The Allahabad High Court, in a petition challenging an arbitral award, held that an arbitral award passed in a reference made under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 must be challenged as per provisions of Section 19 of the MSMED Act read with Section 34 of the Arbitration and Conciliation Act, 1996.
Brief Facts:
The Petitioner entered into a contract with the respondent company, M/s. Hightech Concrete Ltd.. Both companies are said to be registered under the Micro, Small and Medium Enterprises Development Act, of 2006. When disputes arose between the parties, they were referred to conciliation. However, due to the failure of conciliation proceedings, the parties were referred for arbitration as per Section 18 of the MSMED Act.
Contentions of the Petitioner:
The learned counsel appearing on behalf of the petitioner submitted that the petitioner had appeared in the arbitration proceedings and also filed objections to the claim preferred by respondent No. 2, however, due to COVID-19, the petitioner could not appear thereafter and the award was passed on 23.03.2021. the petitioner came to know of the award only when recovery proceedings were initiated against it in November 2022. Subsequently, the petitioner filed a writ petition challenging the arbitral award.
Contentions of the Respondent:
The learned counsel appearing on behalf of the respondent submitted that the present writ petition would not be maintainable inasmuch as the petitioner has an equally efficacious remedy under Section 19 of the MSME Act of 2006 for challenging the award and further, the said challenge has to be made under Section 34 of the Arbitration and Conciliation Act, 1996. Further, it was submitted that the dispute between the petitioner and the respondent is a private dispute and the matter was referred to arbitration and further submitted that an award passed by the Arbitrator would not be amenable to writ jurisdiction under Article 227 of the Constitution of India.
Observations of the court:
The court referred to the decision of the court in the case of Bhaven Construction Vs. Sardar Sarovar Narmada Nigam Ltd, wherein it was held that it is prudent for a Judge to not exercise discretion to allow judicial interference beyond the procedure established under the enactment. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear 'bad faith' shown by one of the parties.
Further, the court stated that the petitioner has an equally efficacious remedy for raising all the grievances which have been raised by him in the present case in proceeding for challenging the said award as per Section 34 of the Arbitration and Conciliation Act read with Section 19 of the MSME Act, 2006.
Further referring to Section 19 of the MSME Act, the court stated that even as per Section 36, it is provided that where time for making an application to set aside the award under Section 34 of the Arbitration and Conciliation Act, 1996 has expired, then, subject to provisions of Sub-section 2 such award shall be enforced in accordance with the provision of the CPC in the same manner as if it were a decree of the Court and further the consequences not assailing the award within the time prescribed have been provided under Section 36 and the award has to be challenged as per the provisions of Section 36(3) of Arbitration and Conciliation Act, 1996 and the time period, accordingly is mandatory within which the award has to be assailed undoubtedly the time for challenge of award has expired.
The decision of the Court:
The court dismissed the petition and held that where a statutory prescription has already been provided for challenging the award and the dispute between private parties a writ petition in this regard would not be maintainable.
Case Title: M/S Sahbhav Engineering Ltd. vs. U.P. State Micro Small And Medium Enterprises Facilitation Council
Coram: Hon’ble Mr. Justice Alok Mathur
Case No.: WRIT - C No. - 3774 of 2023
Advocate for the Petitioner: Mr. Mohit Sharma, Mr. Rakesh Kumar Srivastava
Advocate for the Respondent: Mr. G.P Mishra
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