Orissa High Court
The Deputy General Manager vs M/S. Maa Bhairabi Traders on 14 February, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: AR-CUM- SR. SECRETARY
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.3 of 2023
Along with
ARBA No.37 of 2022,
ARBA No.4 of 2023,
ARBA No.5 of 2023
(IN ARBA No.3 of 2023)
(From the Judgment dated 12.1.2023 passed by the Learned District
Judge, Ganjam in Arbitration Petition No.1 of 2021 arising out of
award dated 18.7.2018 passed by the Micro and Small Enterprises
Facilitation Council in MSEFC Case No. 33 of 2017)
The Deputy General Manager, .... Appellant (s)
(Elect.), Electrical Circle,
Berhampur,
-versus-
M/s. Maa Bhairabi Traders, .... Respondent (s)
Lochapada Road, PO. Berhampur,
Dist.-Ganjam &Anr.
Advocates appeared in the case through Hybrid Mode:
Appellant (s) : Mr. Anindya Kumar Mishra, Adv.
Respondent (s) : Mr. Rajeet Roy, Adv.
Mr. Suryakanta Dwibedi, Adv.
Mr. R.K. Mahanta, Adv.
(IN ARBA No.37 of 2022)
(From the order dated 14.09.2022 passed by the Learned District
Judge, Ganjam, Berhampur in Arbitration Petition No.1 of 2021
arising out of award dated 18.07.2018 passed by the Micro and Small
Enterprises Facilitation Council in MSEFC Case No. 33 of 2017)
Page 1 of 25
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: AR-CUM- SR. SECRETARY
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
Superintending Engineer (TPSODL, .... Appellant (s)
Electrical Circle, Bidyutpuri Colony,
Berhampur
-versus-
M/s. Maa Bhairabi Traders, .... Respondent (s)
Lachapada Road, PO. Berhampur,
Dist.-Ganjam & Anr.
Advocates appeared in the case through Hybrid Mode:
Appellant (s) : Mr.Suresh Chandra Dash, Adv.
Respondent (s) : M/s. G.M. Rath, Adv.
Mr. S.S. Padhy, Adv.
(IN ARBA No.4 of 2023)
(From the Judgment dated 12.1.2023 passed by the Learned District
Judge, Ganjam in FAO No.20 of 2022 arising out of award dated
19.01.2019 passed by the Micro and Small Enterprises Facilitation
Council in MSEFC Case No.35 of 2017)
Chief Operating Officer, SOUTHCO .... Appellant (s)
Utility, Corporate Office,Berhampur
-versus-
Director of Industries, Cuttack, .... Respondent (s)
Odisha & Ors.
Advocates appeared in the case through Hybrid Mode:
Appellant (s) : Mr. Anindya Kumar Mishra, Adv.
Respondent (s) : Mr. Rajeet Roy, Adv.
Mr. Suryakanta Dwibedi, Adv.
Mr. R.K. Mahanta, Adv.
Page 2 of 25
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: AR-CUM- SR. SECRETARY
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
(IN ARBA No.5 of 2023)
(From the Judgment dated 12.1.2023 passed by the Learned District
Judge, Ganjam in FAO No.19 of 2022 arising out of award dated
19.01.2019 passed by the Micro and Small Enterprises Facilitation
Council in MSEFC Case No.34 of 2017)
Chief Operating Officer, SOUTHCO .... Appellant (s)
Utility, Corporate Office,
Berhampur
-versus-
Director of Industries, Cuttack, .... Respondent (s)
Odisha & Anr.
Advocates appeared in the case through Hybrid Mode:
Appellant (s) : Mr. Anindya Kumar Mishra, Adv.
Respondent (s) : Mr. Rajeet Roy, Adv.
Mr. Suryakanta Dwibedi, Adv.
Mr. R.K. Mahanta, Adv.
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-25.11.2024
DATE OF JUDGMENT: -14.02.2025
Dr. S.K. Panigrahi, J.
1. These Appeals under Section 37 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as ‚A&C Act‛) have been filed against the
Judgments dated 12.1.2023 passed by the Ld. District Judge, Ganjam in
Arbitration Petition No. 1 of 2021 as well as FAO No. 19 of 2022 and
FAO No. 20 of 2022 arising out of award dated 18.7.2018 passed by
Micro and Small Enterprises Facilitation Council in MSEFC Case No. 33
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
of 2017, award dated 19.1.2019 passed by Micro and Small Enterprises
Facilitation Council in MSEFC Case No. 34 of 2017 and award dated
19.1.2019 passed by Micro and Small Enterprises Facilitation Council in
MSEFC Case No. 35 of 2017. As all the aforesaid Appeals involve the
same contesting parties and raise the same questions of law, it is
considered prudent to deal with them together.
I. FACTUAL MATRIX OF THE CASE:
2. For the sake of brevity, the facts involved in the aforesaid appeals are
summarily discussed herein:
i. This Appeal u/s 37 of the A&C Act challenges the Judgment
dated 12.1.2023 passed by the Ld. District Judge, Ganjam in
Arbitration Petition No. 1 of 2021.The same arises out of award
dated 18.7.2018 passed by Micro and Small Enterprises
Facilitation Council in MSEFC Case No. 33 of 2017.
ii. As desired by the Asst. Engineer, PH Division Aska for a 11
KV dedicated feeder for strengthening the water supply
system of NAC, Polasara a tender call notice was issued by the
office of the G.M. Electrical Circle, Berhampur. M/s Maa
Bhairabi being the lowest bidder in the said tender was
selected and work order was issued on 8.2.2016 for
construction of 11KV dedicated feeder for power supply to
Ranipada & Rameswar PHD Substation under Polasara
Electrical Sub Division.
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
iii. As per clause 3.1 of the work order M/s Maa Bhairabi had to
complete the work within a period of 120 days from the date of
issuance of the work order. The same was not completed in
time and M/s Bhairabi time and again request for extension of
time for completion of the work.
iv. Subsequently, after allegedly not completing the entire work
and leaving glaring deficiencies in the same, the present
Petitioner was intimated that M/s Maa Bhairabi has filed a
claim before the MSEFC, Cuttack, Odisha for payment of Rs.
32,32,580.00 out of which principal amount is Rs. 31,28,823.00
and interest amount is Rs. 1,03,757.00 on the ground that M/s
Maa Bhairabi has completed the work and energized the same
on 23.6.2017.
v. After receipt of notice, a detailed reply was filed disputing the
averments made in the claim petition and bringing it to the
notice of the authority that the original Claimant has not
completed the work as per the terms of the work order. It was
also pointed out that the line was not handed over in time,
therefore there is no question of paying a final bill. It was also
contended that the bills so contended having not been paid,
were never sent to the present Petitioner.
vi. After hearing the parties, the Ld. Council vide order dated
18.7.2018 in MSEFC Case No. 33 of 2017 was pleased to direct
the present Petitioner to pay the principal amount of Rs.
31,28,823.00 (Rupees Thirty one Lakhs twenty eight thousand
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
eight hundred twenty three) only and interest claim of Rs.
1,03,757.00 (Rupees One Lakh three thousand seven hundred
fifty seven) only calculated up to 31.07.2017 (statement
enclosed as Annexure-II) as per Section 15 & 16 of MSMED
Act, 2006. It was further directed that compound interest with
monthly rests shall be payable at the rate of 3 times of the Bank
rate as notified by Reserve Bank of India from time to time till
realization of dues.
vii. Thereafter, after a slew of litigation to condone delay, this
Court directed the Ld. District Judge, Ganjam to hear the
present Petitioner's appeal u/s 34 of the A&C Act on merits,
which was not entertained by the Ld. District Judge, hence the
present Appeal.
i. This Appeal under Section 37 of the A & C Act arises out of the
order dated 14.09.2022 passed by the Learned District Judge,
Ganjam, Berhampur in C.M.A. No.05 of 2022 arising out of
Arbitration Petition No.1 of 2021, wherein the application filed
by the Appellant under Sections 5 and 14 of the Indian
Limitation Act, 1963 has been rejected. In the process, the
Arbitration Petition No.1 of 2021 filed under Section 34 of the
& C Act was dismissed.
ii. Challenging the order/ award dated 18.07.2018 passed in
MSEFC Case No.33 of 2017 by the Director of Industries-cum-
Chairman, MSEFC Industries, Directorate Odisha, Cuttack, the
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
present Appellant had filed a Writ Petition being W.P.(C)
No.19024 of 2018 which was disposed of on 16.09.2019 with a
direction that if along with the Appeal, a Petition for
condonation of delay is filed by the Petitioner therein within
three weeks from passing of the order, the same shall be
disposed of in accordance with law quite liberally.
iii. Aggrieved by the aforesaid order of this Court, the present
Appellant filed W.A. No.551 of 2019 before the Division Bench
of this Court which was disposed of as withdrawn with liberty
to approach the appropriate forum under Section 34 of the A &
C Act. vide order dated 27.07.2021.
iv. Pursuant to the aforesaid order dated 27.07.2021 passed in
W.A. No.551 of 2019, the Appellant preferred ARBP No.01 of
2021 in the court of the learned District Judge, Ganjam,
Berhampur assailing the order/ award dated 18.07.2018 passed
in MSEFC Case No.33 of 2017 by the Director of Industries-
cum- Chairman, MSEFC Industries, Directorate Odisha,
Cuttack along with a petition under Section 5 of the Limitation
Act i.e. CMA No.05 of 2022 for condonation of delay in
preferring the ARBP No.01 of 2021.
v. Learned District Judge, Ganjam, Berhampur vide order dated
14.09.2022 passed in CMA No.05 of 2022 dismissed the ARBP
No.01 of 2021 being barred by limitation. Hence, the present
Appeal.
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
i. This Appeal u/s 37 of the A&C Act arises out of judgment
dated 12.1.2023 passed by the Ld. District Judge, Ganjam in
FAO No. 20 of 2022 arising out of award dated 19.1.2019
passed by Micro and Small Enterprises Facilitation Council in
MSEFC Case No. 35 of 2017.
ii. The present Respondent No.2 as petitioner therein had filed
MSEFC Case No.35/2017 against the Chief Operating Officer,
Southco Utility. Alleging therein that the management of
Southco Utility had placed three numbers of work order on
National Small Industries Corporation Ltd. (NSIC Ltd.) vide
Work Order No. 14732 dated 24.11.2014, Work Order No.14733
dated 24.11.2014 and Work Order No.14734 dated 24.11.2014
respectively. Thereafter, M/s Maa Bhairabi Traders had been
awarded the work orders by NSIC vide Letter No.
NSIC/BAM/SUB-BR/Maa Bhairabi/14-15/0363, dated 3.12.2014
of Branch Manager. NSIC, Berhampur being a registered
MSME vendor for execution.
iii. Soon after receipt of the said work orders from NSIC, the
petitioner started execution of work assigned against package
IV and package V of work order under the guidance,
supervision and direction of the Engineer-in-charge and
Project Manager. In spite of some field problems in conducting
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
joint verification by various inter departmental officers and
delayed support of Southco Utility for resolving the site
problem, M/s Maa Bhairabi was able to execute the said two
package of works after expiry of scheduled completion period
and the said line was energised on 8.8.2015. Accordingly, it is
submitted that the entire newly constructed asset was handed
over and taken over by the Southco Utility as per the formality
of the work order.
iv. Thereafter, M/s Maa Bhairabi submitted its invoices to NSIC
and consequently NSIC submitted the invoices to Project
Manager, Southco Utility. In response, an advance payment
against NSIC for the amount of 32,16,840/- was released on
6.11.2015 through RTGS. Thereafter NSIC released the amount
of Rs.31,33,492/- in favour of M/s Maa Bhairabi after deducting
statutory taxes and duties of Rs.83,348/-. But an amount of
Rs.13,11,823/- was kept pending by Southco Utility without
showing any reason at the time of release of payment.
v. Further, due to non-support for joint survey, revised bill of
quantity and single line diagram according to route alignment
against pending package VI of work order, the work of
package VI was hampered. Due to delayed execution of work
of package VI of work order, M/s Maa Bhairabi had purchased
and deployed materials to the site to the tune of Rs. 24,82,894/-
which remained unutilized and suffered severe depreciation of
materials and thereby cost escalation occurred.
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
vi. Therefore, for release of the dues of Rs.84,29,765/- out of which
the principal, amount Rs.39,62.511/- and Rs.44,67,254 towards
interest, M/s Maa Bhairabi filed an application before the
MSEFC for realization of the same.
vii. As being noticed by the MSEFC, Cuttack the Appellant
appeared in this case and filed his written objection denying
the averments made in the claim petition. The Appellant
(Opposite Party in the MSEFC below) in his written objection
has stated that at no point of time any work orders have been
placed with the respondent No.2 by Southco and all the work
orders have been placed with the NSIC Ltd. with different
terms and conditions. Accordingly, as per the work order
placed by the NSIC Ltd., the respondent No.2 has executed the
work. It was also brought to the notice of the council that as
against the invoice raised by the claimant through NSIC for
execution of his works, an amount of Rs. 31,33,492/- has
already been released in favour of the respondent No.2 by
deducting statutory dues and taxes amounting to Rs.83,348/-.
As the respondent No.2 had not complied with the
observations of the Engineer-in-charge and Project Manager,
an amount of Rs.13,1 1,823/- has been kept and the same shall
be released after compliance of the observations.
viii. That on 19.1.2019 in its 64th sitting it is alleged that the MSEFC
conducted a hearing and passed an order without considering
the matter in its proper perspectives, without going through
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
the factual aspect of the case and without applying its judicial
mind and sans any suitable reasons observed that M/s Maa
Bhairabi has approached the present Appellant for amicable
settlement but the Appellant did not pay any attention to it,
therefore the Appellant is liable to pay the legitimate
outstanding dues of M/s Maa Bhairabi. Accordingly it was
directed that the present Appellant would pay the principal
amount of Rs.39,62,511/- and interest claim of Rs.44,67,254/-
calculated up to 31.7.2017 as per Section 15 & 16 of MSMED
Act, 2006 and further compound interest with monthly rest
shall be payable at three times of bank rate as notified by the
Reserve Bank of India from time to time till realization of the
dues.
ix. Thereafter, after a slew of litigation to condone the delay, this
Court directed the Ld. District Judge, Ganjam to hear the
present Appellant's appeal u/s 34 of the A&C Act on merits,
which was not entertained by the Ld. District Judge, hence the
present Appeal.
i. This Appeal u/s 37 of the A&C Act arises out of judgment
dated 12.1.2023 passed by the learned District Judge, Ganjam
in FAO No. 19 of 2022 arising out of award dated 19.1.2019
passed by Micro and Small Enterprises Facilitation Council in
MSEFC Case No. 34 of 2017.
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
ii. That the present respondent No.2 as petitioner had filed
MSEFC Case No.34/2017 against the Chief Operating Officer,
Southco Utility alleging therein that the petitioner participated
in the tender under CAPEX programme for replacement of
single phase meter for Ganjam North Electrical Division
(GNED), Purushottampur Electrical Division (PSED), Aska
Electrical Division No.ll (AED-II), Ganjam Southern Electrical
Division (GSED) &Aska Electrical Division No.l (AED No.l),
the Divisions functioning under Southern Electricity Supply
Company (Now TPSODL) erstwhile Southco Utility.
iii. The procurement committee for CAPEX after considering
Techno commercial evaluation of meter replacement and price
bid on different dates awarded the work in favour of the
claimant O.P. No.2 for single phase meter replacement with or
without shifting as per the Work Order issued on 26.6.2015 for
different divisions.
iv. Thereafter, it is submitted that the M/s. Maa Bhairabi Traders
completed the order in phased manner as per the direction and
under direct supervision of the Executive Engineer-in-Charge
and submitted Invoice date wise/ division wise against each
completed work.
v. Due to delayed releasing of payment by the Southco Utility
against the invoices for release of payment, M/s. Maa Bhairabi
Traders issued several reminders.
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
vi. Further, due to non-release of payment invoice wise in time (as
alleged by), M/s. Maa Bhairabi Traders, they filed an
application before MSME for realization of an amount of
Rs.23,05,000/- as a principal and Rs.20,78,923/- as interest (Total
amount of Rs.43,83,923/-) for realization of the same.
vii. Upon being noticed by the MSEFC, Cuttack, the Appellant
appeared in the case and filed his written objection denying
the averments made in the claim petition. The Appellant in his
written objection has stated that in spite of repeated request by
the Engineer-in- Charge, the claimant has failed to execute the
Work order within time. Due to slow progress of the work by
the claimant on 28.10.2016, the procurement committee
meeting for CAPEX was held at OPTCL office, Bhubaneswar
and decision was taken to cancel the Work order along with
forfeiture of the EMD dues. As per the Para-36 of the Work
order it is stipulated that if any disputes arises the party to
approach the competent authority and the competent
authority is to resolve the dispute in accordance with the
provisions of the arbitration and conciliation Act 1996. In fact,
without exhausting the remedy available under the work
order, the present application has been filed for realization of
the arrear dues is not maintainable. It is also submitted that
there has been no such delay as alleged in payment of dues to
the claimant for the bills submitted by him.
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
viii. On 19.1.2019 in its 64th sitting it is alleged that the MSEFC
conducted a hearing and passed an order without considering
the matter in its proper perspectives and without going
through the factual aspect of the case and without applying its
judicial mind and sans any reasons observed that M/s Maa
Bhairabi has approached the present Appellant for amicable
settlement but the Appellant did not pay any heed to it,
therefore the Appellant is liable to pay the legitimate
outstanding dues of M/s Maa Bhairabi. Accordingly, it was
directed that the present Appellant would pay the principal
amount of Rs.39,62,511 and interest claim of Rs.44,67,254/- only
calculated up to 31.7.2017 as per Section 15 & 16 of MSMED
Act, 2006 and further compound interest with monthly rest
shall be payable at three times of bank rate as notified by the
Reserve Bank of India from time to time till realization of the
dues.
3. Now the facts leading up to the instant Appeals have been laid down,
this Court shall endeavour to summarise the contentions of the Parties
and the broad grounds that have been raised to seek the exercise of this
Court's limited jurisdiction available under S. 37 of the A&C Act.
II. APPELLANTS' SUBMISSIONS:
4. The counsels for the Appellants assail the judgment of the Ld. District
Judge mainly on the ground that the Ld. District Judge has not
considered the mandatory provision of conciliation as provided in
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
Section 18(2) of the MSMED Act, has not been complied with and
therefore, the award is bad in law and liable to be set aside.
III. SUPPLIER'S SUBMISSIONS:
5. Per contra, learned counsel for the Supplier submits that there is no
infirmity with the order of the Ld. District Judge who has considered all
the grounds raised by the Appellants in their proper perspective to pass
a well reasoned judgment and order.
IV. ISSUEFOR CONSIDERATION:
6. Having heard the parties and perused the materials available on record,
this Court here has identified the following solitary issue to be
determined:
A. Whether the order of the Ld. District Judge warrants interference
keeping in mind the limitations of this Court's powers under Section
37 of the A&C Act?
V. ISSUE A: WHETHER THE ORDER OF THE LD. DISTRICT JUDGE
WARRANTS ANY INTERFERENCE KEEPING IN MIND THE
LIMITATIONS OF THIS COURT'S POWERS UNDER SECTION 37
OF THE A&C ACT?
7. This Court has had the pleasure of delving into the contours of the
MSMED Act in National Aluminium Co. Ltd. v. Orissa Coal Chem. (P)
Ltd.1
8. As held earlier, the very object of enacting the MSMED Act, 2006 was to
facilitate the promotion and development, and enhance the
2023 SCCOnLineOri 5234
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
competitiveness of micro, small and medium enterprises. The Act also
aimed to ensure timely and smooth flow of credit to the micro, small
and medium enterprises, and to minimise the incidence of sickness. One
of the main objects of the Act was to delete the Interest on Delayed
Payments under Small Scale and Ancillary Industrial Undertakings Act,
1993, and to include stringent provisions as also to provide dispute
resolution mechanism for resolving the disputes of non-payment of
dues to the micro and small enterprises. Thus, the seed of
the MSMED Act, 2006 had sprouted from the need for a comprehensive
legislation to provide an appropriate legal framework and extend
statutory support to the micro and small enterprises to enable them to
develop and grow into medium ones.
9. Sections 15 to 25 contained in Chapter V of the MSMED Act, 2006
pertain to the ‚delayed payments to micro and small enterprises‛. A
bare perusal of the said provisions contained in Chapter V shows that a
strict liability is fastened on the buyer to make payment to the supplier
who supplies any goods or renders any services to the buyer,
prescribing the time-limit in Section 15. Section 16 further fastens the
liability on the buyer to pay compound interest if any buyer fails to
make payment to the supplier as required under Section 15. Such
compound interest is required to be paid at three times of the bank rate
notified by the Reserve Bank, notwithstanding contained in any
agreement between the buyer and supplier or in any law for the time
being in force. An obligation to make payment of the amount with
interest thereon as provided under Section 16 has been cast upon the
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
buyer and a right to receive such payment is conferred on the supplier
in Section 17. Thus, Section 17 is the ignition point of any dispute under
the MSMED Act, 2006. Section 18 of the Act provides for the mechanism
to enable the party to the dispute with regard to any amount due under
Section 17, to make a reference to the Micro and Small Enterprises
Facilitation Council.
10.Further, if there is any dispute related to delayed payment, reference
can be made to the Micro and Small Enterprises Facilitation Council
(hereinafter, 'Facilitation Council') for dispute resolution. Furthermore,
it has been provided in the said act that the provisions contained under
Section 15 to Section 23, will have an overriding effect on any law which
is in contravention of the same.
11.The MSMED Act has, therefore, provided for the establishment of
MSME Facilitation Councils as the one-stop shop for resolution of
disputes under the MSMED Act. Section 18 of the MSMED Act reads as:
"18. (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 (Recovery of
Amount Due), 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 shall apply to such a dispute as if the
conciliation was initiated under Part III of that Act.
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
(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 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) Every reference made under this section shall be decided
within a period of ninety days from the date of making such a
reference." [Emphasis is ours]
12. A bare perusal of the above, it appears that there is a two tiered dispute
resolution system provided in the MSMED Act itself for facilitating the
promotion and development, and enhancing the competitiveness of
micro, small and medium enterprises and for matters connected
therewith or incidental thereto.
13.Section 18 starts with a non obstante clause i.e. ‚notwithstanding
anything contained in any other law for the time being in force‛. It
means that the said provision has been enacted with the aim to
supersede other laws for the time being in force. Further, a dedicated
statutory forum i.e. the Micro and Small Enterprises Facilitation Council
(as established under Section 20of the MSMED Act, 2006), has been
provided so that a reference could be made by any party to the dispute.
Sub-section (2) of Section 18 empowers the Facilitation Council, on
receipt of such reference made under sub-section (1), to conduct
conciliation in the matter or seek assistance of any institution or centre
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
providing alternate dispute resolution services by making a reference to
such an institution or centre, for conducting conciliation, as
contemplated in Sections 65 to 81 of the Arbitration Act, 1996. If the
conciliation initiated under sub-section (2) is not successful and stands
terminated without any settlement between the parties, the Council is
further empowered under sub-section (3) to either itself take up the
dispute for arbitration or refer to it any institution or centre providing
alternate dispute resolution services for such arbitration. The provisions
of the Arbitration Act, 1996 are then made applicable to the dispute as if
the arbitration was in pursuance of an arbitration agreement referred to
in sub-section (1) of Section 7 of the Arbitration Act, 1996. Sub-section
(4) of Section 18 again starts with a non obstante clause i.e.
"notwithstanding anything contained in any other law for the time being in
force", and confers jurisdiction upon the Facilitation Council to act as an
arbitrator or a conciliator in a dispute between the supplier located
within its jurisdiction and a buyer located anywhere in India. Sub-
section (5) of Section 18 fixes the time-limit of ninety days to decide
such reference.
14.It is, therefore, clear that only when the conciliation initiated under
Section 18 (2) is not successful, then in the absence of any settlement
between the parties, the Facilitation Council under Section 18 (3) is to
either itself take up the dispute for arbitration or refer to it any
institution or centre providing alternate dispute resolution services for
such arbitration.
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
15.The conciliation envisioned in the MSMED Act, not being a voluntary
but compulsory step, any failure to initiate/conduct the same would
render a consequent award passed by the MSEFC bad in law and liable
to be set aside. The same view has also been reiterated by the Supreme
Court in Jharkhand Urja Vikas Limited v. The State of Rajasthan and
Ors.2 wherein the Apex Court held as under:
"9. 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."(emphasis is ours)
16.As far as this Court's powers of interference under Section 37 of the
A&C Act is concerned, it is apt to advert to the decision of the Supreme
Court in Oil & Natural Gas Corporation Ltd. v. Western Geco
International Limited3 which was subsequently discussed in Associate
Builders v. Delhi Development Authority4. The position of law was
clarified and laid down recently by the Supreme Court in Ssangyong
Engg. & Construction Co. Ltd. v. NHAI5 and more recently reiterated in
UHL Power Company Ltd. v. State of Himachal Pradesh6.
17.The award passed in pursuance of an arbitration under Section 18(3) of
the MSMED Act can therefore also only be set aside under Sections
Judgement dated 15.12.2021 in Civil Appeal No. 2899 of 2021
(2014) 9 SCC 263
(2015) 3 SCC 49
(2019) 15 SCC 131
(2022) 4 SCC 116
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
34/37 of the Arbitration Act, if the award is found to be contrary to, (a)
fundamental policy of Indian Law; or (b) the interest of India; or (c)
justice or morality; or (d) if it is patently illegal.
18.A cumulative reading of the UNCITRAL Model Law and Rules, the
legislative intent with which the 1996 Act is made, Section 5 and Section
34 of the 1996 Act would make it clear that judicial interference with the
arbitral awards is limited to the grounds in Section 34. While deciding
applications filed under Section 34 of the Act, Courts are mandated to
strictly act in accordance with and within the confines of Section 34,
refraining from appreciation or re-appreciation of matters of fact as well
as law. This Court may refer to the Apex Court's judgment in
Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field
Ltd.7, Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd.8
And RashtriyaIspat Nigam Ltd. v. Dewan Chand Ram Saran9 for the
same.
19.The limited grounds available to Courts for annulment of arbitral
awards are well known to legally trained minds. However, the
difficulty arises in applying the well-established principles for
interference to the facts of each case that come up before the Courts.
There is a disturbing tendency of Courts setting aside arbitral awards,
after dissecting and reassessing factual aspects of the cases to come to a
conclusion that the award needs intervention and thereafter, dubbing
(2020) 2 SCC 455
(2022) 1 SCC 75
(2012) 5 SCC 306
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
the award to be vitiated by either perversity or patent illegality, apart
from the other grounds available for annulment of the award. This
approach would lead to corrosion of the object of the 1996 Act and the
endeavours made to preserve this object, which is minimal judicial
interference with arbitral awards.
20.The scope of Section 37 of the Arbitration Act was further analysed by
the Supreme Court in MMTC Limited v. Vedanta Limited10 where it
was held that any such interference under Section 37 cannot travel
beyond the restrictions laid down under Section 34.A similar view, as
stated above, has been taken by the Supreme Court in K.
Sugumar v. Hindustan Petroleum Corpn. Ltd.11.
21.This Court had the opportunity to peruse the Awards passed by
MSEFC, Cuttack, Odisha and the Ld. District Judge's judgments.
22.Section 18(2) of the MSME Act provides, on receipt of a reference, 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. It is only in the event that such
conciliation fails, shall the Council proceed to enter into the realm of
arbitration under Section 18 (3) of the MSMED Act. Section 18(2) of the
MSMED Act further provides that Sections 65 to 81 of the A&C Act
shall apply to such a conciliation attempt.
(2019) 4 SCC 163
(2020) 12 SCC 539
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
23.It is pertinent to mention herein that the basic tenet of a conciliation
proceeding is derived from a person being appointed as the conciliator
who shall then assist the parties in an ‚independent‛ manner in their
attempt to reach an amicable settlement of their dispute. The purpose
behind making this a mandatory pre-cursor to the MSEFC entering into
the realms of arbitration is that the parties have the opportunity to
explore the possibility of privately settling their issue with the
assistance and support of an independent person, who would facilitate
and buttress such dialogue.
24. In the facts of the present case, upon a perusal of the orders of the
Facilitation Council, this Court is perturbed to note that the Council did
not refer the parties for a proper attempt of conciliation despite the
statutory mandate prescribed under Section 18(2). Firstly, no reference
to Section 18(2) of the MSMED Act was made, and secondly, no
conciliator was appointed. There is only one line pertaining to M/s. Maa
Bhairabi approaching the Appellant for 'settlement' and then complete
silence.
25.This ground and glaring infirmity was raised by the Appellants before
the Ld. District Judge who was, however, of the opinion that the fact
that the party had allegedly approached the Appellant for settlement
satisfied the statutory requirement under Section 18(2) of the MSMED
Act.
26.This Court is unable to accept the same. When the statute mandates that
upon receipt of a reference, the Council shall either itself conduct
conciliation in the matter or seek the assistance of any institution or
Designation: AR-CUM- SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
centre providing alternate dispute resolution services by making a
reference to such an institution or centre, for conducting conciliation,
the Council was bound to conduct the conciliation itself or refer the
parties for such conciliation. There is no whisper of either things being
done and therefore, given the gross irregularities as well as non-
conformity committed by the MSEFC in its awards, the same in the
opinion of this Court and for the reasons stated above, shocks the
conscience of this Court.
27.Violating the mandate that was laid down by the same statute that
created the Facilitation Council and a step that it was bound to follow
tantamounts to contravention with the fundamental policy of Indian
law and being in conflict with the most basic notions of justice. Hence,
such contravention affords a ground under Section 34, including its
explanations.
VI. CONCLUSION:
28.In light of the discussion above, keeping the settled principles of law in
mind and for the reasons given above, this Court is of the considered
view that the judgment dated 12.1.2023 passed by the learned District
Judge, Ganjam in Arbitration Petition No.1 of 2021, FAO No.19 of 2022
and FAO No.20 of 2022 arising out of award dated 18.7.2018 passed by
Micro and Small Enterprises Facilitation Council in MSEFC Case No.33
of 2017, award dated 19.1.2019 passed by Micro and Small Enterprises
Facilitation Council in MSEFC Case No.34 of 2017 and award dated
19.1.2019 passed by Micro and Small Enterprises Facilitation Council in
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Location: ORISSA HIGH COURT, CUTTACK
Date: 18-Feb-2025 17:31:36
MSEFC Case No.35 of 2017 are all liable to be interfered with and set
aside.
29. The parties are directed to appear before the concerned MSEFC within
15 days from the date of this judgment/order to facilitate the Council to
adjudicate afresh on the dispute between the parties in strict terms of
Section 18 of the Act.
30.ARBA No.3 of 2023, ARBA No.37 of 2022, ARBA No.4 of 2023 and
ARBA No.5 of 2023 are disposed of on the abovementioned terms. No
order as to costs.
31. Interim order, if any, passed earlier in any of the aforesaid Appeals
stands vacated.
(Dr.S.K. Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the 14th February, 2025/
