Writ petition against arbitral award is maintainable; petitioner must follow remedies under Arbitration Act.

ORDER :

The petitioner challenges an award passed by the 1^st respondent under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, (hereinafter referred to as the ‘2006 Act’).

2.The 2^nd respondent herein had filed a petition under Section 18 (1) of the 2006 Act, on 18.10.2021. It claimed for the recovery of a sum of Rs.2,38,22,126/-, together with interestagainst the writ petitioner. The 2^nd respondent claimed that it had entered into an agreement with the writ petitioner, who had defaulted in payments of money due to it. It submitted that, it made several requests, but as the payment had not been made by the petitioner, it approached the 1^st respondent for resolution of the dispute.

3.Summons were issued by the 1^st respondent to the writ petitioner. The writ petitioner filed a reply to the same. In December 2022, as mandated by the 2006 Act, the Council took up the matter for conciliation. However, the efforts for conciliation failed. Consequently, the 1^st respondent closed the conciliation proceedings on 22.02.2024, and decided to proceed under Section 18 (3) of the 2006 Act.

4.Notice of Arbitration was issued to the writ petitioner. The 1^st respondent recorded that on 09.10.2024, the writ petitioner and the 2^nd respondent were asked to give their consent to proceed with the arbitration either by the Micro and Small Enterprises Facilitation Council (MSEF Council) itself, or require the matter to be referred to the Madras High Court Arbitration Center. The matter was taken up on 14.11.2024. On that date, the 1^st respondent recorded that the 2^nd respondent was present, but the writ petitioner was absent. The matter was again called on 12.12.2024. On that day too, the Council recorded that the 2^nd respondent alone was present and the writ petitioner was absent. The case was again adjourned to 20.12.2024. The same situation prevailed even on that day.

5.Pending the arbitration proceedings, the 2^nd respondent filed an application in I.A.No.1 of 2024, seeking a relief under Section 17 of the Arbitration and Conciliation Act, 1996 . By this application, the 2^nd respondent called upon the 1^st respondent to pass an interim order to secure a sum of Rs.13,56,73,497/-, pending disposal of the arbitration proceedings. By an order dated 20.12.2024, the 1^st respondent passed an award, directing the writ petitioner to pay a sum of Rs.2,38,22,126/-, together with compound interest with monthly rests, at three times the bank rate, notified by the Reserve Bank of India and disposed of the arbitration claim. Challenging the same, the present writ petition.

6.This Court entertained the writ petition, issued rule nisi and granted an order of interim stay of the impugned award on 20.08.2025.

7.When the interlocutory application came up for hearing before on 11.09.2025, this Court directed the petitioner to deposit 50% of Rs.2,79,45,258/-, in a fixed deposit in a Nationalized Bank in the name of the Registrar General of this Court, and granted four weeks’ time for the said exercise. The petitioner deposited a sum of Rs.1,39,72,629/- in a fixed deposit and handed over the same to the Registrar General in compliance with the order granted by this Court. Thereafter, the interim order was extended and the matter was posted for final hearing.

8.The 1^st respondent has produced the records and the 2^nd respondent has filed a counter. The pleadings having been completed, the matter was taken up for final disposal.

9. I heard Mr.S.Ramesh for the petitioner, Mr.L.S.M.Hasan Fizal, Additional Government Pleader for the 1^st respondent and Mr.Mubarak Ahmad for the 2^nd respondent.

10.After na