Allowed¶68

Universal Infra and Agri Oils Pvt. Ltd. v. Micro and Small Enterprise Facilitation Council

Arbitration – Micro & Small Enterprise Facilitation Council (MSEFC)

Orissa HC14 Mar 2024WP(C)/12961/2017

Download

Case brief

AI extract

What is this about?

MSEFC Cuttack rescission of own arbitral award; functus officio after final award; Section 32(1), 32(3), 33, 34 Arbitration and Conciliation Act 1996; modification of award limited to arithmetical/clerical errors; Gyan Prakash Arya v. Titan Industries (2023) 1 SCC 153; Dakshin Haryana Bijli Vitran Nigam v. Navigant Technologies (2021) 7 SCC 657; NSIC; MSMED Act 2006 Section 2(n); W.P.(C) No.12961 of 2017; High Court of Orissa; K.R. Mohapatra J.; decision dated 14.03.2024.

What did the court decide?

Impugned order dated 20th March, 2017 (Annexure-7) set aside; writ petition allowed to that extent with no order as to costs; interim order dated 25th October, 2017 in Misc. Case No.11727 of 2017 vacated. ¶68

Universal Infra and Agri Oils Pvt. Ltd. Vs Micro and Small… — Arbitration | Orissa HC (2024)

What the court decided

AI extract

Outcome

¶68

Issue for consideration

Whether the Council was justified in rescinding its award dated 7th February, 2017 (Annexure-4) in MSEFC Case No. 14 of 2012 by the impugned order dated 20th March, 2017 (Annexure-7). +2 more

¶16

Court's answer

No order of stay was operating in respect of MSEFC Case No. 14 of 2012 when the award was passed (stay operated only in respect of MSEFC Case Nos. 2, 3, 4, 21, 22 and 23 of 2012), hence the ground on which the impugned order was passed is unsustainable.

¶67

Ratio / Principle

The arbitral proceedings stood terminated by the final arbitral award made on 7th February, 2017 (Annexure-4), and subject to Section 33 and sub-section (4) of Section 34, the mandate of the arbitral tribunal terminated with the termination of the arbitration proceedings.

¶60

Key takeaways

The Council could entertain an application under Section 33 only to rectify any computation/arithmetical/clerical error in the award, but had no jurisdiction to rescind the award as it did.ratio¶66
On the date the award was passed (7th February, 2017), the Council became functus officio to entertain any application touching the merit of the award; by rescinding the award, the Council assumed a jurisdiction not vested in it under law.ratio¶66
The impugned order under Annexure-7, being without jurisdiction, is not sustainable and is set aside; the writ petition is allowed to that extent.

Detailed headnote1 paragraphs

Arbitration - Micro & Small Enterprise Facilitation Council (MSEFC) - rescission of its own award. After the Council passed the final arbitral award on 07.02.2017 in MSEFC Case No. 14 of 2012, the arbitral proceedings stood terminated under Section 32(1) and the mandate of the arbitral tribunal under Section 32(3) of the Arbitration and Conciliation Act, 1996; the Council thereupon became functus officio, its only remaining power being correction of computation/arithmetical/clerical errors under Section 33. Following Gyan Prakash Arya v. Titan Industries Ltd., (2023) 1 SCC 153, the Court held that the Council could not travel beyond such rectification, and its rescission of the award (Annexure-7, dated 20.03.2017) was without jurisdiction. The alternate ground - pendency of a stay - failed because no stay operated in respect of MSEFC Case No. 14 of 2012 (stays related to Case Nos. 2, 3, 4, 21, 22 and 23 of 2012). Impugned order set aside; writ petition allowed; no order as to costs; interim order dated 25.10.2017 in Misc. Case No. 11727 of 2017 vacated.

¶1

Signature Not Verified Digitally Signed Signed by: ROJALIN NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 19-Mar-2024 18:37:20

¶2

IN THE HIGH COURT OF ORISSA AT CUTTACK

¶3

W.P.(C). NO.12961 OF 2017

¶4

(An application under Articles 226 and 227 of the Constitution of India) *********

¶5

Universal Infra and Agri Oils Pvt. Ltd. … Petitioner -versus- Micro and Small Enterprise … Opp. Parties Facilitation Council, Cuttack and others

¶6

Advocate for the Parties :

¶7

For Petitioner : Mr. Saswat Kumar Acharya, Advocate
along with Mr. K.R. Thakker, Advocate
For Opposite Parties : Mr. Jagannath Pattanaik, Senior Advocate,
being assisted by Ms. Soma Pattanaik,
Advocate
& Mr. Smita Ranjan Pattanaik, Advocate
CORAM:
JUSTICE K.R. MOHAPATRA
--------------------------------------------------------------------------
Heard and disposed of on 14.03.2024
--------------------------------------------------------------------------
J U D G M E N T
K.R. Mohapatra, J.-

¶8

1. This matter is taken up through hybrid mode.

¶9

2. Order dated 20^th March, 2017 (Annexure-7) passed by the Micro & Small Enterprise Facilitation Council, Cuttack (for brevity ‘the Council’) in MSEFC Case No. 14 of 2012 is assailed in this writ petition whereby the Council rescinded the award passed in its 51^st sitting held on 7^th February, 2017 (Annexure-4).

¶10

3. Mr. Acharya, learned counsel along with Mr. Thakker, learned counsel appearing for the Petitioner submits that a short point is to be considered in this writ petition is whether the Council

¶11

Page 1 of 8

¶12

W.P.(C). No.12961 of 2017

¶13

Signature Not Verified

¶14

// 2 //

¶15

Digitally Signed Signed by: ROJALIN NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 19-Mar-2024 18:37:20

¶16

is justified in rescinding the award passed by it on 7^th February, 2017 ( Annexure-4). It is submitted that award in the MSEFC Case No.14 of 2012 was passed on 7^th February, 2017 in the 51^st sitting of the Council. Immediately thereafter, the National Small Scale Industries Corporation Limited-Opposite Party No.2 wrote to the Chief Secretary, Government of Odisha, vide his letter dated 9^th February, 2017 underAnnexure-8 series, seeking his intervention and requesting him to advise the Chairman of the Council to take cognizance of the facts mentioned in the said letter and to stay further proceedings pursuant to the award under Annexure-4 till decision of this Court is passed in pending writ petitions.

¶17

4. It is further submitted that Opposite Party No.2 was also a party to the reference before the Council and participated in the arbitration of the dispute. After the award under Annexure-4 was passed, series of communications were made by the Opposite Party No.2 either with the Chairman of the Council namely, Director of Industries, Odisha or to the State Government to rescind the award. Taking note of those communications, the Council in its 53^rd sitting held on 20^th March, 2017 rescinded the award holding as under:

¶18

“Taking the provisions under MSMED Act & Rules, 2006 and Section-32 & 33 of Arbitration & Conciliation Act1996 into account the facts supra, it is concluded unanimously that the award dated 07.02.2017 is rescinded till the outcome of the Writ Petitions subjudice in the Hon'ble High Court of Orissa wherein stay operations is in force and also the appeal petitions pending. Moreover, the Council further resolved that the role of NSIC as facilitator and supplier for SSI units as defined in Section 2(n) of MSMED Act-2006 needs further adjudication thereafter by the Council.

¶19

Either of the parties may take shelter in the appropriate Court of law. Copies of the Award may be extended accordingly to the parties.”

¶20

Page 2 of 8

¶21

W.P.(C). No.12961 of 2017

¶22

// 3 //

¶23

Signature Not Verified Digitally Signed Signed by: ROJALIN NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 19-Mar-2024 18:37:20

¶24

5. Learned counsel appearing for the Petitioner also submits that once the award is passed, the Council becomes functus officio to entertain any application, lest an application to rescind the award. The only scope is with the Council to rectify the award under Section 33 of the Arbitration and Conciliation Act, 1996 (for brevity ‘the Arbitration Act’), which reads as under:

¶25

“33. Correction and interpretation of award; additional award .—(1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties—

¶26

(a) a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award;

¶27

(b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award.

¶28

(2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award.

¶29

(3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award.

¶30

(4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award.

¶31

(5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request.

¶32

(6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-section (5).

¶33

(7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.”

¶34

Page 3 of 8

¶35

W.P.(C). No.12961 of 2017

¶36

// 4 //

¶37

Signature Not Verified

¶38

Digitally Signed Signed by: ROJALIN NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 19-Mar-2024 18:37:20

¶39

6. In view of the clear and unambiguous words of Section 33 of the Arbitration Act, there remains no iota of doubt that the Council, which undertook the arbitration is not conferred with the power to rescind the award passed by it. By rescinding the award, the Council acted like a Court to entertain an application under Section 34 of the Arbitration Act, which is per se illegal and without jurisdiction. In support of his submission, Mr. Acharya, learned counsel for the Petitioner relied upon the case of Gyan Prakash Arya Vrs. Titan Industries Limited , reported in (2023) 1 SCC 153 , wherein it is held as under:

¶40

“13. The original award was passed considering the claim made by the claimant as per its original claim and as per the statement of the claim made and therefore subsequently allowing the application under Section 33 of the 1996 Act to modify the original award in exercise of powers under Section 33 of the 1996 Act is not sustainable. Only in a case of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected. In the present case, it cannot be said that there was any arithmetical and/or clerical error in the original award passed by the learned arbitrator. What was claimed by the original claimant in the statement of claim was awarded. Therefore, the order passed by the learned arbitrator on an application filed under Section 33 of the 1996 Act and thereafter modifying the original award cannot be sustained. The order passed by the learned arbitrator in the application under Section 33 of the 1996 Act is beyond the scope and ambit of Section 33 of the 1996 Act. Therefore, both, the City Civil Court as well as the High Court have committed a grave error in dismissing the arbitration suit/appeal under Sections 34 and 37 of the 1996 Act respectively. The modified award passed by the learned arbitrator allowing the application under Section 33 of the 1996 Act cannot be sustained and the same deserves to be quashed and set aside.”

¶41

( emphasis supplied )

¶42

7. Thus, Section 33 of the Arbitration Act only permits the arithmetical and/or clerical error in the award to be rectified by the Arbitrator (in the instant case the Council).

¶43

Page 4 of 8

¶44

W.P.(C). No.12961 of 2017

¶45

// 5 //

¶46

Signature Not Verified Digitally Signed Signed by: ROJALIN NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 19-Mar-2024 18:37:20

¶47

8. He further relied upon the case of Dakshin Haryana Bijli Vitran Nigam Limited vrs. Navigant Technologies Private Limited, reported in (2021) 7 SCC 657 , wherein at para 32 and 35, Hon’ble Supreme Court observed as under:

¶48

“32. In an Arbitral Tribunal comprising of a panel of three members, if one of the members gives a dissenting opinion, it must be delivered contemporaneously on the same date as the final award, and not on a subsequent date, as the Tribunal becomes functus officio upon the passing of the final award. The period for rendering the award and dissenting opinion must be within the period prescribed under Section 29-A of the Act .

¶49

xxx xxx xxx

¶50

35. The date on which the signed award is provided to the parties is a crucial date in arbitration proceedings under the Arbitration and Conciliation Act, 1996. It is from this date that:

¶51

35.1. The period of 30 days for filing an application under Section 33 for correction and interpretation of the award, or additional award may be filed.

¶52

35.2. The arbitral proceedings would terminate as provided by Section 32(1) of the Act. 35.3. The period of limitation for filing objections to the award under Section 34 commences.” ( emphasis supplied )

¶53

9. Para 35 of the said case law clarifies that date, on which signed arbitral award is provided to the parties, is crucial as the arbitration proceeding terminates on that date. Thus, after passing the award on 7^th February, 2017, which is the crucial date, the Council did not have any jurisdiction to entertain any request, reference or application to modify its own award vide Annexure-7. The order passed under Annexure-7 being without jurisdiction is not sustainable and is liable to be set aside.

¶54

10. Mr. Pattanaik, learned Senior Advocate appearing for Opposite Party No.2 submits that the Council has committed no error in rescinding the prayer under Section 33 of the Arbitration

¶55

Page 5 of 8

¶56

W.P.(C). No.12961 of 2017

¶57

// 6 //

¶58

Signature Not Verified Digitally Signed Signed by: ROJALIN NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 19-Mar-2024 18:37:20

¶59

Act in rectifying the award. When interim order of stay was continuing in respect of different MSEFC cases passed by this Court, the Council could not have proceeded to pass the award under Annexure-4. Thus, the Council has jurisdiction to rectify its own mistake by rescinding the award. If this Court holds that the Council has exceeded its jurisdiction in passing the order under Annexure-7, then the matter should be remitted back to the Council to entertain the request of the Opposite Party No.2 to rectify the award under Annexure-4 in terms of Section 33 of the Arbitration Act. He further submits that before passing the award under Annexure-4, no conciliation was held. Thus, initiation and continuance of arbitration proceeding are without jurisdiction. As such, the Council has committed no error in passing the order under Annexure-7. Hence, he prays for dismissal of the writ petition.

¶60

11. Taking note of the rival contentions of the parties and on perusal of the record, this Court finds that the Council in its 51^st sitting, held on 7^th February, 2017 passed the award in MSEFC Case No.14 of 2012. Section 32(1) of the Arbitration Act stipulates that the arbitral proceedings stand terminated by the final arbitral award or by an order of the arbitral tribunal under Sub-section (2). In the instant case, the arbitral proceedings stood terminated by the final arbitral award made on 7^th February, 2017 (Annexure-4). Further, Sub-section (3) of Section 32 of the arbitration Act makes it clear that subject to Section 33 and Sub-section (4) of Section 34 of the Arbitration Act, the mandate of the arbitral tribunal terminates with the termination of the arbitration proceedings. Admittedly, no petition under Section 34 of the Arbitration Act has yet been filed against the award under Annexure-4. Whether the

¶61

Page 6 of 8

¶62

W.P.(C). No.12961 of 2017

¶63

// 7 //

¶64

Signature Not Verified

¶65

Digitally Signed Signed by: ROJALIN NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 19-Mar-2024 18:37:20

¶66

impugned order under Annexure-7 is an outcome of an application under Section 33 of the Arbitration Act is the next question to be answered. No doubt, the Council had no difficulty to entertain an application under Section 33 of the Arbitration Act to rectify the award to the extent of any computation / arithmetical /clerical error in the award under Annexure-4. But, certainly, he did not have any jurisdiction to rescind the award as has been done in the instant case. Law is well-settled in the Gyan Prakash Arya (supra) that only in a case of arithmetical or clerical error, award can be modified and such errors can be corrected. Entertaining an application under Section 33 of the Arbitration Act, the Council cannot travel beyond rectification of any computation, arithmetical or clerical error. No doubt, the date on which the award is passed, i.e., on 7^th February, 2017 (Annexure-4), the Council becomes functus officio to entertain any application touching the merit of the award. By rescinding the award under Annexure-4, the Council assumed a jurisdiction not vested in it under Law.

¶67

12. On perusal of the arbitral award under Annexure-4 passed by the Council, it appears that the Opposite Party No.2 in its written statement, categorically stated that order of stay granted by this Court was operating in respect of MSEFC Case Nos. 2, 3, 4, 21, 22 and 23 of 2012. But, no order of stay in respect of MSEFC Case No.14 of 2012 in which, the award passed under Annexure-4, was operating. Thus, the ground on which the impugned order under Annexure-7 was passed is also unsustainable.

¶68

13. In view of the discussions made above, the impugned order under Annexure-7, being without jurisdiction, is not sustainable and is accordingly set aside. The writ petition is allowed to the aforesaid

¶69

Page 7 of 8

¶70

W.P.(C). No.12961 of 2017

¶71

Signature Not Verified

¶72

// 8 //

¶73

Digitally Signed Signed by: ROJALIN NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 19-Mar-2024 18:37:20

¶74

extent. But, in the facts and circumstances of the case, there shall be no order as to costs.

¶75

14. Interim order dated 25^th October, 2017 passed in Misc. Case No.11727 of 2017 stands vacated.

¶76

Urgent certified copy of this judgment be granted on proper application.

¶77

(K.R. Mohapatra) Judge

¶78

High Court of Orissa, Cuttack Dated 14^th March, 2024/Rojalin

¶79

Page 8 of 8