The court ruled that a party to a dispute cannot waive the mandatory conciliation requirement under Section 18(2) of the MSMED Act, validating subsequent arbitration proceedings.

JUDGMENT

Muralee Krishna S., J.

The 1^st respondent in W.P.(C) No.28740 of 2024 filed this writ appeal under Section 5 (i) of the Kerala High Court Act, 1958, challenging the judgment dated 14.01.2025 passed by the learned Single Judge in that writ petition.

2. Going by the pleadings in the writ petition, the 1^st respondent herein-writ petitioner is a Society registered under the Travancore Literacy Scientific and Charitable Societies Registration Act, 1955. It is an accredited agency of the Government of Kerala in the field of water and environmental sanitation. Its activities include rural water supply, sanitation, resource mapping, etc. The appellant submitted Ext.P1 application before the 2^nd respondent Regional Micro and Small Enterprises Facilitation Council (‘Facilitation Council’ for short), on 17.08.2023 under Section 18 of the Micro Small and Medium Enterprises Development Act, 2006 (‘MSMED Act’ for short), claiming that an amount of Rs.44,55,301.68/- is due from the 1^st respondent in respect of works undertaken by it. Upon receipt of notice from the 2^nd respondent, the 1^st respondent entered appearance before the Facilitation Council and filed Ext.P2 preliminary objection dated 16.01.2024, pointing out that there was no contract between the appellant and the 1^st respondent and therefore, the application is not maintainable under the MSMED Act. It was further pointed out in the preliminary objection that the appellant had obtained registration only on 21.08.2020 and had not rendered any service to the 1^st respondent. It is also contended in Ext.P2 preliminary objection that the appellant had moved the Ombudsman for Local Self Government Institutions, making the very same allegation as that in Ext.P1, and the appellant subsequently withdrew that complaint. The liability was denied in the objection filed by the 1^st respondent. To Ext.P2 preliminary objection, the appellant submitted Ext.P3 reply dated 08.02.2024, wherein it was admitted that Mr. Sulfikar Ali has registered in the Ministry of MSME as Proprietor of Malabar Social Services and Sanitation (‘MASSS’ in short) under Udayam No.KL-09-0000309 on 21.08.2020, subsequent to the execution of the contract between the appellant and the 1^st respondent. In the reply statement, it was further stated that the bills for works undertaken by him under the contract were submitted in the name of MASSS and were accepted by the 1^st respondent and the part-payments were effected. 2.1. It is further pleaded in the writ petition that the 1^st respondent received notice issued by the 2^nd respondent for hearing scheduled on 27.06.2024. Thereafter, the counsel of the 1^st respondent had sent Ext.P4 email on 26.06.2024 stating that he could not appear in the matter on the specified date and requested two weeks’ notice if a personal hearing was required. He had also forwarded Ext.P5 a detailed argument note in the matter along with the email. Subsequently, the 2^nd respondent issued Ext.P6 order dated 27.06.2024, holding the 1^st respondent liable to pay an amount of Rs.44,55,301/- with compound interest calculated at 3 times the bank rate notified by the Reserve Bank of India, as provided under Section 16 of the MSMED Act. The 2^nd respondent held that the 1^st respondent was deliberately absent after the 3^rd sitting. The 2^nd respondent completely ignored Ext.P4 adjournment application and Ext.P5 argument note. Though the 2^nd respondent acknowledged Ext