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.

JUDGMENT :

Sanjeeb K Panigrahi, J.

1. The present Writ Petition has been preferred seeking quashing of the order/ award dated 30.07.2024 passed by the Opposite Party No.2/ Micro Small and Medium Enterprises Facilitation Council, Rourkela in MSEFC Case No.24 of 2010.

I. FACTUAL MATRIX OF THE CASE:

2. The brief facts of the case are as follows:

(ii) That, the Petitioner is a Government of India enterprise engaged in manufacturing activities.

(iii) The Petitioner floated a tender for 700M/Ts of Iron Balls and the present Opposite Party No. 3 was selected as a supplier in accordance with the terms of notice. A purchase order was, accordingly, issued in favour of O.P. No. 3.

(iv) It is alleged that due to non-supply of Iron Balls within the scheduled period, the extraction of ore and subsequent delivery to potential buyers was delayed. The same caused financial losses to the present Petitioner and accordingly, the present Petitioner delayed the release of certain payments to O.P.No. 3.

(v) Aggrieved, O.P.No. 3 approached the MSEFC Council alleging delay in payments, and the matter was registered as MSEFC Case No. 24 of 2010. Accordingly, the present Petitioner received notice on 13.9.2011. The present Petitioner filed a preliminary objection raising the issue of jurisdiction, but the MSEFC proceeded with the matter.

(vi) The present Petitioner had approached this Court in W.P.(C) No. 10041 of 2015 challenging the vires of the MSMED Act, 2006 and additionally sought quashing of proceedings in MSEFC Case No. 24 of 2010. Vide order dated 3.6.2015, this Court in W.P.(C) No. 10041 of 2015 had stayed further proceedings in MSEFC Case No. 24 of 2010.

(vii) However, it appears that despite the stay order, the MSEFC Council had passed final order dated 1.3.2016 in MSEFC Case No. 24 of 2010 directing the Petitioner to pay interest on delayed payment subject to vacation of stay or disposal of W.P.(C) No. 10041 of 2015.

(viii) When this order was brought to the knowledge of this Court, this Court vide order dated 27.7.2023 was pleased to quash the order dated 1.3.2016 in MSEFC Case No. 24 of 2010 and remitted the matter for reconsideration after affording an opportunity of hearing to the Petitioner.

(ix)In the meanwhile, it is also pertinent to note, the present Petitioner had invoked the arbitration clause of the contract between the Parties and approached the Chairman-cum-Managing Director for appointment of Arbitrator to adjudicate upon the dispute existing between the Parties. An Arbitral Tribunal was constituted. O.P. No. 3 approached the Madhya Pradesh High Court at Jabalpur in W.P.(C) No. 13550 of 2014 challenging initiation of arbitration. However, vide order dated 1.4.2016 in W.P.(C) No. 13550 of 2014, the Madhya Pradesh High Court at Jabalpur was pleased to dismiss the Writ Petition. Thereafter, both parties participated in the Arbitration Proceeding. However, vide award dated 4.6.2022, the Ld. Tribunal was pleased to arrive at the conclusion that neither of the parties have any claim alive against each other.

(x) Consequently, the present Petitioner has approached this Court in Review Petition No. 469 of 2023 arising out of W.P.(C) No. 10041 of 2015, to bring to this Court’s notice that an award has been passed by the Ld. Tribunal, which is still pending.

(xi)Qua the MSEFC Council proceeding, it appears that after the matter was remanded for reconsideration by this Court, the MSEFC Council on 4.10.2023, directed O.P. No. 3 to file a copy of the original claim petition along with supporting documents.