Micro, Small and Medium Enterprises Development Act, 2006 – s.18(2), (3) – Claim by respondent no.3-supplier against appellant before the Rajasthan Micro and Small Enterprises Facilitation Council for payment of bill – Appellant did not appear before the Council on which Council directed the appellant to make payment as claimed – Challenge against – Held: Under s.18(3), when conciliation fails and stands terminated, the Council is empowered either to take up arbitration on its own or to refer the arbitration proceedings to any institution as specified in the said Section – The order of Council was a nullity and patently illegal – When conciliation was not successful, the said proceedings stood terminated and thereafter the Council ought to have proceeded to initiate arbitration proceedings – Arbitration and Conciliation Act, 1996.
Allowing the appeal, the Court
HELD : If the appellant had not submitted its reply at the conciliation stage, and failed to appear, the Facilitation Council could, at best, have recorded the failure of conciliation and proceeded to initiate arbitration proceedings in accordance with the relevant provisions of the Arbitration and Conciliation Act, 1996, to adjudicate the dispute and make an award. Proceedings for conciliation and arbitration cannot be clubbed. In this case only on the ground that the appellant had not appeared in the proceedings for conciliation, on the very first date of appearance, that is, 06.08.2012, an order was passed directing the appellant and/or its predecessor/Jharkhand State Electricity Board to pay Rs.78,74,041/- towards the principal claim and Rs.91,59,705/- odd towards interest. The Facilitation Council did not initiate arbitration proceedings in accordance with the relevant provisions of the Arbitration and Conciliation Act, 1996. The order dated 06.08.2012 is a nullity and runs contrary not only to the provisions of MSMED Act but contrary to various mandatory provisions of Arbitration and Conciliation Act, 1996. There is no arbitral award in the eye of law. It is true that under the scheme of the Arbitration and Conciliation Act, 1996 an arbitral award can only be questioned by way of application under Section 34 of the Arbitration and Conciliation Act, 1996. At the same time when an order is passed without recourse to arbitration and in utter disregard to the provisions of Arbitration and Conciliation Act, 1996, Section 34 of the said Act will not apply. [Paras 11, 12, 13][504-C-G] Rajkumar Shivhare v. Asst. Director, Directorate of Enforcement & Anr. (2010) 4 SCC 772 : [2010] 4
SCR 608 – referred to
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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