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2021 Supreme(Online)(MP) 8566
HIGH COURT OF MADHYA PRADESH
Subodh Abhyankar, J
Jabalpur Treasure Island Pvt. Ltd. – Appellant
Versus
State of Madhya Pradesh – Respondent
Writ Petition No.369/2020
For the Appellants/Petitioners: Shri Vishal Baheti
For the Respondents: Shri Sameer Verma, Shri Yogesh Bhatnagar
The Micro, Small and Medium Enterprises Development Act allows the Facilitation Council to act as both conciliator and arbitrator after failed conciliation, without requiring a new notice for arbitration.
Headnote:(A) Micro, Small and Medium Enterprises Development Act, 2006 - Sections 18 and 19 - Arbitration proceedings - Dispute between parties regarding supply of construction material and award by Facilitation Council - Court held that once a notice is served under Section 18, it encompasses both conciliation and arbitration proceedings without a separate notice for arbitration needed (Paras 12, 20).
(B) The court affirmed that the Facilitation Council can act as both conciliator and arbitrator following failed conciliation (Paras 14, 15).
(C) The obligation to deposit 75% of the awarded amount before challenging the award is asserted (Paras 6, 19).
(D) Dismissal of the writ petition is justified due to the lack of merit regarding jurisdiction and notice (Paras 22, 23).
Facts of the case:
The petitioners challenged an award by the Facilitation Council for failing to serve a separate notice for arbitration after conciliation failed (Paras 2, 4).
Findings of Court:
Writ petition dismissed with a cost for attempts to misuse the court process (Paras 22, 23).
Issues: Key questions included the jurisdiction of the Facilitation Council and the requirement for notice after failed conciliation.
Ratio Decidendi: The court recognized the dual capacity of the Facilitation Council to conduct both conciliation and arbitration under MSMED Act, encapsulated by the overriding effects of the legislation (Paras 14, 15).
Result: Petition dismissed, with a cost of Rs. 1,00,000/- imposed.
ORDER
(Passed on this 30th day of December, 2021)
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 08.02.2011, 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 & Medium Enterprises Development Act, 2006 (herein after referred to as “the Act”) for adjudication of the dispute (vide claim statement dated 17.04.2015 Annexure P/5) before the Madhya Pradesh Micro & Small Industry Facilitation Council, Bhopal (MP), respondent No.2 (herein after 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 15.04.2015, 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 Concilliation 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 & 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 v. 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 Cou
