M/S Dsc Limited E Rd Floor South ... vs Madhya Pradesh Micro And Small ...
2021 Latest Caselaw 3597 MP

                                        1        Wr i t P e t i t i o n . NO. 14122/ 2019




       HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT AT
                                   JABALPUR

Writ Petition No.                 14122/2019
Parties Name:                     M/s DSC Limited and another Vs. Madhya Pradesh
                                  Micro and Small Enterprises Facilitation Council and
                                  another
Bench Constituted                 Single Bench
Judgment delivered By             HON'BLE SHRI JUSTICE VISHAL DHAGAT
Whether       approved      for
reporting
Name of counsel for parties       For petitioners : Shri Deepak Khurana, Advocate
                                  For respondent no.2: Shri Anoop Nair, Advocate.

Law laid down


Significant         paragraph
numbers




  Hearing Through Video Conferencing
                                    ORDER

26.07.2021 Petitioners have called in question award dated 12.3.2019

passed by Madhya Pradesh Micro and Small Enterprises

Facilitation Council, Bhopal.

2. Respondent no.2 i.e. M/s Sanfield India Limited has filed an

application before Facilitation Council, Bhopal against buyers to

make payment of order issued on 17.7.2009, 8.2.2010 and

15.7.2010 in respect of purchase of bearings and joint systems.

Facilitation Council after failure of conciliation commenced

Arbitration Proceedings and passed an award dated 12.3.2019 for

principal amount of Rs. 13,48,305/- and interest of Rs. 8,74,820/-

  against       petitioners/Company.          Petitioners-Company                   being
                                 2       Wr i t P e t i t i o n . NO. 14122/ 2019

aggrieved by impugned award have preferred this writ petition

under Article 226 of the Constitution of India.

3. Counsel appearing for the petitioners has challenged the

impugned award on two grounds i.e., award was passed without

giving an opportunity of hearing to petitioners/Company and

Facilitation Council wrongly held that provision of Limitation Act

1963 is not applicable in Arbitration proceedings conducted under

the Micro, Small and Medium Enterprises Development Act, 2006.

4. Counsel appearing for the petitioners has drawn attention of

this Court towards para 4 of the award and argued that case was

fixed for conciliation on 18.2.2015, 7.5.2015, 28.8.2015, 3.1.2016,

18.2.2016, 23.6.2016, 21.12.2016 and 15.3.2017. Facilitation

Council on 15.3.2017 held that non applicants refused to do

conciliation, therefore, conciliation proceedings were terminated.

On the said date, non applicants prayed for time as there was

reconstitution DSC Ltd.. Facilitation Council held that sufficient

opportunity was given to petitioners, non applicants therein and

ordered to argue the matter today i.e. 15.3.2017 or to file written

arguments by 25.3.2017. Referring to the said facts, counsel

appearing for the petitioners submitted that after termination of

conciliation proceedings and on commencement of Arbitration,

notice ought to have been given to petitioners regarding initiation

of arbitration under Arbitration and Conciliation Act, 1996.

Petitioners ought to have been given opportunity to lead their 3 Wr i t P e t i t i o n . NO. 14122/ 2019

evidence. Since no notice regarding commencement of Arbitration

Proceedings and opportunity to lead evidence was given to

petitioners, therefore, their rights of natural justice have been

violated.

5. Counsel appearing for the petitioners further argued that

Limitation Act, 1963 is applicable in Arbitration Proceedings. He

referred to Section 18(3) of the Micro Small and Medium

Enterprises Development Act, 2006 (herein after referred to as

MSMED Act, 2006) and Section 43 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to Act, 1996) before

the Court. He also relied on Apex Court judgment reported in

2021 SCC Online SC 439-Shilpi Industries Etc. Vs. Kerala

State Road Transport Corporation and another . Relying on the

said judgment counsel appearing for the petitioner submitted that

Apex Court held that provision of Limitation Act, 1963 is

applicable to Arbitration Proceedings under Section 18(3) of the

MSMED Act, 2006. It was further argued by him that though

there is an alternative remedy under Section 19 of MSMED Act,

2006 to challenge the award, but this Court can exercise its

discretion under Article 226 of the Constitution of India despite

availability of alternative remedy because there is violation of

fundamental rights and jurisdictional error to entertain claim

barred by Limitation Act.

4 Wr i t P e t i t i o n . NO. 14122/ 2019

6. Counsel appearing for the respondents submitted that

petitioners have an alternative remedy for setting aside the award

in MSMED Act, 2006. Under Section 19 of the MSMED Act

2006, 75% pre-deposit of award is mandatory for entertaining

application. To avoid pre-deposit, respondents had filed writ

petition under Article 226 of the Constitution of India. In view of

same, writ petition may be dismissed.

7. No other ground was raised by counsel appearing for the

petitionerS as well as by counsel appearing for the respondents.

8. Heard learned counsel for the petitioners and respondents.

9. Section 18(3) of the Micro, Small and Medium

Enterprises Development Act, 2006 provides as under:

(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.

5 Wr i t P e t i t i o n . NO. 14122/ 2019

10. Section 43 of the Arbitration and Conciliation Act, 1996

is quoted as under:

43. Limitations- (1) The Limitation Act, 1963 (36

of 1963) shall apply to arbitrations as it applies to

proceedings in Court.

(2) For the purposes of this section and the

Limitation Act, 1963 (36 of 1963), in arbitration

shall be deemed to have commenced on the date

referred in section 21.

(3) Where an arbitration agreement to submit future

disputes to arbitration provides that any claim to

which the agreement applies shall be barred unless

some step to commence arbitral proceedings is

taken within a time fixed by the agreement, and a

dispute arises to which the agreement applies, the

Court, if it is of opinion that in the circumstances of

the case undue hardship would otherwise be caused,

and notwithstanding that the time so fixed has

expired, may on such terms, if any, as the justice of

the case may require, extend the time for such

period as it thinks proper.

(4) Where the Court orders that an arbitral award

be set aside, the period between the commencement

of the arbitration and the date of the order of the 6 Wr i t P e t i t i o n . NO. 14122/ 2019

Court shall be excluded in computing the time

prescribed by the Limitation Act, 1963 (36 of

1963), for the commencement of the proceedings

(including arbitration) with respect to the dispute so

submitted.

11. In view of the said provisions of MSMED Act 2006 and

Arbitration and Conciliation Act, 1996, it is clear that Limitation

Act, 1963 shall apply to Arbitration as it apply to proceedings in

the Court. This has been given seal of approval by Apex Court in

case of Shilpi Industries (supra).

12. From perusal of the award, it is clear that on 15.3.2017

conciliation proceedings were terminated and on the same date

parties were directed to argue the matter finally or to give their

written arguments in the case on 25.3.2017. Parties were not given

notice of commencing of Arbitration. On the said date, parties

were appearing before the Facilitation Council in conciliation

proceedings. In proceedings under the Act, 1996 parties shall be

given sufficient advance notice of hearing or any meeting of

Arbitral Tribunal for purposes of inspection of documents goods,

properties and to adduce evidence oral or documentary in the case.

Petitioners were ordered to argue the matter on same date when

conciliation was terminated. No opportunity was given to

petitioners by giving notice of commencement of arbitration, 7 Wr i t P e t i t i o n . NO. 14122/ 2019

therefore, they had no opportunity and sufficient time to lead

evidence.

13. In view of the aforesaid facts and circumstances of the case

since award has been passed without giving any opportunity to

lead evidence to both the parties applicability of issue of

Limitation Act is also wrongly decided, therefore, award is

quashed and matter is remanded back to Facilitation Council to

pass fresh award after giving opportunity of leading evidence to

both the parties on issue involved and also on question whether

claim is barred under Limitation Act.

14. With the aforesaid directions, writ petition filed by the

petitioners is disposed off.

(VISHAL DHAGAT) JUDGE

DUBEY/-

Digitally signed by
ARVIND KUMAR DUBEY
Date: 2021.07.29
11:12:05 +05'30'
                                  8      Wr i t P e t i t i o n . NO. 14122/ 2019

In view of above, Facilitation Council committed an error in

holding that Limitation Act, 1963 is not applicable in proceedings

arising out of MSMED Act, 2006 as no limitation is provided

under the said Act and claim of petitioners barred by time.

Proceedings in Arbitration and Conciliation Act, 1996 as well as

proceedings under MSMED Act, 2006 are to be carried out in time

bound manner. Case was filed in the year 2014 and award was

passed on 12.3.2019, therefore, there is no point in remanding the

matter back to Facilitation Council for considering the issue of

Limitation Act.

On going through the award, it is clear that claim is made in

respect of bills dated 17.7.2009, 8.2.2010 and 15.7.2010.

Petitioners had raised the ground before Facilitation Council that

last payment was made to claimant/applicant on 31.7.2010.

Respondents had not made any acknowledgment regarding

payment of amount after 31.7.2010. Respondent M/s Sanfield

India Limited ought to have filed an application within a period

of three years i.e. before 30.7.2013.

Since Arbitration commenced on the same date and final

arguments was also to be made on the same date therefore,

sufficient opportunity was not given to the parties to adduce their 9 Wr i t P e t i t i o n . NO. 14122/ 2019

evidence. In view of same, right of natural justice of petitioners

was violated while passing the award and fair procedure was not

adopted in Arbitral proceedings. Since right of natural justice of

petitioners was violated and issue of jurisdiction was not

considered and decided by Facilitation Council in Arbitral

Proceedings, therefore, arbitration award dated 12.3.2019 is set

aside. Facilitation Council, Bhopal is ordered to reconsider the

claim of respondent no.2-M/s Sanfield India Ltd.. after giving

opportunity to both the parties to lead evidence on issues (i)

whether claim of respondents is barred under Limitation Act, 1963

or not and give proper opportunity to contesting parties to lead

evidence in the matter and thereafter pass final award in the case

regarding claim of respondent no.2-M/s Sanfield India Limited.