GVPR Engineers Limited v. Micro And Small Enterprises Facilitation Council
2023-10-18
MANINDRA MOHAN SHRIVASTAVA, PRAVEER BHATNAGAR
body2023
DigiLaw.ai
ORDER : 1. Heard on admission and stay. 2. This intra court appeal is directed against order dated 26.09.2023 passed by the Ld. Single Judge, whereby, the appellant’s petition challenging an order dated 15.05.2023 of the Micro and Small Enterprises Facilitation Council (hereinafter referred to as ‘the Council’) mainly on the ground that there is an efficacious and alternative statutory remedy and therefore, the writ petition, being bereft of any material to prima facie show a case of mala fide exercise of power, could not be entertained. 3. Learned Senior Counsel appearing for the appellant argued that the contract was terminated way-back in the year 2018. The respondents, without any basis, only to somehow revive an old and stale matter, took recourse to the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “the Act of 2006”) seeking conciliation which eventually failed. Thereafter, the Council, without drawing due and proper proceedings in the matter of adjudication of dispute through arbitration as ordained under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act of 1996”) as also without determining the rules of procedure as mandated under Section 19 thereof, proceeded hurriedly and summarily without there being any issue framed and not giving the parties sufficient opportunity to lead their respective evidence, recommendation for passing an award has been made vide order impugned in the writ petition. He would submit that though, upon failure of conciliation proceedings, the dispute between the parties was required to be resolved through the process of arbitration, the manner in which the proceedings in the name of arbitration have been drawn are in flagrant violation of not only the provisions of Act of 2006 but also of the Act of 1996. That being the extraordinary circumstances of the case, the appellant approached the writ court. He would submit that the extra-ordinary remedy under Article 226 of the Constitution of India is not barred and though ordinarily when there is an alternative remedy, discretionary jurisdiction may not be exercised but present is a case which shows that all rules and procedures of arbitration were kept at bay and hurriedly recommendation for passing an award in favour of respondent has been made.
He would submit that in similar circumstances, the Hon’ble Supreme Court in the case of Jharkhand Urja Vikas Nigam Limited Versus State of Rajasthan and Others, 2021 SCC ON LINE SC 1257 categorically held that in such cases alternative remedy would not be a bar. 4. Per contra, learned counsel appearing for respondents, while opposing the prayer for stay, would also support the order passed by the Ld. Single Judge by submitting that the grounds which have been raised for consideration in the writ petition are only in the nature of grounds on which an application under Section 34 of the Act of 1996 could be filed before the Commercial Court. He would submit that the decision of the Hon’ble Supreme Court in the case of Jharkhand Urja Vikas Nigam Limited Versus State of Rajasthan (supra) is distinguishable on facts. That was a case where the proceedings of conciliation and arbitration were drawn simultaneously and even without appearance of other party the award was passed without any other proceedings in arbitration drawn. Present is not a case where arbitration proceedings were not drawn. After conciliation proceedings failed, the Council appointed arbitrator. Parties were allowed to file the statement of claim and reply and after consideration of the case of the rival parties, arbitrator applied its mind and has made recommendation for passing an award. Relying upon the decision of the Hon’ble Supreme Court in the case of S.B.P. and Co. Versus Patel Engineering Ltd., AIR 2006 SC 450 , it is contended that Arbitral Tribunal is a forum chosen by the parties by agreement and it has been held that the jurisdiction of the High Court under Articles 226 and 227 of the Constitution of India could not be invoked to correct any order or proceedings of the Arbitral Tribunal. 5. We find that the appellant filed writ petition challenging an order dated 15.05.2023 passed by the Council. The facts which are floating on the surface of the case reveal that appellant-company was awarded contract for laying the water pipelines in the Bhilwara District of Rajasthan. It entered into a contract of supply of water pipes with the respondent No.2 namely Mohit Polytech Pvt. Ltd. on 07.09.2017.
The facts which are floating on the surface of the case reveal that appellant-company was awarded contract for laying the water pipelines in the Bhilwara District of Rajasthan. It entered into a contract of supply of water pipes with the respondent No.2 namely Mohit Polytech Pvt. Ltd. on 07.09.2017. A dispute, however, arose between the appellant and the respondent No.2 in connection with quality of pipes which were to be supplied to the appellant by the respondent No.2 which eventually led to termination of contract by the appellant on 29.10.2018. The respondent No.2 being a small and medium scale enterprise invoked conciliation proceedings by submitting an application under Section 18 of the Act of 2006 on 11.01.2021 before the Council. The Council concluded in the proceedings on 22.04.2022 that as no amicable settlement could be arrived at between the parties, the conciliation has come to an end and it would be followed by commencement of arbitration proceedings as per the mandate of Sections 18(2) and 18(3) of the Act of 2006. An arbitrator was also appointed. There was change of arbitrator also in March, 2023. As applications filed by the appellant were not being properly considered and the arbitrator was proceeding with the arbitration, the appellant approached this Court raising objection to the manner in which the arbitration proceedings were being drawn alleging that those proceedings were in violation of statutory provisions contained in the Act of 2006 and the Act of 1996. In the earlier round of petition, this Court passed an order on 09.05.2023 directing the Council to consider and adjudicate on the pending applications filed by the appellant. The applications having been rejected on 10.05.2023 by the arbitrator, another petition was again filed wherein initially interim order was passed on 31.05.2023 but finally it was dismissed by the impugned order holding that the appellant had an alternative remedy. 6. Pleadings and various documents including proceedings which have been placed on record reveal that after the respondent No.2 approached the Council, proceedings for conciliation by making a reference under Section 18 of the Act of 2006 were drawn but conciliation ultimately failed. It was thereafter that an arbitrator was appointed. The record of the writ petition also shows that parties were directed to file their respective pleadings.
It was thereafter that an arbitrator was appointed. The record of the writ petition also shows that parties were directed to file their respective pleadings. Thereafter, various applications were being filed by the appellant, one of them being an application seeking to lay down the rules of procedure. It appears that the arbitrator so appointed proceeded with the arbitration proceedings and has finally adjudicated upon the dispute and recommended for passing of an arbitration award vide order dated 15.05.2023. The impugned order shows that the arbitrator appointed by the Council has drawn proceedings, considered the claims of the parties and has come to the conclusion that the arbitrator could draw summary proceedings and provisions of the Code of Civil Procedure, 1908 or Indian Evidence Act, 1872 are not binding and further that the provisions contained under Section 24 of the Act of 2006 as also the provisions contained in Sections 15 to 23 of the Act of 2006 have overriding effect and, therefore, to that extent it has overriding effect over the provisions of the Act of 1996. 7. The grounds which have been raised in the writ petition are mainly with regard to the manner in which the proceedings have been drawn by the arbitrator. The appellant appears to be aggrieved because the arbitrator has drawn summary proceedings and proceeded to adjudicate the dispute between the parties. 8. We are of the view that all the grounds which have been taken before us are available to be raised while taking recourse to alternative statutory remedy under Section 34 of the Act of 1996. It is not a case where challenge to the order of arbitrator is based on serious allegations of mala fide exercise of power. The grounds, which have been raised before us, could well be taken up in proceedings under Section 34, once a formal award is drawn and passed on the basis of order dated 15.05.2023. The dispute is between two parties without involvement of State. Even if there are allegations of violations of procedure, in our opinion, the parties to a private dispute inter se should work out their remedy provided under the law instead of invoking extra-ordinary jurisdiction under Article 226 of the Constitution of India.
The dispute is between two parties without involvement of State. Even if there are allegations of violations of procedure, in our opinion, the parties to a private dispute inter se should work out their remedy provided under the law instead of invoking extra-ordinary jurisdiction under Article 226 of the Constitution of India. An arbitration award is open to challenge on grounds as stated in Section 34 of the Act of 1996, inter alia, on the ground that the party was not given proper notice of the arbitral proceedings or was otherwise unable to present its case; the award is in conflict with the public policy of India (it is in contravention with the fundamental policy of Indian law or it is in conflict with the most basic notions of morality or justice; the award is vitiated by patent illegality appearing on the face of the award). Various grounds which have been raised before us, therefore, could well be raised by filing an application under Section 34 of the Act of 1996. 9. Ld. Single Judge has rightly dismissed the petition on the ground of existence of alternative and efficacious statutory remedy and has also taken into consideration the law laid down by the Hon’ble Supreme Court in the case of S.B.P. and Co. Versus Patel Engineering Ltd. (supra). The Hon’ble Supreme Court deprecated the practice of entertaining challenge to the order passed by the Arbitral Tribunal by taking recourse to Articles 226 and 227 of the Constitution of India, keeping in view the remedial provisions contained in Section 34 and 37 of the Act of 1996 whereunder the aggrieved party has an avenue for ventilating its grievances against the award including any in-between orders that might have been passed by the Arbitral Tribunal acting under Section 16 thereof. The Hon’ble Supreme Court was of the view that the Arbitral Tribunal is after all, the creature of a contract between the parties, the arbitration agreement. It has also been held that object of minimising judicial intervention while the matter is in the process of being arbitrated upon would be defeated if the High Court could be approached under Articles 226 or 227 of the Constitution of India against every order made by the Arbitral Tribunal.
It has also been held that object of minimising judicial intervention while the matter is in the process of being arbitrated upon would be defeated if the High Court could be approached under Articles 226 or 227 of the Constitution of India against every order made by the Arbitral Tribunal. Therefore, once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the Act even at an earlier stage. It was finally concluded that once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 of the Act or in terms of Section 34 of the Act. 10. The legal position, therefore, is quite clear. The remedy of a party to arbitration proceedings, which is aggrieved by the order or an award of the arbitral tribunal or sole arbitrator is to take remedy under the Act of 1996 rather than bringing the private dispute inter se between the parties to contract before a writ court. 11. Much emphasis has been laid on the decision of the Hon’ble Supreme Court in the case of Jharkhand Urja Vikas Nigam Limited Versus State of Rajasthan (supra). That was a case where only on the ground that even after receipt of summons the appellant therein had not appeared before the Council, the Council proceeded to pass award even before completing the process of conciliation. Taking note of such an extra-ordinary circumstance, the Hon’ble Supreme Court observed that as per Section 18(3) of the Act of 2006 if conciliation is not successful, the said proceedings stand terminated and thereafter, the Council is empowered to take up the dispute of arbitration on its own or refer to any other institution. It was, further noted that when notice of conciliation proceedings were issued and reply was not filed at conciliation stage and the other party failed to appear, the 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 upon the dispute and make an award.
Proceedings for conciliation and arbitration could not be clubbed. It was in that factual background that the Hon’ble Supreme Court ruled that the order passed therein was in nullity and there was no arbitral award in the eye of law. On such consideration of exceptional nature, it was held that alternative remedy of taking re-course to Section 34 of the Act of 1996 could not be a bar to entertain the petition. 12. Present is not a case where while drawing conciliation proceedings, even before recording failure of conciliation, an award has been passed. After recording failure of conciliation, arbitration proceedings have been initiated, arbitrator appointed, parties have submitted their statement of claim and reply and thereafter, the arbitrator has proceeded to pass an award. All the grounds which are being raised to assail the correctness of the order dated 15.05.2023 are available to be raised by making an application under Section 34 of the Act of 1996. We are not rejecting the contentions which are being raised by Ld. Senior Counsel to challenge the correctness and validity of order dated 15.05.2023. Even though we assume that there is some substance in the submissions which are being raised before this Court, we are of the view that present is not a case where the writ court should invoke its discretionary jurisdiction under Article 226 of the Constitution of India when the appellant has an efficacious and alternative statutory remedy to challenge award by filing an application under Section 34 of the Act of 1996. 13. In view of above consideration, we are not inclined to interfere with the order of discretionary nature passed by Ld. Single Judge refusing to entertain writ petition and leaving the appellant to work out alternative remedy available under the law. 14. The appeal is dismissed and consequently application for stay is rejected.