A writ petition challenging an order of non-arbitrability under the Arbitration Act is not maintainable when an alternative remedy via appeal exists.

ORDER :

K. LAKSHMAN, J.

Heard Mr. K.R. Kaushal Karan, appearing as party-in-person, representing the Petitioner, Mr. G. Madhusudhan Rao, learned standing counsel appearing for Respondent No. 3 and learned Asst.Govt.Pleader for Industries and Commerce, appearing for respondent Nos.1 and 2.

2. This writ petition is filed to declare the order dated21.12.2024 passed in Case No.1292/MSEFC/2021 by 2^nd respondent as non-arbitrable and illegal and to direct the Respondent No.2 to dispose of the case of the petitioner in accordance with the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as ‘the MSME Act’).

3. The present case involves a question whether a writ petition is maintainable against an order passed by the MSME Facilitation Council (Respondent No. 2 herein) under Section 16 of the Arbitration & Conciliation Act, 1996 (hereinafter ‘the Act, 1996’) holding that no jurisdiction to arbitrate exists.

4. Before deciding the issue under consideration, the relevant facts need to be stated. The Petitioner, a partnership firm, registered itself under the MSME Act. It had participated in the tender conducted by the Greater Hyderabad Municipal Corporation - respondent No. 3 for executing work relating to the ‘Improvement of Nanakramguda Expressway Junction to Phoenix Info City via Nanakramguda village, Hyderabad’. The Petitioner was selected for quoting the lowest work expenditure. Accordingly, an agreement dated 25.06.2013 and a contract deed dated 25.06.2013 was entered into between the Petitioner and Respondent No. 3.

5. The Petitioner claims to have executed the work as per the work order dated 25.06.2013 issued by Respondent No. 3. The Petitioner raised an invoice dated 10.05.2016 seeking payment of Rs. 25,11,618/- As Respondent No. 3 failed to discharge its liability under Section 15 of the MSME Act, the Petitioner filed an online application dated 14.04.2020 through the Samadhan Portal for resolution of the dispute by the MSME Facilitation Council (hereinafter ‘Council’).

6. The Council had issued notice on three occasions i.e., on05.11.2021, 22.03.2022, and 31.03.2023 directing Respondent No. 3 to appear for the conciliation meeting. Noting the failure of Respondent No. 3 in participating in the conciliation proceedings, the Council referred the matter to arbitration under Section 18 of the MSME Act. Accordingly, an arbitration notice dated 05.05.2023 was issued to Respondent No. 3.

7. During the arbitral proceedings, Respondent No. 3 objected to the jurisdiction of the Council on the ground that disputes arising out of works contracts cannot be adjudicated by the Council. They contended that the work order dated 25.06.2013 was in the nature of a works contract.

8. After hearing both the Petitioner and Respondent No. 3, the Council vide impugned order dated 21.12.2024 held that they have no jurisdiction to arbitrate the dispute. The said order was passed under Section 16 of the Act, 1996 holding that the MSME Act does not cover ‘works contracts’.

9. The concluding portion of the impugned order is extracted below:

“D. DECISION OF THE COUNCIL ON WORKS CONTRACT ISSUE:

The Council has unanimously decided that MSEFC Ranga Reddy Region has no Jurisdiction for arbitrating the subject matter of case falling under WORKS CONTRACTS and thus the claim is rejected as NON ARBITRABLE and the following order is issued:

ORDER

The Council unanimously decides that it has no jurisdiction to arbitrate the claim No. 1292/MSEFC/2021 Cla