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IN THE HIGH COURT OF CHHATTISGARH, BILASPUR
Rakesh Mohan Pandey, J.
The Collector And District Mission Director - Petitioner
Versus
The Micro and Small Enterprises Facilitation Council, Chhattisgarh Director of Industries and ors. – Respondents
WPC No. 221 of 2022
Decided On : 11-03-2024
MSMED Act - Dispute Resolution - Section 18, Section 19 - The court discussed the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006) and their application in resolving the dispute between the parties. The court emphasized the mandatory nature of the pre-deposit requirement under Section 19 for challenging an award and the overriding effect of the MSMED Act, 2006 over the Arbitration Act, 1996 in specific disputes.
Fact of the Case:
The petitioner, the District Mission Director of Rajiv Gandhi Shiksha Mission (SSA), District Balrampur-Ramanujganj, entered into an agreement with respondent No. 2 for the sale and supply of a Biometric Unit and the creation of a website-based District School Management Information System (MIS) at the District Level. The respondent raised bills for supply, periodic maintenance, and up-gradation, which were not cleared by the petitioner. The respondent approached the Micro and Small Enterprises Facilitation Council, Chhattisgarh (MSEFC) for dispute resolution under the MSMED Act, 2006. The MSEFC passed an award against the petitioner, directing payment of the outstanding amount and interest. The petitioner challenged the award on various grounds.
Finding of the Court:
The court found that the MSEFC followed the procedure contemplated under Section 18 of the MSMED Act, 2006 and emphasized the mandatory nature of the pre-deposit requirement under Section 19 for challenging an award. The court also highlighted the overriding effect of the MSMED Act, 2006 over the Arbitration Act, 1996 in specific disputes. The court dismissed the petition, stating that the petitioner failed to avail the remedy under Section 34 of the Arbitration Act, 1996 and that the writ petition was not maintainable.
Issues: The issues involved the challenge to the award passed by the MSEFC under the MSMED Act, 2006, the mandatory pre-deposit requirement under Section 19 for challenging an award, and the jurisdiction of the Facilitation Council to arbitrate disputes under the MSMED Act, 2006.
Ratio Decidendi: The court held that the petitioner failed to avail the remedy under Section 34 of the Arbitration Act, 1996 and that the writ petition challenging the award was not maintainable. The court emphasized the mandatory nature of the pre-deposit requirement under Section 19 of the MSMED Act, 2006 and the overriding effect of the MSMED Act, 2006 over the Arbitration Act, 1996 in specific disputes.
Final Decision: The petition was dismissed, and the petitioner was granted liberty to avail the remedy available under the law.
ORDER :
1. The petitioner has filed this petition seeking the following relief(s):-
10.2 That the Hon’ble Court may kindly be pleased to quash the order dated 16.2.2021 pronounced on 29.5.2021 passed by respondent No.1 (Annexure P/1).
10.3 Any other relief/ reliefs, which this Hon’ble Court may think fit and proper in the facts and circumstances of the case, with cost of the petition, may also please be granted to the petitioner.”
2. The facts of the present case are that the petitioner is the District Mission Director of Rajiv Gandhi Shiksha Mission (SSA), District Balrampur-Ramanujganj. The Mission is an autonomous registered Society. The petitioner entered into an agreement with respondent No. 2 for the sale and supply of a Biometric Unit (Finger Print Scanner and Tablet, Standalone or embedded) and for the creation of a website based District School Management Information System (MIS) at the District Level along with the operation, management and maintenance of the hardware and software for a period of one year. The agreement was made effective from 25.10.2014. A total of 1235 units of fingerprint scanners and 1235 units of tablets were purchased and installed as per the terms of the agreement. The work order was issued on 25.10.2024. Respondent No. 2 raised bills from time to time according to the terms of the contract. It is further pleaded in the Writ Petition that the petitioner was paid in accordance with the terms of the contract through various cheques. The details are as under:
3. The biometric machines were installed by respondent No. 2 in four phases between the period from 01.01.2015 to 19.12.2015 and bills inclusive of the periodic management, maintenance and up- gradation costs were raised by respondent No. 2 and the same were cleared by the petitioner. Respondent No. 2 raised a bill in relation to periodic maintenance from 01.05.2016 to 30.04.2017 to the tune of Rs. 75,00,000/- and for new parts of hardware of biometric machine Rs.21,12,708/-, a total of Rs.96,12,708/-. The bills were not cleared therefore respondent No. 2 approached respondent No. 1 i.e. Micro and Small Enterprises Facilitation Council, Chhattisgarh (MSEFC) for the resolution of dispute under Section 18(1) of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006). Respondent No. 1 passed an award against the petitioner on 29.05.2021 and directed the petitioner to make payment of Rs. 96,12,708/-, the outstanding amount of the bills raised by respondent No. 2 and the interest part to the tune of Rs. 77,60,813/-, a total of Rs. 1,73,73,521/- within a period of 30 days. The petitioner has challenged the award passed by respondent No. 1.
4. Learned counsel for the petitioner would submit that the impugned order dated 16.02.2021 pronounced on 29.05.2021 has been passed by respondent No. 1 in a cryptic manner and without jurisdiction. It is further argued that the proceedings were conducted by respondent No. 1 against the principles of natural justice and public policy. The provisions of the MSMED Act, 20
The mandatory pre-deposit requirement under Section 19 of the MSMED Act, 2006 for challenging an award and the overriding effect of the MSMED Act, 2006 over the Arbitration Act, 1996 in specific disp....
Important Point : The court established that statutory remedies must be exhausted before invoking writ jurisdiction against awards under the MSMED Act.
The main legal point established in the judgment is that the Facilitation Council has the jurisdiction to act as an Arbitrator after the failure of conciliation proceedings under the MSME Act. The ri....
Section 34 of the Arbitration Act arises as is evident from sub Section (6) of Section 16 of the Arbitration Act, which inter alia provides that the parties aggrieved by such an arbitral award may ma....
The main legal point established is that arbitration proceedings under the MSMED Act must adhere to the procedural requirements of the Act and the Arbitration and Conciliation Act, 1996.
Orders by MSEFC failing to follow arbitration procedures under the MSMED Act are not valid awards, allowing for writ petitions under Article 226 due to natural justice violations.
Jurisdictional challenges to arbitration awards must be raised under Section 34 of the Arbitration Act, and the pre-deposit requirement under Section 19 of the MSME Act is mandatory.
The conciliation proceedings contemplated under Section 18(2) of MSMED Act is mandatory in nature, and failure to comply with the mandatory procedure vitiates the impugned order.
The court ruled that a party to a dispute cannot waive the mandatory conciliation requirement under Section 18(2) of the MSMED Act, validating subsequent arbitration proceedings.
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