Calcutta High Court | While deciding a writ petition seeking to set aside an arbitral proceeding, Moushumi Bhattacharya*, J. held that the writ petition is not maintainable on the ground of availability of alternative remedy under the Arbitration and Conciliation Act, 1996 (the Act, 1996). The Court further held that the supplier is statutorily entitled to make a reference to the Council for adjudication of the disputes even if its MSME registration is after the date of Contract entered between the parties.
In the instant matter, petitioner 1 (buyer) and respondent 2 – claimant (supplier) entered into a transactions in 2013 and respondent 2 admittedly supplied goods in terms of the transactions entered into between the parties. Respondent 2 registered an arbitration case against the petitioners. The petitioner preferred a petition before this Court seeking to set aside all proceedings initiated or being conducted by the Facilitation Council under the Arbitration Case.
The petitioners contended that the Council cannot act both as a conciliator as well as an arbitrator; therefore, the arbitration proceeding before the Council is liable to be quashed. The petitioners further contended that the registration of the respondent 2 under the MSMED Act is after the date of the transaction and therefore, the claim of the respondent 2 as a supplier is not maintainable.
On the other hand, the respondent 2 raised a preliminary objection on the maintainability of the writ petition and contended that the petitioners have an alternative and adequate statutory remedy under the Act, 1996 and therefore they cannot seek a mandamus for quashing of the arbitration proceedings pending before the Council.
Maintainability of writ petition under Article 226.
MSME registration after date of Contract.
Maintainability of writ petition under Article 226
The Court observed that an aggrieved party have several routes of statutory redress under the Act, 1966 — (a) S. 34 provides for recourse to a party against an arbitral award, (b) S. 37(1) and (2) provides for appeal from certain orders, (c) S. 16 empowers the arbitral tribunal to rule on its own jurisdiction including on any objection in respect of the existence or validity of the arbitration agreement and also provides for a plea being raised before the arbitral tribunal on the ground of competence and jurisdiction.
Negating the contention of the petitioners that the Council did not have jurisdiction to entertain the dispute, the Court observed that the Council's letter dated 12-03-2020 which records that the conciliation process has been terminated as the parties could not arrive at a settlement, clearly shows that the Council had proceeded to initiate arbitration under s. 18(3) only after termination of the conciliation proceedings.
The Court further observed that it is well settled law that “…a Writ Court exercising jurisdiction under Article 226 of the Constitution will step back and decline to exercise its discretionary powers in issuing writs and directions where there is an adequate alternative remedy. There is of course no bar on the Court from entertaining a matter even in the face of an alternative remedy where sufficient reason exists for interference; the restraint shown by the Court is more of a self-imposed restraint.”
The Court relied on Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75, where the Supreme Court held that the issue of jurisdiction must first be dealt by the Tribunal under S. 16 of the Act, 1996 and observed that “the alternative statutory remedy in the present case is not only sufficient and effective but also multi-layered”, therefore the petitioner can seek recourse through any of the remedies available under the Act, 1996.
MSME registration after date of Contract
The Court relied on Marine Craft Engineers (P) Ltd. v. Garden Reach Shipbuilders & Engineers Ltd., 2023 SCC OnLine Cal 807, where this Court held that when the supplier claims recovery of the amount due under S. 17 for goods supplied after the date of registration, the date of execution of a contract between a buyer and a supplier under the MSMED Act loses relevance for the application of the said Act. It was also held that “the supplier would not be disqualified from making a reference to the Facilitation Council only on the basis of whether the supplier was registered as an MSME Unit on the date of the contract.”
While dismissing the writ petition, the Court held that respondent 2 was statutorily entitled to make a reference to the Council for adjudication of the disputes. The Court also refused to set aside or interfere with the ongoing arbitration proceedings before the Facilitation Council on the ground of maintainability as the petitioners was not able to make out a compelling case for interference by this Court on the grounds of breach of the principles of natural justice or infraction of their constitutional rights.
The Court advised the petitioners to wait for the decision of the Council in the form of the Award and then seek suitable recourse under the Act, 1996.
[Anupam Industries Ltd. v. W.B. Micro Small Enterprise Facilitation Council, 2023 SCC OnLine Cal 956, order dated 25-04-2023]
*Judgment by Justice Moushumi Bhattacharya
Advocates who appeared in this case :
Dr. Kamlesh Vaidankar, Mr. Arnab Dutta and Ms. Prerana Choudhury, Counsel for the Petitioners
Mr. Moinak Bose and Mr. Debkumar Sen, Counsel for the Respondent No. 2
Mr. Soumitra Mukherjee, Counsel for the State