Karnataka High Court
Tejas Networks Limited vs Iti Limited on 13 December, 2023
Author: M.G.S. Kamal
Bench: M.G.S. Kamal
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NC: 2023:KHC:45248
WP No. 24285 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF DECEMBER, 2023
BEFORE
THE HON'BLE MR JUSTICE M.G.S. KAMAL
WRIT PETITION NO. 24285 OF 2022 (GM-RES)
BETWEEN:
TEJAS NETWORKS LIMITED
A COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE
AT PLOT NO.25, 5TH FLOOR
J.P SOFTWARE PARK, ELECTRONIC CITY
PHASE-1, HOSUR ROAD,
BENGALURU 560 100
REPRESENTED BY ITS AUTHORIZED
REPRESENTATIVE MR. VENKATESH GADIYAR.
...PETITIONER
Digitally
signed by (BY SRI. SUSHAL TIWARI N.,ADVOCATE)
SHAKAMBARI
AND:
Location: High
Court of
Karnataka ITI LIMITED
A GOVERNMENT OF INDIA UNDERTAKING
HAVING ITS REGISTERED AND CORPORATE OFFIE
AT ITI BHAVAN, DOORAVANINAGAR
BENGALURU 560 015
ASLO AT
MIRZALPLUR ROAD, NAINI
ALLAHABAD - 211 010
U.P INDIA
RPERESENTED BY THE AUTHORIZED
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WP No. 24285 of 2022
SIGNATORY ANINDUMARO
LEGAL EXECUTIVE.
...RESPONDENT
(RESPONDENT-SERVED)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
a) QUASH THE ORDER DATED 18.08.2022 PASSED IN THE
CASE NO.14/2020 BY THE HONBLE COUNCIL OF
MSEFC(ANNEXURE-A). b)ORDER RELEGATING THE PARTIES
BACK TO THE MSMEFC FOR FRESH ADJUDICATION OF THE
PRESENT DISPUTE BETWEEN THE PARTIES.
THIS PETITION, COMING ON FOR PRELIMINARY HEARING
IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
Learned counsel for the petitioner taking through the documents produced along with the petition submits that impugned order dated 18.08.2022 produced at Annexure- A passed in Case No.14/2020 on the file of Micro and Small Enterprises Facilitation Council, Bengaluru, is unsustainable in law as well as on facts.
2. He submits that petitioner had initiated the proceedings before the Micro and Small Enterprises Facilitation Council, Bengaluru, on 25.09.2019 under the provisions of Section 18 of the Micro, Small and Medium -3- NC: 2023:KHC:45248 WP No. 24285 of 2022 Enterprises Development Act, 2006, seeking relief in the nature of direction to the respondent for payment of Rs.2,58,64,950/-. He submits that the petitioner did not have information regarding the dates of hearing on the proceedings before the Council. He submits that in view of intervening COVID-19 Pandemic the petitioner also could not keep track of the matter as there was no provision for petitioner to work from office and all employees were restricted to work from home. He submits that in that view of the matter the petitioner could not keep track of the dates of hearing. He further submits that Council had apparently conducted conciliation proceedings and had accepted the contention of the respondent of they having cleared all the dues to the petitioner. He submits that such a Conciliation proceedings cannot be recorded in the eye of law, more particularly, in view of Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 r/w Sections 72, 73, and 76 of the Arbitration and Conciliation Act, 1996.
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3. He submits that Conciliation Proceedings could be conducted only in the presence of the parties and if the conciliation failed the Council ought to have referred the matter for Arbitration. He therefore submits that the impugned order is neither in the nature of conciliation proceedings nor in the nature of award as contemplated under the Act, as such same is unsustainable. Hence, seeks for allowing of the petition.
4. None appears for the respondent despite service of notice.
5. Heard. Perused the records.
6. Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, reads as under;
"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 -5- NC: 2023:KHC:45248 WP No. 24285 of 2022 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.
(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 to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act.
(4) Notwithstanding anything contained in any other law for the time being in force, the 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".
7. It is also necessary to note Sections 72, 73 and 76 of the Arbitration and Conciliation Act, 1996, which reads as under;
"72. Suggestions by parties for settlement of dispute.-Each party may, on his own initiative or at the invitation of the conciliator, -6- NC: 2023:KHC:45248 WP No. 24285 of 2022 submit to the conciliator suggestions for the settlement of the dispute.
73. Settlement agreement.-(1) When it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such observations.
(2) If the parties reach agreement on a settlement of the dispute, they may draw up and sign a written settlement agreement. If requested by the parties, the conciliator may draw up, or assist the parties in drawing up, the settlement agreement.
(3) When the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them respectively.
(4) The conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties
76. Termination of conciliation proceedings.-The conciliation proceedings shall be terminated
(a) by the signing of the settlement agreement by the parties on the date of the agreement; or
(b) by a written declaration of the conciliator, after consultation with the parties, in the effect that further efforts at conciliation longer -7- NC: 2023:KHC:45248 WP No. 24285 of 2022 justified, on the date of the declaration; or are no
(c) by a written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated, on the date of the declaration; or
(d) by a written declaration of a party to the other party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration".
8. Thus, in terms of the above provisions resolution of dispute through arbitration is provided and the provisions of Arbitration and Conciliation Act, 1996 are made applicable to the proceeding to be conducted by the Facilitation Council.
9. Reading of the aforesaid provisions makes it clear that Facilitation Council shall endeavour to conduct conciliation in the first instance and if the conciliation fails and terminated only thereafter the Council shall either itself take up dispute for arbitration or refer it to any institution or center described thereunder. -8-
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10. In the instant case, as seen, the order at Annexure-A do not reveal if the Council had adopted this procedure. Though there is reference of notices having been issued to the petitioner, it is not clear if the notices were issued for the purpose of conducting conciliation or for the arbitration proceedings and if the notices were issued for the purpose of conciliation, no conciliation proceedings could have been conducted by the Council in the absence of the petitioner.
11. Paragraph 8 of the impugned order would reveal that on the date fixed thereon, i.e., 24.06.2022 the Council had appreciated the material facts on record made available by the respondent and its contention of they having cleared the pending dues to the petitioner. If that is so, said proceedings cannot be considered as conciliation proceedings, that would amount to passing of an order on merits. The said paragraph 8 and operative portion of the impugned order read as under;
"8. During the MSEFC hearing held on 24.06.2022, petitioner remained absent.-9-
NC: 2023:KHC:45248 WP No. 24285 of 2022 Respondent Anindumrao, Legal executive appeared and showed records / documents regarding the clearance of pending dues to M/s. Tejas i.e., petitioner. Case is posted for orders. Hence the Council passes the following orders.
ORDER
1. The Council conducted conciliation proceedings with regard to claim of the petitioner, company, the respondent has cleared all the dues to the petitioner as per the documents submitted. Petitioner remained absent for all the hearings. Hence the case is disposed off as settled.
2. This order is signed and issued on 18.08.2022".
12. Thus, there is a contrast in the contents of para 8 and the operative portion of the order. It is not clear as to whether the Council had conducted conciliation proceedings or had passed the orders on merits. In either case there appears to be non-compliance of the mandatory requirement of Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 r/w Sections 72, 73 and 76 of the Arbitration and Conciliation Act, 1996. There is clear irregularity in exercise of jurisdiction by the Council.
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13. In that view of the matter, petition is allowed. The order dated 18.08.2022 passed in Case No.14/2020 on the file of the Micro and Small Enterprises Facilitation Council, Bengaluru, is set aside and the matter is remitted back to the Council. The Council shall pass orders strictly in compliance with the terms of Micro, Small and Medium Enterprises Development Act, 2006, after affording opportunities to the parties.
The petitioner shall appear before the Council on 04.01.2024.
Sd/-
JUDGE RU