Orissa High Court: In an intra-court appeal against the decision of the Single Judge whereby a challenge to an award passed by the Micro and Small Enterprises Facilitation Council, Cuttack (‘the Council’) under Article 226 of the Constitution was refused to be entertained holding that the said award can be challenged only in accordance with the provisions prescribed under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Arbitration and Conciliation Act’), the Division Bench of Chakradhari Sharan Singh and Murahari Sri Raman, JJ. found no legal infirmity in the impugned order passed by Single Judge, accordingly the appeal was dismissed.
The appellant/writ petitioner’s case was that the award made by the Council ought to have been interfered with under Article 226/227 of the Constitution of India as there was no conciliation held in accordance with the procedure prescribed, which is a condition precedent for initiation of arbitration proceeding under Section 18 (3) of the MSMED Act and, therefore, the arbitral award was a nullity.
Referring to the relevant provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (‘MSMED Act’) and the Arbitration and Conciliation Act, the Court noted that Section 18 of the MSMED Act as it then existed, prior to its amendment, laid down 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 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.
The Court noted that by an order dated 17-11-2022, the conciliation process under Section 18 (2) of the MSMED Act was initiated for amicable settlement of the disputes between the parties. By a subsequent order dated 27-12-2022, the Council declared failure of the conciliation process under Section 18(2). Thereafter, it invoked an arbitration clause under Section 18 (3) of the Act.
The Court also noted that the appellant in the writ proceeding attempted to assail the opinion of the Council that conciliation between the parties had failed, on various grounds including the ground that effective steps were not taken for conciliation.
The Court said that the appellant appeared before the Tribunal and that the award rendered in arbitration did not show that the appellant raised any issue of non-compliance of the requirement under Section 18 (2) of the MSMED Act read with the provisions under Part-III of the Arbitration and Conciliation Act.
The Court clarified that the Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan, (2021) 19 SCC 206 not applicable in the present facts and circumstances of the case as therein, the appellant had not appeared in the proceeding for conciliation and on the very first date of appearance, an order was passed by the Council directing the appellant and/or its predecessor Jharkhand State Electricity Board to pay a sum of Rs.78,74,041/- towards principal claim and Rs.91,59,705 towards interest. The Court also pointed out that in the said case, no arbitration proceeding was found to have been initiated in accordance with the provisions of the Arbitration and Conciliation Act.
Hence, the Court held that the Single Judge had rightly refused to interfere with the arbitral award which could have been assailed by the appellant under Section 34 of the Arbitration and Conciliation Act.
[AES India (Pvt.) Ltd. v. State of Odisha, W.A No.968 of 2024, decided on: 04-11-2024]
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