VIKASH JAIN
Reliance Communications Limited – Appellant
Versus
State of Bihar – Respondent
Arbitration - Micro, Small and Medium Enterprises Development Act, 2006 - Section 18 - Section 80 of the Arbitration and Conciliation Act, 1996 - The court held that the Council lacked jurisdiction to act as an arbitrator after conducting conciliation, and the arbitration award was non est in law. The matter was remitted back to the Council for an appropriate reference for arbitration of the disputes between the parties in accordance with the law.
Fact of the Case:
The petitioner engaged the services of the respondent for construction work and the respondent claimed unpaid bills under the Micro, Small and Medium Enterprises Development Act, 2006. The Council initially directed payments to be made, but the petitioner challenged the order. The matter was taken up for de novo proceedings, and the Council initiated conciliation proceedings, which failed due to the petitioner's non-cooperation. The Council then commenced arbitration proceedings and passed an impugned order for payment.
Finding of the Court:
The court found that the Council lacked jurisdiction to act as an arbitrator after conducting conciliation, and the arbitration award was non est in law. The matter was remitted back to the Council for an appropriate reference for arbitration of the disputes between the parties in accordance with the law.
Issues: The main issue was the jurisdiction of the Council to act as an arbitrator after conducting conciliation, and the validity of the arbitration award.
Ratio Decidendi: The court held that the Council lacked jurisdiction to act as an arbitrator after conducting conciliation, as per Section 80 of the Arbitration and Conciliation Act, 1996. The arbitration award was deemed non est in law.
Final Decision: The impugned order was quashed, and the matter was remitted back to the Council for an appropriate reference for arbitration of the disputes between the parties in accordance with the law.
Vikash Jain, J.
Heard learned counsel for the petitioner and learned counsel for the respondents.
2. These writ petitions have been filed for quashing the common order dated 06.02.2018 passed by the Micro, Small and Medium Enterprises Facilitation Council, Patna (hereinafter referred to as "the Council") in Reference Case No. 05/2015 and Reference Case No. 01/2016 in which the petitioner has been directed to make payment of a sum of Rs. 4,91,33,701/- plus compound interest totalling to Rs. 62,08,65,575/-, and a sum of Rs. 2,04,44,080/- plus compound interest totalling to Rs. 25,25,01,087/- respectively as on 30.09.2017 to respondent no. 4 against the latter's unpaid bills; and for restraining the Council from passing further orders in the said matters.
3. The facts of both cases are almost identical and both writ petitions are accordingly taken up for disposal together at the admission stage itself with the consent of parties.
4. The brief facts according to the petitioner are that it had engaged the services of the respondent no. 4 by issuing several work orders for carrying out construction work for establishment of towers for mobile services and providing ancillary works and materials in that regard. The respondent no. 4 approached the Council under section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (for short "MSMED Act") claiming that certain payments had not been made by the petitioner for works carried out. The Council by its order dated 30.06.2016 directed the payments to be made. The petitioner challenged the order dated 30.06.2016 in C.W.J.C. No. 14884 of 2016 with C.W.J.C. No. 15044 of 2016 which were disposed of by judgment dated 11.04.2017 by a Bench of this Court with the following observations:-
"69. So, on analysis of the aforesaid provisions, it is very much clear that the Facilitation Council has miserably failed to follow the procedure provided under section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 Act, but it appears that on the first day the Facilitation Council decided to lis itself, directed payment and when the objection was raised, then it thought fit to send the matter for arbitration, but the procedure followed is strange procedure, not compatible to the provisions of the Act and not known to the law. If the Facilitation Council has already directed for payment, the question of again sending the matter to the arbitrator is misplaced procedure, instead it should first tried to conciliate the dispute, in failure to adjudicate the same, either the Facilitation Council itself conducted conciliation or refer the matter to the third party, then arbitration stage had come to adjudication the dispute in terms of Section Arbitration and Conciliation Act, 1996.
74. So from the above quotations and discussions, it is apparently clear that either the Facilitation Council will take the burden on its shoulder for arbitration or it relegates the matter to anybody. Either the Facilitation Council or anybody while making arbitration will follow the certain provision of Code of Civil Procedure as mention in Section 19 of the Act for the arrival to a fair and proper conclusion.
75. For the foregoing reasons, the impugned order containing memo No.3898 dated 27.10.2016 and the order containing memo No.3913 dated 28.10.2016 passed by the Facilitation Council are hereby quashed. But, it is not end of the matter, this Court directs both the parties to appear before the Facilitation Council within 15 days from the date of passing the order of this Court. They should present themselves, the Facilitation Council will make effort to resolve the dispute, in failure, either the Facilitation Council itself will take responsibility of arbitrator or refer the matter to third party, according to the provisions of the Act, for arbitration."
5. The petitioner unsuccessfully carried the matter in LPA No. 827 of 2017 which was dismissed by judgment dated 17.07.2017 with a direction
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