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.

JUDGMENT

(Prayer: Writ Petition is filed Under Article 226 of the Constitution of India to issue a Writ of Certiorari, to call for the records pertaining to the Impugned Order in MSEFC/CR/170/2021 dated 28.12.2022 passed by the 1st respondent and to quash the same.)

1. The writ petition is filed challenging the order passed by the 1st respondent directing the petitioner to pay a sum of Rs.50,26,895/- (Rupees Fifty Lakhs Twenty Six Thousand Eight Hundred and Ninety Five only) along with compound interest with monthly rests, at three times the bank rate.

2. According to the 3rd respondent, it is engaged in the manufacturing of Machineries for Bottling Plant and Stainless Steel Tanks and the above said sum together with interest was due from the petitioner to the 3rd respondent based on 23 Nos. of Invoices raised by it towards goods supplied. The 3rd respondent made a claim before the 1st respondent-Council under Section 18(1) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as 'MSMED Act' for brevity). As the conciliation attempted by the 1st respondent failed, it proceeded to decide the matter on merits and passed above said order directing the petitioner to pay the above mentioned sum to the 3rd respondent. Aggrieved by the same, the petitioner has come up by way of this writ petition.

3. The learned counsel appearing for the petitioner assailed the impugned order on the ground that the 1st respondent failed to follow the step by step procedure contemplated under Section 18 of MSMED Act. The learned counsel further submitted that the 1st respondent in the impugned order noted that conciliation proceedings failed on 27.11.2022 and thereafter, without affording any opportunity to parties to file their pleadings and lead evidence as per the provisions of the Arbitration and Conciliation Act, 1996, the impugned order has been passed. The learned counsel further submitted that there is no express notice issued by the 1st respondent regarding initiation of arbitration proceedings.

4. The learned counsel appearing for the 3rd respondent submitted that the writ petition filed by the petitioner challenging the order passed by the 1st respondent in an arbitration proceedings initiated under Section 18(3) of MSMED Act is not maintainable. The learned counsel by drawing the attention of this Court to Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996, contended that even assuming no notice was given to the petitioner regarding initiation of arbitration proceedings, the same shall be challenged only in an application filed under Section 34 of Arbitration Act read with 19 of MSMED Act. In support of his contention, the learned counsel relied on the judgment of the Apex Court in Gujarat State Civil Supplies Corporation Limited vs. Mahakali Foods Private Limited and another reported in (2023) 6 SCC 401.

5. In reply, the learned counsel appearing for the petitioner by relying on the judgment of this Court in Union of India vs. The Chairman, Uttar Pradesh (UP), State Micro and Small Enterprises Facilitation Council in W.P.(MD).No.13870 of 2021 submitted that when 1st respondent-Council failed to conduct arbitration in the manner known to law, the final order passed by it cannot be termed as an award under the Arbitration and Conciliation Act, 1996. Therefore, the petitioner need not challenge the same in accordance with Section 34 of the Arbitration and Conciliation Act, 1996 and it can very well invoke extraordinary jurisdiction of this Court under Article 226 of the Constitution of India.

6. Section 18 of MSMED Act, reads as follows:-

“Section 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