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 right of the defendant to counter claim under the MSME Act was also emphasized. The Court also clarified that the remedy lies under section 34 of the Arbitration and Conciliation Act, 1996 and a petition under Article 226/227 of the Constitution of India would not be maintainable.

ORDER : – Heard on IA No. 10005/2021, an application on behalf of the respondent No. 3 (Sanfield India Limited) for dismissal of the instant writ petition for want of jurisdiction and also on availability of efficacious alternative remedy.

2. In brief, the facts giving rise to the present petition are that the petitioner and respondent No. 3 entered into a business transactions with effect from 8-2-2011, regarding supply of construction material. Subsequently, a dispute arose between the parties and respondent No. 3 filed an application under section 18 of the Micro Small and Medium Enterprises Development Act, 2006 (herein after referred to as “the Act”) for adjudication of the dispute (vide claim statement dated 17-4-2015 Annexure P/5) before the Madhya Pradesh Micro and Small Industry Facilitation Council, Bhopal (MP), respondent No. 2 (hereinafter referred to as “the Facilitation Council”).

3. In the aforesaid proceedings, the Facilitation Council vide its award dated 27-12-2017 (Annexure P/7) directed the petitioners to pay a sum of Rs. 33,78,745/- (rupees thirty three lakh seventy eight thousand seven hundred forty five only) along with penal interest of Rs. 23,07,729 (rupees twenty three lakh seven thousand seven hundred twenty nine only) as on 15-4-2015, as well as additional interest till the payment is made.

4. The said award dated 27-12-2017 is assailed before this Court on the ground that the Facilitation Council, although entered into conciliation proceedings, as provided under section 18 of the Act, failed to give further notice to the petitioners, after coming to a conclusion that the conciliation proceedings have failed and as per the petitioners, immediately after holding that the conciliation proceedings have failed, the Facilitation Council decided to conclude the proceedings on the same day holding that the matter can be decided on its merits; and passed the final award.

5. The aforesaid interlocutory application IA No. 10005/2021, has been filed by the respondent No. 3 on the ground that against an award passed under section 18(3) of the Act, the remedy under section 34 of the Arbitration and Conciliation Act, 1996 is available which is to be filed before the appropriate District Court of competent jurisdiction, along with 75% of the awarded amount, as a precondition and only to circumvent the aforesaid precondition of depositing the 75% of the awarded amount, this petition has been filed and on this ground only, the present petition is liable to be dismissed.

6. A reply to the aforesaid application has also been filed by the petitioners assailing that in the present case, the Facilitation Council has erred in not issuing notice to the petitioners, after holding that the conciliation proceedings are not successful as provided under section 18 of the Act which is against the principles of natural justice, hence the petition is maintainable.

7. Learned counsel for the petitioners has pressed upon sub-section (3) of section 18 of the Act which provides that if the conciliation proceedings initiated by the Facilitation Council are not successful and stand terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution; and in such proceedings, the provisions of Arbitration and Conciliation Act, 1996 shall apply, as if the dispute is in respect of the arbitration agreement itself.

8. In support of his contention, Shri Vishal Baheti, learned counsel for the petitioners has also relied upon a decision rendered by the Bombay High Court in the case of Gujarat State Petronet Limited, Gujarat vs. Micro and Small Enterprises Facilitation Council, Thane and others, reported as AIR 2018 Bombay 265 (paras 17, 18, 19, 21 and 23) wherein also in similar circumstances, where after the conciliation proceedings stood terminated and the Facilitation Council went on to arbitrate the matter, the Bombay High Court has emphatically quashed th