jharkhand high court

Jharkhand High Court: In an appeal challenging judgment dated 3-03-2016 dismissing writ petition holding that a challenge to award passed by Jharkhand MSE Facilitation Council (memo no. 3342 of 12-12-2013) not to be entertained in proceedings under Article 226 of Constitution of India, while liberty was given to the petitioner (‘buyer’) to avail statutory remedy, the Division Bench of Shree Chandrashekhar, ACJ and Anubha Rawat Choudhary, J. followed Supreme Court’s decisions to remit the matter back to the Facilitation Council quashing the previous award since the same was not passed in accordance with the provisions of Arbitration and Conciliation Act, 1996 (‘1996 Act’) and Micro, Small and Medium Enterprises Development Act, 2006 (‘MSME Act’)

The Court had further observed regarding buyer’s obligation to deposit 75% of the amount awarded before application under Section 34 of 1996 Act was entertained by the Court.

The writ petition was filed for quashing award dated 12-12-2013 passed by Facilitation Council on reference made by the supplier. The buyer challenged the award particularly targeting the jurisdiction as well as the Tribunal’s composition not following the provisions of Section 21 of MSME Act since there were more than 5 members, and that it proceeded with deciding the claim without evolving any procedure, with a cryptic order not containing any reason as to admissibility of the amount claimed by way of adequate proof. The Writ Court viewed that such challenge against the award should not be entertained in a proceeding under Article 226 of Constitution and accordingly dismissed the petition.

Court’s Analysis

The Court considered whether the Writ Court was justified in dismissing petition under special legislation, stating that the grounds raised were already available for challenge under Section 34 of 1996 Act, amenability of challenge under Section 34 of 1996 Act, question of jurisdiction. The Court explained that the coram of Facilitation Council could be considered if the issues were decided in supplier’s favour, and that if the award was held to be in nullity and not within the meaning of 1996 Act, other issues need not be considered since the matter would be remanded to the Facilitation Council for consideration as per law.

On the question of res judicata, the Court expressed that the plea of res judicata raised by the supplier was not applicable to the facts and circumstances in the instant case, since the writ petition was dismissed after passing interim orders for Court’s dissatisfaction on requirements for its interference. The Court further referred to the observations in the other matter proceeded with application for execution proceedings in West Bengal, which was dismissed on the ground that buyer did not challenge award under Section 34 of 1996 Act and had not deposited 75% of amount awarded prior to challenge under Section 19 of 1996 Act. The Calcutta High Court stayed all further proceedings in Arbitration Execution Case, then dismissed writ petition for the buyer’s option to challenge the award under Section 34 of 1996 Act, as well as pendency of the instant matter.

The Court found that the issue regarding Facilitation Council’s jurisdiction was a proceeding initiated before the initiation of the execution proceedings. The Court viewed that the instant proceedings were initiated prior to execution case by supplier, the Court in the instant matter was not precluded from deciding the issues involved in the instant case on the ground of res judicata. Thus, the Court held that the instant appeal was not hit by res judicata.

Going further, the Court perused the record of proceedings before the Facilitation Council and pointed out that from the stage of filing till the issuance of first notice of hearing, the matter remained pending for resolution as per the provisions of MSMEAct as the first step after an application under Section 18 of MSME Act and for filing objection/written statement by the buyer at the conciliation stage, and when buyer did not file objection/written statement, the Facilitation Council rejected the time petition and passed award based on evidence produced by the supplier at the conciliation stage.

Considering this, the Court was of the opinion that the Facilitation Council passed the impugned award abruptly without recording failure of conciliation proceedings or reference to deciding dispute as per provisions of 1996 Act read with Section 18 of MSME Act. It observed that “Such an award having been passed without entering into reference for arbitration cannot be said to be an award at all and is a nullity in law. Once there was no reference for arbitration and the Facilitation Council did not take up the dispute for arbitration, the order impugned in the writ petition cannot be termed as an award within the meaning of the Act of 1996 so as to direct the buyer to challenge the same in terms of section 34 of the Act of 1996 and dismiss the writ petition on such a ground.”

The Court referred to Vijeta Construction v. Indus Smelters Ltd., 2021 SCC OnLine SC 3436 wherein, in similar circumstances, the Supreme Court remitted the matter to Facilitation Council while considering the entire scheme of 1996 Act and MSME Act. It further referred to Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan, (2021) 19 SCC 206 wherein the Court explained the fundamental difference between conciliation and arbitration, and that the two proceedings could not be clubbed.

Coming back to the instant facts, the Court noticed that the Facilitation Council proceeded with an award, with no record of failure of conciliation or parties going for arbitration. The Court highlighted that the Facilitation Council did not exercise any power in terms of 1996 Act read with Section 18(3) of MSME Act to enter into reference and held that the order by Writ Court asking the buyer to file petition under section 34 of 1996 Act challenging award passed by Facilitation Council and could not sustain in law since the award passed by Facilitation Council was not an award passed under 1996 Act, holding the same in nullity in law and remitted the matter back to Facilitation Council.

[G.P.T. Infraprojects Limited v. State of Jharkhand, 2024 SCC OnLine Jhar 184, decided on 29-01-2024]

Judgment by: Justice Anubha Rawat Choudhary

Advocates who appeared in this case :

For Appellants: Advocate Debangshu Dinda, Advocate Shadab Iqbal, Advocate Haroon Rasheed, Advocate Anshuman Om

For State/Respondents: Advocate Mrinal Kanti Roy, Advocate Arnab Chakraborty, Advocate Khushboo Kataruka, Advocate Shubham Kataruka, Advocate Md. Aslam, Advocate Uzma Sohail, Advocate Abhay Shankar

Buy Constitution of India  HERE

Constitution of India

Buy Arbitration and Conciliation Act, 1996   HERE

arbitration and conciliation act, 1996

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