Spectrum Infra Ventures Private ... vs West Bengal State Micro ...
2023 Latest Caselaw 7042 Cal

AD-16
Ct No.09
12.10.2023
TN
                             WPA No. 11265 of 2023

                     Spectrum Infra Ventures Private Limited
                                      Vs.
                  West Bengal State Micro Enterprises Facilitation
                               Council and others


             Mr. Utpal Bose,
             Mr. Ankan Rai,
             Mr. Sayantan Das
                                                  .... for the petitioner

             Mr. T.M. Siddique,
             Mr. Suddhadev Adak
                                       .... for the respondent nos.1 & 2

1. The present challenge has been preferred against

an award passed in an arbitral proceeding held

within the contemplation of Section 18 of the

MSME Act, 2006.

2. Learned senior counsel appearing for the

petitioner submits that the present writ petition

is maintainable in view of the palpable injustice

which has been done in the present case. It is

contended that service of a peremptory notice, to

the effect that in the event of absence of a party

the hearing would be taken up ex parte, was not

given to the petitioner, which vitiates the award

itself. It is further contended that in the facts of

the case, only a meagre sum was due and

payable by the petitioner even as per the claims

of the respondents. That apart, the petitioner had

to suffer the ignominy and harassment of

previous litigation unnecessarily for such paltry

sum.

3. Learned senior counsel places reliance on a

judgment of a learned Single Judge of the Orissa

High Court rendered in Bajaj Electricals Limited

vs. Micro Small and Enterprises Facilitation and

another, reported at 2022 SCC OnLine Ori 77. In

the said case, the learned Single Judge observed,

inter alia, that the question therein was whether

the petitioner was aggrieved by the reasoning or

he had not been heard at all.

4. The learned Single Judge went on to observe that

the question for consideration, adjudication and

answer was whether the petitioner was heard.

The court was convinced that in the facts and

circumstances of the case, the petitioner was not

heard or given the right of hearing to which it

was entitled under the Act of 2006.

5. Learned senior counsel next places reliance on a

Division Bench judgment of this court rendered

in Ganesh Chandra Ghosh and others vs. State of

West Bengal and others, reported at 2022 SCC

OnLine Cal 2582. The Division Bench observed in

the said case that the petitioner's specific case

was that no notice of arbitration was served upon

them and the arbitral award was passed behind

their back.

6. The Division Bench further observed that the

arbitrator was a statutory arbitrator under the

1956 Act and he was mandated by Section 3G(6)

of the said Act to conduct the arbitration in terms

of the Arbitration and Conciliation Act, 1996. The

arbitral award itself, it was observed, revealed

that in disposing of as many as 299 arbitration

petitions in a single day and in a single hearing,

the principle of natural justice was given a

complete go-bye, much less the compliance of the

1996 Act. In such factual matrix, it was observed,

the Division Bench was not ready to accept the

argument of alternative remedy in view of the

flagrant violation of the principle of natural

justice in passing the award-in-question.

7. Learned senior counsel next contends that the

issuance of a peremptory notice of ex parte

hearing is mandatory. In support of such

contention, learned senior counsel cites an

unreported Single Judge decision of the Madras

High Court in M/s Feedback Infra Private Limited

vs. The Micro and Small Enterprises Facilitation

Council and others, where the learned Single

Judge went on to observe that the impugned

order passed by the first respondent therein

cannot be termed as an award passed under the

provisions of the 1996 Act. Though Section

34(2)(a)(iii) of the 1996 Act enables that the

aggrieved party to challenge the award on the

ground that no proper notice of appointment of

an arbitrator or of the arbitral proceedings was

given or it was otherwise unable to present his

case, in the case before the Madras High Court,

the second respondent not even filed a claim

statement after initiation of arbitration

proceedings and in the absence of filing of

pleadings and recording of evidence as per the

1996 Act, the court had already come to a

conclusion that the impugned order could not be

termed as an award. Under such circumstances,

the court invoked the power under Article 226 of

the Constitution of India.

8. The petitioner next cites Mittal Pigments Pvt. Ltd.

vs. Gail Gas Limited, reported at 2023 SCC

OnLine Del 977 where again, a learned Single

Judge of the Delhi High Court went on to observe

that sufficient notice was not served upon the

petitioner before the arbitration proceedings were

proceeded against him ex parte.

9. In the said case, admittedly no communication

was made on or behalf of the respondent

intimating the initiation of arbitration

proceedings. Only in the month of December,

2018, the petitioner had received a

communication from the arbitrator calling upon

the petiotner to appear for the arbitration

proceedings at the time and place decided. It was

observed that the said case lies within the ambit

of Section 25(c) of the Arbitration Act. The

petitioner, it was observed, chose not to appear

before the learned Arbitrator. However, the

pertinent question was that whether before

proceeding ex parte there was any procedural

requirement including furnishing of notice etc. to

be fulfilled by the learned Arbitrator.

10. On a reading of Section 25(c) of the Arbitration

Act, the court held that the Arbitrator is to

examine whether the absence of the parties is

without showing sufficient cause. The learned

Single Judge referred to several judgments, some

of which are of this court, before coming to its

conclusion.

11. Heard learned counsel for the parties.

12. Before deciding the issue of maintainability of the

present writ petition in the teeth of the an

alternative remedy under Section 34 of the

Arbitration and Conciliation Act, 1996 read with

Section 19 of the MSME Act, 2006, the scope of

Section 18 is required to be looked into.

13. Section 18(3) of the 2006 Act clearly provides that

the provisions of the 1996 Act shall apply to the

dispute, once it is referred to arbitration under

the said Act, "as if the arbitration was in

pursuance of an arbitration agreement referred to

in sub-section (1) of Section 7 of that Act".

14. Section 19 of the Act 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 alternative dispute

resolution services to which reference is made

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 award.

15. Thus, a conjunctive reading of the said two

provisions indicates that the provisions of Section

34 of the 1996 Act, read with the pre-condition of

seventy-five per cent deposit as stipulated in

Section 19 of the 2006 Act, is the appropriate

remedy before a person aggrieved by the award

under normal circumstances.

16. It has to be explored in the context of Section 34

whether the petitioner stands the scrutiny of an

exceptional case to override the alternative

remedy in the present case.

17. Section 34 of the Arbitration and Conciliation

Act, 1996, it has to be kept in mind, is not an

ordinary appeal but stipulates specific grounds

on which a challenge to an arbitral award can be

taken out.

18. It is also required to be remembered that after

coming into force of the 1996 Act in line with the

UNCITRAL Model Law of Arbitration, the intended

scheme of the legislature is clearly to encourage

arbitration and the arbitral process, with the

least interference of the court, which is also

clearly provided within the contemplation of

Section 5 the 1996 Act itself. Under the said Act,

the judicial interference shall be minimal.

19. Seen in such perspective, the scope of

interference with an arbitral award de hors

Section 34 is extremely limited.

20. Insofar as the judgments cited by learned senior

counsel are concerned, the same do not help the

petitioner much.

21. As far as Bajaj Electricals Limited (supra) is

concerned, the learned Single Judge had

observed that the petitioner was not heard or

given the right of hearing it was entitled to under

the Act of 2006.

22. The present case is different on facts. Here, the

petitioner was given a hearing on August 05,

2021. Thereafter, the petitioner chose not to put

in its defence.

23. Subsequently, vide notice by way of an e-mail

dated February 10, 2022, the petitioner was

informed that a final hearing of the matter was

fixed.

24. The petitioner although did not appear in such

hearing, issued an e-mail on February 16, 2022

indicating to the authorities that it would not be

possible for the petitioner to be available during

the relevant period of hearing since the petitioner

would remain outstation. The petitioner also

sought an adjournment and the opportunity to

file a statement of defence and counter-claim to

effectively defend its case.

25. Thus, it cannot be said that the petitioner did not

get any opportunity of hearing at all, which were

the circumstances in Bajaj Electricals Limited

(supra).

26. In Ganesh Chandra Ghosh and others (supra), the

Division Bench took into consideration the

exceptional circumstance that the arbitrator,

whose award was challenged had disposed of as

many as 299 arbitration petitions in a single day

and in a single hearing which, of course, was an

ex facie travesty of justice. The court, in such

circumstances, held that there was a flagrant

violation of the principles of natural justice which

prompted the court to observe that a challenge

under Article 226 was maintainable.

27. The petitioner, in the present case, has not made

out such a high ground.

28. The judgment rendered by the Madras High

Court in M/s Feedback Infra Private Limited

(supra) recorded, inter alia, that the second

respondent had not even filed a claim statement

after initiation of arbitration proceeding. The

court observed that in the absence of filing of

pleadings and recording of evidence as per the

provisions of the 1996 Act, the court had to come

to a conclusion that the impugned order was not

fit to be called an award at all. In such

circumstances only, the learned Single Judge of

the Madras High Court interfered under Article

226 of the Constitution of India. Here, as opposed

to the said case, a claim statement had definitely

been filed and a first opportunity of hearing was

given to the petitioner on August 05, 2021.

29. However, the petitioner had not filed its defence.

Thus, the facts of the present case are not akin to

those before the Madras High Court in the

reported judgment, since there no pleadings were

filed by either of the parties, nor was there any

scope of recording evidence. In the present case,

however, it cannot be said that the arbitral award

is so tainted that the same cannot be called an

arbitral award at all.

30. In the judgment of Mittal Pigments Pvt. Ltd.

(supra), the learned Single Judge of the Delhi

High Court, noticeably, was hearing a petition

under Section 34 of the 1996 Act and not an

application under Article 226 of the Constitution

of India. While taking into consideration the

challenge of the petitioner therein, the court had

observed that under the Arbitration Act, 1940,

the court had formulated a concept of serving

peremptory notice of hearing so that a litigant

may be warned if he defaults in future.

31. In fact, all the judgments cited in the Mittal

Pigments Pvt. Ltd. (supra), apart from Magma

Leasing Limited vs. Gujarat Composite Limited

2006 SCC OnLine Cal 235, were from proceedings

under the Arbitration Act, 1940.

32. The scheme of things under the 1940 Act

contemplated much more interference by the

courts than the present Act of 1996.

33. We also have to keep in mind that Section 25 of

the 1996 Act has brought in a new era into the

field of arbitration.

34. Remaining on the topic of Mittal Pigments Pvt.

Ltd. (supra), the same had also considered the

proposition laid down in Magma Leasing Limited

(supra). However, the concept of preliminary

notice of ex parte hearing is not inbuilt into the

scheme of the 1996 Act. To such extent, this

court cannot but differ with utmost respect from

the view of the Delhi High Court.

35. A cursory reading of Section 25 of the 1996 Act

indicates that under the said provision, unless

otherwise agreed by the parties where, without

showing sufficient cause, the respondent failed to

communicate his statement of defence in

accordance with sub-section (1) of Section 23, the

Arbitral Tribunal shall continue the proceedings

without treating that failure in itself as an

admission of the allegations by the claimant and

shall have the discretion to treat the right of the

respondent to file such statement of defence as

having been forfeited.

36. Under sub-section (c) of Section 25, when a party

fails to appear at an oral hearing or to produce

documentary evidence, without showing

sufficient cause, the Arbitral Tribunal may

continue the proceedings and make the arbitral

award on the evidence before it. Per se, the

contrary need not be read into Section 25(c)

insofar as if some reason is shown for the non-

appearance of a party, the Arbitral Tribunal

cannot continue with the proceedings. There is

no such fetter in Section 25 of the 1996 Act to

vitiate an award so much so as to call for

interference under the high ground of judicial

review under Article 226 of the Constitution of

India.

37. As is well-settled, for exploring the window under

Article 226 of the Constitution of India, a patently

arbitrary act, mala fides, palpable violation of the

law and/or a patent arbitrariness is to be

established. In the present case, no such

yardstick has been satisfied by the petitioner.

38. Insofar as the provisions of Section 34 of the

1996 Act are concerned, the same, in sub-section

2(a)(iii), provide that one of the grounds of

challenge under Section 34 is that the party

making the application under Section 34 was not

given proper notice of the appointment of an

arbitrator or of the arbitral proceedings or

otherwise unable to present his case. Thus, the

petitioner has to establish, if the petitioner is so

entitled in law, to show before the court taking

up the Section 34 application if preferred, that

the petitioner falls within the purview of Section

34(2)(a)(iii). Merely because the petitioner's

request for adjournment was not granted, the

petitioner cannot invoke the jurisdiction of this

court under Article 226 of the Constitution of

India, bypassing the provisions of Section 34 of

the 1996 Act and Section 19 (1) of the 2006 Act.

39. In such scenario, this court does not find any

reason to interfere with the impugned award

under Article 226 of the Constitution of India.

40. Accordingly, WPA No. 11265 of 2023 is dismissed

as not entertained, with liberty to the petitioner

to approach the appropriate authority with a

challenge under Section 34 of the Arbitration and

Conciliation Act, 1996 upon compliance of the

statutory stipulation of Section 19(1) of the

MSME Act, 2006.

41. It is made clear that this court has not gone into

the merits of the contentions of either of the

parties and it will be open to the parties to agitate

all points in a challenge, if taken out under

Section 34 of the 1996 Act.

42. There will be no order as to costs.

43. Urgent photostat certified copies of this order, if

applied for, be made available to the parties upon

compliance with the requisite formalities.

(Sabyasachi Bhattacharyya, J.)