Court reaffirms that challenges to MSME Facilitation Council's arbitration awards must follow statutory remedies under the Arbitration and Conciliation Act, 1996.
In a significant ruling, the Madhya Pradesh High Court dismissed a writ appeal filed by M/s Shri. Chain Perfumery Works, reinforcing the legal framework that disputes arising from the Micro, Small, and Medium Enterprises Development Act, 2006 (MSMED Act) should be resolved through arbitration rather than writ petitions. This decision follows the dismissal of the writ petition challenging an arbitration award by the MSME Facilitation Council, emphasizing that the appropriate remedy lies under Section 34 of the Arbitration and Conciliation Act, 1996.
The case arose when the MSME Facilitation Council issued a notice to M/s Shri. Chain Perfumery Works regarding a pending payment claim by respondent No. 4, amounting to Rs. 51,54,584 plus interest. Despite being directed by the High Court to participate in the conciliation process, the appellant expressed disinterest and failed to engage in arbitration proceedings, leading to an ex-parte award by the Council.
Appellant’s counsel, Shri. Amit Sahani, argued that the concurrent conciliation and arbitration proceedings violated the MSMED Act and requested the court to annul the award based on precedents set by the Supreme Court in the Jharkhand Urja Vikas Nigam Limited case. However, the court, led by Justices Vivek Rusia and Pradeep Mittal, upheld the dismissal of the writ petition, citing the Supreme Court’s ruling in India Glycols Limited v. Micro and Small Enterprises Facilitation Council, which mandates the use of Section 34 for challenging arbitration awards.
The court found that the appellant's non-cooperation and delay tactics justified the Council's ex-parte decision, reiterating that the MSMED Act aims to protect the interests of Micro and Small Enterprises through summary proceedings. The High Court imposed a cost of Rs. 25,000 on the appellant, payable to the respondent within four weeks, for the unwarranted litigation.
This judgment underscores the judiciary's commitment to uphold statutory arbitration mechanisms over writ jurisdiction in MSME-related disputes, aligning with the legislative intent to provide swift and effective resolutions.
Bottom Line:
Proceedings under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) - Writ petition challenging arbitration award passed by MSME Facilitation Council is not maintainable; remedy lies under Section 34 of the Arbitration and Conciliation Act, 1996.
Statutory provision(s): Micro, Small and Medium Enterprises Development Act, 2006, Arbitration and Conciliation Act, 1996, Sections 18, 34.
