Madras High Court
M/S.Vee Kay Logistics vs The Micro And Small Enterprises on 27 February, 2025
Author: S. M. Subramaniam
Bench: S. M. Subramaniam
2025:MHC:915
WA No. 284 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 27-02-2025
CORAM
THE HONOURABLE MR JUSTICE S. M. SUBRAMANIAM
AND
THE HONOURABLE MR.JUSTICE K.RAJASEKAR
WA No. 284 of 2025
AND
CMP NO. 2215 OF 2025
M/s.VEE KAY LOGISTICS
Rep. by its Partner, Mr.Mathew.J,
New No.24/3, Sri Vinayaga Sarang
Garden Street,
George Town, Chennai - 600 001.
Appellant(s)
Vs
1. The Micro And Small Enterprises
Facilitation Council
Chennai Region, A30,
Thiru Vi. Ka. Industrial Estate,
Guindy, Chennai - 600 032.
2.M/s. Eco Care Pest Control Services
New No.62, 4th North Beach Road,
Chennai - 600 001
Respondent(s)
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WA No. 284 of 2025
PRAYER
To set aside the impugned order dated 05-01-2024 in WP.No.36067/2023.
For Appellant(s): Mr.D.Prabhu Mukunth Arun
Kumar For M/s.G.Derrick Sam
For Respondent(s): MR.T.Chandra Sekaran SGP For
R1
Mr.Mohanaselvan
For Mr.E.Shankar For R2
JUDGMENT
(Judgement was delivered by S.M.Subramaniam J.)
Under assail is the order dated 05.01.2024 passed in W.P.No.36067 of
2023. The unsuccessful writ petitioner is the appellant before this Court.
2. The writ of certiorari has been instituted to quash the order dated
23.03.2023 passed by the Micro and Small Enterprise Facilitation Council
(MSEFC), Chennai Region.
3. The brief facts to be considered in the present Intra-Court Appeal are
that the 2nd respondent had made a claim in Case No.MSEFC/CR/232/2022
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before the MSEF Council under Section 18(1) of the Micro, Small and Medium
Enterprises Development Act, 2006 [hereinafter referred to as 'MSMED Act']
claiming payment of Rs.15,49,234/- from the writ appellant towards the
remaining amount due for services rendered, along with interest calculated in
terms of that Act. By an order dated 23.03.2023, the Council held that the
appellant was liable to pay the principal amount of Rs.15,49,234/- with
compounded interest, with monthly rate at three times of the Bank rate notified
by the Reserve Bank of India (RBI), as stipulated in Sections 15 and 16 of the
MSMED Act. The interest was payable from the due dates of appointment until
payment.
4. Three key issues arise for consideration in the present lis on hand, as
under;
(1) Whether a writ petition under Article 226 of the Constitution of
India is maintainable, when an efficacious alternate remedy is
contemplated under the provisions of the Arbitration and
Conciliation Act for setting aside the award passed under the
Arbitration Act?
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(2) Whether the claim petition filed under Section 18(1) of the
MSMED Act was validly taken up for conciliation by the Council,
and whether the Council's decision to proceed with the arbitration
upon the failure of conciliation proceedings is valid?
(3) When the conciliation proceedings and consequential arbitration
proceedings are taken up by the Council as a continuous process,
whether certain procedures under the Arbitration Act need to be
repeated?
5. Section 18(1) of the MSMED Act pertains to “Reference to Micro and
Small Enterprises Facilitation Council”. Sub Section (1) stipulates that
“Notwithstanding anything contained in any other law for the time being in
force, any party to a dispute may, with regard to any amount due under Section
17, make a reference to Micro and Small Enterprises Facilitation Council”. Sub
Section (2) contemplates “On receipt of a reference under Sub-Section (1), the
Council shall either conduct mediation itself or refer the matter to any mediation
service provider as provided under the Mediation Act, 2023”. Sub Section (3)
contemplates “The conduct of mediation under this section shall be as per the
provisions of the Mediation Act, 2023”. Sub Section (4) contemplates “Where
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the mediation initiated under Sub-Section (3) 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 it to any institution or centre
providing alternative 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”.
6. In the context of Section 18(1), it is admitted that a reference was made
to the Council in the present case. The Council conducted conciliation
proceedings between the parties, which ultimately ended in failure. Thereafter,
the Council initiated further proceedings for arbitration, fixing a date for
arbitration. The arbitration proceedings were conducted by adjudication of
merits by the Council. The documents and invoices were verified by the Council
and subsequently an award was passed.
7. The learned counsel appearing on behalf of the appellant would mainly
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contend that the procedures as contemplated by the Council for conducting
arbitration are in violation of various provisions of the Arbitration and
Conciliation Act, 1996. Specifically, the arbitration was not conducted in
accordance with the procedures contemplated and no notice was issued for
conducting arbitration under the Arbitration Act. Further, it is contended that the
procedures relating to the filing of written statement, hearing of parties claims,
and differences, were not followed. It is contended that the procedures
contemplated under Sections 20, 23, 24 and 25 of the Arbitration Act have been
violated. Consequently, the arbitration award passed by the Council is infirm
and liable to be set aside.
8. In support of the contentions raised, the learned counsel for the
appellant relied on the judgment of the Hon’ble Supreme Court of India in the
case of Jharkhand Urja Vikas Nicam Limited vs. State of Rajasthan and
Others1, and the judgment in the case of Silpi Industries and Others vs. Kerala
State Road Transport Corporation and Another2. Additionally, the learned
counsel cited the case of Super Steam Boilers Engineers Private Limited vs.
1. (2021) 19 SCC 206
2. (2021) 18 SCC 790
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The Micro, Small Enterprises Facilitation Council, Coimbatore Region and
Others3, wherein, the Division Bench of the Madras High Court decided the
issues on 07.08.2022, relating to procedures to be followed.
9. Relying on the above judgments, the learned counsel for the appellant
would submit that there is a patent violation in adhering to the procedures
contemplated under Sections 23, 24 and 25 of the Arbitration Act.
Consequently, it was argued that the Writ Court erred in dismissing the writ
petition.
10. Mr.T.Chandrasekaran, the learned Special Government Pleader
appearing on behalf of the 1st respondent would oppose by stating that the
procedures as contemplated under both the Micro, Small and Medium
Enterprises Development (MSMED) Act and the Arbitration and Conciliation
Act were duly followed. He emphasised that the proceedings are continuous in
nature. On receipt of claim petition under Section 18(1) of the MSMED Act,
conciliation was conducted and upon its failure, arbitration proceedings
3. MANU/TN/5356/2022
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commenced thereafter. There is no bar for commencing the arbitration
proceedings based on the failure of conciliation proceedings. Thus, there is no
infirmity and the Writ Court has rightly rejected the writ petition.
11. The learned counsel for the 2nd respondent, who is the claimant before
the Council, submitted that all the documents relating to the claim petition were
filed during the course of conciliation before the Council. As the dispute
relating to business transactions, which are record based, including invoice,
these documents were perused even during the conciliation proceedings by the
Council. Further, when the arbitration proceedings commenced, these
documents were reconsidered and formally recorded. In light of this, the Writ
Court is right in forming a opinion that to circumvent the conditions stipulated
under Section 19 of the MSMED Act. Consequently, the writ petition is not
maintainable otherwise.
12. This Court has carefully considered the arguments as advanced by the
parties to the lis on hand.
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13. Section 18(1) of MSMED Act empowers the Council to entertain the
claim petition. In the present case, the Council duly entertained the petition and
made an effort to conciliate the matter to resolve the issues. However, during
the course of conciliation, the appellant refused to settle the amount, leading to
the conciliation proceedings being declared unsuccessful.
14. A perusal of the impugned dated 23.03.2023, reveals that the claim
petition was filed before the Council on 23.06.2022 under Section 18(1) of
MSMED Act. The Council held its meetings on 30.08.2022, 09.12.2022,
19.02.2023 and 09.03.2023. During the course of meetings conducted in the
aforesaid dates, relevant documents were also verified by the Council. From
paragraph 6 of the order reveals that the sufficient opportunities were afforded
to the parties for conciliation. Since the conciliation proceedings did not
fructify, the Council held that the conciliation proceedings failed.
15. Thereafter, on 09.03.2023, the Council decided to post the case for
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conducting arbitration proceedings. Therefore, it is made clear that the Council
decided to proceed with the arbitration proceedings on account of the failure of
conciliation proceedings, on 09.03.2023 itself.
16. Pertinently, arbitration proceedings did not commenced on
09.03.2023. Following the decision to conduct arbitration proceedings, the
Council held a meeting via video conference on 23.03.2023, where both parties
were present along with their representatives. An inquiry was conducted on the
same day.
17. During the inquiry, the Council examined the invoices and other
relevant documents, including GSTR-1 documents. The appellant / respondent
in the claim petition denied the claim stating that bills were inflated. In their
counter statement, the appellant contended that, according to the unwritten
agreement between the buyer and supplier of fumigation services rendered to
the clients, a sum of Rs.250/- per import container, during the period between
2018 to 2021, and thereafter 2021-2022 a sum of Rs.500/- per import container,
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are the only mutually agreed rate for supplier of fumigation services.
18. A thorough reading of paragraph 8 in the arbitration award reveals
that the writ appellant filed a counter statement and relied on the counter
statement for the purpose of defending his case. The Council during the course
of inquiry considered the audit report, invoices and all other relevant
documents, including GSTR-1 documents. The relevant para of the arbitration
award relating to the inquiry are extracted here under:
“6. In the Joint Sitting held on 09.05.2023, both
the parties were present. Petitioner was represented
by Thiru. Sivakumar. Partner and Respondent was
represented by Thiru Jhon Mathew Petitioner stated
that Respondent was not ready to make the payment.
The Respondent stated that ledger of the Petitioner
was confusing and requested the Petitioner to provide
Auditor's report for relevant financial years. Further
stated that, according to their books of accounts, a
total sum of Rs.1,67,267/- remain pending. The
Petitioner instructed to submit Auditor's report for
relevant financial years and a documentary evidences
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to the Council. Conciliation failed and conciliation
proceedings are closed. It is decided to post the case
before the Council for conducting arbitration
proceedings
7. In the Council meeting held on 23 03.2023
through Video Conference both the parties were
present. Petitioner was represented by Thiru.K.
Sivakumar and Respondent was represented by Thiru.
Sampath Kumar. Conciliation failed, and conciliation
proceedings were closed. The case is taken up for
conducting arbitration proceedings. Petitioner stated
that Audit report will be submitted to the Council. The
Council decided to pass orders based on merits.
8. The Council has gone through the invoices
and other relevant documents including GSTR-1
documents. Respondent denied liability and contended
that the claim of the Petitioner is inflated. Respondent
in their counter statement has contended that
according to the unwritten agreement between the
buyer and supplier of fumigation services rendered to
the clients, a sum of Rs.250/-per import container,
during the period between 2018 to 2021, and
thereafter upto 2021-2022 a sum of Rs.500/- per
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import container, are the only mutually agreed rates
for the supply of fumigation services. It is further
stated therein that whatever balance amount claimed
in the Petitioner's bills shall become payable to the
buyer of the services, by the supplier of the services.
Also, it is stated in the counter that the modus
operandi of the disbursal of excess amount to the
buyer of the services claimed in the Petitioner's bills
were liable to be set off against amounts claimed vide
their subsequent bills raised on the buyer of services.
It is the contention of the Respondent that such excéss
amount claimed by the supplier of services is adjusted
by issuing credit notes reflected in the ledger of
Petitioner for the year 2021-2022. It is pertinent to
note that admittedly there is no written agreement for
supporting the contentions of the Respondent. The
invoice number 16373/15-16 dated 18.02.2016,
16230/16-17 dated 04.01.2017 and invoice number
ECC/6910/21-22 dated 21.07.2021 are submitted by
the Respondent in support of their contentions. It is
ascertained that invoice no. 16373/15-16 and
no.16230/16-17 do not pertain to fumigation and is
raised towards document charges. Invoice No.
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ECC/6910/21-22 pertains to fumigation and also is
part of the claim of the Petitioner. No evidence is
adduced by the Respondent to establish their
contentions. Credit notes have been already adjusted
by the Petitioner and the balance amount is claimed
in this petition. Further, the Petitioner has referred to
a report dated 27.06.2022 with respect to
investigation on the complaint filed by the Respondent
regarding non usage of Methyl Bromide for import
shipment by the Petitioner. The report which is signed
by RCMPIC, DD, states that fumigation has been
done by the Petitioner as per prescribed standards It
is ascertained that work has been duly completed by
the Petitioner. The claim of the Petitioner is
established by way of documents. Based on a detailed
and critical examination of the claims made by the
Petitioner along with available materials on record
and on merits of the case, the Council has come to the
considered conclusion that the Respondent is liable to
pay to the Petitioner the principal amount of Rs.
15,49,234/- along with the compound interest with
monthly rests at three times the Bank rate notified by
the RBI in accordance with Sections 15 & 16 of the
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MSMED Act, 2006.
9. Section 15 of the MSMED Act 2006 is
extracted as under:
15. Where any supplier supplies any goods
or renders any services to any buyer, the buyer
shall make payment there for on or before the
date agreed upon between him and the supplier
in writing or, where there is no agreement in this
behalf, before the appointed day:
Provided that in no case the period agreed upon
between the supplier and the buyer in writing
shall exceed forty-five days from the day of
acceptance or the day of deemed acceptance"
Section 16 of the MSMED Act 2006 is extracted
under:
"16. Where any buyer fails to make payment of
the amount to the supplier, as required under
section 15, the buyer shall, notwithstanding
anything contained in any agreement between
the buyer and the supplier or in any law for the
time being in force, be liable to pay compound
interest with monthly rests to the supplier on that
amount from the appointed day or, as the case
may be from the date immediately following the
date agreed upon, at three times of the bank rate
notified by the Reserve Bank"
10. The Council hereby allows the reference of
the Petitioner and directs the Respondent to pay the
principal amount of Rs. 15,49,234/- (Rupees Fifteen
Lakh Forty Nine Thousand Two Hundred and Thirty
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Four only) long with compound interest with monthly
rests, at three times the bank rate, notified by the
Reserve Bank of India as stipulated in Section 15 and
16 the MSMED Act, 2006 from the appointed due
dates pertaining to 203 Nos. of Invoices dated from
08.01.2020 to 06.08.2021 to the Petitioner, till the
date of realization of dues.
Based on the above, the petition filed before this
Council on 23.06.2022 stands disposed.”
19. Let us now consider the procedures to be followed under the
provisions of the Arbitration and Conciliation Act, 1996.
20. Regarding the procedures for conciliation, Section 18(2) of the
MSMED Act, specifically provides that for conducting conciliation, the
provisions of Sections 65 to 81 of the Arbitration and Conciliation Act shall
apply.
21. Sections 65 to 81 of the Arbitration and Conciliation Act, 1996,
govern the conciliation process. Here's a breakdown of these sections:
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(a) Section 65: Submission of statements to conciliator.
(b) Section 66: Conciliator not bound by certain enactments.
(c) Section 67: Role of the conciliator.
(d) Section 68: Administrative assistance.
(e) Section 69: Communication between the conciliator and parties.
(f) Section 70: Disclosure of information.
(g) Section 71: Co-operation of parties with the conciliator.
(h) Section 72: Suggestions by parties for settlement of dispute.
(i) Section 73: Settlement agreement.
(j) Section 74: Status and effect of settlement agreement.
(k) Section 75: Confidentiality.
(l) Section 76: Termination of conciliation proceedings.
(m)Section 77: Resort to arbitral or judicial proceedings.
(n) Section 78: Costs.
(o) Section 79: Deposits.
(p) Section 80: Role of conciliator in other proceedings.
(q) Section 81: Admissibility of evidence in other proceedings.
22. Section 76 of the Arbitration Act deals with termination of
conciliation proceedings. Once the conciliation proceedings are terminated,
Section 81 governs the admissibility of evidence in other proceedings.
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23. Section 81 explicitly states that the parties shall not rely on or
introduce as evidence as arbitral or judicial proceedings, whether or not such
proceedings relate to dispute that is the subject of the conciliation proceedings.
Sub Section (a) to Section 81 specifically states that “views expressed or
suggestions made by the other party in respect of a possible settlement of the
dispute”.
24. Therefore, it is made clear that conciliation proceedings and
arbitration proceedings are distinct and different, and the procedures are
contemplated separately with reference to the evidence adduced. In other words,
certain admissions made during the conciliation proceedings by any of the
parties cannot be relied upon in arbitration proceedings.
25. The safeguard is provided because the scope of conciliation is to
arrive a compromise between the parties, so as to resolve the disputes. Once the
conciliation failed and the arbitration proceedings commenced, then it is to be
adjudicated based on the documents and with reference to the claims.
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26. The purpose of this distinction is to ensure that confidential or oral
statements made during conciliation proceedings are not used to the advantage
of either party in arbitration or other proceedings. These proceedings must be
conducted independently, based on documents and evidence presented before
the arbitration. Thus, the role of the Council in conciliation is distinct from its
role in conducting arbitration proceeding. However, there is no impediment to
the Council to conduct conciliation and subsequently to conduct arbitration
proceeding, as contemplated under the Act. When acting in a dual role, the
Council is expected to exercise its powers in accordance with the procedures
contemplated for conciliation and arbitration.
27. In the case of Jharkhand Urja Vikas Nicam Limited cited supra, the
Apex Court clarified the role of the Council in paragraphs 14, 15, and 16, which
reads as under:
“14. From a reading of Sections 18(2) and
18(3) of the MSMED Act it is clear that the Council is
obliged to conduct conciliation for which the
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provisions of Sections 65 to 81 of the Arbitration and
Conciliation Act, 1996 would apply, as if the
conciliation was initiated under Part III of the said
Act. Under Section 18(3), when 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
Arbitration and Conciliation Act, 1996, particularly
Sections 20, 23, 24 and 25.
15. There is a fundamental difference between
conciliation and arbitration. In conciliation, the
conciliator assists the parties to arrive at an amicable
settlement, in an impartial and independent manner.
In arbitration, the Arbitral Tribunal/arbitrator
adjudicates the disputes between the parties. The
claim has to be proved before the arbitrator, if
necessary, by adducing evidence, even though the
rules of the Civil Procedure Code or the Evidence Act
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may not apply. Unless otherwise agreed, oral
hearings are to be held.
16. If the appellant had not submitted its reply
at the conciliation stage, and failed to appear, the
Facilitation Council could, at best, have recorded the
failure of conciliation and proceeded to initiate
arbitration proceedings in accordance with the
relevant provisions of the Arbitration and
Conciliation Act, 1996, to adjudicate the dispute and
make an award. Proceedings for conciliation and
arbitration cannot be clubbed.”
28. Therefore, the claim must be proved before the Arbitrator, if
necessary, by producing evidence, even though the Rules of Civil Procedure
Code or the Evidence Act may not apply. Oral hearings are also permitted.
29. The primary objective of the conciliation proceedings is to amicably
settle the dispute between parties. With reference to the claim petition instituted
under Section 18(1) of MSMED Act, in the event of failure, the Council can
proceed with arbitration proceedings after intimating the parties. Thereafter, the
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role of the Council is to ensure that the issues are considered based on the
documents and evidence produced between the parties, as per the Arbitration
Act.
30. One of the contention raised by the appellant is that no separate notice
was issued for the commencement of arbitration proceedings after declaring that
the conciliation proceedings ended in failure.
31. In this context, the arbitral award dated 23.03.2023, paragraphs 6 and
7 unambiguously indicate that the joint sitting for conciliation was held on
09.03.2023 and the failure of conciliation was declared and consequently
closed. The parties were informed by the Council that arbitration proceedings
would be taken up, and the date for arbitration proceedings was communicated
to the parties. The Council meeting for arbitration held on 23.03.2023 through
video conference, reveals that both the parties were present along with their
representatives, which would be sufficient to hold that the date of arbitration
proceedings was intimated to all the parties by the Council.
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32. Perusal of the findings in paragraph 7 onwards reveals that the
Council considered the documents independently, including invoices, auditor
reports and all other relevant documents. The particulars regarding the
documents are recorded in the proceedings.
33. That being so, the appellant has to file an application for setting aside
the arbitrator's award under Section 34 of the Arbitration and Conciliation Act,.
Section 34 of the Act, reads as follows:
“Section 34. Application for setting aside arbitral
award.- (1) Recourse to a Court against an arbitral
award may be made only by an application for setting
aside such award in accordance with sub-section (2)
and sub-section (3).
(2) An arbitral award may be set aside by the Court
only if--
(a) the party making the application
1[establishes on the basis of the record of the
arbitral tribunal that]--
(i) a party was under some incapacity, or
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(ii) the arbitration agreement is not valid under
the law to which the parties have subjected it or,
failing any indication thereon, under the law for the
time being in force; or
(iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so
submitted, only that part of the arbitral award which
contains decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the arbitral tribunal or
the arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement was
in conflict with a provision of this Part from which the
parties cannot derogate, or, failing such agreement,
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was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not
capable of settlement by arbitration under the law for
the time being in force, or
(ii) the arbitral award is in conflict with the
public policy of India.
Explanation 1.--For the avoidance of any doubt, it is
clarified that an award is in conflict with the public
policy of India, only if,--
(i) the making of the award was induced or
affected by fraud or corruption or was in violation of
section 75 or section 81; or
(ii) it is in contravention with the fundamental
policy of Indian law; or
(iii) it is in conflict with the most basic notions
of morality or justice.
Explanation 2.--For the avoidance of doubt, the test
as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a
review on the merits of the dispute.]
(2A) An arbitral award arising out of
arbitrations other than international commercial
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arbitrations, may also be set aside by the Court, if the
Court finds that the award is vitiated by patent
illegality appearing on the face of the award:
Provided that an award shall not be set aside merely
on the ground of an erroneous application of the law
or by reappreciation of evidence.
(3) An application for setting aside may not be
made after three months have elapsed from the date
on which the party making that application had
received the arbitral award or, if a request had been
made under section 33, from the date on which that
request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the
applicant was prevented by sufficient cause from
making the application within the said period of three
months it may entertain the application within a
further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-
section (1), the Court may, where it is appropriate and
it is so requested by a party, adjourn the proceedings
for a period of time determined by it in order to give
the arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action as in
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the opinion of arbitral tribunal will eliminate the
grounds for setting aside the arbitral award.
(5) An application under this section shall be
filed by a party only after issuing a prior notice to the
other party and such application shall be
accompanied by an affidavit by the applicant
endorsing compliance with the said requirement.
(6) An application under this section shall be
disposed of expeditiously, and in any event, within a
period of one year from the date on which the notice
referred to in sub-section (5) is served upon the other
party.”
34. Sub Section 34(2)(iii) of the Arbitration Act stipulates that the party
making the application was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to present his
case. This ground can also be raised before the Competent Forum under Section
34 of the Act.
35. Section 19 of MSMED Act contemplates Application for setting aside
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decree, award or order. “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”. Therefore, Section 19 mandates that 75% of the award amount
is to be deposited for entertaining an application under Section 34 of the
Arbitration Act.
36. Numerous writ petitions have been filed before the High Court under
Article 226 of the Constitution of India, attempting to circumvent the conditions
stipulated under Sections 17 and 19 of MSMED Act, and to avoid depositing
75% of the award amount. These writ petitions are filed commonly on the
ground of non-compliance of rules of natural justice, arbitral proceedings no
notice was issued for the commencement of the arbitration proceeding and other
grounds.
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37. In the case of Jharkhand Urja Vikas Nicam Limited cited supra
relied on behalf of the appellant for maintainability of writ petition reveals that
the council did not initiate arbitration proceeding and instead decided the issue
on the same day. Pertinently, notice for conciliation was issued, but the opposite
party remained absent, and on the very same day arbitration award was passed.
Thus, in paragraph 18, the Hon'ble Supreme Court held that it is directly in
violation of provisions and entertained the writ petition.
38. However, the facts of the present case are distinguishable. In the
present case, conciliation proceedings were conducted on various dates, and the
commencement of arbitration proceedings was intimated to the parties. Both
parties were present during the arbitration proceedings, and the council
scrutinized and assessed the documents before passing the award on merits.
39. Once the award has been passed on merits, with reference to the
document, then the remedy lies in filing an application under Section 34 of the
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Arbitration Act. Therefore, writ petitions filed merely on the ground that the
arbitration proceedings are continued after the failure of the conciliation are
unacceptable.
40. Even such grounds can be raised under Section 34 of the arbitration
Act. Consequently, parties are to be relegated to file an application. In a writ
proceeding, disputed facts relating to business transactions cannot be
adjudicated with reference to the original documents and evidence considered
during the conciliation and arbitration proceedings.
41. The other judgments relied on by the appellant are also
distinguishable on facts. The Division Bench of this Court has not considered
various provisions of the MSMED Act and arbitration proceeding. Therefore,
the said judgment of the Division Bench in the case of Super Steam Boilers
Engineers Private Limited cited supra cannot be cited as precedent for the
purpose of maintaining a writ petition challenging the arbitral award.
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42. This Court often witnesses writ petitions being filed for prolongation
and to increase the longevity of the disputes, so as to escape from the liability.
Thus, writ petitions challenging arbitral awards passed on merits are not
maintainable and the person aggrieved from and out of arbitral award shall be
relegated to institute an application under Section 34 of the Arbitration Act for
adjudication of issues on merits and in accordance with law.
43. In view of the above discussions, this Court concurs with the decision
of the Writ Court and the same stands confirmed. Consequently, Writ Appeal is
dismissed. The connected Miscellaneous Petition is closed. There shall be no
order as to costs.
(S.M.SUBRAMANIAM J.)(K.RAJASEKAR J.)
27-02-2025
Jeni
Index:Yes/No
Speaking/Non-speaking order
Internet:Yes
Neutral Citation:Yes/No
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To
1.The Micro and Small Enterprises
Facilitation Council
Chennai Region,
A30, Thiru Vi.Ka. Industrial Estate,
Guindy, Chennai - 600 032.
2.M/s. Eco Care Pest Control Services
New No.62, 4th North Beach Road,
Chennai - 600 001
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S.M.SUBRAMANIAM
J.
AND
K.RAJASEKAR J.
Jeni
27-02-2025
https://www.mhc.tn.gov.in/judis ( Uploaded on: 07/04/2025 02:58:14 pm )
