Disposed

M/S Rajhans Pile Foundation v. Micro and Small Enterprises Facilitation Council

Rajasthan HC21 Nov 2024CW/3411/2023

Case brief

AI extract

What is this about?

Petitioner challenged MSEFC's decision closing its dispute after unsuccessful conciliation without referring it to arbitration under the MSMED Act. The High Court found this contrary to Sections 18(2) and 18(3) and directed the Council to proceed with arbitration and decide the claim within four months.

What did the court decide?

Directions issued to MSEFC to proceed with the matter per Section 18(2) & 18(3) and dispose of the claim within four months.

M/S Rajhans Pile Foundation Vs Micro and Small Enterprises… — Arbitration | Rajasthan HC (2024)

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[2024:RJ-JP:47829]

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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S.B. Civil Writ Petition No. 3411/2023

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M/s Rajhans Pile Foundation, through Proprietor and Authorised Signatory Sudhanshu Sharma S/o Shri Rajendra Prasad Sharma Aged About 28 Years, Resident of Behind Poonia Wines, Balaji Nagar, Ward No. 26, Jaipur Road, Sikar, Rajasthan 332001.

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----Petitioner

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Versus

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Micro And Small Enterprises Facilitation Council, Headquarter (First), MSEFC, HQ-1, Jaipur, through Commissioner, Industries, Government of Rajasthan Udyog Bhavan, Tilak Marg, Jaipur, Rajasthan-302005.

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Micro and Small Enterprises Facilitation Council, Headquarter (First), MSEFC, HQ-1, Jaipur, Through Joint Director, Industries, Government of Rajasthan Udyog Bhavan, Tilak Marg, Jaipur, Rajasthan-302005.

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Shapoorji Pallonji & Co. Ltd., Through Its Managing Director, Registered Office 70, Nagindas Master Road, Fort, Mumbai-400023.

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Director, Regional Office, Shapoorji Pallonji & Co. Ltd., 7Th Floor, Surya Chambers, No. 124, Hal Airport Road, Bangalore-560017.

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Director, Corporate Office, Shapoorji Pallonji & Co. Ltd., SP Centre, 41/44, Minoo Desai Marg, Colaba, Mumbai400005.

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Debasis Sarkar, Project Manager, Shapoorji Pallonji And Co. Ltd. DDG (PI), Project Seabird, PO Box No.12, Karwar-581301.

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----Respondents

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For Petitioner(s) : Mr. Asad Sheikh For Respondent(s) : None Present

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JUSTICE ANOOP KUMAR DHAND

Order

21/11/2024

[2024:RJ-JP:47829]

[CW-3411/2023]

(2 of 5)

By way of filing of this writ petition a challenge has been made against the decision dated 26.12.2022 passed by the Micro and Small Enterprises Facilitation Council (for short ‘MSEFC’).

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Learned counsel for the petitioner submits that the dispute between the parties was referred for conciliation vide meeting dated 06.06.2022 but the conciliation proceedings remained unsuccessful on 26.12.2022. Counsel submits that in the event of failure of conciliation proceedings, the MSEFC was supposed to refer the dispute for arbitration in terms of Section 18 of the Micro, Small Medium Enterprises Development Act, 2006 (for short ‘Act of 2006’) but without doing so the matter was closed. Counsel submits even the Apex Court in the case of Jharkhand Urja Vikas Nigam Limited Vs. The State of Rajasthan & Ors. while deciding Criminal Appeal No.2899 of 2021 vide order dated 15.12.2021 has dealt with the similar issue where after the failure of the conciliation proceedings between the parties, the matter was sent to the Arbitrator in terms of Section 18(2) & 18(3) Act of 2006. Counsel submits that under these circumstances, interference of this Court is warranted.

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Heard and considered the submissions made at Bar and perused the material available on the record. 4. Perusal of the record indicates that vide meeting dated 06.06.2022, the matter was referred for conciliation between the parties but the same remained unsuccessful on 26.12.2022. As per the mandate contained under Section 18(2) & 18(3) of the Act of 2006, the matter was required to be referred to the Arbitrator by the Council for adjudication and settlement of the dispute on merit between the parties but instead of referring the said dispute

[2024:RJ-JP:47829]

[CW-3411/2023]

(3 of 5)

to the concerned Arbitrator, the Council has closed the matter. The aforesaid action on the part of the Council is in violation of the Section 18(2) & 18(3) of the Act of 2006 and against the settled proposition of law as laid down by the Hon’ble Apex Court in the case of Jharkhand Urja Vikas Nigam Limited (supra) in para Nos. 8, 9 & 10 as the Apex Court has dealt with the issue involved in this writ petition and the same reads as under:

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“ 8. Only on the ground that even after receipt of summons the appellant has not appeared the Council has passed order/award on 06.08.2012. As per Section 18(3) of the MSMED Act, if conciliation is not successful, the said proceedings stand terminated and thereafter Council is empowered to take up the dispute for arbitration on its own or refer to any other institution. The said Section itself makes it clear that when the arbitration is initiated all the provisions of the Arbitration and Conciliation Act, 1996 will apply, as if arbitration was in pursuance of an arbitration agreement referred under sub-section (1) of Section 7 of the said Act.

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Section 18 of the MSMED Act reads as under:

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“18. Reference to Micro and Small Enterprises Facilitation Council.-

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(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under Section 17, make a reference to the Micro and Small Enterprises Facilitation Council.

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(2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.

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(3) Where the conciliation initiated under subsection (2) is not successful and stands terminated without any settlement between the

(4 of 5)

[2024:RJ-JP:47829]

[CW-3411/2023]

parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 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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(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.

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(5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.”

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From a reading of Section 18(2) and 18(3) of the MSMED Act it is clear that the Council is obliged to conduct conciliation for which the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 would apply, as if the conciliation was initiated under Part III of the said Act. Under Section 18(3), when conciliation fails and stands terminated, the dispute between the parties can be resolved by arbitration. The Council is empowered either to take up arbitration on its own or to refer the arbitration proceedings to any institution as specified in the said Section. It is open to the Council to arbitrate and pass an award, after following the procedure under the relevant provisions of the Arbitration and Conciliation Act, 1996, particularly Sections 20, 23, 24, 25.

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There is a fundamental difference between conciliation and arbitration. In conciliation the conciliator assists the parties to arrive at an amicable settlement, in an impartial and independent manner. In arbitration, the Arbitral Tribunal/ arbitrator adjudicates the disputes between the parties. The claim has to be proved before the arbitrator, if necessary, by adducing evidence, even though the rules of the Civil Procedure Code or the Indian Evidence Act may not apply. Unless otherwise agreed, oral hearings are to be held.”

[2024:RJ-JP:47829]

[CW-3411/2023]

(5 of 5)

Considering the above factual aspect of the matter, the instant writ petition is disposed of by issuing directions to the MSEFC to proceed with the matter, in terms of Section 18(2) & 18(3) of the Act of 2006.

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The Council (MSEFC) is directed to dispose of the claim, expeditiously as early as possible, preferably within a period of four months, after following the due process of law and after affording due opportunity of hearing to all the respective parties.

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(ANOOP KUMAR DHAND),J

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GARIMA /145

M/S Rajhans Pile Foundation v. Micro and Small Enterprises Facilitation Council

Case brief

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M/S Rajhans Pile Foundation v. Micro and Small Enterprises Facilitation Council

Case brief

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