Madras High Court
B.Shanthi vs / on 29 January, 2025
Author: G.K.Ilanthiraiyan
Bench: G.K.Ilanthiraiyan
W.P.(MD)No.19365 of 2022
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 29.01.2025
CORAM:
THE HONOURABLE MR.JUSTICE G.K.ILANTHIRAIYAN
W.P.(MD)No.19365 of 2022
and
W.M.P(MD)No.14134 of 2022
B.Shanthi ... Petitioner
/Vs./
1.The Micro, Small Enterprises
Facilitation Council, Madurai Region,
represented by its Chairperson/
Industries Commissioner and Director of
Industries and Commerce,
Guindy, Chennai.
2.M/s.ARR Packaging Industry,
Through its Proprietor,
Shed No.40, SIDCO
Kappalur, Madurai-625 008. ... Respondents
PRAYER: Petition filed under Article 226 of the Constitution of India, to
issue a Writ of Certiorari, to call for the records relating with the
impugned order of the first respondent dated 26.11.2020 and made in
Case No.MSEFC/MDU/12/2020 and quash the same as it is arbitrary and
illegal as it violates the mandate under Section 18 of the MSME Act,
2006.
1/10
https://www.mhc.tn.gov.in/judis
W.P.(MD)No.19365 of 2022
For Petitioner : Mr.R.Suriya Narayanan
For R1 : Mr.M.Senthil Ayyanar
Government Advocate
For R2 : Mr.A.Arputharaj
ORDER
This writ petition has been filed challenging the award passed by
the first respondent, dated 26.11.2020 thereby, directed the petitioner to
pay a sum of Rs.6,38,565/- together with compounded interest in favour
of the second respondent.
2. The petitioner is the manufacture and supplier of the paper
plates and paper cups. In order to manufacture the said products, the
petitioner purchased the materials on credit basis with the second
respondent. However, during COVID-19, the petitioner was not able to
get the order for the said products and as such, there is a dues to the
second respondent. Therefore, the second respondent initiated the
proceedings before the Micro and Small Enterprises Facilitation Council,
Madurai Region by way of claim petition under Section 18 of the Micro,
Small, Medium Enterprises, Development Act (hereinafter called as
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MSMED Act). On receipt of the said claim petition, the petitioner was
served with notice and passed an order, dated 26.11.2020. Aggrieved by
the same, the petitioner preferred an appeal on the ground that Section 18
(1) to (4) have not been complied with by the first respondent.
Therefore, the award passed by the first respondent is arbitrary and
illegal. As per Section 18 of the MSMED Act, the first respondent
explore the possibility of Mediation and Conciliation between the parties
as arbitrator, after failure of the said proceedings or terminate
proceeding, take up the dispute and act as arbitrator and passed an award.
3. On perusal of the records and also on perusal of the counter
affidavit filed by the second respondent revealed that on receipt of the
claim made by the second respondent to the tune of Rs.6,38,565/- under
Section 18 of MSMED Act, 2006, the first respondent issued notice to
the petitioner. On receipt of the same, the petitioner appeared through
counsel and requested time to furnish the copies. Once again the
documents were furnished to the petitioner, even thereafter, the learned
counsel for the petitioner requested time to file a counter. The same
request was made on three occasions through Video Conference.
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Thereafter, the first respondent decided to dispose of the claim by
passing final orders. It is relevant to extract the provision under Section
18 of the MSMED Act, 2006.
"18. Reference to Micro and Small Enterprises
Facilitation Council. (1) 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 the Micro and
Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the
Council shall either itself conduct conciliation in the
matter or seek the assistance of any institution or centre
providing alternate dispute resolution services by making
a reference to such an institution or centre, for conducting
conciliation and the provisions of sections 65 to 81 of the
Arbitration and Conciliation Act, 1996 (26 of 1996) shall
apply to such a dispute as if the conciliation was initiated
under Part III of that Act.
(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 it to 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.
(4) Notwithstanding anything contained in any other law
for the time being in force, the Micro and Small
Enterprises Facilitation Council or the centre providing
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alternate dispute resolution services shall have
jurisdiction to act as an Arbitrator or Conciliator under
this section in a dispute between the supplier located
within its jurisdiction and a buyer located anywhere in
India.
(5) Every reference made under this section shall be
decided within a period of ninety days from the date of
making such a reference.
4. Accordingly, the first respondent ought to have proceeded with
the Mediation process and if the Mediation process failed between the
parties, the first respondent itself either 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. There is no record to show that
the first respondent proceed with the mediation process between the
parties, namely, the petitioner and the second respondent and there is no
order of termination for mediation process on the ground that there is no
settlement between the petitioner and the second respondent.
5. The Hon'ble Supreme Court of India, in the case of Jharkhand
Urja Vikas Nigam Limited Vs. State of Rajasthan and others reported
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in 2021 SCC Online SC 1257 has held as follows :
“11. From a reading of Section 18(2) and 18(3) of
the MSMED Act it is clear that the Council is obliged to
conduct conciliation for which the 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 20,23,24,25.”
6. Further, the Hon'ble Division Bench of this Court in W.A.No.
2655 of 2021 in the case of M/s.Super Steam Boilers Engineers Pvt.
Ltd., Vs. The Micro, Small Enterprises Facilitation Council,
Coimbatore Region, Rep. by its Chairperson, Office of Industries
Commissioner and Director of Industries and Commerce, Guindy,
Chennai – 600 032, held as follows :
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“8. A perusal of the order passed by the
Council shows that initially the matter was taken up for
conciliation and was deferred from time to time to settle
the disputes in the interest of the parties. When the
conciliation failed, an order was passed to take up the
matter for arbitration invoking Section 18(3) of the Act of
2006. While taking a decision to arbitrate the matter, the
procedure required for it has not been followed. The
matter was ordered to be posted directly for arguments
and for that, to lead evidence by the parties. Without
realising that, after the failure of conciliation
proceedings, the matter was to be taken up for arbitration
as per the procedure.
9. The Council could have taken up the
matter for arbitration or send it for independent
arbitration as given under Section 18 of the Act of 2006.
It at all the matter is taken up for arbitration, it should
have been after calling for the claim and thereupon
writeen statement from the side opposite with counter
claim, if any. The procedure aforesaid was not followed
and in view of the judgment of the Apex Court in the case
o fJharkhand Urja Vikas Nigam Limited, it becomes
clear that the procedure given under Section 18 of the Act
of 2006 is mandatory in nature and when conciliation
fails, the Council is empowered either to take up
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arbitration on its own or to refer it to any institution
providing alternative dispute resolution services and the
provisions of the Arbitration and Conciliation Act, 1996
to apply therein.”
7. In view of the above, the award passed by the first respondent
dated 26.11.2020 is liable to be quashed and accordingly it is quashed.
The matter is remitted back to the first respondent for fresh consideration
and the first respondent is directed to follow the procedure as
contemplated under Section 18(1) to (4) of the MSMED Act and pass
fresh award within a period of twelve weeks from the date of receipt of a
copy of this order. Whatever the amount deposited by the petitioner in
the light of the interim order passed by this Court, it may be adjusted
towards any award passed as against the petitioner.
8. In the result, the writ petition is allowed. No costs.
Consequently, connected miscellaneous petition is also closed.
29.01.2025
Index : Yes / No
NCC : Yes / No
am
https://www.mhc.tn.gov.in/judis
To
1.The Micro, Small Enterprises
Facilitation Council, Madurai Region,
represented by its Chairperson/
Industries Commissioner and Director of
Industries and Commerce,
Guindy, Chennai.
2.M/s.ARR Packaging Industry,
Through its Proprietor,
Shed No.40, SIDCO
Kappalur, Madurai-625 008.
https://www.mhc.tn.gov.in/judis
G.K.ILANTHIRAIYAN, J.
am
Order made in
Dated:
29.01.2025
https://www.mhc.tn.gov.in/judis
