Act, 1996."
12. The appellant failed to avail of the remedy under Section
34. If it were to do so, it would have been required to deposit seventy-five per cent of the decretal amount. This obligation under the statute was sought to be obviated by taking recourse to the jurisdiction under Articles 226/227 of the Constitution. This was clearly impermissible.
13. For the above reasons, we are in agreement with the view of the Division Bench of the High Court that the writ petition which was instituted by the appellant was not maintainable.
14. Mr. Parag P Tripathi, senior counsel appearing on behalf of the appellant sought to urge that the view of the Facilitation Council to the effect that the provisions of the Limitation Act, 1963 have no application, which has been affirmed by the Division Bench in the impugned judgment, suffers from a
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( 2025:JHHC:15000-DB ) perversity, and hence a petition under Article 226 of the Constitution ought to have been entertained. We cannot accept this submission for the simple reason that Section 18 of the MSMED Act, 2006 provides for recourse to a statutory remedy for challenging an award under the Act of 1996. However, recourse to the remedy is subject to the discipline of complying with the provisions of Section 19. The entertaining of a petition under Articles 226/227 of the Constitution, in order to obviate compliance with the requirement of pre-deposit under Section 19, would defeat the object and purpose of the special enactment which has been legislated upon by Parliament.
15. For the above reasons, we affirm the decision of the Division Bench by holding that it was justified in coming to the conclusion that the petition under Articles 226/227 of the Constitution instituted by the appellant was not maintainable. Hence, it was unnecessary for the High Court, having come to the conclusion that the petition was not maintainable, to enter upon the merits of the controversy which arose before the Facilitation Council.
16. Mr. Parag P Tripathi, senior counsel then submitted that the appellant would move proceedings under Section 34 of the Act of 1996 and this Court may direct that they may be disposed of expeditiously. Having come to the conclusion that the remedy which was adopted by the appellant was thoroughly misconceived, it is not necessary for this Court to make any observation on what course of action should be adopted by the appellant. Were the appellant at this stage to take recourse to the proceedings under Section 34 of the Act of 1996, it would be open to the second respondent to object on all counts which are available in law.
17. For the above reasons, we affirm the impugned judgment of the High Court of Telangana dated 21 March 2023 by affirming the finding that the petition which was instituted by the appellant to challenge the award of the Facilitation Council was not maintainable, in view of the provisions of Section 34 of the Act of 1996."
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( 2025:JHHC:15000-DB )
89. The Hon'ble Apex Court again in the case of Gujrat State Disaster Management Authority Vs. Aska Equipments Limited [(2022 1 SCC 61], has held the issue of deposit of the amount under Section 75% of the awarded amount to be mandatory.
90. The Hon'ble Apex Court referring to Section 19 of the Act, 2006 has held that considering the language used in Section 19 of the MSME Act, 2006 and the object and purpose of providing deposit of 75% of the awarded amount as a pre-deposit while preferring the application/appeal for setting aside the award, it has to be held that the requirement of deposit of 75% of the awarded amount as a pre-deposit is mandatory. For ready reference, paragraph 15 of the judgment is quoted as under:
"15. In view of the above and considering the language used in Section 19 of the MSME Act, 2006 and the object and purpose of providing deposit of 75% of the awarded amount as a pre-deposit while preferring the application/appeal for setting aside the award, it has to be held that the requirement of deposit of 75% of the awarded amount as a pre-deposit is mandatory. Therefore, as such, both the High Court as well as the learned Additional District Judge (Commercial), Dehradun were justified in directing the appellant to deposit 75% of the awarded amount as a pre-deposit."
91. Similar issue fell for consideration before the Hon'ble Apex Court in the case of Silpi Industries and
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( 2025:JHHC:15000-DB ) ors Vs. Kerala State Road Transport Corporation & Anr. [(2021) 18 SCC 790]. The factual background involved in the case is that the respondent-Kerala State Road Transport Corporation (for short ―KSRTC‖), invited tenders for supply of thread rubber for tyre rebuilding. The appellants, who were the claimants before the arbitrator, were given purchase orders. As per the terms of the purchase order, 90% of the total purchase price was payable to the appellants/claimants on supply of materials and the balance 10% was to be paid subject to final performance report. When the 10% balance amount was not paid as per the purchase order, the appellants/claimants herein have approached the Industrial Facilitation Council. As the conciliation failed, the claims made by the appellants herein were referred to arbitration under provisions of the 1996 Act. The awards were passed in favour of the claimants and such awards were challenged by way of applications for setting aside the same under Section 34 of the 1996 Act. When their applications were dismissed, the respondents have carried the matter by way of appeals under Section 37 of the 1996 Act before the High Court of Kerala at Ernakulam, where the issues were framed as to - (a) Whether the Limitation Act, 1963 applies to arbitration
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( 2025:JHHC:15000-DB ) proceedings held under the IDPASC and the MSMED Acts?;
(b) Which is the starting point of limitation to raise claim for the 10% unpaid purchase price?; And (c) Whether counterclaim is entertainable in the arbitration proceedings held pursuant to the provisions of the IDPASC and the MSMED Acts?‖
92. The High Court, after considering the submissions of the parties and by referring to various provisions of the Arbitration and Conciliation Act, 1996 and the provisions of the Limitation Act, 1963, has answered the issue of limitation and held that the Limitation Act, 1963 is applicable to the proceedings under the 1996 Act arising out of the MSMED Act. While answering the third question with regard to maintainability of counterclaim, the High Court has held that in view of Section 23(2-A) of the 1996 Act, the ―counterclaim‖ and ―set-off‖ are maintainable. Aggrieved by the findings recorded by the High Court on the applicability of the Limitation Act, 1963 and maintainability of counterclaim, the claimants have filed these appeals on various grounds.
93. In second set of appeals, the factual background of the case is that the appellant and the respondent herein have entered into a contract for supply and
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( 2025:JHHC:15000-DB ) installation of hydro-mechanical equipments. The parties have signed an agreement on 27-3-2011, containing various clauses. It is the case of the appellant that it has completely executed the contract and the project was commissioned on 27-6-2015. The appellant herein alleging that, though it has fulfilled all its obligations under the contract, the respondent has refused to make payments as per the contract, has filed a claim petition, before the Micro and Small Enterprises Facilitation Council constituted under the provisions of the MSMED Act, on 20-3-2017. The claim was filed in respect of supply of goods and services rendered to the respondent Company. It is the case of the appellant that pursuant to notice issued by Facilitation Council, the respondent appeared before the Council. Thereafter the respondent has filed OP No. 617 of 2017 before the High Court of Judicature at Madras. The said application was filed under Section 11(6) of the 1996 Act praying for appointment of a second arbitrator to decide upon disputes that have arisen between the parties pursuant to the breach of terms and conditions of contract for supply of hydro-mechanical equipments. The said application filed by the respondent herein, is opposed by the appellant mainly on the ground that it has already
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( 2025:JHHC:15000-DB ) moved the Micro and Small Enterprises Facilitation Council for resolution of disputes, as such, the respondent as well participate in the proceedings before the Council, prayed for dismissal of application filed under Section 11(6) of the 1996 Act. Before the High Court, it was the case of the respondent that the Facilitation Council has been constituted primarily to deal with the disputes that are raised by the supplier and does not envisage the laying of counterclaim by other party to a contract, as such it can seek appointment of arbitrator under Section 11(6) of the 1996 Act. The High Court, while considering the definition of ―supplier‖ under Section 2(n) of the MSMED Act and also by placing reliance on Sections 17 and 18 of the MSMED Act, has allowed the application and appointed Mr Justice K. Gnanaprakasam, former Judge of the Madras High Court as 2nd arbitrator. The said order has been challenged before the Hon'ble Apex Court.
94. The Hon'ble Apex Court, after hearing the parties has framed following two issues:
(i) Whether the provisions of the Limitation Act, 1963 is applicable to arbitration proceedings initiated under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006?
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( 2025:JHHC:15000-DB )
(ii) Whether, counterclaim is maintainable in such arbitration proceedings?
95. The Hon'ble Apex Court, however, before answering those issues has first gone into the object and intent of enactment of Micro, Small and Medium Enterprises Development Act, 2006 as also Ancillary Industrial Undertakings Act, 1993, which was repealed by virtue of Section 32 of the Act, 2006. For ready reference, paragraph 19 to 23 of the judgment is quoted as under:
"19. Act 32 of 1993 was an outcome pursuant to a policy statement on small scale industries made by the Government in Parliament. It was felt that, inadequate working capital in small scale or an ancillary industrial undertaking causes serious and endemic problems affecting the health of such undertaking. The Small Scale Industries Board, which was an apex advisory body on policies relating to small scale industrial units with representatives from all the States, governmental bodies and industrial sector was also of the same view. Therefore, it was felt that prompt payments of money by buyers should be statutorily ensured and mandatory provisions for payment of interest on outstanding money, in case of default, should be made.
20. The "appointed day", as defined under Section 2(b) of the said Act, means--the day following immediately after the expiry of the period of thirty days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier. Therefore, a liability to make payment by the buyer was made under Section 3 of the said Act mandating that buyer shall make payment before the agreed date by the parties, where there is no agreement, before the appointed day. In case of failure
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( 2025:JHHC:15000-DB ) to make payment by the buyer within the stipulated time as per Section 3, buyer was made to pay interest at one and a half time of prime lending rate charged by the State Bank of India. There was also a mechanism for recovery and created Industry Facilitation Council, as primary body and appellate authority was notified under Section 7 of the said Act. Under Section 10 of the said Act, Act 32 of 1993 was given overriding effect.
21. The Micro, Small and Medium Enterprises Development Act, 2006 was enacted to provide, for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto. By bringing the aforesaid Act (Act 27 of 2006) w.e.f. 16-6- 2006, the earlier Act, namely, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 was repealed by virtue of Section 32 of the 2006 Act. Prior to the enforcement of Act 32 of 1993, the small scale industry was defined only by notification under Section 11-B of the Industries (Development and Regulation) Act, 1951. As per Section 29- B of the said Act, notifications were being issued notifying reservation of items for exclusive manufacture in small scale industry sector. Except the abovesaid two provisions, as there was no legal framework for the small scale industry, and by noticing that the small scale industry is the dynamic and vibrant sector of the country's economy, it was felt to bring a comprehensive Central enactment to provide appropriate legal framework for the sector to facilitate its growth and development.
22. It is also clear from the Statement of Objects and Reasons of the Act, that the need which was felt to extend policy support for small scale sector so that they are enabled to grow into medium ones and to adopt better and higher levels of technology and achieve higher productivity to remain competitive in fast globalisation period. It was also noticed that medium industry or enterprise was not defined by any law. From the Statement of Objects and
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( 2025:JHHC:15000-DB ) Reasons, it is clear that the said Act was enacted to provide statutory definitions to "small enterprise" and "medium enterprise"; to provide for establishment of National Small and Medium Enterprises Board; provide for classification of small and medium enterprises on the basis of investment in plant and machinery; empower the Central Government to notify programmes, guidelines for enhancing the competitiveness of small and medium enterprises; to make provisions for ensuring timely and smooth flow of credit to small and medium enterprises to minimise the incidence of sickness; empower the Central and State Governments to notify preference policies in respect of procurement of goods and services; empowering the Central Government to create a Fund or Funds for facilitating promotion and development and enhancement of the competitiveness of small enterprises and medium enterprises; to make further improvements in the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 and to make that enactment a part of the proposed legislation and to repeal the enactment, etc.
23. From the Statement of Objects and Reasons of both the above legislations, it is clear that the earlier legislation i.e. Act 32 of 1993 was confined only with regard to delayed payments to small scale and ancillary industrial undertakings but by subsequent enactment of 2006, a comprehensive legislation was brought covering the micro, small and medium enterprises. Under the new Act, there is a provision for establishment of Board by the Central Government, namely, National Board for Micro, Small and Medium Enterprises. The "enterprises" were classified under Chapter III of the 2006 Act into micro, small and medium enterprises. Liability of buyer and the mechanism in the event of default is by various provisions under Chapter V of the Act."
96. Thereafter, the Hon'ble Apex Court has dealt with the different provisions of Act, 2006 and then dealt with
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( 2025:JHHC:15000-DB ) the first issue of applicability of Limitation Act, 1963 and a discussion has been held that we hold that the provisions of the Limitation Act, 1963 will apply to the arbitrations covered by Section 18(3) of the 2006 Act. For ready reference, paragraph 25 to 27 of the judgment is quoted as under:
25. With regard to the first issue, namely, applicability of Limitation Act, 1963 to the arbitration proceedings initiated under the provisions of Micro, Small and Medium Enterprises Development Act, 2006, we need to notice certain relevant sections of the Act. As per Section 15 of the said Act, where supplier supplies any goods or renders any services to any buyer, the buyer shall make payment on or before the agreed date between the parties in writing or where there is no agreement, before the appointed day. Section 16 deals with date from which and rate of interest payable in the event of not making the payment. The recovery mechanism for the amount due is covered by Sections 17 and 18 of the said Act. If any party has a dispute with regard to amount due under Section 17, a reference is required to be made to the Micro and Small Enterprises Facilitation Council. On such reference, the Council is empowered to conduct conciliation in the matter or seek assistance of any institution or centre providing alternate dispute resolution services by making a reference to such institution for conducting conciliation. If the conciliation is not successful, as contemplated under Section 18(2) of the said Act, same stands terminated under Section 18(3) of the said Act. Thereafter, 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 are made applicable as if the arbitration was in pursuance of arbitration agreement between the parties, under sub-section (1) of Section 7 of the 1996 Act.
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26. Applicability of the Limitation Act, 1963 to the arbitrations is covered by Section 43 of the 1996 Act. The High Court, while referring to abovesaid provisions and the judgment of this Court in A.P. Power Coordination Committee v. Lanco Kondapalli Power Ltd. [A.P. Power Coordination Committee v. Lanco Kondapalli Power Ltd., (2016) 3 SCC 468] has held that the Limitation Act, 1963 is applicable to the arbitrations covered by Section 18(3) of the 2006 Act. A reading of Section 43 itself makes it clear that the Limitation Act, 1963 shall apply to the arbitrations, as it applies to proceedings in court. When the settlement with regard to a dispute between the parties is not arrived at under Section 18 of the 2006 Act, necessarily, the Micro and Small Enterprises Facilitation Council shall take up the dispute for arbitration under Section 18(3) of the 2006 Act or it may refer to institution or centre to provide alternate dispute resolution services and provisions of the Arbitration and Conciliation Act, 1996 are made applicable as if there was an agreement between the parties under sub-section (1) of Section 7 of the 1996 Act.
27. In view of the express provision applying the provisions of the Limitation Act, 1963 to arbitrations as per Section 43 of the Arbitration and Conciliation Act, 1996, we are of the view that the High Court has rightly relied on the judgment in A.P. Power Coordination Committee [A.P. Power Coordination Committee v. Lanco Kondapalli Power Ltd., (2016) 3 SCC 468] and held that the Limitation Act, 1963 is applicable to the arbitration proceedings under Section 18(3) of the 2006 Act. Thus, we are of the view that no further elaboration is necessary on this issue and we hold that the provisions of the Limitation Act, 1963 will apply to the arbitrations covered by Section 18(3) of the 2006 Act. We make it clear that as the judgment of the High Court is an order of remand, we need not enter into the controversy whether the claims/counterclaims are within time or not. We keep it open to the primary authority to go into such issues and record its own findings on merits"
97. So far as the second issue regarding maintainability of counter claim in the arbitration
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( 2025:JHHC:15000-DB ) proceedings initiated as per Section 18(3) of the Act 2006 is concerned, it has been held that when there is a provision for filing counterclaim and set-off which is expressly inserted in Section 23 of the 1996 Act, there is no reason for curtailing the right of the respondent for making counterclaim or set-off in proceedings before the Facilitation Council. For ready reference, paragraph 33 and 34 of the judgment is quoted as under:
"33. From a reading of Section 18(3) of the 2006 Act it is clear that when the conciliation initiated under sub-section (2) of Section 18 of the said Act is not successful, the Council shall either itself take up the dispute for arbitration or refer to any institution for arbitration. Further Section 18(3) of the said Act also makes it clear that the provisions of 1996 Act are made applicable as if there is an agreement between the parties under sub-section (1) of Section 7 of the 1996 Act. Section 23 of the 1996 Act deals with the statement of claim and defence. Section 23(2-A), which gives a right to the respondent to submit a counterclaim or plead set-off with regard to claims within the scope of the arbitration agreement, is brought into statute by Amending Act 3 of 2016. If we look at the Statement of Objects and Reasons of the Amending Act, same is also enacted to provide for speedy disposal of cases relating to arbitration with least court intervention. Clause 11 of the Bill, by which sub-section (2-A) was proposed to be inserted, states that sub-section (2-A) was intended to give an opportunity to the respondent, in support of his case, to submit counterclaim or a set-off if such counterclaim or set-off falls within the scope of arbitration agreement. When Section 18(3) makes it clear that in the event of failure by the Council under Section 18(2) if proceedings are initiated under Section 18(3) of the 1996 Act, the provisions of 1996 Act are not only
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( 2025:JHHC:15000-DB ) made applicable but specific mention is made to the effect as if the arbitration was in pursuance to an arbitration agreement referred to in sub-section (1) of Section 7 of the 1996 Act. When there is a provision for filing counterclaim and set-off which is expressly inserted in Section 23 of the 1996 Act, there is no reason for curtailing the right of the respondent for making counterclaim or set-off in proceedings before the Facilitation Council.
34. It is also further to be noted that if we do not allow the counterclaim made by the buyer in the proceedings arising out of claims made by the seller, it may lead to parallel proceedings before the various fora. On one hand, in view of beneficial legislation, seller may approach the Facilitation Council for claims, in the event of failure of payment by the buyer under provisions of 2006 Act, at the same time, if there is no separate agreement between the parties for any arbitration in a given case, buyer may approach the civil court for making claims against the seller, or else if there is an agreement between the parties for arbitration in the event of dispute between the parties, parties may seek appointment of arbitrator. At the same time if the seller is covered by definition under micro, small and medium enterprises, seller may approach the Facilitation Council for making claims under the provisions of Micro, Small and Medium Enterprises Development Act, 2006. In such event, it may result in conflicting findings, by various forums."
98. The Hon'ble Court has further held that when there are two legislations, the provisions of MSMED Act will prevail since it being a special statute and held that it will have an overriding effect vis-à-vis Arbitration and Conciliation Act, 1996, which is a general Act. The relevant paragraph of the judgment is quoted as under:
"39. Thus, it is clear that out of the two legislations, the provisions of the MSMED Act will prevail, especially when it
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( 2025:JHHC:15000-DB ) has overriding provision under Section 24 thereof. Thus, we hold that the MSMED Act, being a special statute, will have an overriding effect vis-à-vis the Arbitration and Conciliation Act, 1996, which is a general Act. Even if there is an agreement between the parties for resolution of disputes by arbitration, if a seller is covered by Micro, Small and Medium Enterprises Development Act, 2006, the seller can certainly approach the competent authority to make its claim. If any agreement between the parties is there, same is to be ignored in view of the statutory obligations and mechanism provided under the 2006 Act. Further, apart from the provision under Section 23(2-A) of the 1996 Act, it is to be noticed that if counterclaim is not permitted, buyer can get over the legal obligation of compound interest at 3 times of the bank rate and the "75% pre-deposit"
contemplated under Sections 16 and 19 of the MSMED Act.‖
99. Reliance since has been placed upon the judgment rendered in the case of Duro Shox Private Limited Vs. State of Maharashtra & Ors [2024 SCC OnLine Bom 3416], and State Trading Corporation of India Ltd vs. Micro and Small Enterprises Facilitation Council & Anr. [2024 SCC OnLine Del 979], as such the same are also being referred herein.
100. The factual aspect involved in the case of Duro Shox Private Limited Vs. State of Maharashtra & Ors (supra) is that the petitioner which is a private limited company entered into a supplier agreement with Respondent 3 effective from 12-4-2019. The petitioner, also entered into separate agreements i.e. duroshox supplier agreement and duroshox supplier quality
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( 2025:JHHC:15000-DB ) agreement dated 7-5-2019 as reflected in e-mail dated 03-06-2019 and 22-10-2019 and other correspondence between the parties, which includes supply manual and other forms of binding contracts between the parties. It is contended that the petitioner later on realised that the material supplied by Respondent 3 was lacking in quality and faulty in nature and the same was duly communicated to Respondent 3 along with the demand of undertaking corrective measures. As Respondent 3 failed to replace defective supplies, the petitioner was exposed to incur huge remediation costs, cost for replacement of materials, transportation cost and cost for packaging. Respondent 3 being a medium and small- scale industry under Section 18 of the MSMED Act filed a claim i.e. application No. UDYAM-HM-04- 0017041/s/00002, thereby demanding an outstanding amount of Rs 4,53,87,615 (Rupees four crores fifty-three lakhs eighty-seven thousand six hundred and fifteen) and the interest of Rs 31,46,612 (Rupees thirty-one lakhs forty-six thousand six hundred twelve). The petitioner in response to the claim filed the details reply and a counterclaim as also an application under Section 25 of the Arbitration and Conciliation Act. Thereafter, the Respondent 2 after giving sufficient opportunity to the
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( 2025:JHHC:15000-DB ) party to respond passed final order dated 2-2-2024, ordering the petitioner to pay outstanding amount of Rs 4,53,87,615 amongst other directions. Aggrieved thereof, the petitioner preferred the writ petition. Before the writ court, the respondent 3, took the ground that there is statutory remedy of appeal available to challenge the impugned order and that the present is not the case for invoking the writ jurisdiction of the court as the judgment is passed by the authority constituted under the MSMED Act.
101. The writ court, therefore, first considered the issue that arises for consideration before this Court is, "whether the jurisdiction of the High Court under Articles 226/227 of the Constitution of India can be invoked to set aside an "award" passed under Section 18 of the MSMED Act, as being ex facie illegal and not being an "award" in the eyes of law." The writ Court, after discussing the provisions of law and judicial pronouncements has come at conclusion at paragraph 18, which is quoted as under:
"18. Considering the above judgments i.e : (1) Jharkhand Urja Vikas Nigam Ltd. case; (2) Bhaven Construction case; (3) SBP & Co. case and (4) India Glycols Ltd. case, the law on the subject of entertainment the petition by the High Court under Articles 226/227 of the Constitution of India to challenge an "award" or orders passed by the Facilitation
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( 2025:JHHC:15000-DB ) Council/Arbitral Tribunal under the MSMED Act is summarised as under:
(1) The power of the High Court under Article 226 of the Constitution of India to issue writs/directions is a basic feature of the Constitution and cannot be curtailed by parliamentary legislation L. Chandra Kumar v. Union of India. However, the High Court under Articles 226 and 227 of the Constitution of India would interfere rarely in exceptional circumstances in the arbitral proceedings, when the order passed by the Facilitation Council/Arbitral Tribunal is perverse and patently lacking in inherent jurisdiction and, when there is no semblance of "Award" as contemplated under Section 18 of the MSMED Act.
(2) India Glycols Ltd. case, does not overrule Jharkhand Urja Vikas Nigam Ltd. case1. India Glycols Ltd. case, should be construed as imposing a higher bar to invoke jurisdiction of the High Court under Article 226 of the Constitution of India, as it is held that entertaining a petition under Articles 226/227 of the Constitution of India, in order to obviate compliance with the requirement of predeposit under Section 19, would defeat the object and purpose of the special enactment which has been legislated upon by Parliament.
(3) When the "award" is made by the Facilitation Council/Tribunal by exercising jurisdiction vested in it, however erroneous the "award" may be, the same has to be challenged only by invoking Section 34 of the Arbitration Act, and this Court would not exercise jurisdiction under Articles 226 and 227 of the Constitution of India, only to avoid the aggrieved party from the hardship of deposit of 75% of the award amount in terms of Section 19 of the MSMED Act
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102. After answering the issue of maintainability, the learned writ court has gone into the merit of the issue and has come to the conclusion as under:
"22. Unlike Jharkhand Urja Vikas Nigam Ltd. case, in the instant case, parties are heard by the Facilitation Council/Tribunal. However, I cannot go into the issue whether sufficient opportunity was given to the petitioner to lead evidence or whether the Tribunal could have passed the impugned "award" based on admission made by way of ledger confirmation. The impugned "Award" is passed under Section 18 of the MSMED Act. Detail discussion of the award is avoided so as not to prejudice the case of the parties before the court where the award may be challenged. The aggrieved party may challenge the award before the court under Section 34 of the Arbitration Act. In view of the judgment of the India Glycols Ltd. case10, this Court would not exercise the writ jurisdiction to obviate the requirement of deposit as contemplated under Section 19 of the MSMED Act.
23. All the grounds raised in the present petition can be taken up before the court under Section 34 of the Arbitration Act. All contentions are left open. The observations made in this petition is limited for the purpose of deciding this petition and should not be taken into consideration for any purpose by the court if award is challenged under Section 34 of the Arbitration Act. The petitioner is left with the remedy as available in law.
24. In view of the same, the writ petition stands dismissed with liberty being reserved to the petitioner to pursue the remedy as available in law."
103. The factual background involved in the case of State Trading Corporation of India Ltd. (supra) is that the writ petition was filed by the Appellant therein challenging the Award dated 1st December, 2012, whereby the learned Arbitrator awarded a sum of Rs.
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( 2025:JHHC:15000-DB ) 7,21,10,729/- to the Respondent No. 2 along with pendente lite and future interest as per the Micro, Small and Medium Enterprises Development Act, 2006 (‗MSMED Act') and litigation costs of Rs. 50,000/- on the ground that the Award is non-est in law and deserves to be set aside on ground of lack of inherent jurisdiction. The writ petition was dismissed, as such the writ petitioner preferred intra-court appeal contending that since, at the time of execution of contract and/or at the time of concluding of supplies thereunder i.e., in the year 1991, the Respondent No. 2 was not registered under the MSMED Act, which itself was enacted in the year 2006 and therefore, the said Act is not applicable to the transactions/contracts entered into before enactment of said Act.
104. The Division Bench, after hearing the parties, has come to the conclusion that the writ petition filed by the Appellant under Articles 226/227 of the Constitution for setting aside the Award was not maintainable and the learned Single Judge has rightly dismissed the writ petition. The relevant concluding paragraph of the judgment is quoted as under:
13. With respect to the objection taken by the Appellant to the effect that the MSEFC does not have inherent jurisdiction to make a reference to arbitration under the
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( 2025:JHHC:15000-DB ) provisions of MSMED Act and therefore a writ petition would be maintainable, is also misconceived. In similar facts, the Supreme Court in Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods (P) Ltd.4 has categorically held that such an issue of lack of inherent jurisdiction can be decided by the Arbitral Tribunal appointed under the said Act, which by virtue of Section 18(3) of MSMED Act is competent to rule on its own jurisdiction as also the other issues in view of Section 16 of the Act of 1996. The sequitur is that, the decision of the Arbitral Tribunal on the issue of jurisdiction would be amendable to challenge under Section 34 of the Act of 1996.
14. In light of the aforesaid judgments of the Supreme Court and more specifically the judgment India Glycols Ltd. v. MSEFC, Medchal-Malkajgiri (supra) we are of the considered opinion that the judgment of the learned Single Judge of this Court in Malani Construction Company (supra) holding that a writ petition under Article 227 of the Constitution can be maintained, is not the correct view.
15. The Appellant has already taken recourse to the proceedings under Section 34 of the Act of 1996 and has raised the objection of lack of jurisidiction of the Arbitrator in the said petition. The contention of the Appellant that the obligation to comply with the condition of pre-deposit under Section 19 of the MSMED Act is onerous, is without any merit. The mandatory nature of Section 19 of the MSMED Act has been pronounced upon by the Supreme Court in Gujarat State Disaster Management Authority v. Aska Equipments Ltd.5 and the same cannot be circumvented by the Petitioner by filing the present petition. The Petitioner admittedly has sufficient annual income of Rs. 62 crores and hardship, if any, in making the deposit is an issue which can be raised before the competent Court in terms of the observations made by the Supreme Court in Tirupati Steels v. Shubh Industrial Component.
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( 2025:JHHC:15000-DB )
16. In view of the aforesaid observation, the present appeal is without any merit and is accordingly, dismissed along with pending applications."
105. Similar issue fell for consideration before the Hon'ble Apex Court in the case of Heavy Engineering Corportion Limited Vs. State of Jharkhand & Ors [2023 SCC OnLine Jhar 2779], wherein the factual background of the case is that pursuant to tender notice dated 13th August 2010 issued by the Corporation for supply of fabricated items an offer was made by M/s. National Small Industries Corporation Limited (in short, NSICL) which was accepted by M/s. Heavy Engineering Corporation Limited (in short, the Corporation) and a rate contract was signed on 23rd November 2010. Pursuant thereto, purchase order was issued by the Corporation for supply of fabricated items as per the drawings of the Corporation. According to the Corporation, there were delays in supply of the fabricated items and the Corporation was entitled to invoke the liquidated damages clause and to adjust such amount from the bills of NSICL. Aggrieved thereby, the industry filed a petition before the Facilitation Council at Cuttack under section 18 of the MSME Act which was registered as MSEFC Case No. 13 of 2015. Accordingly, award was passed by the Facilitation Council. Ultimately, the Corporation filed
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( 2025:JHHC:15000-DB ) WP(C) No. 3533 to set aside the impugned order dated 02.06.2018 as also to quash the entire proceeding of Commercial Execution Case No. 03 of 2018, as contained in execution petition filed under Order-XXI, Rule-11 of Civil Procedure Code, 1908, to execute the aforesaid Award dated 07.02.2017, pending in the Court of Shri Rajeev Anand, the learned Presiding Officer, Commercial Court, Ranchi. The writ Court considered the scheme under the Micro, Small and Medium Enterprises Development Act, 2006 (in short, MSMED Act) and came to a conclusion that the statutory regime under the MSMED Act which requires a pre-deposit of 75% of the decreetal/awarded amount is a mandatory requirement for entertaining the writ petition and, that, section 19 of the MSMED Act shall prevail upon the general provisions under section 35 of the AC Act. The writ Court held that the requirement of pre-deposit under section 19 of the MSMED Act having not been complied, W.P.(C) No. 3533 of 2019 cannot be entertained and, accordingly, dismissed the same vide order dated 22nd October 2019.
106. Aggrieved thereof, the matter came before the Division Bench, wherein affirming the order passed by the learned writ Court, it has been held at paragraph 16 as under:
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( 2025:JHHC:15000-DB ) "16. The well-recognized exception to a statutory alternative remedy of appeal does not take into its fold all kinds of cases and merely by raising a contentious issue the Corporation cannot support maintainability of the writ petition to challenge the award dated 7th February 2017. In a situation like the present one which would involve a strenuous exercise by the writ Court to examine the facts of the case and interpret the definition of „buyer‟ and „supplier‟, the writ Court shall not exercise its powers under Article 226 of the Constitution of India. The writ Court shall definitely exercise its powers to entertain a challenge to the award/decree which on the face of it and, without any enquiry into the facts of the case, appears to be a nullity. Therefore, the aggrieved party must demonstrate on the face of the award a prima facie case for entertaining the writ petition filed under Article 226 of the Constitution of India - the present one is not such a case. The question raised by the Corporation before the writ Court could have very well been raised and established by it in a proceeding under section 34 of the AC Act. The award dated 7th February 2017 takes note of history of the case, objections taken by opposite party nos. 1 and 2 and the rejoinder affidavits dated 19th October 2015 and 21st December 2015. The award made by the Facilitation Council specifically records that the parties were present in the 48th sitting of the Facilitation Council held on 29th September 2016 but NSICL did not evince any interest for amicable settlement of the case. There are references of further sittings of the Facilitation Council held on 30th December 2016 and 7th February 2017.
Therefore, the rival claims on adherence/non- adherence of the provisions under section 18(2) by the Facilitation Council also could have been decided in a section 34 petition where the parties would have
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( 2025:JHHC:15000-DB ) supported their rival stands with reference to the materials on record. Now in a case which involves a host of disputed questions of fact and an interpretation of various clauses of the MSMED Act including the expressions „buyer‟ and „supplier‟, in our opinion, the writ Court has rightly stayed away from entering into the realm of factual dispute and dismissed the writ petition on the ground that no appeal has been preferred under section 19 of the MSMED Act."
107. At this juncture, it requires consideration by this Court that since argument has been advanced that the law laid down by the Hon'ble Apex Court in the case of Jharkhand Urja Nigam Ltd. has been referred to the larger Bench, as such the same has got no binding effect.
108. In the aforesaid context it needs to refer herein the settled position of law that merely by referring an issue decided by the Hon'ble Apex Court before the larger Bench, the ratio decidendi of the judgment which has been referred before the larger Bench for its consideration will not lose its force.
109. The Hon'ble Apex Court in the case of Rajnish Kumar Rai v. Union of India & Ors., (2023) 14 SCC 782 has observed that it cannot ignore the ratio laid down in an earlier judgment merely because the same stands referred to a larger Bench. The Hon'ble Apex Court further observed that judicial propriety did not permit it ignoring the ratio laid down in the earlier
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( 2025:JHHC:15000-DB ) judgement as no decision regarding the same had come out from the larger Bench. For ready reference the relevant paragraph of the aforesaid judgment is being quoted as under:
"4. The learned counsel appearing for the petitioner has brought to our notice a coordinate Bench decision of this Court in Union of India v. Sanjiv Chaturvedi [Union of India v. Sanjiv Chaturvedi, (2023) 5 SCC 706 : (2023) 2 SCC (L&S) 181] in which the point of law laid down in the earlier judgment passed by this Court in Alapan Bandyopadhyay [Union of India v. Alapan Bandyopadhyay, (2022) 3 SCC 133 :
(2022) 1 SCC (L&S) 504] has been referred to a larger Bench. But so far as this Bench is concerned, we do not think judicial propriety permits ignoring the ratio laid down by the coordinate Bench in AlapanBandyopadhyay [Union of India v. Alapan Bandyopadhyay, (2022) 3 SCC 133 : (2022) 1 SCC (L&S) 504] as no decision has come as yet from the larger Bench on the point of territorial jurisdiction of the High Court in a similar context. If we were to take a different view, the only course open for us would have been to refer the petition to the Hon'ble the Chief Justice for being adjudicated by a larger Bench, as has been done in Sanjiv Chaturvedi [Union of India v. Sanjiv Chaturvedi, (2023) 5 SCC 706 : (2023) 2 SCC (L&S) 181] . No argument has been raised before us that the decision in Alapan Bandyopadhyay [Union of India v. Alapan Bandyopadhyay, (2022) 3 SCC 133 : (2022) 1 SCC (L&S) 504] is per incuriam.
110. The Hon'ble Apex Court in the case of UT of Ladakh & Ors. v. Jammu & Kashmir National Conference & Ors. 2023 SCC OnLine SC 1140 has
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( 2025:JHHC:15000-DB ) observed that the High Courts will proceed to decide matters on the basis of the law as it stands and it is not open, unless specifically directed by this Court, to await an outcome of a reference and it is also not open to a High Court to refuse to follow a judgment by stating that it has been doubted by a later Coordinate Bench. For ready reference the relevant paragraph is being quoted as under:
"35. We are seeing before us judgments and orders by High Courts not deciding cases on the ground that the leading judgment of this Court on this subject is either referred to a larger Bench or a review petition relating thereto is pending. We have also come across examples of High Courts refusing deference to judgments of this Court on the score that a later Coordinate Bench has doubted its correctness. In this regard, we lay down the position in law. We make it absolutely clear that the High Courts will proceed to decide matters on the basis of the law as it stands. It is not open, unless specifically directed by this Court, to await an outcome of a reference or a review petition, as the case may be. It is also not open to a High Court to refuse to follow a judgment by stating that it has been doubted by a later Coordinate Bench. In any case, when faced with conflicting judgments by Benches of equal strength of this Court, it is the earlier one which is to be followed by the High Courts...."
111. Thus, merely by referring an issue decided by the Hon'ble Apex Court before the larger Bench, the ratio decidendi of the judgment which has been referred before the larger Bench for its consideration will not lose its
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( 2025:JHHC:15000-DB ) force rather the ratio decided by the Hon'ble Apex Court having been sent for its consideration will have the binding precedence so long as it is not being reversed by the larger bench of the Hon'ble Apex Court.
112. Now coming to the issue involved in this case, this Court, after having referred the aforesaid judicial pronouncements/legal issues which has been referred hereinabove, is of the considered view that there is no dispute that the award passed under Section 18 of the Act, 2006 can be entertained in writ jurisdiction but the circumstances, which is required to be taken into consideration by the writ Court that the award is not the award in the light of provision as contained under Section 18(3) of the Act, 2006 read with Arbitration and Conciliation Act, 1996.
113. Further as per the mandate of Section 19 of the Act 2006 the award, if passed by the Council under Section 18(3) of the Act, 2006 then the same is to be assailed by challenging the same, subject to deposit of 75% of the awarded amount by the Council.
114. In the aforesaid backdrop this Court is now proceeding to examine the factual aspect of the instant case as to whether the award which has been passed by the Council is construed to be arbitral award said to be
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( 2025:JHHC:15000-DB ) passed in light of provision as contained under Section 18 of the Act, 2006, therefore, this Court once again needs to refer herein the provision of Section 18 (2) and (3).
115. As per provision, as contained under sub-section (2) of Section 18, the Council on receipt of a reference, under sub-section (1), shall either itself conduct conciliation or seek the assistance of any institution or centre providing alternate dispute resolution 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 conciliation was initiated under Part III of that Act. And in the eventuality of failure of such conciliation, sub-section (3) thereof comes to play, which says that 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.
116. It has been admitted that after the reference of the claim under Section 18(1) of the Act, 2006 before the
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( 2025:JHHC:15000-DB ) Council, the recourse has been taken by the Council for conciliation in the light of provision as contained under Section 18(2) of the Act, 2006 by sending the matter before the JHALSA since Section 18(2) of the Act, 2006 provides that the Council shall either itself conduct conciliation or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation.
117. Herein, the Council has thought it proper to send the reference to the JHALSA for its conciliation. Both the parties have agreed for conciliation by expressing their wish to appear before the JHALSA for the purpose of conciliation in the light of provision as contained under Section 18(2) of the Act, 2006. All the documentations were made before the conciliator, JHALSA, but the conciliation failed and the failure report was submitted before the Council.
118. The moment the failure report was submitted by the conciliator before the Council the provision of Section 18(2) of the Act, 2006 will be said to be fulfilled. Thereafter, as per mandate of the Section 18(3) of the Act 2006 the Council is to adjudicate on its own or by sending it before the alternate dispute system. Council in
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( 2025:JHHC:15000-DB ) the present case has decided to adjudicate the claim on its own, as would appear from order passed on various dates.
119. It is evident from the record, part of which has been made available in record, that on 12.09.2022 the Council has directed the party to file written note of submission. The writ petitioner-respondent has filed written note of submission on 27.09.2022. The said fact is admitted since the written note of argument has been made part of the paper book. It further appears from the record that the writ petitioner-respondent has not raised any objection by filing any application before the Council to have opportunity required to be given under the statute rather in pursuance to order passed by the Council written submission was filed on 27.09.2022.
120. The Council has closed the hearing on 12.09.2022 with liberty to the writ petitioner-respondent to file written submission. The same has been filed. Thereafter the award was passed and communicated to the writ petitioner-respondent on 05.01.2023.
121. The ground, which has been raised on behalf of writ petitioner-respondent, is that the procedure as laid down under the Act, ought to have been followed but not followed, hence, the award cannot be construed to be
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( 2025:JHHC:15000-DB ) award in the eye of law, hence, the writ petition is well maintainable.
122. It is evident from the argument that there is no issue of participation in the proceeding; and even there is no issue that the adjudication has not been made by the Council which was made in the light of provision as contained under section 18(3) of the Act, 2006, rather, the ground has been taken that the procedure which ought to have been followed for the purpose of adjudication to be made by the arbitrator has not been followed.
123. The procedure said to be not followed is the main ground agitated on behalf of writ petitioner - respondent before the learned writ Court in challenging the arbitral award.
124. Thus, the procedure followed or not followed can be a ground to entertain the writ petition that is the question which is also to be considered herein.
125. Further, question arises herein that merely because the procedure even if it is accepted has not been followed by the Council, the provision of Section 19 of the Act, 2006 will be allowed to be go by maintaining the writ petition.
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126. The Hon'ble Apex Court has considered the implication of Section 19 of the Act, 2006 in the judgment referred hereinabove and had concluded that provision of Section 19 of the Act 2006 is mandatory.
127. It needs to refer herein that it is true that Article 226 of the Constitution of India being constitutional provision would not be subject to rigor of Section 19 of Act 2006 but for the application the Article 226 the circumstances should be there.
128. There is no dispute that the constitution is the supreme in our country and in the Constitution itself, the parliament has power to make legislation. The moment the legislation is being made is also equally important to follow the legislative mandate. Even under Article 226 of the Constitution of India the stipulation has been made that the writ petition under Article 226 will be entertained for the purpose of issuance of appropriate writ for availing efficacious remedy. Article 226 of the Indian Constitution grants the High Court broad jurisdiction to impose orders and writs on any individual or entity but before the court can grant a writ or issue an order, the party filing the petition must show that his rights are being illegally violated. The High Court's authority to grant writs is also subject to a
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( 2025:JHHC:15000-DB ) number of limitations if the petitioner is entitled to pursue other equally effective alternative remedies. The High court consider a number of deliberations before using its extraordinary constitutional jurisdiction and the High Court relief may refuse to grant relief if there is a remedy available and send the party to the proper forum to seek relief but it is a self-imposed guideline rather than a jurisdictional one for considering writ petitions. Therefore, even though there is an alternative remedy available, in extraordinary circumstances, a writ may be issued.
129. Thus, the power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well and the High Court has the discretion not to entertain a writ petition if there is an effective alternate remedy available to the aggrieved person.
130. Thus, merely because a statutory provision has been made by the parliament by way of alternative forum, the same cannot be construed to abridge the power conferred to this Court under Article 226 of the Constitution of India in order to secure the basic structure of the Constitution.
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131. However, it needs to refer herein that the Hon'ble Apex Court in the case of Sterling Industries Vs. Jayprakash Associate Limited & Ors. (2021) 18 SCC 367 has clearly disapproved the stand approved by some high court that any order passed by an arbitral tribunal capable of being corrected by the high court under Article 226/227 of the Constitution of India. Further, the Hon'ble Apex Court adverting to Section 34 of the Act, 1996 and taking in to consideration the ratio of the judgment rendered by in the case of SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 has held that intervention by the high court under Article 226 or 227 of the Constitution of India in an arbitral award is not permissible. For ready reference the relevant paragraph is being quoted as under:
3. This Court in SBP & Co. v. Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] in para 45 held as follows : (SCC p. 663) "45. It is seen that some High Courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution of India. We see no warrant for such an approach. Section 37 makes certain orders of the Arbitral Tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in-between orders that might have been passed by the Arbitral Tribunal acting under Section 16 of the Act. The party aggrieved by any order of the Arbitral Tribunal, unless has a right of
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( 2025:JHHC:15000-DB ) appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a creature of a contract between the parties, the arbitration agreement, even though if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the Arbitral Tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India. Such an intervention by the High Courts is not permissible."
132. Herein the issue of procedure which has been alleged to be not followed is the basis to call the arbitral award, not an award in the eye of law i.e., under the Act, 1996, then the question would be that if such notion of the writ petitioner/respondent will be accepted and if any procedure has not been followed by the arbitrator in view of provision as contained under Section 11(6) of the Act, 1996 then in such circumstance can the writ petition be entertained.
133. The answer of this Court will be in „absolute negative‟ since if the provision of Section 34 of the Arbitration and Conciliation Act, 1996 will be taken into consideration then it would be evident that the ground to challenge the award has been referred under Section 34 of the Act,1996, as would be evident from Section 34(2), wherein it has been provided that an arbitral award may
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( 2025:JHHC:15000-DB ) be set aside by the court only if -- (a) the party making the application establishes on the basis of the record of the arbitral tribunal that-- (i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that-- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India.
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134. It is evident from Section 34(2)(iii) that the arbitral award can be questioned on the ground of giving no proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case. The inclusion of the phrase ‗was otherwise unable to present his case' is have bearing in the present case since herein also the bone of contention is that the due procedure as provided under the Arbitration and Conciliation Act has not been followed. Therefore, the mandate as contained under Section 32(2)(iii) making available the ground to challenge the award by taking recourse of Section 34 of the Arbitration and Conciliation Act, 1996 is required to be taken. Even in the arbitral award passed under the Arbitration and Conciliation Act, 1996 read with Commercial Courts Act, 2015, the arbitral award cannot be entertained in a proceeding filed under Article 226 of the Constitution of India, rather, the forum is Section 37 of the Act, 1996 read with Section 13-IA of the Commercial Courts Act, 2015. Further, the appellate Court is to exercise the power of appeal in order to interfere with the impugned order having with the very limited scope i.e., only on the ground of perversity.
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135. Accepting the argument advanced by learned counsel for the respondent/appellant that award which is to be passed under Section 18(3) of the Act, 2006 is treated to be an award passed under the Arbitration and Conciliation Act, 1996 and the said argument is in consonance with the mandate of Section 18(2) and 18(3) of the Act, 2006 wherein the award is to be passed by following the procedure as laid down under the Arbitration and Conciliation Act, 1996 particularly as under part (iii) and only difference by creating a forum by way of Facilitation Council is expeditious disposal of the claim i.e., within the period of 90 days, as per the provision contained under Section 18(5) of the Act, 2006, this Court, is of the view that when the award which is being passed under the Arbitration and Conciliation Act, 1996 by the arbitral tribunal and the same is being challenged by filing an application under Section 34 of the Act, 1996 before the appropriate court depending upon the availability of the condition as stipulated under the said provision, then against the award passed by the Council under Section 18 (3) of the Act, 2006, how the writ petition will lie, even if there is a procedural lapses since in view of insertion of particular condition to challenge the award by filing an application before the
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( 2025:JHHC:15000-DB ) court under Section 34, as per the ground available under Section 34(2) (a)(iii) of the Act, 1996.
136. Therefore, the contention of the writ petitioner /respondent that since the procedures having not been followed and therefore, the arbitral award is not to be termed as arbitral award, hence, the writ petition will lie, the same according to our considered view cannot be said to be permissible, rather, as per the settled position of law that the forum is available by way of filing an application under Section 34 of the Act 1996 invoking the jurisdiction conferred under Section 19 of the Act 2006 but subject to deposit of 75% of the total awarded amount(except supplier)
137. This Court, after having discussed the aforesaid legal issues and factual aspect, adverting to the order passed by learned Single Judge has found therefrom that the aforesaid issues have not been taken into consideration in entirety and without considering the mandate as provided under Section 19 of the Act, 2006 in full horizon has observed that the arbitral award not to be construed to be an arbitral award and while observing the aforesaid the learned single Judge has exercised the power conferred under Article 226 of the
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( 2025:JHHC:15000-DB ) Constitution of India, which cannot said to be correct approach.
138. Further, the learned Single Judge has also not specifically taken into consideration that, then only in order to frustrate the statutory mandate of deposit of 75% of the total amount which is to provide security to the small enterprises to be handed over in favour of the small enterprises depending upon the final outcome and as such in that view of the matter also, the judgment passed by learned Single Judge is not to be approved.
139. The matter would have been different if the award would have been passed under Section 18(3) of the Act, 2006 without taking recourse of Section 18(2) then the award could not have been said to be arbitral award rather the same would have been said to be passed contrary to the statutory mandate under Section 18(2) of the Act, 2006, then certainly the writ petition is to be entertained but that is not the fact herein, as per the admitted case of the party herein.
140. Accordingly, the impugned order/judgment dated 22.12.2023 passed by learned Single Judge in W.P.(C) No. 928 of 2023; W.P.(C) No. 923 of 2023; and W.P.(C) No. 925 of 2023 is hereby quashed and set aside.
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141. In the result, the writ petitions stand dismissed reserving liberty with the writ petitioner-respondent to avail the remedy available under the statute for consideration of the issue, if the party so wishes.
142. With the aforesaid direction and observation, the instant intra-court appeals stand disposed of.
143. Pending Interlocutory Application(s), if any, stands disposed of.
I Agree (Sujit Narayan Prasad, J.)
(Rajesh Kumar, J.) (Rajesh Kumar, J.)
Alankar/
A.F.R
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