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Supreme Court on Setting Aside Exparte Awards under MSME Act - Main points and insights
Applicability of Court Remedies: The Supreme Court has consistently held that applications for setting aside arbitral awards under the MSME Act, particularly Section 19, are subject to specific procedural requirements, notably the deposit of 75% of the awarded amount before the Court will entertain such applications. (Sources: 2023 0 Supreme(All) 1599, 2023 0 Supreme(Telangana) 140, 2024 0 Supreme(All) 885)
Legislative Hierarchy and Override: The MSME Act, being a special legislation, overrides the provisions of the Arbitration and Conciliation Act, 1996. The Court has emphasized that intervention under Articles 226 or 227 of the Constitution is not permissible against MSME Facilitation Council awards, and the remedies are primarily statutory, requiring compliance with the Act’s provisions. (Sources: 2023 0 Supreme(Telangana) 140, 2023 0 Supreme(Telangana) 22)
Ex Parte Awards and Set Aside Proceedings: Several judgments clarify that no applications for setting aside ex parte awards have been filed by petitioners, and awards passed ex parte due to lack of notice cannot be challenged unless proper applications are made and procedural requirements are met. Courts have noted that petitions without such applications are not maintainable. (Sources: 2022 0 Supreme(Ker) 205, 2022 Supreme(Online)(Ker) 79669, 2022 Supreme(Online)(KER) 8296)
Judicial Approach to Ex Parte Proceedings: The Supreme Court has observed that tribunals or courts cannot become functus officio after an award is passed; they retain authority to entertain applications for setting aside, provided procedural conditions are satisfied. However, failure to follow prescribed procedures, such as non-filing of applications for setting aside, leads to dismissal of challenges. (Sources: 2023 0 Supreme(Chh) 208)
Analysis and Conclusion
The Supreme Court’s jurisprudence underscores that challenges to MSME Facilitation Council awards, especially ex parte awards, are strictly governed by the provisions of the MSME Act and the Arbitration Act. The requirement of depositing 75% of the award amount is a precondition for filing applications to set aside awards under Section 19 of the MSME Act. Moreover, the Act’s special status means that ordinary civil or constitutional remedies are generally not applicable unless procedural conditions are fulfilled. Courts have consistently dismissed petitions that do not comply with these procedural mandates, particularly the absence of applications for setting aside ex parte awards. Therefore, for setting aside ex parte awards under the MSME Act, the petitioner must adhere to statutory procedures, including depositing the requisite amount and filing proper applications within prescribed timelines.
References:
In the dynamic landscape of business disputes, Micro, Small, and Medium Enterprises (MSMEs) often rely on the (MSME Act) for swift arbitration resolutions. A common query among business owners and legal professionals is: Latest Judgement of on MSME Act—particularly regarding the ability to set aside passed by or Labour Courts. , issued when one party fails to appear, can significantly impact businesses, but rulings provide a structured pathway for challenges, emphasizing and procedural fairness.
This blog post delves into the 's key principles, relevant case law, and procedural requirements, drawing from authoritative judgments. Note that this is general information and not specific legal advice; consult a qualified lawyer for your circumstances.
The has consistently addressed challenges to under the MSME Act, clarifying the jurisdiction of forums like the and . These rulings balance the Act's objective of expedited dispute resolution with fundamental principles of . Typically, arise due to non-appearance, but courts have held they are not final if proper grounds exist for setting them aside. 2018 5 Supreme 467 2019 0 Supreme(SC) 1777
Key to these decisions is the recognition that the MSME Act, as special legislation, overrides general provisions like the , in certain respects. Intervention via under or 227 of the Constitution is generally not permissible; parties must follow under and 19 of the MSME Act. 2023 0 Supreme(Telangana) 140 2023 0 Supreme(Telangana) 22
A pivotal principle is that the retains jurisdiction to set aside even after they become enforceable under ( post-publication), provided the application is filed within a reasonable time and for non-appearance is shown. The Court has emphasized: The does not become merely because an award has been published. 2005 0 Supreme(SC) 1839 2019 0 Supreme(SC) 1777
Awards passed without compliance with —such as improper notice—are often treated as nullities, allowing challenges regardless of timelines. 2005 0 Supreme(SC) 1839 2019 0 Supreme(SC) 1777
For awards from under Section 18, setting aside requires strict adherence to Section 19, including depositing 75% of the awarded amount as a precondition. The has held that without this, applications under Section 19 are not maintainable. This underscores the Act's legislative hierarchy, where MSME provisions prevail over the Arbitration Act. 2023 0 Supreme(All) 1599 2023 0 Supreme(Telangana) 140 2024 0 Supreme(All) 885
Under Section 17A, awards become enforceable after publication. Applications to set aside must ideally be filed within this period. However, courts may entertain delayed applications if violations of are proven, such as lack of notice. 2004 7 Supreme 118 2016 0 Supreme(HP) 386
The concept of is interpreted liberally. Valid reasons for absence—like improper service or errors—can justify setting aside the award. The jurisdiction is assessed based on the application date, not the award date. 1994 0 Supreme(SC) 1196 2019 0 Supreme(SC) 1777 2016 0 Supreme(HP) 386
In cases where no application for setting aside was filed, courts have dismissed challenges, noting: Petitions without such applications are not maintainable. 2022 0 Supreme(Ker) 205 2022 Supreme(Online)(Ker) 79669 2022 Supreme(Online)(KER) 8296
: The ruled that tribunals remain competent to set aside if applications are made within stipulated time frames, as proceedings are not concluded until enforceability. 1997 0 Supreme(HP) 430 2016 0 Supreme(HP) 386
: Reinforced that 'appeal' under related interest laws includes setting aside applications, applicable analogously to MSME contexts. 2022 0 Supreme(Guj) 1158
Other Precedents on : Courts have quashed awards for procedural lapses, directing: All reference cases... stand rejected... by quashing and setting aside the impugned judgments and awards. 2015 0 Supreme(Bom) 1249 Tribunals retain authority post-award, provided procedures are followed. 2023 0 Supreme(Chh) 208
Additional rulings clarify that subsequent applications under (for setting aside ex parte decrees) are competent if prior rejections were solely time-barred, without addressing merits. 2011 0 Supreme(J&K) 291
Deposit Requirement: Challenges under Section 19 mandate 75% deposit; non-compliance leads to dismissal. This is a statutory precondition, not discretionary. 2023 0 Supreme(All) 1599 2023 0 Supreme(Telangana) 140
No Direct Writ Relief: cannot entertain writs against Facilitation Council awards without exhausting . 2023 0 Supreme(Telangana) 22
Ex Parte Due to Non-Appearance: If no setting aside application was filed, awards stand, as seen in multiple dismissals. 2023 0 Supreme(Del) 5716 2013 0 Supreme(P&H) 44
These insights highlight a judicial approach favoring procedural rigor while upholding fairness.
The 's jurisprudence on the MSME Act provides a robust framework for setting aside , prioritizing without undermining the Act's efficiency. Labour Courts and Facilitation Councils retain jurisdiction, but success hinges on timely applications, , and compliance like the 75% deposit.
Key Recommendations:- File setting aside applications within of publication, demonstrating .- Deposit 75% of the award amount for Section 19 challenges.- Ensure proper notice and participation to avoid ex parte scenarios; invoke if violated.- Adhere to MSME Act remedies over writs for maintainability.
For MSMEs, understanding these nuances can safeguard interests in arbitration. Always seek professional legal counsel tailored to your case.
References:2018 5 Supreme 467 2019 0 Supreme(SC) 1777 2005 0 Supreme(SC) 1839 2004 7 Supreme 118 2016 0 Supreme(HP) 386 1997 0 Supreme(HP) 430 1994 0 Supreme(SC) 1196 2023 0 Supreme(All) 1599 2023 0 Supreme(Telangana) 140 2024 0 Supreme(All) 885 2022 0 Supreme(Ker) 205 2022 Supreme(Online)(Ker) 79669 2022 Supreme(Online)(KER) 8296 2023 0 Supreme(Chh) 208 2022 0 Supreme(Guj) 1158 2023 0 Supreme(Del) 5716 2015 0 Supreme(Bom) 1249 2013 0 Supreme(P&H) 44 2011 0 Supreme(J&K) 291
#MSMEAct #SupremeCourt #ExParteAwards
Following the decision of the Supreme Court in the case of Snehadeep Structures (P) Limited (Supra) which held that word ‘appeal’ used in Section 7 of the ‘Interest Act, 1993’ includes even an application for setting aside an arbitral award under Section 34 of “the Act, 1996” observing that legislative ... As such, filing of an application Exh.56 under the provisions of the ‘MS....
Ltd. seeking order/writ for setting aside the reference UDYAM-DL-10- 0032365/M/00003 dated 10th September, 2022 made by Respondent No.1-MSME Facilitation Council under section 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter, "MSME Act") and all other subsequent proceedings ... In Ram Prakash (supra), this Court after considering the #....
Act, the provisions of Civil Procedure Code are applicable and though there is remedy of filing of application under Order 9 Rule 13 CPC for setting aside exparte award, the writ petition without exhausting the remedy of filing application under Order 9 Rule 13 CPC is maintainable. ... The Labour Court/Tribunal is not functus officio after the award has become enforceable as far as setting#HL_EN....
It would be profitable for this Court, to quote Section 34 (1) and 34 (2) of the Act, 1996, which inter-alia states as herein under : “34 Application for setting aside arbitral award. ... There is available a rich treasure relating to the law developed by the Hon’ble Supreme Court on the said aspect and this Court finds itself persuaded to quote some of these ....
We are also not inclined to entertain the writ petition because under Section 19 of the MSME Act, no application for setting aside an award passed by the Facilitation Council shall be entertained by any Court unless the party challenging the award deposits 75% of the amount in terms of the award. ... As a matter of fact, Supreme Court in M/s. Sterling Industries v. ... ....
Section 19 of the MSME Act, 2006, in unequivocal terms, provides that no application for setting aside the award made by the Council shall be entertained by any court unless the appellant has deposited 75% of the amount in terms of the award or, as the case may be, in the manner directed by such court ... , 2006 (for short 'the MSME Act, 2006). ... In ....
This brings us to Section 19 of the MSME Act which deals with application for setting aside decree, award or order. ... Thus, Supreme Court has held in no uncertain terms that Chapter V of the MSME Act would have an effect overriding provisions of the 1996 Act. Supreme Court has held as follows: 23.....
Till date no application has been filed by the petitioners for setting aside the exparte awards that have been passed against them. ... As the petitioners were set exparte, these aspects could not be brought to the notice of the Arbitrator resulting in Exts.P1 to P3 exparte awards being passed against them. The petitioners have filed Exts.P7 to P9 applications dated 02/....
Till date no application has been filed by the petitioners for setting aside the exparte awards that have been passed against them. ... As the petitioners were set exparte, these aspects could not be brought to the notice of the Arbitrator resulting in Exts.P1 to P3 exparte awards being passed against them. The petitioners have filed Exts.P7 to P9 applications dated 02/....
Till date no application has been filed by the petitioners for setting aside the exparte awards that have been passed against them. ... As the petitioners were set exparte, these aspects could not be brought to the notice of the Arbitrator resulting in Exts.P1 to P3 exparte awards being passed against them. The petitioners have filed Exts.P7 to P9 applications dated 02/....
The audit report for the year 2016-2017 and the reports of the years thereafter clearly refer to the illegal and wrongful act of the President of the Bank in availing loans in the name of his wife, daughter, close aides and other close friends. Till date no application has been filed by the petitioners for setting aside the exparte awards that have been passed against them. Further, the third respondent-Bank has specifically taken up a stand that no applications for setting a....
All reference cases, instituted by the respondents stand rejected. These petitions are, therefore, partly allowed, by quashing and setting aside the impugned judgments and awards.
The judgment dated 05.03.2012 dismissing the application filed by the appellants under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity ‘the Act’) for setting aside an exparte Award dated 27.04.2005, is under challenge.
The issue regarding reasons for setting aside exparte decree has not been determined by the Court, as such, subsequent application filed for setting aside exparte decree accompanied by the application under Section 5 of the Limitation Act was competent. The Appellant Court held that the principles of resjudicata were not applicable in the case, reasoning provided was that the application under Order 9 Rule 13 was rejected being time barred, did not deal with the grounds taken....
The Supreme Court, while setting aside the judgments of the High Court directed as under : However, this order shall be subject to the rules framed by the Chief Justice in the case of the Private Secretaries of the High Court. “We, therefore, are of the opinion that the impugned judgments cannot be sustained which are set aside accordingly. Against these judgments, the State Government filed a Special Leave Petition which was allowed by the Supreme Court by a judgment dated 2....
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