IMPORTANT POINT
Non-compliance with mandatory provisions of Section 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006 vitiates the award, rendering it null and void.

JUDGMENT :

(P. Sam Koshy, J.)

Heard Mr. A.Venkatesh, learned Senior Counsel assisted by Mr. Sathakarni K, learned counsel for the appellant and Mr. G.Narender Reddy, learned Standing Counsel for HMWS & SB appearing for the respondents.

2. Aggrieved by the order dated 27.12.2014 passed by the X Addl. Chief Judge, City Civil Court at Hyderabad (for short the ‘Court below’) in Arbitration O.P. No.1212 of 2013, the instant appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘Act of 1996’) has been filed by the appellant.

3. The questions of law to be decided in the instant appeal are:-

1. Whether non-compliance of Section 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter the ‘Act of 2006’) would vitiate an award passed?

2. Whether the provisions of Section 18, particularly Sub-Section (2) of the Act of 2006, is a mandatory provision or not?

4. The facts relevant for adjudication of the present dispute are that respondent No.1 herein i.e. M/s. Hyderabad Metro Water Supply and Sewerage Board had invited tenders from the manufacturers of Water Meters/Authorized Dealers/Agencies for the work of supply, fixing and maintenance of 1000 Nos. of 15 mm dia single jet water meter confirming to ISO 4064 Class-B and maintenance of existing working meters for a period of three years each under O&M Divisions. The committee constituted for finalization of the tender recommended the appellant herein (respondent No.1 before the Court below) as an agency for O&M Division Nos.1, 6, 7, 9 and 10 and an agreement was also entered into.

5. It was alleged that the appellant failed to execute the work as per the specifications and it was also alleged that the appellant in spite of receiving letters from respondent No.1 failed to submit the details of maintenance as per the agreement. In the process, there was some dispute and the appellant herein thereafter moved before respondent No.2/A.P. State Micro and Small Enterprises Facilitation Council, Hyderabad (hereinafter the ‘Facilitation Council’). After the notices were issued, the Facilitation Council without following due process as is envisaged under the Act of 2006 had passed an award dated 31.03.2012 in Case No.31 of 2011 which was communicated to the parties on 22.06.2012 and which was subjected to challenge before the Court below vide Arbitration O.P. No.1212 of 2013 under Section 19 of the Act of 2006 read with Section 34 (2) (iii) (v) and (b) (ii) of the Act of 1996.

6. The Court below vide the impugned award held that since the Facilitation Council did not comply with the mandatory provisions under the Act of 2006, particularly Section 18(2) and (3), the award was bad in law and the same was set aside. It is this order under challenge in the instant appeal.

7. Learned Senior Counsel appearing for the appellant only contended on the aspect of Section 18(2) not being mandatory and it is only obligatory and therefore the award dated 31.03.2012 was not required to be interfered with. It was also contended that even otherwise mere non-compliance of the provisions under Section 18(2) would not by itself vitiate the award which has been passed after hearing both the parties and no prejudice as such would be caused only on account of non-compliance of Section 18(2) of the Act of 2006.

8. It was further contended by the learned Senior Counsel that the respondents having participated in the arbitration proceedings before the award was passed and the award being finally passed would amount to waiving of their objection so far as Section 18(2) of the Act of 2006 is concerned and also by implication it would amount to respondents having accepted the proceedings to be settled by way of arbitration and the award so passed therein. According to the learned Senior Counsel for the appellant, the very purpose of enacting the Act of 2006 was for the early redressal of the grievance of suppliers like the appellants and it was in this context keeping thi