Jharkhand High Court
M/S K.D. Infraengicon Private Limited ... vs Jharkhand Micro And Small Scale ... on 6 February, 2025
Author: Gautam Kumar Choudhary
Bench: Gautam Kumar Choudhary
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No.6244 of 2022
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M/s K.D. Infraengicon Private Limited having its head office at 110-B Block,
Dhatkidhi, Bistupur, Jamshedpur, P.O. & P.S. Bistupur, District East
Singhbhum through its Director Manzar Imam Khan aged about 63 years son
of Md. Quiyamuddin Khan, resident of H. No.110, B Block, Line No.10,
Dhatkidih, behind Community Centre, Jamshedpur, P.O. & P.S. Bistupur,
District East Singhbhum, Jharkhand .... .... .... Petitioner
Versus
1. Jharkhand Micro and Small Scale Enterprises Facilitation Council through
the Under Secretary cum Member Secretary having its office at Nepal
House, P.O. & P.S. Doranda, District Ranchi
2. D.C. Ranchi, Jharkhand having its office at Deputy Para, Ahirtoloi, P.O.
G.P.O., P.S. Kotwali, District Ranchi, Jharkhand
3. M/s Sharda Infrasolutions Private Limited through its Director, Rishabh
Sighania, son of Sushil Kumar Singhania having its office at A/302, Green
Park, P.O. & P.S. Bariatu, District Ranchi, Jharkhand
.... .... .... Respondents
CORAM: HON'BLE MR. JUSTICE GAUTAM KUMAR CHOUDHARY
For the Petitioner : Mr. Shresth Gautam, Advocate
Mr. Rishu Ranjan, Advocate
Mr. Abhishek Singh, Advocate
Mr. Yogendra Yadav
For the Respondent-State : Mr. Ashok Kumar Yadav, Sr. S.C. I
Mr. Ranjan Kumar, A.C. to Sr. S.C. I
For the Respondent No.3: Mr. Pratyush Kumar Jha, Advocate
Mr. Chitrajan Kumar Jha, Advocate
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Order No.04 / Dated : 06.02.2025
Instant writ petition has been filed for quashing the order contained
in Memo No.2140 dated 29.11.2022 passed in connection with Case No.
JHMSEFC-43/2021 corresponding to New Case No. JH/20/S/JKH/00286
whereby and whereunder claims of the respondent no.3 against the petitioner
have been allowed.
2. Petitioner is a private limited company and claim of Rs.21,94,982.79
with interest was raised by respondent no.3 before the Jharkhand Micro and
Small Scale Enterprises Facilitation Council, Ranchi towards the supply of
Thermoplastic Road Marking Paint, Potters Glass Beads, Catalysts, RPM
Epoxy kit etc. in the year 2019.
3. Notice was issued vide letter no.1519 dated 10.08.2021 by MSMED
Facilitation Council to file reply within a period of seven days. In pursuant to
the notice issued, the petitioner appeared and raised preliminary objections.
The Council held its meeting on 25.08.2021 and admitted the case. Further
sittings were held on 14.12.2021, 01.06.2022 and finally on 12.09.2022, when
the award was passed which is under challenge before instant writ petition.
4. It is argued by the learned counsel on behalf of petitioner that the
provisions of the MSMED Act, 2006 (hereinafter in short referred '2006 Act')
have been given a complete go bye by the Council and therefore, it cannot be
termed as arbitral award. As per Section 18(2) of 2006, Act, the Facilitation
Council is mandated to conduct conciliation of the dispute between the
parties either by itself, or, by an institution without compliance of which no
further reference can be made to its arbitration under Section 18(3) of 2006,
Act. In the present case, neither Conciliator was ever appointed nor
conciliation proceedings were held. In the absence of valid reference being
made to conciliation in terms of Section 18(2) of 2006, Act, there can be no
reference to arbitration and therefore, the question of adjudication of the
dispute by the Council does not arise. Section 18(2) of MSMED Act, 2006
mandates that procedure of Sections 64 - 81 of Arbitration and Conciliation
Act, 1996 (in short hereinafter referred 'Act, 1996') is to be followed and none
adherence of it, deprives the petitioner from the opportunity of filing
pleading and evidence before the Arbitrator.
5. It is argued that the manner in which arbitral proceeding was
concluded in one day i.e. 12.09.2022, shows that provisions of the Arbitration
and Conciliation Act, 1996 were completely bypassed. Reliance is placed on
the judgment placed by this Court in W.P. (C) No.5804 of 2022 which was
upheld in L.P.A. No. 475 of 2023. This order was passed in the light of ratio
laid down by the Hon'ble Supreme Court in Jharkhand Urja Vikas Nigam
Limited Vs. State of Rajasthan and Others, (2021) 19 SCC 206, wherein it has
been held that the Council was obliged to conduct conciliation for which the
provisions of Sections 65 to 81 of the Act, 1996 would apply, as if the
conciliation was initiated under Part III of the 2006, Act. Under Section 18(3),
when the Conciliation fails and stands terminated, the dispute between the
parties can be resolved by arbitration. The Council is empowered either to
take up arbitration on its own or to refer the arbitration proceedings to any
institution as specified in the said Section. It is open to the Council to
arbitrate and pass an award, after following the procedure under the relevant
provisions of the Act, 1996, particularly Sections 20, 23, 24 and 25. If this has
not been done, the order becomes nullity as it runs contrary to the provision
of 2006, Act and Act, 1996. On similar facts and situation, the order passed by
the MSMED Council was remanded by the High Court of Gujarat in
Principal Chief Engineer Vs. Manibhai & Brothers (Sleeper) & 1, 2012 SCC
OnLine Guj 2422.
6. It is argued by the learned counsel, Mr. Pratyush Kumar Jha
appearing on behalf of private respondent that the writ petition is not
maintainable in view of ratio laid down by Hon'ble Supreme Court in India
Glycols Limited & Another Vs. Micro and Small Enterprises Facilitation
Council, Medchal - Malkajgiri & Others, 2023 SCC OnLine SC 1852,
wherein it was held that in terms of Section 19 of the MSMED Act, 2006, an
application for setting aside an award of the Facilitation Council cannot be
entertained by any Court unless the appellant has deposited 75% of the
amount in terms of the award. Once facilitation Council proceeds to arbitrate
upon the dispute, provisions to the Act, 1996 will apply to the dispute, hence
available remedy is Section 34 of the Act, 1996. In this view of the matter,
petition under Article 226/227 of the Constitution instituted by the
appellants, was not maintainable. It is argued that MSMED Act is a complete
code, having specific provisions for appeal which has been enacted with that
object. Sub-section (5)(C) of Section 3 of 2006, Act provides that no act or
proceeding of the Board shall be invalid merely by reason of any irregularity
in the procedure of the Board not affecting merits of the case.
7. Having considered the submissions advanced on behalf of both
sides, there cannot be any semblance of doubt that Section 19 of the MSMED
Act mandates, 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 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. Order under challenge is purportedly an
award and not an interlocutory order which could not have been agitated
before this Court.
8. The moot question that falls for consideration is if the impugned
order can be said to be an arbitral award in the proper sense of term? If it is
accepted that it is arbitral award then this writ petition is barred in view of
the statutory remedy available under Section 19 of the MSMED, Act 2006 and
as per the ratio laid down in India Glycols Limited & Another case (supra).
9. In the present case, no arbitration proceeding was held, shall be
manifest from the very impugned order itself. As per para 5 (vii/viii) of the
Award, it is evident that conciliation under Section 18(2) of MSMED Act, 2006
was held between both the parties from 14.12.2021 to 12.09.2022 without
success. Thereafter, on the very same day i.e. on 12.09.2022, the award was
passed. There is no mention that reference for arbitration was made by the
Council. The Petitioner was therefore deprived of opportunity to submit
statements, documents or other evidence before the Council, which is
required under Section 23 of the 1996 Act. Procedure adopted by the Council
completely bypassed the provisions contained in Act, 1996. The facts of this
case is distinguishable from the facts of India Glycols Limited & Another
case (supra), as it was a proper arbitral award that was sought to be
challenged in a writ petition, on the ground that the very claim was barred by
limitation, whereas in the present case, the impugned order cannot be called
an arbitral award. This Court is of the view that as the impugned order
cannot be called an 'arbitral award' within the meaning of Act, 1996,
therefore, it will be amenable to writ jurisdiction. Impugned order was
passed in complete disregard of the procedure under the Act, 1996, it is
therefore, not sustainable.
10. The impugned order is set aside. The matter is remanded back to the
Jharkhand Micro and Small Scale Enterprises Facilitation Council (JMSEFC)
for passing order afresh as per law. Both sides to appear before the Council
on 17th February 2025.
Writ Petition is allowed. Pending Interlocutory applications stands
disposed.
(Gautam Kumar Choudhary, J.)
Anit
