IMPORTANT POINT
The central legal point established in the judgment is the importance of following the prescribed procedures and principles of natural justice in arbitration proceedings under the MSME Act and the Arbitration and Conciliation Act, 1996.

ORDER :

In this writ petition, the petitioner is seeking a writ of Certiorari calling for records leading upto the order passed by the official respondent No.3, dated 27.10.2022 vide Case No.193/IC/Mdl-Mlg/2020, as being illegal, arbitrary and nonest in law as it is contrary to the provisions of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 and the Telangana Micro, Small Enterprises Facilitation Rules, 2014 and consequently to set aside the same and to pass such other order or orders.

2. Brief facts leading to the filing of the present writ petition are that the writ petitioner and unofficial respondent No.4 had an arrangement for supply of products for 4X270 MW project at Manuguru, Telangana. The unofficial respondent No.4 alleging that it did not receive certain amounts from the petitioner and claiming to be a registered entity under the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), has filed an application before the official respondent No.3 under Section 18(1) of MSME Act vide Case No.192/IFC/Mdl-Mlg/2020, seeking recourse against the petitioner company under the MSME Act for the alleged claim amount under Purchase order No.1655132, dated 13.08.2015. Consequent thereto, the dispute was taken up for Conciliation, wherein the official respondent No.3 acted as a Conciliator as per the powers granted under Section 30 read with Section 21(3) of the MSME Act and rule 6(xiii) of the Telangana Micro, Small Enterprises Facilitation Rules, 2017. It is submitted that the petitioner’s company as well as unofficial respondent filed their respective responses/statements before the official respondent No.3, but the conciliation proceedings failed.

3. Thereafter, the respondent No.3 issued a notice dated 15.06.2022 to the petitioner’s company stating that the authorized representative of the company should be present to attend the council meeting at 02.30 p.m., on 29.06.2022, as the matter was being taken up for arbitration. It is submitted that the authorized representative of the petitioner’s company appeared on the said date and orally raised objections that no notice regarding the appointment of the arbitrator or suggesting an arbitrator, was given to the petitioner company. It was also alleged by the learned counsel for petitioner company that due process has not been followed for taking up the matter for arbitration. It is submitted that the council had stated that it would take appropriate steps to carry out the necessary processes, however, there was no notice or any further development in the matter until the petitioner received an order wherein the conciliation proceedings are referred to as arbitration proceedings and that an award was passed on 27.10.2022. It is submitted that no communication was made to the petitioner’s company informing about the initiation and furtherance of arbitration proceedings, despite the objections raised by the authorized representative of the petitioner’s company on 29.06.2022. Therefore, alleging non-compliance of the procedure for arbitration proceedings, the present writ petition has been filed.

4. Learned counsel for the petitioner submitted that under the MSME Act, a dispute can be referred for conciliation or arbitration within a prescribed period and since the claim pertains to the year 2015, the unofficial respondent could not have made reference in the year 2022 and the respondent No.3 ought not to have entertained the same. He further submitted that on account of failure of conciliation, the respondents ought to have intimated about the failure of conciliation proceedings and only thereafter, should have initiated proceedings for arbitration and the procedure prescribed under the Arbitration and Conciliation Act ought to have been followed. It is further submitted that the respondent No.3, without giving any opportunity of hearing to the petitioner, has passed the Arbitral award and therefore, it is in violation of the principles of n