Ms Bharat Coking Coal Ltd. through Sri Santosh Kumar Singh Vs the State of Jharkhand through Its Secretary Department of Industries

IN THE HIGH COURT OF JHARKHAND AT RANCHI

W.P.(C) No. 1196 of 2019

M/s. Bharat Coking Coal Ltd., a company within the meaning of Section 617 of the Companies Act, 1956, having its Registered Office at Koyla Bhawan, P.O. – Koyla Nagar, P.S.- Saraidhela, DistrictDhanbad, through Sri Santosh Kumar Singh, General Manager (P)/Legal), BCCL, resident of Hirapur, Dhanbad, P.O., P.S. & District- Dhanbad. … … Petitioner

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Versus

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The State of Jharkhand through its Secretary, Department of Industries, Nepal House, Doranda, P.O. & P.S.- Doranda, Ranchi.

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Director of Industries-cum-Chairman, Jharkhand Micro, Small and Medium Enterprises Facilitation Council, 3^rd Floor, Nepal House, Doranda, P.O. & P.S.- Doranda, Ranchi.

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M/s C.K. Industries, a Proprietorship Firm, through its ProprietorChandra Kant Parkaria, Son of Late Dungoshi Parkaria, having its Works at Katras Road, Matkuria, P.O.- Dhanbad, P.S.- Bank More, District- Dhanbad. … … Respondents

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CORAM :HON'BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY

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--For the Petitioner : Mr. A.K. Mehta, Advocate For the Respondent No.3 : Ms. Amrita Sinha, Advocate : Ms. Shweta Suman, Advocate : Ms. Anjali Kumari, Advocate For the State : Mr. Mukul Kr. Singh, AC to GP-III ---

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C.A.V on 16^th October, 2024 Pronounced on 11/02/2025.

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1. This writ petition has been filed for the following reliefs:-

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“(i) To issue a writ in the nature of certiorari or any other appropriate writ for quashing the Decision/Award/Decree contained in Memo No. 933/Ranchi, dated 5.4.2018 in Case No. JHMSEFC-03/2011 (Annexure-10) passed in complete violation of the principles of natural justice without even serving notice of hearing upon the petitioner, even though the matter was remanded by this Hon’ble Court vide its order/judgment dated 14.9.2016 passed in W.P.(C) No. 6464/2012 (Annexure-6);

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AND/OR

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(ii) For issuance of any other appropriate writ, order or direction as Your Lordships may deem fit and proper for doing conscionable justice to the petitioner.”

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1

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Foundational facts.

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2. The foundational facts of dispute. The respondent No. 3 filed an application before the Facilitation Council constituted under the provisions of Micro, Small and Medium Enterprises Development Act 2006 (hereinafter referred as MSMED Act of 2006) . The claim was filed for recovery of the principal amount of Rs.50,231.00 and Interest amount of Rs.3,82,443.00. Notice was issued to the petitioner however, the decision/award dated 22.03.2012 was passed by the Facilitation Council directing the petitioner to pay Rs.50,231.00 towards the principal and interest @ three times at bank rate under MSMED Act, 2006. The decision/award dated 22.03.2012 was challenged before this Court in writ petition being W.P.(C) No. 6464 of 2012 and in the said writ proceedings 75% of the amount was directed to be deposited before the Registrar General, Jharkhand High Court. Consequently, the amount was deposited. The writ petition was finally heard on 14.09.2016 and the matter was remanded to the Facilitation Council to hear the matter afresh and take a decision after due opportunities to the parties and the amount deposited before this Court was directed to be returned to the petitioner.

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3. The Facilitation Council passed a fresh order/award dated 20.02.2018 after recording that the petitioner did not attend six meetings and as such observed that there is no need for any interference in earlier order/award dated 22.03.2012, communicated vide Memo No. 1384/Ranchi dated 26.04.2012. The order/award termed as Award/Decree was passed on 20.02.2018 under MSMED Act of 2006 is quoted as under:-

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The Award/Decree on 20.02.2018 under MSMED Act 2006

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“1. The applicant M/S C.K. Industries has filed application dated 30.05.2017 enclosing therewith the copy of Hon’ble Jharkhand High Court order dated 7/14.9.2016 and requesting therein to re-consider the case. The fact of the case is that the opposite party M/S BCCL has filed Writ Petition to Hon’ble Jharkhand High Court against the Order of this facilitation Council’s order 22.03.2012. The Hon’ble Jharkhand High Court has

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remanded back to this facilitation Council to hear the reference afresh and take a decision after due opportunity to the parties within a frame time.

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2. The case was taken up for hearing and the application of 1^st party was sent to opposite party vide letter no. 3279 dated 11.09.2017.

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3. The opposite party did not attend the 6 nos. of Council meetings held since 04.09.2017 as detailed at point no. 2 (attendance) which shows that opposite party has nothing to say in their defense.

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4. In compliance of Hon’ble High Court order sufficient opportunity was given to Opposite Party but Opposite Party did not respond. And as such there is no need for any interference in earlier order dated 22.03.2012, communicated vide Memo No. 1384/Ranchi dated 26.04.2012.”

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4. The fresh order /award dated 20.02.2018 is under challenge in this writ petition.

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5. An objection has been raised by the private respondent that this writ petition is not maintainable as the order/award ought to have been challenged under section 34 of the Arbitration and Conciliation Act of 1996 (hereinafter referred to as the Act of 1996). Another objection has been raised regarding non-compliance of pre-deposit of 75% of the awarded amount in terms of section 19 of the MSMED Act of 2006. The details of the objection has been mentioned in the arguments of the private respondent.

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6. Arguments of the Petitioner.

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A. The aforesaid order of remand passed by this Court in W.P.(C) No. 6464 of 2012 has not been complied as the provisions of Order 41 Rule 23 and 25 of the CPC have not been followed.

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B. Six notices issued to the petitioner after remand were not served upon the petitioner on account of which there has been gross violation of principle of natural justice. Upon remand, the matter was taken up by the Facilitation Council and directions were issued for issuance of notice on various dates but the orders do not record service of any notice and ultimately impugned order/award has been passed reviving the earlier

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award after recording that the petitioner did not attend six meetings.

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C. Irrespective of the fact as to whether the petitioner appeared or not appeared, the direction passed by this Court on remand was required to be followed in letter and spirit. The same having not been followed, the impugned award cannot be sustained in the eyes of law and calls for interference under Article 226 of the Constitution of India.

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D. The learned counsel has also heavily relied upon the judgment passed by the Hon’ble Supreme Court in the case of Jharkhand Urja Vikas Nigam Limited Vs. State of Rajasthan & Ors. reported in (2021) 19 SCC 206 paragraphs 14 to 21 to submit that it has been held that under section 18(3) of MSMED Act of 2006 when the conciliation fails and stands terminated, the dispute between the parties can be resolved by Arbitration and it is open to the Facilitation Council to arbitrate and pass an award after following the procedure more particularly under Sections 20, 23, 24 and 25 of the Act of 1996. In paragraph 16 of the judgment, it has been held that if the party fails to appear, the Facilitation Council could at best have recorded failure of conciliation and proceeded to initiate Arbitration Proceedings in accordance with the provisions of the Act of 1996 to adjudicate the dispute between the parties through arbitration. It has been held that proceedings for conciliation and arbitration cannot be clubbed. The award which was involved in the aforesaid judgment of Jharkhand Urja Vikas Nigam Limited (Supra) was held to be in nullity and it was held that it was not only contrary to the provisions of MSMED Act of 2006 but was also contrary to the mandatory provisions of the Act of 1996 and the award impugned was held to be no arbitral award in the eyes of law.

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E. The learned counsel submits that in view of the aforesaid decision passed in the case of Jharkhand Urja Vikas Nigam

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Limited (Supra) the impugned award in the present case is a nullity in the eyes of law and therefore, there is no question of seeking remedy through Section 34 of the Act of 1996. In paragraph 20 of the aforesaid judgment passed by the Hon,ble Supreme Court the order passed by the Facilitation Council was set aside and liberty was granted to the Council to proceed in accordance with law, similar order may be passed. The learned counsel has also relied upon the judgment passed by this Court in L.P.A. No. 505 of 2019 dated 11.09.2023 and has submitted that this Court has held that such award is a nullity having not followed the mandate as provided in Section 18(2) and (3) of the MSMED Act of 2006. In the said judgment another judgment passed by Hon’ble Supreme Court reported in ( 2023) 6 SCC 401 (Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods Private Limited & Another) has also been relied upon.

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F. It has submitted that the present case is squarely covered by the judgment passed by the Hon’ble Supreme Court in the case of Jharkhand Urja Vikas Nigam Limited (Supra) and also the judgment passed by this Court in L.P.A. No. 505 of 2019 (supra) inasmuch as the Facilitation Council on remand neither recorded failure of conciliation nor recorded any reference to itself for adjudication of the dispute through arbitration. It has been submitted that the impugned order/award dated 22.02.2018 is a nullity and is not an arbitral award in the eyes of law so as to require challenge under section 34 of the Act of 1996 and it is submitted that section 34 of the Act of 1996 does not apply to this case at all and consequently there is no question of pre-deposit in terms of section 19 of the MSMED Act of 2006 to challenge the impugned order/award.

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G. That the present Writ Petition is more or less similar to the facts of the Judgment in the case of Jharkhand Urja Vikas Nigam Limited (supra) as well as the Judgment rendered by the

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Division Bench of this Hon'ble Court in the case of LPA No. 505 of 2019 in as much as the Facilitation Council, Ranchi on remand has done nothing on reference made to it. There is no mention of any Conciliation upon remand or recording of failure of conciliation. There is no order of the Facilitation Council for Arbitration on failure of conciliation. The private respondent has also not proved the claim before the Arbitrator to adjudicate the dispute and make an award. The Petitioner therefore submits that the order/award termed as Award/Decree was passed on 20.02.2018 of the Facilitation Council, Ranchi is a nullity and is also patently illegal and therefore it is not an Arbitral Award in the eyes of law which is required to be questioned by way of an application under Section 34 of the Act of 1996.

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H. The observations and directions passed by this Court in the order of remand also have not been followed.

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7. During the course of hearing and upon going through the records of this case, the learned counsel for the petitioner has not been able to show any averment in the writ petition with regard to nonservice of the award which was said to be communicated to the parties as is reflecting from the impugned order/award itself. It is further not clear from the records as to the date on which the award came to the knowledge of the petitioner for the first time. However, the petitioner has also annexed a copy of the notice dated 19.09.2018 which is a communication from the private respondent to the petitioner mentioning about the award. The date of receipt of the said notice dated 19.09.2018 has also not been mentioned in the writ petition.

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8. Arguments of the private Respondent.

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I. The impugned order is an arbitration award and writ petition is not maintainable.

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II. Writ petition has been filed on a date by which the statutory remedy under section 34 of the Act of 1996 had become time

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barred and the permissible period of condonation of delay under section 34(3) of the Act of 1996 had also expired. The present Writ Petition has been filed on 05.03.2019 i.e. with a delay of 1 year 12 days from the date of passing of the award dated 05.04.2018, which was duly communicated to the Petitioner.

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III. This Hon'ble Court in the case of Union of India v. M/s Ekta, Telecommunications Systems being L.P.A. 644 of 2022 at paragraphs 53, 54 and 55 after relying upon the judgment of the Hon'ble Supreme Court passed in Simplex Infrastructure Ltd. V. Union of India has held that a plain reading of sub section (3) along with the proviso to section 34 of the Act of 1996 shows that the application for setting aside the award on the grounds mentioned in section 34(2) could be made within three months and the period can only be extended for a further period of 30 days on showing sufficient cause and not thereafter. Arbitral process is strictly conditioned upon time limitation and modelled on the "Principle of unbreakability" and if the courts are allowed to interfere with the arbitral process beyond the ambit of enactment, then the efficiency of the process will be diminished. The aforesaid view of this Hon'ble Court has attended finality, as the Appeal preferred against the order passed in L.P.A. No.644 of 2022 has duly been dismissed vide order dated 01.12.2023 passed in S.L.P. No. 27886 of 2023 .

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IV. A point regarding non-deposit of 75% of the awarded amount (with interest) has also been raised as per the provisions of section 19 of MSMED Act of 2006. In terms of Section 19, an application for setting aside an award of the Facilitation Council cannot be entertained by any Court unless the applicant has deposited 75% of the amount in terms of the award, as held by the Hon'ble Supreme Court in the case of M/s India. Glycols Limited & Others v. MSEFC, Medchal & Others being SLP (C) No. 9899 of 2023 decided on 06.11.2023 and also in the case of Goodyear India Limited reported in (2012) 6 SCC 345.

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In the present case the Petitioner is claiming to have deposited 75% of the decretal amount being Rs.3,24,506/- pursuant to an order passed by this Court in the earlier round of litigation being order dated 15.07.2013 passed in W.P.(C) No. 6464 of 2012. The mandatory condition of deposit of seventy-five percent of the award has not been complied with and on this ground alone, the Writ Petition may be dismissed.

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V. It is submitted that Section 18 of MSMED Act of 2006 provides for a reference to the Facilitation Council. Sub Section (2) of Section 18 provides for the conduct of Conciliation proceedings. Sub Section (3) empowers the Facilitation Council to thereafter take up the dispute for arbitration or to refer it to an Institution or Centre providing for the Alternative Dispute Resolution Services "for such arbitration". Sub Section (3) of Section 18 stipulates that the provisions of the Act, 1996 "shall then apply to the dispute as if the arbitration was in pursuance of the Arbitration Agreement referred to in Sub Section (1) of Section 7 of that Act". In view of Sub Section (3) of Section 18 of the MSMED Act of 2006 the proper remedy available to the person aggrieved by the impugned order/award is under Section 34 of the Act, 1996. It is submitted that the Hon'ble Supreme Court in the Judgment reported in (2023) 6 SCC 401, namely Gujarat State Civil Supplies Corporation Limited v. Mahakali Foods Pvt. Limited & Another , has held in paragraph No. 48, that the Facilitation Council is the Arbitral Tribunal constituted under Section 7(1) of the Arbitration Act, 1996 and Section 16 of the Arbitration Act would apply.

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VI. That the Hon'ble Court in the case of M/s G.P.T. Infraprojects Limited & Others v. State of Jharkhand & Others, reported in 2016 SCC Online Jhar 1004 at Paragraphs 9 and 10 of the Judgment has held that when such specific grounds to assail the impugned Award are already available for challenge in a proceeding in an application under Section 34 of the Act, 1996

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on the part of the aggrieved buyer/purchasers, there is no reason why the Petitioner should not have availed of the statutory remedy available under the provisions of the Act which are in the nature of Special Legislation. In conclusion, it can only be said that in such matters when hierarchy of statutory remedy is available and interference of the Courts are to be avoided. Moreover, loosing Party, that is, the buyer in the instant case, is also under a statutory obligation to make deposit of 75% of the amount awarded before his application u/s 34 of the Act, 1996 is entertained. That this Hon'ble Court in a recent Judgment dated 16.08.2023 passed in the case of Union of India v. M/s Ekta Telecommunications Systems being L.P.A No. 644 of 2022 , has reaffirmed the above view/the settled principle of law.

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VII. It is submitted that the principle of natural justice has duly been complied in the present case as all the notices granting opportunity of hearing issued by the Facilitation Council were duly served upon the Petitioner on their new address i.e. Koyala Bhawan, Dhanbad as is evident from the cause title of the impugned award, as contained in page 62 of the Writ Petition and also from page 64 of the Writ Petition which says that the award was duly communicated. That the petitioner at paragraph 24 of its Writ Petition has itself stated that notices to be served in the office of General Manager, P.B. Area, BCCL or in any of the functional office including the BCCL Head Quarter, Koyala Bhawan, Dhanbad. Accordingly, all the six notices granting opportunity of hearing to the Petitioner were duly served on the aforesaid address itself. However, the Petitioner chose not to appear in the proceeding merely in order to linger the proceeding. From the order dated 23.01.2018, as contained in the final award dated 05.04.2018, it is further evident that the notice granting opportunity of hearing was also served through email on the Petitioner, communicating the next date of hearing.

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Thus, sufficient opportunity was granted to the petitioner to appear and contest the matter. However, the Petitioner chose not to appear and thus the Petitioner cannot take the plea of violation of principles of natural justice merely in order to show the maintainability of the petition. Moreover, the ground of violation of principal of natural justice can be raised in an application filed u/s 34 of the Act of 1996.

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VIII. The Learned Facilitation Council only upon verifying each and every document being the bills, sanction letters, and the payment of few of the bills, came to the conclusion that the principal amount of Rs.50,231/- is due and that the payment has also been made with delay. Even if the Petitioner was aggrieved by the aforesaid award the right course of action available to Petitioner was to prefer an application under section 34 of the Act, 1996.

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IX. That Hon'ble Apex Court in the case of M/s India Glycols Ltd. & Others being Civil Appeal No. 7491 of 2023 at paragraph 16 has held that having come to the conclusion that the remedy which was adopted by the Appellant was thoroughly misconceived, it is not necessary for the Court to make any observation on what course of action should be adopted by the Appellant and it was also observed that the Appellant at that stage could take recourse to the proceedings under section 34 of the Act of 1996 and it would be open to the second Respondent to object on all counts which were available in law.

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X. That it is submitted the Jharkhand Urja Vikas Nigam Limited (supra) and L.P.A. No. 505 of 2019, are not applicable to the facts and circumstances of the above case as in the present case the matter was remanded back by this Hon'ble Court vide order dated 14.09.2016 passed in W.P.(C) No. 6464 of 2012 with a specific direction to hear the reference afresh and take a decision with respect to the claims arising out of such supply orders such as the date of the supply orders, the date on which

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supplies were made, the date on which bills were raised, the date on which the acceptance of supplies were made or refused, after giving due opportunity to the parties within a time frame. Thus, the matter was remanded back from the stage to decide the claim of the Respondent No. 3. Inspite of notices, the Petitioner chose not to appear and defend the claim of the private respondent. The Facilitation Council was of the view that the Petitioner had nothing to say in their defence and accordingly, the earlier order dated 22.03.2012 was reiterated as the same was passed only after examining the entire documents/records of the case. The relevant portion of the order is quoted herein for ready reference:

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"It is evident from the papers that the supplier bill was processed, 1^st for obtaining sanction and thereafter for payment. In this process some bills are left out for payment and in some cases there are considerable delay in making payment. The first party has informed the opposite party vide letter dated 05.07.2011 by enclosing a C.A. Certificate showing the details of outstanding Principal amount of various bills totalling to rupees 50,231/- and interest of rupees 3,82,443/with a copy to the Council."

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XI. Thus, if there is still any grievance, the proper recourse available to the Petitioner is to file an application under section 34 of the Act of 1996 challenging the impugned order/Award as contained in Memo No. 933/Ranchi dated 05.04.2018.

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XII. The aforesaid grounds of non-compliance of provisions as contained in sub section (2) and (3) of section 18 has been raised for the first time in their written argument. There is no pleading to that extent in the Writ Petition. Therefore, the Principle of Waiver applies herein.

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Findings of this Court.

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9. This Court finds that after remand by this Court in W.P(C) No. 6464 of 2012 dated 14.09.2016 as many as six notices were issued to the petitioner but the petitioner did not appear. At the same time the proceedings on different dates as recorded in the impugned

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order/award itself does not record that the notices were served. However, non-service of notices issued by Facilitation Council by itself will not be a ground to entertain this writ petition. The point regarding service/non service of notices by Facilitation Council is certainly a point which can be raised under Section 34 of the Act of 1996 which may even require examination of the records of the Facilitation Council.

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10. The argument is that the impugned decision/award/order is not an arbitral award and hence is a nullity and therefore Section 34 will not apply. The question of pre-deposit of 75% would arise only if the impugned order is held to be an award. Essentially, it has to be examined as to whether the impugned order/award can be said an award under section 18 of the MSMED Act of 2006 so as to hold that the petitioner ought to have challenged the award under section 34 of the Act of 1996 which is certainly a self-contained code and the challenge was to be coupled with pre-deposit in terms of section 19 of the MSMED Act of 2006. This has to be examined in the light of the observations made in the order of remand of the earlier writ court and also in view of the judgements relied upon by the parties.

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11. This takes us to the core issue involved in the present case as to whether the impugned order can be said to be an award in eyes of law at all or it is a nullity in the eyes of law. 12. On the face of the record, particularly the entire proceeding which have been recorded in the impugned order itself, this Court finds that upon remand the Facilitation Council issued six notices including final notice to the petitioner vide order dated 12.12.2017 mentioning that upon failure to appear the case will be decided on merits and ultimately on the next meeting on 20.02.2018 nonappearance of the petitioner was recorded and the impugned final order/award dated 20.02.2018 was also passed. The Facilitation Council was of the view that enough opportunity was given to the petitioner to defend his case but the petitioner remained absent and the Facilitation Council straightaway simply reaffirmed/revived its earlier

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award dated 22.03.2012 which was set aside by this Court in writ petition being W.P.(C) No. 6464 of 2012 while remanding the matter. The Facilitation Council neither recorded failure of conciliation nor proceeded to take up the matter for arbitration and reaffirmed the earlier order/award which was set-aside by this Court in the earlier round of the writ petition.

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13. This Court finds that while setting aside the award dated 22.03.2012, and remanding the matter to the Facilitation Council vide W.P.(C) No. 6464 of 2012, this Court had examined the entire scheme of Section 18 of the MSMED Act of 2006 and it was not a case of simple remand on account of violation of principles of natural justice. The specific case of the petitioner in the earlier round of the writ petition has been recorded interalia, as:-

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“….. It has also questioned the approach of the Facilitation Council in deciding the matter on merits without exhausting the steps stipulated under Section 18(2) of the Act of 2006. It was submitted that the matter was required to be first referred for conciliation and only on failure to arrive at a settlement between the parties, the Council would have taken up dispute for arbitration or referred it to any institution or center for adjudication in the nature of an arbitration proceeding in terms of Section 18(3) of the Act. The impugned order is otherwise also cryptic and straightaway proceeded to determine the liability of the petitioner ……………….”

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14. The findings recorded in final judgement dated 14.09.2016 passed in W.P.(C) No. 6464 of 2012 while remanding the matter to the Facilitation Council reveal as follows: -

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a) The facilitation council under the MSMED Act of 2006 has been entrusted with the statutory conciliatory/adjudicatory role to perform as per mandate of law and the procedure laid down therein.

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b) The scheme of the MSMED Act of 2006 including Section 18 was considered and it has been held that the claim petition as made before the Facilitation Council in the first place as per section 18(2) it is required to conduct conciliation in the matter itself or

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seek an assistance of any institution or center providing alternate dispute resolution services by making a reference thereto and it is only on the failure of the conciliation effort and where the parties do not arrive at a settlement, the Facilitation Council under section 18 (3) is requited to take up dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services. It has been held that the provisions of the Act of 1996 shall then apply to the disputes as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of Section 7 of the Act of 1996.

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c) The Facilitation Council while entertaining a reference is required to follow up the procedure laid down under Section 18.

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d) The Facilitation Council without discussing the admissibility of each of such claim in proceeding in the nature of arbitration proceeding has by cryptic order straightaway proceeded to hold that the petitioner was liable to pay outstanding amount along with interest.

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e) The Facilitation Council had also chosen to bye-pass the first step of undertaking conciliation of the dispute between the parties.

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f) Ultimately in the totality of the facts and circumstances, the order impugned was set aside and the matter was remanded to the Facilitation Council to hear the reference afresh and take a decision after due opportunity to the parties within a time frame.

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15. On perusal of the aforesaid judgement passed in W.P.(C) 6464 of 2012 it is clear that this Court had also recorded that while passing the order impugned the Facilitation Council had chosen to by-pass the first step of undertaking conciliation on the dispute between the parties and the procedure as laid down under section 18 which was required to be followed, was not followed. This Court finds that the manner in which the Facilitation Council had conducted the proceedings ignoring the procedure laid down under section 18 of the Act of 1996 was directly in issue in the earlier writ petition but the Facilitation Council repeated the same error in the proceedings after remand.

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16. Upon non-appearance of the petitioner, the Facilitation Council ought to have recorded failure of conciliation and then proceed for arbitration.

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17. In the case of Jharkhand Urja Vikas Nigam Limited Vs. State of Rajasthan & Ors. reported in (2021) 19 SCC 206 paras 14 to 21, the Hon'ble Supreme Court has held that:-

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a) Facilitation Council is obliged to conduct Conciliation for which provisions of Section 65 to 81 of the Act of 1996 would apply as if conciliation was initiated under Part III of the Act of 1996.

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b) Under Section 18(3) of MSMED Act of 2006, when conciliation fails and stands terminated, the dispute between the parties can be resolved by Arbitration and it is open to the Facilitation Council to arbitrate and pass an Award after following the procedure more particularly Sections 20, 23, 24 and 25 of the Act of 1996.

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c) There is a fundamental difference between conciliation and arbitration in as much as in the former, the Conciliator assists the parties to arrive at an amicable settlement while in arbitration the claim has to be proved before the Arbitrator, if necessary, by adducing evidence even though the provisions of CPC or Evidence Act may not apply.

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d) In Paragraph 16 the Apex Court held that if the party failed to appear, the Facilitation Council could at best have recorded failure of conciliation and proceeded to initiate Arbitration Proceedings in accordance with the provisions of the Act of 1996 to adjudicate the dispute and make an Award. The proceedings for conciliation and arbitration cannot be clubbed.

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e) In paragraph 17 of the Judgment, the Apex Court held that it was clear from the records of the proceedings of the concerned case before the court that Facilitation Council did not initiate Arbitration Proceedings in accordance with the provisions of the Act of 1996 and accordingly in paragraph 18 of the judgment the Apex Court held that the order of the Facilitation Council is a nullity and runs contrary not only to provisions of MSMED Act of 2006 but also contrary to mandatory provisions of the Act of 1996 and therefore the order/award was held to be patently illegal and that there was no Arbitral Award in the eyes of law.

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f) The Hon'ble Apex Court also held that it is true that an Arbitral Award can only be questioned by way of application under Section 34 of the Act of 1996 but at the same time when an order is passed without recourse to Arbitration and in utter disregard to the provisions of the Act of 1996, Section 34 of the said act will not apply. Accordingly, the Apex Court held

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that the Court cannot reject the case only on the ground that the appellant had not availed the remedy under Section 34 of the Act of 1996.

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g) In paragraph 20 of the Judgment the Hon'ble Supreme Court of India interfered with the order passed by the Facilitation Council and granted liberty to the Facilitation Council to proceed in accordance with law.

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18. In the case of “Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods Private Limited and another” reported in (2023) 6 SCC 401 the Hon’ble Supreme Court examined the scheme of the MSMED Act of 2006 and recorded the salient features in paragraph No. 40 as under: -

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“40. Having regard to the purpose, intention and objects as also the scheme of the MSMED Act, 2006 and having regard to the unambiguous expressions used in Chapter V thereof, following salient features emerge:

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40.1. Chapter V is “party-specific”, inasmuch as the party i.e. the “buyer” and the “supplier” as defined in Sections 2(d) and 2(n), respectively are covered under the said Chapter.

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40.2. A specific provision is made fastening a liability on the buyer to make payment of the dues to the supplier in respect of the goods supplied or services rendered to the buyer, as also a liability to pay compound interest at three times of the bank rate notified by the Reserve Bank, if the buyer fails to make payment within the prescribed time-limit. The said liability to pay compound interest is irrespective of any agreement between the parties or of any law for the time being in force.

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40.3. A dedicated statutory forum i.e. Micro and Small Enterprises Facilitation Council is provided to enable any party to a dispute with regard to any amount due under Section 17, to make reference to such Council.

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40.4. A specific procedure has been prescribed to be followed by the Facilitation Council after the reference is made to it by any party to the dispute.

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40.5. The Facilitation Council or the centres providing alternative dispute resolution services have been conferred with the jurisdiction to act as an arbitrator or conciliator under Section 18(4), notwithstanding anything contained in any law for the time being in force, in a

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dispute between the suppliers located within its jurisdiction.

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40.6. The provisions of the Arbitration Act, 1996 have been made applicable to the dispute only after the conciliation initiated under sub-section (2) does not succeed and stands terminated without any settlement between the parties.

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40.7. Sub-section (1) and sub-section (4) of Section 18 starting with non obstante clauses have an effect overriding the other laws for the time being in force.

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40.8. As per Section 24, the provisions of Sections 15 to 23 have an effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.”

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19. A Division Bench of this Hon'ble Court in LPA No. 505 of 2019 has followed the Judgment of the Hon'ble Supreme Court of India in the case of Jharkhand Urja Vikas Nigam Limited (supra) and the scheme of the act has explained in Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods Pvt. Ltd. & Anr. reported in (2023) 6 SCC 401 with regards to mandate of Section 18 of the MSMED Act of 2006. Accordingly, the Division Bench of this Hon'ble Court has held that the Award was a nullity as it had not followed the mandate as provided in Section 18(2) and (3) of the MSMED Act of 2006.

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20. Thus, the Facilitation Council, upon filing of such an application under section 18 (1) of MSMED Act of 2006, was under a duty to deal with the same step by step as per the mandate of Section 18 of MSMED Act of 2006 as explained by the Hon’ble Supreme Court in “Jharkhand Urja Vikas Nigam Limited v. State of Rajasthan and Others” reported in 2021 SCC online SC 1257 and the scheme of the Act as explained in “Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods Private Limited and another” reported in (2023) 6 SCC 401 and also in the order of remand passed in WPC No. 6464 of 2012.

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21. This Court is of the considered view that even if the notices issued to the petitioner after remand are taken to have been duly served, the Facilitation Council could not have straightaway revived their earlier award which was set-aside by this Court. The impugned order/award has been passed without recording failure of conciliation and without entering into arbitration reference under the Act of 1996 either by itself or by referring it to another institution for arbitration. Such steps have not been followed inspite of clear indication of the procedures to be followed under section 18 of the MSMED Act of 2006 indicated in the order of remand and also mentioned in the judgement passed in the case of Jharkhand Urja Vikash Nigam (supra) .

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22. The impugned order/award having been passed without even entering into reference for arbitration ex- facie it cannot be said to be an arbitration award under the Act of 1996 read with MSMED Act of 2006 so as to even prima-facie hold that the impugned order/award ought to have been challenged under section 34 of the Act of 1996 read with section 19 of the MSMED Act of 2006.

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23. The Facilitation Council has not only ignored the step-by-step procedure prescribed under MSMED Act of 2006 but has also failed to notice the observations/findings made by this Court while remanding the matter. The argument of the learned counsel for the private respondent that the order of remand was to take up the matter straightaway for arbitration is also devoid of any merits as the judgement and order passed in the earlier round of writ petition has to be read as a whole wherein it was clearly held, interalia, that the Facilitation Council had chosen to bye-pass first step for undertaking conciliation on the dispute between the parties.

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24. There is no doubt that Facilitation Council can also act as an arbitral tribunal constituted under Section 7(1) of the Arbitration and Conciliation Act, 1996 and that Section 16 of the Act of 1996 would apply as held by the Hon’ble Supreme Court in the Judgment reported in Gujarat State Civil Supplies Corporation Limited Vs. Mahakali

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Foods Private Limited and another (Supra). However, the Facilitation Council has twin role to play. Firstly , it acta as a forum for conciliation between the parties and after the conciliation is failed it records the failure of conciliation and secondly, upon such failure of conciliation, an arbitral agreement has to be read in between the parties and then the Facilitation Council can act as arbitral tribunal constituted under section 7(1) of the Act of 1996 and proceed to pass an arbitral award. In the present case the failure of conciliation having not been recorded and after failure of conciliation, the Facilitation Council was required to take a decision to act as arbitral tribunal or to refer the matter for arbitration by itself or any other authority. But the aforesaid procedure has not been followed and consequently impugned order/award has been passed without entering into reference for arbitration .

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25. Entering into arbitration is an important stage while passing an arbitral award in absence of which the impugned order cannot be said to be an arbitral award at all within the meaning of the Act of 1996 and the same is ex-facie nullity in the eyes of law. Consequently, the arguments of the private respondent that the award ought to have been challenged under section 34 of the Act of 1996 and that this writ petition is not maintainable is rejected. Even the limitation prescribed under section 34 of the Act of 1996 to challenge the award is not applicable to the impugned order/award. Since the impugned order/award is not an award under the Act of 1996 read with MSMED Act, 2006, the arguments of the private respondent that the writ petition has to be dismissed on account of non-deposit of 75% of the award in terms of section 19 of MSMED Act,2006 is also rejected.

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26. In M/s India Glycols Limited and Another (Supra) it has been held that Section 18 of the MSMED Act of 2006 provides for recourse to the statutory remedy for challenging an award under Arbitration and Conciliation Act, 1996 and this remedy is subject to the discipline of complying with pre-deposit in terms of the provisions of Section 19 of MSMED Act of 2006. In the said judgment itself the entire step by

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step procedure under Section 18 of MSMED Act of 2006 has been again explained by the Hon’ble Supreme Court in Paragraph 8 as follows:-

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“Section 18 of the MSMED Act provides for a reference to the Facilitation Council, Sub-section (2) of Section 18 provides for conduct of conciliation proceeding. Subsection (3) empowers the Council to thereafter take up the dispute for arbitration or to refer it to an institution or centre providing for Alternative Dispute Resolution services “for such arbitration”. Sub-section (3) of Section 18 stipulates that the provisions of the Act of 1996 “shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in subsection (1) of section 7 of that Act”.

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The aforesaid paragraph clearly reveal that Section 18 (2) provides for conduction of conciliation proceeding and sub-section (3) empowers the Facilitation Council to thereafter take a dispute for arbitration or refer it to an institution or a centre providing for alternative dispute resolution services for such arbitration and the Act of 1996 applies to the dispute as if arbitration was in pursuance of an arbitration agreement referred to in sub section 1 of section 7 of the MSMED Act of 2006. It has been held that in case of challenge to an arbitral award passed in terms of sub section 3 of section 18 after failure of conciliation in terms of section 18 (2) certainly the procedure to challenge the such award under the Act of 1996 under Section 34 of the Act of 1996 has to be availed coupled with compliance of Section 19 of the MSMED Act of 2006 i.e. pre-deposit of 75%. However, the said judgment of M/s India Glycols Limited and Another (Supra) does not help the petitioner in any manner. In this case, ex-facie, neither failure of conciliation has been recorded in terms of section 18 (2) nor any steps have been taken to enter into arbitration in terms of Sub-section 3 of Section 18 of MSMED Act, 2006. Consequently, the award in the present case is a nullity as discussed above. Once it is held that the impugned award is not an arbitral award at all, the writ petition cannot be dismissed on account

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of availability of remedy under Section 34 of the Act of 1996 and the writ petition can also not be dismissed on account of non-compliance of pre-deposit of 75% of the awarded amount under Section19 of the MSMED Act, 2006.

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27. So far as the point argued by the private respondent that recourse to Section 34 of the Arbitration and Conciliation Act, 1996 has already become barred by limitation prior to filing of the writ petition is concerned, this Court is of the considered view that having held that the impugned award is not an arbitral award in the eyes of law and hence a nullity, the limitation to challenge an arbitral award prescribed under Section 34 of the Act of 1996 does not apply . Accordingly, the judgment passed by the Hon’ble Supreme Court in the case of Simples Infrastructure Limited (Supra) which has been followed in the judgment passed by this Court in L.P.A. No. 644 of 2022 does not apply to the facts of this case.

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28. The plea of the private respondent that no plea has been taken in the writ petition in connection with Section 18(2) and 18(3) also fit to be rejected. This Court finds that in the earlier writ petition this Court while remanding the matter had clearly dealt with the scheme of MSMED Act of 2006 and had also held that the Facilitation Council had given a complete go bye to the step by step procedure prescribed under section 18 of the MSMED Act of 2006 and had not even followed the step of recording failure of conciliation. The specific case of the petitioner is the fresh order/award has not followed the order of remand. The order of remand has to be read as a whole and this Court having held that the step prescribed under section MSMED Act of 2006 was not followed, it was for the Facilitation Council to follow the procedure not only as per the mandate of law and also indicated in the order of remand. The point regarding Section 18(2)(3) is covered by the plea taken by the petitioner that order of remand was not followed. The consequences of not recording failure of conciliation and not taking any step to enter into arbitration is fatal to the impugned order/award and renders it a nullity and is not an arbitral

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award at all. The law is well settled that even on account of nonappearance failure of conciliation is to be recorded and an order is required to be drawn with respect to reference for arbitration either by the Facilitation Council or by any other authority and this having not been done, the impugned award reviving the earlier award is a nullity and thus not an arbitral award.

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29. To summaries, on the face of the impugned award, this Court finds that the proceeding prescribed under the MSMED Act of 2006 has been given a complete go by and without recording failure of conciliation on account of non-appearance of petitioner and further without initiating arbitral proceeding the impugned order/award has been passed. In such circumstances, the impugned award cannot be said to be an arbitral award at all in the eyes of law which can be subject matter of challenge under Section 34 of the Act of 1996. The impugned award is ex-facie a nullity in the eyes of law and since the impugned award is not an award in the eyes of law, therefore there is no question of deposit of 75% of the awarded amount in terms of section 19 of MSMED Act 2006 as objected to by the learned counsel for the claimant. Accordingly, the impugned order/award requires interference under Article 226 of the Constitution of India.

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30. Consequently, the impugned order/award dated 20.02.2018 passed by the Facilitation Council is quashed and set-aside and the matter is remitted back to the Facilitation Council and Case No. JHMSEFC 03 /2011 is restored to the original file of the Facilitation Council to enable the Facilitation Council to proceed in accordance with law.

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31. I.A. No. 9838 of 2023 filed by the respondent No. 3 seeking withdrawal of the amount deposited by the petitioner in earlier writ petition being W.P.(C) No. 6464 of 2012 is dismissed.

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32. The petitioner as well as the claimant are directed to appear before the Facilitation Council on 11^th March 2025 at 11: 00 a.m. Upon their appearance, the Facilitation Council is directed to proceed with the matter step by step in terms of Section 18 of the MSMED Act

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of 2006 as indicated by the Hon’ble Supreme Court in the case of Jharkhand Urja Vikas Nigam Limited (Supra) .

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33. This writ petition is accordingly disposed of in the aforesaid terms.

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34. Interim order, if any, stands vacated.

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(Anubha Rawat Choudhary, J.)

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Rakesh/-