1

NAFR

HIGH COURT OF CHHATTISGARH AT BILASPUR

WP227 No. 67 of 2025

1 - M/s Jai Balaji Industries Ltd. Borai Industrial Growth Centre, P.O.

Rasmada, Dist. Durg Chhattisgarh 491009.

... Petitioner(s)

Versus

1 - Garuda Ispat Private Limited Through Its Director, Having Its Registered

Office At A 4/204, Kool Homes, Daldal Seoni, Mowa, Raipur - 492009.

... Respondent(s)

(Cause-title taken from Case Information System)

For Petitioner : Shri Sunil Otwani, Sr. Advocate along with

Shri Ankit Pandey, Advocate.

For Respondent : Shri Sidharth Shukla, Advocate.

Hon’ble Shri Justice Ravindra Kumar Agrawal, J

Order Reserved on 19.03.2026

O rder Delivered on 22.06.2026

1.The petitioner has filed the present writ petition under Article 227 of the

Constitution of India, claiming the following reliefs:-

“10.1 It is respectfully prayed to the Hon'ble Court that the record

of the execution proceedings being Case No:- TD/82/2024

pending before the Learned IInd Additional District and Sessions

Judge, Durg, Chhattisgarh be called for the perusal of this

Hon'ble Court.

10.2 It is respectfully prayed to the Hon'ble Court that the suitable

writ/writ of certiorari/directions may kindly be issued for setting

aside the order dated 07/01/2025 passed by the Learned IInd

Additional District and Sessions Judge, Durg, Chhattisgarh in

2

Case No:- TD/82/2024 and it be further declared that the order

dated 27/12/2022 cannot be termed as an award within the

meaning of Arbitration and Conciliation Act 1996.

10.3 It is respectfully prayed to the Hon'ble Court that the suitable

writ/writ of certiorari/directions/declaration may kindly be issued

declaring the order dated 27/12/2022 null and void, void ab initio,

and unenforceable and the pending execution proceedings being

Case No:- TD/82/2024 be dismissed and quashed.

10.4 It is respectfully prayed to the Hon'ble Court that it be further

declared that by failing to adhere to the mandatory statutory and

procedural requirements, the MSME Council acted in

contravention of the MSMED Act, the Arbitration and Conciliation

Act, and established legal principles, rendering the order dated

27/12/2023 released on 24/05/2024 i.e. after lapse of 147 days as

invalid, nullity, void-ab-initio, non-est, unsustainable & non-

existent in the eyes of law, Corum-non-judice, without jurisdiction,

illegal, non- executable and contrary to the provisions of law and

thus the same cannot be enforced as a legal decree.

10.5 Any other further order(s) as deemed fit and necessary by

this Hon'ble Court in the interest of justice.”

2.It is the case of the petitioner that the petitioner is a company duly

incorporated under the Companies Act, 1956, and continues to exist

under the Companies Act, 2013. In the ordinary course of its business,

it had placed several purchase orders upon the respondent during the

year 2016 for the supply of steel materials. The purchase orders

bearing Nos. EX-54, EX-57, EX-64, EX-67 and EX-76 were issued for

different quantities of material. Subsequently, a dispute arose between

the parties with regard to the quality of the material supplied and the

payments claimed by the respondent. The material supplied against

the Purchase Order No. EX-57 was defective and not in conformity with

the agreed specifications and, therefore, the same was rejected.

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Despite such rejection, the respondent included the value of the

rejected material while calculating its outstanding dues and raised

claims against the petitioner. On 02.03.2020, the respondent invoked

the provisions of Section 18 of the Micro, Small and Medium

Enterprises Development Act, 2006 (in short “MSMED Act”) and filed a

claim before the Micro and Small Enterprises Facilitation Council (in

short “Council”) seeking recovery of an amount of Rs. 9,63,968/-. The

said claim was registered as Application No. CG14B0010764/S/00002.

The amount claimed by the respondent included the price of the

material, which had already been rejected by the petitioner on account

of alleged defects. Pursuant to registration of the claim, notices under

Section 18(1) of the Act of 2006 were issued by the Council during

March and June, 2020. When the matter was taken up by the Council

on 14.09.2021, it raised a preliminary objection challenging the

jurisdiction of the Council on the ground that the contractual

arrangement between the parties provided that the courts at Kolkata

alone would have exclusive jurisdiction to adjudicate disputes arising

out of the transactions. Despite such objection, the Council proceeded

with the matter and initiated conciliation proceedings under Section

18(2) of the Act on 12.10.2021.

3.It is also the pleading that during the conciliation proceedings, the

matter was adjourned on various dates and on 26.10.2021, the case

was fixed for passing of an ex parte order on 09.11.2021. However, no

order came to be passed on the said date, and the matter remained

pending. Thereafter, after a substantial lapse of time, a fresh notice

dated 28.10.2022 was issued by the Facilitation Council, and the

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matter was again listed for hearing. A copy of the respondent's

rejoinder was supplied to it for the first time on 11.11.2022. Thereafter,

the petitioner objected to the limitation, contending that the claim

preferred by the respondent was barred by time. It is pleaded that on

27.12.2022, the respondent filed its reply to the petitioner's preliminary

objections, and the Council specifically recorded that written

submissions on the issue of limitation would be filed and thereafter the

matter would be reserved for orders. Pursuant thereto, the petitioner

filed its written arguments on 02.01.2023. According to the petitioner,

once the Council had resolved to consider and decide the issue of

limitation, no final adjudication could have been made without first

deciding such objection and granting the petitioner an effective

opportunity to address the matter.

4.Although the impugned order bears the date 27.12.2022, it was

admittedly released only on 24.05.2023, after a delay of 147 days,

without any explanation being furnished by the Council. No notice

regarding the pronouncement of the order was ever issued, and no

opportunity of hearing was granted before its release. It is further

pleaded that after obtaining the complete record through an application

under the Right to Information Act, the petitioner discovered that the

respondent had knowledge of the passing and release of the order and

had received a copy thereof immediately after its issuance on

25.05.2023. According to the petitioner, the records do not disclose

how the respondent was informed about the release of the order or

under what circumstances it received the order so promptly. Based on

these circumstances, the petitioner alleges serious procedural

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irregularities, lack of transparency in the conduct of the proceedings

and even collusion between the respondent and the Facilitation

Council. The order suffers from violation of the principles of natural

justice, non-compliance with the mandatory procedure prescribed

under Section 18 of the MSMED Act, 2006 and the provisions of the

Arbitration and Conciliation Act, 1996, and is therefore void and

unenforceable.

5.It is further pleaded that despite the aforesaid defects and irregularities,

the respondent initiated execution proceedings on 28.03.2024 under

Section 36 of the Arbitration and Conciliation Act, 1996, read with

Order 21 Rule 11 of the Code of Civil Procedure before the Court of

learned 2

nd

Additional District Judge, Durg, which were registered as

Case No. TD/82/2024. Upon receipt of notice in the execution

proceedings, the petitioner filed an application on 02.07.2024 seeking

dismissal of the execution case on the ground that the order dated

27.12.2022 was not a valid arbitral award and, therefore, was

incapable of execution. In the said application, the petitioner

questioned the legality and enforceability of the order on several

grounds, namely lack of jurisdiction of the Facilitation Council, non-

compliance with the statutory procedure governing conciliation and

arbitration, violation of principles of natural justice, failure to decide the

objection regarding limitation, unexplained delay of 147 days in release

of the order, alleged backdating of the award and procedural

improprieties rendering the award contrary to public policy. The learned

2

nd

Additional District Judge, Durg, rejected the petitioner's objections

and passed the impugned order dated 07.01.2025. Aggrieved by the

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said order and the continuation of the execution proceedings, the

petitioner has approached this Court by filing this writ petition.

6.The respondent filed its return and pleaded that the present writ

petition has been filed challenging the order dated 07.01.2025 passed

by the learned 2

nd

Additional District Judge, Durg in T.D. No. 82/2024,

whereby the objections preferred by the petitioner against the

execution proceedings were rejected. The dispute originated from

various purchase orders issued by the petitioner during the year 2016

for the supply of iron and steel materials. Pursuant to the supplies

made, certain amounts remained unpaid and, therefore, the

respondent invoked the provisions of Section 18 of the MSMED Act,

2006 by filing Application No. CG/14/S/CGH/00283 before the Council,

seeking recovery of the outstanding amount of Rs. 9,63,968/-. The

respondent pleaded that the Facilitation Council thereafter undertook

proceedings in accordance with Section 18 of the MSMED Act, 2006

and, upon completion of the statutory process, passed an award dated

27.12.2022, which was issued on 24.05.2023, directing the petitioner to

pay a total sum of Rs. 28,05,929/-, comprising the principal outstanding

amount of Rs. 9,63,968/- and interest amounting to Rs. 18,41,961/-,

along with further interest in the event of non-payment within the

stipulated period.

7.It is also the reply of the respondent that the petitioner had already

challenged the aforesaid award by filing proceedings under Section 34

of the Arbitration and Conciliation Act, 1996, before the Commercial

Court, Durg, which were registered as MJC (Civil) No. 384 of 2023.

However, according to the respondent, the petitioner failed to comply

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with the mandatory requirement contained in Section 19 of the MSMED

Act, 2006, requiring the deposit of 75% of the awarded amount as a

precondition for entertaining a challenge to the award. Consequently,

no stay on the operation or execution of the award was granted by the

Commercial Court. Despite the pendency of the proceedings under

Section 34 of the Act of 1996, the award continues to remain operative

and enforceable in law. The respondent initiated execution proceedings

under Section 36 of the Arbitration and Conciliation Act, 1996 by filing

T.D. No. 82/2024 before the learned 2

nd

Additional District Judge, Durg,

for the enforcement of the award. The petitioner deliberately

suppressed from this Court the material fact regarding the pendency of

MJC (Civil) No. 384 of 2023, challenging the award and the fact that no

stay had been granted therein due to non-compliance with the

mandatory pre-deposit requirement under Section 19 of the MSMED

Act, 2006. On account of such suppression, this Court, while

entertaining the present writ petition, passed an interim order dated

21.01.2025 staying the effect and operation of the award dated

27.12.2022, although the petitioner had sought only a stay of the order

dated 07.01.2025 passed in the execution proceedings. It is submitted

that the interim order was obtained without full disclosure of the

relevant facts and, therefore, is liable to be vacated or modified.

8.The respondent’s reply is also that the objections raised by the

petitioner before the Executing Court were wholly misconceived and

legally untenable. The application seeking dismissal of the execution

proceedings did not disclose any statutory provision under which such

relief could be claimed and, in substance, sought to challenge the

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validity of the arbitral award itself. The questions relating to the legality,

correctness, procedural validity, alleged irregularities, limitation, natural

justice, jurisdiction of the Facilitation Council, or alleged nullity of the

award can be examined only in proceedings under Section 34 of the

Arbitration and Conciliation Act, 1996 and not in execution

proceedings. The scope of inquiry in execution is extremely limited and

extends only to cases where the decree or award is shown to be a

complete nullity for want of inherent jurisdiction, and therefore, the writ

petition is liable to be dismissed.

9.Learned counsel appearing for the petitioner would submit that the

learned Executing Court has committed a manifest error of law in

rejecting the petitioner's objections without examining the foundational

issue as to whether the order dated 27.12.2022 passed by the Council

constitutes a valid and enforceable arbitral award in the eyes of law. It

is submitted that the Council failed to comply with the mandatory

procedure prescribed under Sections 18(2) and 18(3) of the MSMED

Act, 2006 and the corresponding provisions of the Arbitration and

Conciliation Act, 1996. The conciliation proceedings are a mandatory

precondition before commencement of arbitration proceedings, and the

Council was required to conduct conciliation in accordance with

Sections 65 to 81 of the Arbitration and Conciliation Act. It is argued

that neither any valid conciliation proceedings were conducted nor was

any formal termination of conciliation recorded before proceeding

further. Reliance has been placed on the decision of the Hon'ble

Supreme Court in Jharkhand Urja Vikas Nigam Ltd. v. State of

Rajasthan, (2021) 19 SCC 206, wherein it was held that conciliation

9

and arbitration are distinct stages and cannot be clubbed together and

that an order passed without following the mandatory statutory

procedure would be a nullity.

10.Learned counsel for the petitioner would further submit that the learned

Executing Court failed to appreciate that the proceedings before the

MSME Council were fundamentally vitiated for non-compliance with the

mandatory requirements contained in Sections 18(2) and 18(3) of the

MSMED Act, 2006. It is submitted that under the statutory scheme,

conciliation and arbitration are two distinct and independent stages.

Arbitration can commence only after conciliation proceedings have

failed and stand terminated in accordance with the law. In the present

case, a perusal of the entire order-sheet proceedings of the Council

does not reveal any order recording failure of conciliation nor any

declaration terminating the conciliation proceedings. In the absence of

such termination, the Council lacked jurisdiction to proceed further

under Section 18(3) of the MSMED Act.

11.He would next submit that even assuming that conciliation had failed,

the Council was thereafter required to initiate arbitration proceedings

strictly in accordance with the provisions of the Arbitration and

Conciliation Act, 1996. It is submitted that no notice regarding

commencement of arbitration proceedings was issued, no separate

arbitral proceedings were initiated, no statement of claim or defence

was invited in terms of Section 23 of the Act of 1996, no issues were

framed, no evidence was recorded and no opportunity was afforded to

the parties to lead evidence or address arguments as contemplated

under Sections 20, 23, 24 and 25 of the Arbitration and Conciliation

10

Act. Learned counsel submits that the entire process adopted by the

Council reflects an impermissible blending of conciliation and

arbitration proceedings, contrary to the statutory scheme. In support of

the aforesaid submission, reliance has been placed upon the decisions

rendered in Feedback Infra Private Limited v. Micro and Small

Enterprises Facilitation Council, Order dated 29.09.2023 by Madras

High Court, in W.P. No. 25062 of 2023, Electrosteel Steel Limited v.

Ispat Carrier Private Limited 2025 (7) SCC 773,  and Unicon

Engineers v. Jindal Steel & Power Ltd., decided on 26.07.2022 by

Delhi High Court in OMP (ENF.)(COMM.) 140/2021, to contend that

failure to follow the mandatory arbitral procedure renders the resultant

award void and unenforceable.

12.Learned counsel for the petitioner would also argue that the impugned

order dated 27.12.2022 is vitiated by serious procedural irregularities

and violation of the principles of natural justice. It is submitted that

although the matter was fixed on 27.12.2022 for consideration of the

preliminary objections raised by the petitioner, particularly with regard

to limitation and jurisdiction, the Council itself recorded that written

arguments on the issue of limitation would be submitted and thereafter

the matter would be reserved for orders. The petitioner accordingly

filed its written submissions on 02.01.2023. However, without deciding

the issue of limitation separately and without granting any effective

opportunity of hearing in arbitration proceedings, the impugned order

came to be passed. Learned counsel further submits that the order is

purportedly dated 27.12.2022 but was released only on 24.05.2023

after an unexplained delay of 147 days. No notice of the

11

pronouncement of the award was issued to the petitioner, and no

explanation for such extraordinary delay finds place in the record.

Placing reliance upon Anil Rai v. State of Bihar, (2001) 7 SCC 318, it

is argued that such unexplained delay undermines the fairness of the

adjudicatory process and creates serious doubt regarding the

authenticity and legality of the decision-making process.

13.Learned counsel appearing for the petitioner would lastly submit that

the learned Executing Court failed to appreciate that an order passed

without jurisdiction and in complete disregard of mandatory statutory

provisions is a nullity and can be questioned even at the stage of

execution. It is argued that the Council acted without jurisdiction by

bypassing the mandatory statutory framework governing conciliation

and arbitration, and, therefore, the order dated 27.12.2022 is non est in

the eyes of the law. It is also submitted that a decree or award which is

a nullity cannot be executed, and the executing court was duty-bound

to examine the issue of inherent lack of jurisdiction. Reliance has been

placed upon Kiran Singh v. Chaman Paswan, AIR 1954 SC 340,

Jagmittar Sain Bhagat v. Director, Health Services, (2013) 10 SCC

136, Chief Engineer, Hydel Project v. Ravinder Nath, (2008) 2 SCC

350 and Gurnam Singh v. Gurbachan Kaur, 2017 (13) SCC 414, to

submit that a jurisdictional defect strikes at the very root of the matter

and may be raised at any stage, including execution proceedings. On

these grounds, learned counsel submits that the impugned order dated

07.01.2025 passed by the learned Executing Court is unsustainable in

law and deserves to be set aside.

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14.Per contra, learned counsel appearing for the respondent opposes the

submissions of the learned counsel of the petitioner and would submit

that the entire challenge raised by the petitioner is misconceived and

amounts to a collateral attack upon an arbitral award in execution

proceedings, which is impermissible in law. It is submitted that the

award dated 27.12.2022 passed by the Council has already been

challenged by the petitioner under Section 34 of the Arbitration and

Conciliation Act, 1996 in MJC No. 384/2023 before the competent

Commercial Court. However, the petitioner has admittedly failed to

comply with the mandatory requirement of pre-deposit under Section

19 of the MSMED Act, 2006 and, therefore, has not obtained any order

staying the operation or execution of the award. Learned counsel

submits that once the award has become enforceable under Section

36 of the Arbitration and Conciliation Act, the executing court is bound

to execute the same and cannot sit in appeal over the validity or

correctness of the award. Reliance is placed upon Electrosteel Steel

Ltd. v. Ispat Carrier Pvt. Ltd. reported in (2024) 4 SCC 696, wherein

the Hon'ble Supreme Court reiterated that the arbitral regime

contemplates a limited challenge under Section 34 and does not permit

parties to bypass the statutory mechanism by raising objections to the

award in collateral proceedings.

15.Learned counsel would further submit that the objections sought to be

raised by the petitioner relating to non-compliance with Section 18 of

the MSMED Act, alleged procedural irregularities, violation of natural

justice, non-termination of conciliation proceedings and alleged lack of

jurisdiction of the Council are all matters touching upon the legality and

13

validity of the award itself and are issues which fall squarely within the

domain of proceedings under Section 34 of the Arbitration and

Conciliation Act. Referring to the case of Electrosteel Steel Ltd.

(supra), learned counsel submits that the Hon'ble Supreme Court has

emphasized that an executing court cannot go behind an award and

undertake an examination of its correctness on facts or law. It is

submitted that the distinction between an erroneous award and a void

award must be strictly maintained and that objections concerning

procedural compliance during arbitral proceedings are matters to be

adjudicated by the court exercising jurisdiction under Section 34 and

not by the executing court.

16.He would also submit that the petitioner has failed to demonstrate any

patent lack of inherent jurisdiction in the Facilitation Council so as to

render the award a nullity. The respondent is a registered MSME unit,

and the reference under Section 18 of the MSMED Act was

maintainable before the Facilitation Council. The Council entertained

the claim, issued notices, afforded opportunities to the parties and

ultimately passed its order. Whether the conciliation proceedings were

properly concluded, whether a separate order terminating conciliation

was required, or whether the procedure adopted by the Council strictly

conformed to the provisions of the Arbitration and Conciliation Act are

all questions which pertain to the validity of the award and not to the

inherent jurisdiction of the forum. Even assuming such objections are

available, they cannot be examined in execution proceedings.

17.It is lastly submitted that the learned Executing Court rightly rejected

the petitioner's objections, as the same were nothing but an indirect

14

attempt to reopen and challenge the award on merits. Permitting such

objections would defeat the legislative intent underlying the MSMED

Act and the Arbitration and Conciliation Act, which provide a complete

code for challenge and enforcement of arbitral awards. The petitioner,

having already invoked the remedy under Section 34 and having failed

to comply with the mandatory pre-deposit requirement under Section

19 of the MSMED Act, cannot be permitted to circumvent the statutory

framework by questioning the award in execution proceedings. The

impugned order dated 07.01.2025 passed by the learned 2

nd

Additional

District Judge, Durg, suffers from no jurisdictional error warranting

interference under Article 227 of the Constitution of India, and the writ

petition deserves to be dismissed.

18.I have heard rival submissions of the learned counsel for the respective

parties and gone through their pleadings and documents annexed with

the petition.

19.A perusal of the record shows that the petitioner is not directly

challenging the award in the present proceedings but is seeking to

assail the order dated 07.01.2025 passed by the Executing Court,

which rejected its objections. It is not in dispute that the petitioner has

already availed the statutory remedy under Section 34 of the

Arbitration and Conciliation Act, 1996, by questioning the award before

the competent Commercial Court.

20.Before examining the challenge raised by the petitioner, it would be

apposite to notice the statutory scheme contained in Section 18 of the

MSMED Act, 2006. Section 18 enables a supplier to make a reference

15

to the Facilitation Council in respect of any amount due under Section

17 of the Act, which reads as follows:-

“18. Reference to Micro and Small Enterprises Facilitation

Council.—(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.

(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.

(3) Where the conciliation initiated under sub-section (2) is not

successful and stands terminated without any settlement

between the parties, the Council shall either itself take up the

dispute for arbitration or refer ittoany 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 sub-

section(1) of section 7 of that Act.

(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.

(5) Every reference made under this section shall be decided

within a period of ninety days from the date of making such a

reference.”

21.Under Section 18(2) of the MSMED Act, 2006, the Council is required

to conduct conciliation itself or seek the assistance of any institution

providing alternate dispute resolution services. Section 18(3) provides

that where conciliation initiated under sub-section (2) is unsuccessful

and stands terminated without settlement, the Council shall either itself

take up the dispute for arbitration or refer it to any institution providing

arbitration services. Thereafter, the provisions of the Arbitration and

Conciliation Act, 1996, become applicable to such arbitration

16

proceedings. Thus, the legislative intent is to provide a statutory

mechanism for adjudication of disputes involving MSMEs through a

combination of conciliation and arbitration.

22.The records placed before this Court reveal that though proceedings

were initiated before the Facilitation Council under Section 18 of the

MSMED Act, 2006, the order sheets do not disclose any order

recording failure or termination of conciliation proceedings as

contemplated under Section 18(3) of the Act read with Section 76 of

the Arbitration and Conciliation Act, 1996. More importantly, even after

the stage of conciliation, the records do not indicate the

commencement of independent arbitration proceedings in accordance

with the law. It is necessary here to notice the contents of the order

sheets of the Facilitation Council from 14.09.2021 to 18.05.2023, which

are as under:-

“çdj.k esa fnukad 14@09@2021 dks mHk; i{k miLfFkr gq,A vukosnd

}kjk crk;k x;k fd vkosnd dk vkosnu le; ckf/kr gS blfy, fujDr

fd;k tkos rFkk vkosnd dks tkjh fd;s x;s dz; vkns’k esa T;wfjfLMD’ku

Dykl gS ftles mHk; i{k ds e/; mRié fookn dk fujkdj.k dydRrk

osLV caxky ds U;k;ky; }kjk fd;k tkosxkA vr% vkosnd dk vkosnu

çpyu ;ksX; ugha gSA vukosnd nkjk bl lacaèk esa çkjafHkd vkifRr

fnukad 18@02@2021 çRlqr fd;k x;k gSA fopkjksijkar dkmafly }kjk

vkosnd dks funsZf'kr d;k x;k fd og çkjafHkd vkifRr dk rRdky

çR;qRrj çLrqr djsaA çdj.k fnukad 12@10@2021 gsrq fu;r fd;k

x;kA

izdj.k esa fnukad 12@10@2021 dks mHk; i{k mifLFkr gq,A

vkosnd dh vksj ls vukosnd ds vkifRRk;ksaa dk tokc izLrqr fd;k x;kA

fopkjksijkar dkmafly }kjk izdj.k eas /kkjk 18(2) ds rgr lqyg dh

dk;Zokgh izkjaHk dh xbZ rFkk mHk; i{k dks lqyg djus dk volj fn;k

x;k rFkk izdj.k fnukad 26@10@2021 gsrq fu;r fd;k x;kA

çdj.k esa fnukad 26@10@2021 dks mHk; i{k mifLFkr gq,A

vukosnd dh vksj ls crk;k x;k fd mUgsa ewyèku dh jkf’k Hkqxrku dh

tkus gsrq dksbZ vkiRfr ugha gSA og bl cck;k ewy/ku jkf’k dks N%

fdLrksa esa nsus dks rS;kj gSA fopkjksaijksr dkmafly }kjk vukosnd dks

fyf[kr dFku fnukad 09@11@2021 rd izLrqr djus dh vafre volj

fn;k x;kA

17

izdj.k esa fnukad 09@11@2021 dks vkosnd mifLFkr rFkk

vukosnd vuqifLFkr jgkA vkosnd dks lquk x;k rFkk çdj.k

esa ,di{kh; vkns’k tkjh fd;s tkus dk fu.kZ; fy;k x;kA

izdj.k esa fnukad 11@11@2022 dks mHk; i{k mifLFkr gq,A

lquokbZ ds nkSjku vukosnd }kjk crk;k x;k fd mUgsa vkosnd ds

fjtkWbaMj dh çfr çkIr ugha gq, gSA fopkjksijkar dkmafly }kjk funsZf’kr

fd;k x;k fd vukosnd dkss vkonsd ds }kjk izLrqr fjtkWUMj dh izfr

miyC?k djk;k tkosA izdj.k vafre lquokbZ fnukad 29@11@2022 gsrq

fu;r fd;k x;k gSA

çdj.k esa fnukad 29@11@2022 dks mHk; i{k mifLFkr gq,A

mHk; i{k dks lquk x;k rFkk izdj.k lquokbZ fnukad 14@12@2022 gsrq

fu;r fd;k x;kA

çdj.k esa fnukad 14@12@2022 dks mHk;i{k mifLFkr gq,A

vkosnd ds vf/koDrk }kjk odkyrukek izLrqr fd;k x;kA

vukosnd }kjk crk;k x;k fd vkosnd dk vkosnu le; ckf/kr gS RkFkk

rhu lky ls vf/kd vof/k O;rhr gks tkus ds i'pkr vkonsu izLrqr

fd;k x;kA fopkjkaijkar dkmafly }kjk vkosnd dks funsZf’kr fd;k x;k

fd og vukosnd ds vkifRr dk tokc izLrqr djsaaA fopkjksijkar dkmWfly

}kjk izdj.k fnukad 27@12@2022 gsrq fu;r fd;k x;kA

izdj.k esa fnukad 27@12@2022 dks mHk; i{k mifLFkr gq,A

vkosnd dh vksj ls vkosnd }kjk fd;s x;s izkjafHkd vkifRr dk tokc

çzLrqr fd;k x;k] ftldh izfr vukosnd dks iznku dh xbZA fopkjksijkar

dkmafly }kjk mHk; i{k dks funsZf'kr fd;k x;k fd esa vius&vius

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23. There is no material to show the formal termination of the conciliation

proceeding, issuance of notice commencing arbitration, filing of a

statement of claim by the claimant, submission of a statement of

defence by the opposite party, framing of points for determination,

production of evidence, or conduct of hearings as contemplated under

Sections 23, 24 and 25 of the Arbitration and Conciliation Act, 1996.

The challenge raised by the petitioner, therefore, is not confined to the

18

correctness of the award but goes to the very legality of the process by

which the purported award came to be rendered. It is apposite to quote

Sections 23, 24 and 25 of the Arbitration and Conciliation Act, 1996,

which reads as under:-

“23. Statements of claim and defence.—(1) Within the period of

time agreed upon by the parties or determined by the arbitral

tribunal, the claimant shall state the facts supporting his claim,

the points at issue and the relief or remedy sought, and the

respondent shall state his defence in respect of these particulars,

unless the parties have otherwise agreed as to the required

elements of those statements.

(2) The parties may submit with their statements all documents

they consider to be relevant or may add a reference to the

documents or other evidence they will submit.

1[(2A) The respondent, in support of his case, may also submit a

counterclaim or plead a set-off, which shall be adjudicated upon

by the arbitral tribunal, if such counterclaim or set-off falls within

the scope of the arbitration agreement.]

(3) Unless otherwise agreed by the parties, either party may

amend or supplement his claim or defence during the course of

the arbitral proceedings, unless the arbitral tribunal considers it

inappropriate to allow the amendment or supplement having

regard to the delay in making it.

1[(4) The statement of claim and defence under this section shall

be completed within a period of six months from the date the

arbitrator or all the arbitrators, as the case may be, received

notice, in writing of their appointment.]

24. Hearings and written proceedings.—(1) Unless otherwise

agreed by the parties, the arbitral tribunal shall decide whether to

hold oral hearings for the presentation of evidence or for oral

argument, or whether the proceedings shall be conducted on the

basis of documents and other materials:

Provided that the arbitral tribunal shall hold oral hearings, at an

appropriate stage of the proceedings, on a request by a party,

unless the parties have agreed that no oral hearing shall be held:

[Provided further that the arbitral tribunal shall, as far as possible,

hold oral hearings for the presentation of evidence or for oral

argument on day-to-day basis, and not grant any adjournments

unless sufficient cause is made out, and may impose costs

including exemplary costs on the party seeking adjournment

without any sufficient cause.]

(2) The parties shall be given sufficient advance notice of any

hearing and of any meeting of the arbitral tribunal for the

purposes of inspection of documents, goods or other property.

(3) All statements, documents or other information supplied to, or

applications made to the arbitral tribunal by one party shall be

communicated to the other party, and any expert report or

19

evidentiary document on which the arbitral tribunal may rely in

making its decision shall be communicated to the parties.

25. Default of a party.—Unless otherwise agreed by the parties,

where, without showing sufficient cause,—

(a) the claimant fails to communicate his statement of claim in

accordance with sub-section (1) of section 23, the arbitral tribunal

shall terminate the proceedings;

(b) the respondent fails to communicate his statement of defence

in accordance with sub-section (1) of section 23, the arbitral

tribunal shall continue the proceedings without treating that

failure in itself as an admission of the allegations by the claimant

3[and shall have the discretion to treat the right of the respondent

to file such statement of defence as having been forfeited].

(c) a party fails to appear at an oral hearing or to produce

documentary evidence, the arbitral tribunal may continue the

proceedings and make the arbitral award on the evidence before

it.”

24.No doubt, Section 18(4) of the MSMED Act confers jurisdiction upon

the Facilitation Council to entertain disputes between suppliers and

buyers. However, the existence of jurisdiction and the lawful

assumption of arbitral jurisdiction are two distinct concepts. While the

Council undoubtedly possessed jurisdiction to entertain the reference,

its authority to adjudicate the dispute as an arbitral tribunal could arise

only upon satisfaction of the statutory conditions prescribed under

Sections 18(2) and 18(3) of the MSMED Act. The Supreme Court in

Jharkhand Urja Vikas Nigam Ltd. (supra) held that conciliation and

arbitration are distinct stages and that arbitration can commence only

after conciliation has failed. Therefore, compliance with the statutory

transition from conciliation to arbitration is not a matter of mere

procedure but a condition precedent for lawful exercise of arbitral

jurisdiction. It has been held that:-

“14. 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

20

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.

15. 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.

16. If the appellant had not submitted its reply at the conciliation

stage, and failed to appear, the Facilitation 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 the dispute and make an award. Proceedings for

conciliation and arbitration cannot be clubbed.

17. In this case only on the ground that the appellant had not

appeared in the proceedings for conciliation, on the very first

date of appearance, that is, 06.08.2012, an order was passed

directing the appellant and/or its predecessor/Jharkhand State

Electricity Board to pay Rs.78,74,041/- towards the principal

claim and Rs.91,59,705/- odd towards interest. As it is clear from

the records of the impugned proceedings that the Facilitation

Council did not initiate arbitration proceedings in accordance with

the relevant provisions of the Arbitration and Conciliation Act,

1996.

18. The order dated 06.08.2012 is a nullity and runs contrary not

only to the provisions of MSMED Act but contrary to various

mandatory provisions of Arbitration and Conciliation Act, 1996.

The order dated 06.08.2012 is patently illegal. There is no arbitral

award in the eye of law. It is true that under the scheme of the

Arbitration and Conciliation Act, 1996 an arbitral award can only

be questioned by way of application under Section 34 of the

Arbitration and Conciliation Act, 1996. At the same time when an

order is passed without recourse to arbitration and in utter

disregard to the provisions of Arbitration and Conciliation Act,

1996, Section 34 of the said Act will not apply. We cannot reject

this appeal only on the ground that appellant has not availed the

remedy under Section 34 of the Arbitration and Conciliation Act,

1996.”

21

25.The distinction between lack of jurisdiction and an alleged irregular

exercise of jurisdiction has been reiterated by the Hon'ble Supreme

Court in Gujarat State Civil Supplies Corporation Ltd. v. Mahakali

Foods Pvt. Ltd., 2023 (6) SCC 401, wherein it was held that Section

18 creates a special statutory mechanism conferring exclusive

jurisdiction upon the Facilitation Council for adjudication of disputes

involving MSMEs. It has been held that:-

“47. The aforesaid legal position also dispels the arguments

advanced on behalf of the counsel for the buyers that the

Facilitation Council having acted as a Conciliator under Section

18(2) of the MSMED Act, 2006 itself cannot take up the dispute

for arbitration and act as an Arbitrator. Though it is true that

Section 80 of the Arbitration Act, 1996 contains a bar that the

Conciliator shall not act as an Arbitrator in any arbitral

proceedings in respect of a dispute that is subject of conciliation

proceedings, the said bar stands superseded by the provisions

contained in Section 18 read with Section 24 of the MSMED Act,

2006. As held earlier, the provisions contained in Chapter-V of

the MSMED Act, 2006 have an effect overriding the provisions of

the Arbitration Act, 1996. The provisions of Arbitration Act, 1996

would apply to the proceedings conducted by the Facilitation

Council only after the process of conciliation initiated by the

council under Section 18(2) fails and the council either itself

takes up the dispute for arbitration or refers to it to any institute or

centre for such arbitration as contemplated under Section 18(3)

of the MSMED Act, 2006.

48. When the Facilitation Council or the institution or the centre

acts as an Arbitrator, it shall have all powers to decide the

disputes referred to it as if such arbitration was in pursuance of

the arbitration agreement referred to in sub-section (1) of Section

7 of the Arbitration Act, 1996 and then all the trappings of the

Arbitration Act, 1996 would apply to such arbitration. It is

needless to say that such Facilitation Council/institution/centre

acting as an arbitral tribunal would also be competent to rule on

its own jurisdiction like any other arbitral tribunal appointed under

the Arbitration Act, 1996 would have, as contemplated in Section

16 thereof.

77. The issues raised and the submissions made by the learned

counsel appearing for the appellant with regard to the overriding

effect of the MSMED Act, 2006 over the Arbitration Act, 1996

jurisdiction of Facilitation Council, the parties autonomy to enter

into an agreement qua the statutory provisions, the issue of

causus omissus etc. have been discussed and decided

22

hereinabove which need not be reiterated or repeated.

Accordingly, it is held that the reference made to the Facilitation

Council would be maintainable in spite of an independent

arbitration agreement existing between the parties to whom the

MSMED Act, 2006 is applicable, and such Council would be

entitled to proceed under sub-section (2) of Section 18 of the

MSMED Act, 2006 as also to act as an Arbitrator or to refer the

disputes to the institution or Centre as contemplated under

Section 18(3) of the MSMED Act, 2006. As held earlier, such

Facilitation Council/Institute/Centre acting as an Arbitral Tribunal

would have the jurisdiction to rule over on its own jurisdiction as

per Section 16 of the Arbitration Act, 1996. In that view of the

matter, the present appeal also deserves to be dismissed and is,

accordingly, dismissed.”

26.The Arbitration and Conciliation Act, 1996 itself provides a complete

code for challenging an arbitral award. Section 34 specifically permits

an aggrieved party to seek setting aside of an award on grounds

including inability to present its case, violation of principles of natural

justice, improper constitution of the arbitral tribunal, or non-compliance

with the procedure agreed between the parties or prescribed by law. It

is also necessary to notice here Section 34 of the Act of 1996, which is

as under:-

“34. Application for setting aside arbitral award.—(1)

Recourse to a Court against an arbitral award may be made only

by an application for setting aside such award in accordance with

sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if—

(a) the party making the application 1[establishes on the basis of

the record of the arbitral tribunal that]—

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which

the parties have subjected it

or, failing any indication thereon, under the law for the time being

in force; or

(iii) the party making the application was not given proper notice

of the appointment of an arbitrator or of the arbitral proceedings

or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or

not falling within the terms of the submission to arbitration, or it

contains decisions on matters beyond the scope of the

submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration

can be separated from those not so submitted, only that part of

23

the arbitral award which contains decisions on matters not

submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral

procedure was not in accordance with the agreement of the

parties, unless such agreement was in conflict with a provision of

this Part from which the parties cannot derogate, or, failing such

agreement, was not in accordance with this Part; or

(b) the Court finds that—

(i) the subject-matter of the dispute is not capable of settlement

by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

2[Explanation 1.—For the avoidance of any doubt, it is clarified

that an award is in conflict with the public policy of India, only if—

(i) the making of the award was induced or affected by fraud or

corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law;

or

(iii) it is in conflict with the most basic notions of morality or

justice.

Explanation 2.—For the avoidance of doubt, the test as to

whether there is a contravention with the fundamental policy of

Indian law shall not entail a review on the merits of the dispute.]

3[(2A) An arbitral award arising out of arbitrations other than

international commercial arbitrations, may also be set aside by

the Court, if the Court finds that the award is vitiated by patent

illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the

ground of an erroneous application of the law or by

reappreciation of evidence.]

(3) An application for setting aside may not be made after three

months have elapsed from the date on which the party making

that application had received the arbitral award or, if a request

had been made under section 33, from the date on which that

request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was

prevented by sufficient cause from making the application within

the said period of three months it may entertain the application

within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court

may, where it is appropriate and it is so requested by a party,

adjourn the proceedings for a period of time determined by it in

order to give the arbitral tribunal an opportunity to resume the

arbitral proceedings or to take such other action as in the opinion

of arbitral tribunal will eliminate the grounds for setting aside the

arbitral award.

1[(5) An application under this section shall be filed by a party

only after issuing a prior notice to the other party and such

application shall be accompanied by an affidavit by the applicant

endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of

expeditiously, and in any event, within a period of one year from

24

the date on which the notice referred to in sub-section (5) is

served upon the other party.]”

27.The respondent has contended that all objections regarding non-

compliance with statutory procedure can only be examined in

proceedings under Section 34 of the Arbitration and Conciliation Act,

1996. Ordinarily, such a proposition would merit acceptance. However,

the present case stands on a different footing. The petitioner's

grievance is not merely that certain procedural provisions were violated

during arbitration. The grievance is that arbitration proceedings, in the

eyes of the law, never commenced at all. Even assuming that

conciliation proceedings had stood terminated, the record is completely

silent regarding compliance with the mandatory requirements of

Sections 23, 24 and 25 of the Arbitration and Conciliation Act, 1996. In

the absence of pleadings, opportunity to adduce evidence, and

conduct of arbitral proceedings in accordance with law, the resultant

order cannot automatically acquire the status of an arbitral award

merely because it is described as one.

28.The Hon’ble Supreme Court in Jharkhand Urja Vikas Nigam Ltd.

(supra) has emphasized that once conciliation fails, the Council must

either itself act as an arbitral tribunal or refer the dispute for arbitration,

whereupon the provisions of the Arbitration and Conciliation Act, 1996,

become fully applicable. The record of the present case does not

disclose compliance with the aforesaid statutory mandate. Significantly,

the order sheets reveal that the matter was being heard on preliminary

objections relating to limitation and jurisdiction and that written

arguments were invited thereon. Thereafter, without any indication of

the commencement of arbitration proceedings in accordance with law,

25

the impugned award came to be rendered. Such a course is

inconsistent with the statutory framework governing arbitral

adjudication.

29.This Court is unable to accept the contention that failure of conciliation

can merely be inferred from the subsequent conduct of the Council.

While the factum of failure of conciliation may, in a given case, be

discernible from the record, such inference cannot dispense with the

mandatory requirement of conducting arbitration in accordance with the

Arbitration and Conciliation Act, 1996. Even if the Court were to

assume that conciliation had validly terminated, there remains a

complete absence of material demonstrating compliance with the

statutory procedure governing arbitration. Consequently, the defect in

the present case is not confined to the absence of a formal order

terminating conciliation but extends to the very foundation of the

arbitral process itself.

30.The respondent has contended that such objections could not have

been examined by the executing court in view of the limited scope of

execution proceedings and that the petitioner's remedy lies exclusively

under Section 34 of the Arbitration and Conciliation Act, 1996.

Undoubtedly, the Hon’ble Supreme Court in Electrosteel Steel Ltd.

(supra) reiterated the settled principle that an executing court cannot

go behind a decree or award and cannot adjudicate upon the

correctness of the decision on merits. However, the same judgment

also recognizes the equally settled distinction between an erroneous

decree and a decree which is a nullity for want of inherent jurisdiction.

In paragraphs 9, 14 and 67, the Hon’ble Supreme Court reiterated that

26

only a decree or award suffering from jurisdictional nullity can be

questioned in execution proceedings, whereas all other objections are

required to be agitated before the forum provided by law. Thus, the

determinative question is not whether the award suffers from mere

procedural irregularity, but whether the statutory preconditions for

assumption of arbitral jurisdiction were ever satisfied. If the Council

never acquired jurisdiction to enter upon arbitration in the absence of

termination of conciliation, the resultant order would stand on a

different footing from a merely erroneous award.

“9. It appears that on lifting of the moratorium, Facilitation Council

resumed arbitral proceedings. Appellant did not contest the

arbitral proceedings. Ultimately, an award was passed on

06.07.2018. As per the award, the Facilitation Council directed

the appellant to pay a sum of Rs.1,59,09,214.00 along with

interest to the respondent in terms of Section 16 of the MSME

Act.

14. Insofar the first question is concerned, High Court opined that

the plea of nullity qua an arbitral award can be raised in an

execution proceeding under Section 47 of the CPC. However, the

scope of interference would be very narrow. As regards the

second question, High Court rejected the contention of the

appellant that since the award suffered from patent or inherent

lack of jurisdiction and therefore was a nullity, it can be

questioned at the stage of execution without challenging the

award under Section 34 of the 1996 Act. High Court answered

the third question by holding that the Facilitation Council did not

lose its jurisdiction to procced and pronounce the arbitral award

notwithstanding approval of the resolution plan by the NCLT

under Section 31 of IBC. Reasoning given by the High Court is

that the arbitral proceedings were initiated prior to the insolvency

resolution date, kept suspended during the moratorium period

and resumed after lifting of the moratorium; the approved

resolution plan simply determined the claim of the respondent as

nil. Accordingly, vide the impugned judgment and order High

Court dismissed the petition filed by the appellant under Article

227 of the Constitution of India.

67. High Court is correct in answering the first issue that a plea of

nullity qua an arbitral award can be raised in a proceeding under

Section 47 CPC but such a challenge would lie within a very

narrow compass.”

27

31.In the case of Electrosteel Steel Ltd. (supra) the Hon’ble Supreme

Court further reiterated the settled distinction between an award that is

merely erroneous and an award that is a nullity for want of jurisdiction.

While an executing court cannot re-examine the correctness of an

award on merits, an objection founded upon an inherent lack of

jurisdiction remains available. In para 69 and 70 of the Electrosteel

Steel Ltd. (supra), it has been held that:-

“69. Section 47 CPC deals with questions to be determined by

the court executing decree. As per sub- section (1), all questions

arising between the parties to the suit in which the decree was

passed and relating to the execution, discharge or satisfaction of

the decree shall be determined by the court executing the decree

and not by a separate suit. Execution of decrees and orders is

provided for in Order XXI CPC. The law is well settled that at the

stage of execution, an objection as to executability of the decree

can be raised but such objection is limited to the ground of

jurisdictional infirmity or voidness. The law laid down by this

Court in Vasudev Dhanjibhai Modi Vs. Rajabhai Abdul Rehman is

that only a decree which is a nullity can be the subject matter of

objection under Section 47 CPC and not one which is erroneous

either in law or on facts. The aforesaid proposition of law

continues to hold the field.

70. Objection to execution of an award under Section 47 CPC is

not dependent or contingent upon filing a petition under Section

34 of the 1996 Act. High Court was not justified in taking the view

that since the appellant did not file a petition under Section 34 of

the 1996 Act, therefore, it was precluded from filing an

application before the Executing Court to declare the award as

void and hence non- executable.”

32.This Court also finds considerable significance in the subsequent

decision of the Supreme Court in Tamil Nadu Cements Corporation

Limited Vs. Micro and Small Enterprises Facilitation Council &

Another, 2025(4)SCC1. In paragraph 49 thereof, the Hon’ble Supreme

Court noticed an apparent conflict between Jharkhand Urja Vikas

Nigam Ltd.(supra) and Gujarat State Civil Supplies Corporation Ltd.

(supra) on the question whether a writ petition would be maintainable

28

against an award passed by the Facilitation Council and referred the

issue for consideration by a larger Bench. However, the Hon’ble

Supreme Court did not express any doubt regarding the proposition

laid down in Jharkhand Urja Vikas Nigam Ltd. concerning the

mandatory applicability of Sections 18(2) and 18(3) of the MSMED Act

and the requirement that arbitration proceedings must conform to the

Arbitration and Conciliation Act, 1996. Therefore, while the broader

issue concerning maintainability of a writ petition against an MSME

award may presently await authoritative determination by a larger

Bench, there is no conflict in the legal position that the statutory

procedure governing transition from conciliation to arbitration must be

strictly complied with.

33. In the present case, the objection is not directed against the findings

recorded by the Facilitation Council but against the very assumption of

arbitral jurisdiction without compliance with the mandatory statutory

requirements. Such an objection falls within the recognized exception

relating to jurisdictional nullity.

34.The same principle has consistently been recognized by the Supreme

Court in Kiran Singh v. Chaman Paswan, AIR 1954 SC 340, wherein

it was held that a decree passed without jurisdiction is a nullity and its

invalidity can be set up whenever and wherever it is sought to be

enforced. Similar principles were reiterated in Vasudev Dhanjibhai

Modi v. Rajabhai Abdul Rehman, 1970 (1) SCC 670, and Jagmittar

Sain Bhagat v. Director, Health Services,2013 (10) SCC 136,

wherein it was held that a decree suffering from an inherent lack of

jurisdiction can be challenged even in collateral proceedings and at the

29

stage of execution. Therefore, where the challenge is directed not

against the merits of the award but against the very existence of

jurisdiction in the authority which purportedly rendered the award, the

objection is legally permissible.

35.In the present case, the petitioner is not seeking re-appreciation of the

findings recorded by the Facilitation Council on the dispute between

the parties. The challenge is founded on the plea that the Council

never acquired arbitral jurisdiction inasmuch as conciliation

proceedings were never terminated in accordance with Section 18(2)

of the MSMED Act, 2006, no separate arbitration proceedings were

initiated under Section 18(3), and the mandatory provisions of the

Arbitration and Conciliation Act, 1996 were not followed. If such

allegations are ultimately found to be correct, the consequence would

be that the order dated 27.12.2022 is not merely an erroneous award

but an order passed without jurisdiction and therefore a nullity. In that

eventuality, the objection would fall within the exception recognized in

Electrosteel Steel Ltd. (supra). Consequently, the present petition

under Article 227 of the Constitution, directed against the order of the

Executing Court refusing to examine such a jurisdictional objection,

cannot be held to be not maintainable merely because proceedings

under Section 34 of the Arbitration and Conciliation Act are also

pending between the parties.

36.Having considered the material available on record, this Court is of the

view that the present case does not involve a mere procedural

irregularity occurring during arbitral proceedings. Rather, the records

fail to disclose that arbitration proceedings, as contemplated under

30

Section 18(3) of the MSMED Act, read with the Arbitration and

Conciliation Act, 1996, were ever conducted. The absence of any

discernible arbitral procedure, including filing of pleadings, opportunity

of evidence and hearing in accordance with law, strikes at the root of

the matter and raises a serious issue regarding the very existence of a

legally enforceable arbitral award.

37.Consequently, this Court is satisfied that the proceedings culminating

in the award dated 27.12.2022 suffer from a fundamental jurisdictional

infirmity inasmuch as the mandatory statutory requirements governing

the transition from conciliation to arbitration under Section 18 of the

MSMED Act, 2006, and the procedure prescribed under the Arbitration

and Conciliation Act, 1996 have not been shown to have been

complied with. As a result, the award dated 27.12.2022 cannot be

sustained in law. Since the execution proceedings are founded entirely

upon the said award, the consequential order dated 07.01.2025,

passed by the learned 2nd Additional District Judge, Durg in T.D. No.

82/2024 also cannot survive. Accordingly, the award dated 27.12.2022

passed by the Micro and Small Enterprises Facilitation Council as well

as the order dated 07.01.2025 passed by the Executing Court are

hereby set aside. The matter is remitted to the Micro and Small

Enterprises Facilitation Council for reconsideration afresh from the

stage contemplated under Section 18 of the MSMED Act, 2006 and for

proceeding thereafter strictly in accordance with the provisions of the

MSMED Act, 2006 and the Arbitration and Conciliation Act, 1996, after

affording adequate opportunity of hearing to all concerned parties.

31

38.It is clarified that this Court, while exercising supervisory jurisdiction

under Article 227 of the Constitution of India, has not expressed any

opinion on the merits of the rival claims of the parties, and all

contentions available to them in law are left open to be urged before

the Facilitation Council.

39.The writ petition is accordingly allowed. No order as to costs.

Sd/-

(Ravindra Kumar Agrawal)

Judge

inder

32

Head Note

Compliance with the statutory transition from conciliation to arbi-

tration is not a matter of mere procedure, but a condition precedent for

lawful exercise of arbitral jurisdiction invoking the provisions under

Section 23 of the Arbitration and Conciliation Act, 1996.