The absence of mandated conciliation proceedings renders an award invalid, allowing for judicial review under writ jurisdiction.

ORDER :

GAUTAM KUMAR CHOUDHARY, J.

1. Instant writ petition has been filed for quashing the order contained in Memo No.2140 dated 29.11.2022 passed in connection with Case No. JHMSEFC-43/2021 corresponding to New Case No. JH/20/S/JKH/00286 whereby and whereunder claims of the respondent no.3 against the petitioner have been allowed.

2. Petitioner is a private limited company and claim of Rs.21,94,982.79 with interest was raised by respondent no.3 before the Jharkhand Micro and Small Scale Enterprises Facilitation Council, Ranchi towards the supply of Thermoplastic Road Marking Paint, Potters Glass Beads, Catalysts, RPM Epoxy kit etc. in the year 2019.

3. Notice was issued vide letter no.1519 dated 10.08.2021 by MSMED Facilitation Council to file reply within a period of seven days. In pursuant to the notice issued, the petitioner appeared and raised preliminary objections. The Council held its meeting on 25.08.2021 and admitted the case. Further sittings were held on 14.12.2021, 01.06.2022 and finally on 12.09.2022, when the award was passed which is under challenge before instant writ petition.

4. It is argued by the learned counsel on behalf of petitioner that the provisions of the MSMED Act, 2006 (hereinafter in short referred ‘2006 Act’) have been given a complete go bye by the Council and therefore, it cannot be termed as arbitral award. As per Section 18(2) of 2006, Act, the Facilitation Council is mandated to conduct conciliation of the dispute between the parties either by itself, or, by an institution without compliance of which no further reference can be made to its arbitration under Section 18(3) of 2006, Act. In the present case, neither Conciliator was ever appointed nor conciliation proceedings were held. In the absence of valid reference being made to conciliation in terms of Section 18(2) of 2006, Act, there can be no reference to arbitration and therefore, the question of adjudication of the dispute by the Council does not arise. Section 18(2) of MSMED Act, 2006 mandates that procedure of Sections 64 - 81 of Arbitration and Conciliation Act, 1996 (in short hereinafter referred ‘Act, 1996’) is to be followed and none adherence of it, deprives the petitioner from the opportunity of filing pleading and evidence before the Arbitrator.

5. It is argued that the manner in which arbitral proceeding was concluded in one day i.e. 12.09.2022, shows that provisions of the Arbitration and Conciliation Act, 1996 were completely bypassed. Reliance is placed on the judgment placed by this Court in W.P. (C) No.5804 of 2022 which was upheld in L.P.A. No. 475 of 2023. This order was passed in the light of ratio laid down by the Hon’ble Supreme Court in Jharkhand Urja Vikas Nigam Limited Vs. State of Rajasthan and Others, (2021) 19 SCC 206, wherein it has been held that the Council was obliged to conduct conciliation for which the provisions of Sections 65 to 81 of the Act, 1996 would apply, as if the conciliation was initiated under Part III of the 2006, Act. Under Section 18(3), when the 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 Act, 1996, particularly Sections 20, 23, 24 and 25. If this has not been done, the order becomes nullity as it runs contrary to the provision of 2006, Act and Act, 1996. On similar facts and situation, the order passed by the MSMED Council was remanded by the High Court of Gujarat in Principal Chief Engineer Vs. Manibhai & Brothers (Sleeper), 2012 SCC OnLine Guj 2422.

6. It is argued by the learned counsel, Mr. Pratyush Kumar Jha appearing on behalf of private respondent that the writ petition is not maintainable in view of ratio laid down by Hon’ble Supreme Court in