This writ appeal is presented against an order dated 14.01.2022,passed by the learned Single Judge in Writ Petition (C) No.4235 of 2021,whereby the writ petition filed by the petitioner-appellant was ...
No Acts & Articles mentioned in this case
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AFR
HIGH COURT OF CHHATTISGARH, BILASPUR
WA No. 56 of 2022
M/s Sew Infrastructure Limited Registered Office At 6-3-871, Snehlata,
Green Lands Road, Begumpet, Hyderabad, District- Hyderabad-500016
(Telangana) Through Its Power of Attorney Holder Shri K. Ganapathi Rao
S/o Shri Venkatanarayana, District : Hyderabad, Telangana
---- Appellant
Versus
1.Micro and Small Enterprises Facilitation Council C.G. Director of
Industries, Chhattisgarh, Udyog Bhawan, Ring Road No. 1,
Telebandha, Raipur, Chhattisgarh, District : Raipur, Chhattisgarh
2.M/s- Core Fab Projects Pvt. Ltd. 141/21,2nd Floor, Matoshree
Complex, Infront of Steel City Hospital, Maharaja Chowk, Durg,
District- Durg, Chhattisgarh.
---- Respondents
(Cause Title taken from Case Information System)
For Appellant : Mr. Ashish Shrivastava, Senior Counsel assisted
by Mr. Shikhar Sharma and Mr. Aman Saxena,
Advocates.
For Respondent No. 2: Ms. Ginni Jaitley Rautray, Mr. P.R. Patankar and
Mr. Vaibhav Dhar Diwan, Advocates.
Date of Hearing : 23.02.2022
Date of Judgment : 12.05.2022
Hon'ble Mr. Arup Kumar Goswami, Chief Justice
Hon'ble Mr. N.K.Chandravanshi, Judge
C A V Judgment
Per Arup Kumar Goswami, Chief Justice
This writ appeal is presented against an order dated 14.01.2022,
passed by the learned Single Judge in Writ Petition (C) No.4235 of 2021,
whereby the writ petition filed by the petitioner-appellant was dismissed.
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2.The appellant, which is a Company registered and incorporated
under the provisions of the Indian Companies Act, 1956, is engaged in the
field of construction of large infrastructure development projects. It had
entered into an agreement on 23.05.2012 along with its other Consortium
Members with National Mineral Development Corporation Limited (NMDC)
in respect of the works pertaining to Civil, Supply of Fabricated Building
Steel Structures including Sheeting & Glazing and Receipt, Unloading,
Storage and Transportation from Stores to Erection Site, Erection including
Supervision, etc. relating to Steel Melting Shop (Package No.6) for 3.0
MTPA NMDC integrated Steel Plant at Nagarnar, Chhattisgarh, valued at
Rs.643.77 Crores, approximately. The appellant had placed a letter of
award of contract (LAC) to respondent No.2 on 29.12.2012, which was
followed by a contract agreement dated 06.06.2013, for supply of
Fabrication and Transportation to site, building steel structures for Steel
Melting Shop (Package No.06), at a total price of Rs.17,78,52,500/- of
approximately 2,500 MT. The time for completion of the above works was
15 months from the effective date of contract, which is 06.05.2013.
3.It is not necessary to dilate on all the details for the purpose of
disposal of this appeal. Suffice it to say that three amendments, being (i)
amendment dated 10.07.2013, (ii) amendment dated 06.06.2013, and (iii)
amendment dated 05.05.2014, were signed with regard to price and
supply. It is alleged by the appellant that there was failure on the part of
respondent No. 2 in adhering to the terms of the agreement, but it raised
bill for Rs.46,27,70,759/-, which was disputed by the appellant and it is
stated that the balance amount payable by the appellant to the respondent
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No. 2 is only Rs. 25,00,000/-.
4.The respondent No. 2 subsequently filed a claim petition before
respondent No. 1, i.e., Micro & Small Enterprises Facilitation Council, for
short, Facilitation Council, by invoking Section 20 of the Micro, Small and
Medium Enterprises Development Act, 2006 (for short, the Act of 2006) in
the month of August, 2018 claiming Rs.7,89,33,137/-, which included the
outstanding amount of Rs.43,60,936/-, claim towards the price escalation
of Rs.3,53,99,216/- and interest from 13.12.2016 to 18.06.2018 amounting
to Rs.3,91,72,985/-.
5.As stated in the writ petition, after receiving the notice, the appellant
filed reply to the claim petition by disputing the claims lodged and praying
for dismissal of the application. A rejoinder was filed by the respondent No.
2 on 23.11.2020.
6.Though, not stated in the writ petition as was originally filed,
subsequently, on 22.10.2021, the appellant filed an application for taking
documents on record in which an order dated 12.04.2021 passed by the
learned Single Judge of this Court in WP(227) No. 22/2021, a copy of the
letter dated 18.08.2021 issued by the Deputy Director, Facilitation Council
and copy of the general conditions of contract were annexed. Perusal of
the order dated 12.04.2021 would go to show that grievance was
expressed by the appellant to the effect that without resorting to conciliation
proceedings under Section 18(2) of the Act of 2006, an arbitration
proceeding under Section 18(3) of the Act of 2006, was initiated. Noticing
that the Facilitation Council had given only an opportunity to the parties to
“compromise the matter” and there being no indication in the proceedings
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of the Facilitation Council that any conciliation proceeding had been taken
up as required under Section 18(2) of the Act of 2006, the writ petition was
disposed of holding that initial proceeding under Section 18(3) was
erroneous and accordingly, directed the Facilitation Council to take up
conciliation proceeding under Section 18(2) of the Act of 2006 before
taking up the arbitration proceeding under Section 18(3) of the Act of 2006.
7.In the writ petition, there is no averment about the outcome of the
conciliation proceeding which was directed to be taken up by the
Facilitation Council, but it would appear from the pleadings in the writ
petition that the conciliation proceeding had failed and was terminated and
that the arbitration proceeding was again initiated by the Facilitation
Council. The appellant had submitted an objection dated 12.10.2021 to the
effect that (i) the Facilitation Council having been consisted of 04 numbers
of Arbitrators, the same is in violation of Section 10 of the Arbitration and
Conciliation Act, 1996 (for short, the A&C Act), which provides that the
arbitral tribunal should not consist of even number of Arbitrators, (ii)
Facilitation Council having acted as Conciliator, in terms of Section 80 of
the A&C Act, they cannot act as Arbitrator, but in violation of the said
provision, the Facilitation Council had also taken up the role of the
Arbitrators, (iii) no declaration in terms of Section 12 of the A&C Act was
made indicating that the Arbitrators were not having any interest in the
arbitration proceedings, (iv) terms of reference had not been recorded.
8.It is pleaded that without deciding the objections raised by the
appellant, the Facilitation Council posted the matter on 26.10.2021 for
passing of the award.
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9.It is in the background of the aforesaid facts, the writ petition was filed
praying for the following reliefs:
“10. RELIEF (S) SOUGHT :
10.1 It is prayed that this Hon'ble Court may kindly be
pleased to call for the entire records pertaining to the case of the
Petitioner from the possession of the respondent No.1, for its
kind perusal.
10.2 This Hon'ble Court may kindly be pleased to issue a
writ in the nature of mandamus directing that the respondent
No.1 under Section 18 of the Act of 2006 has no jurisdiction to
adjudicate disputed claim of escalation/price variation, hence the
proceeding instituted in the Case No. G/05/S/00169/54 are
without jurisdiction.
10.3 This Hon'ble Court may kindly be pleased to issue a
writ in the nature of mandamus directing, that the arbitration
proceedings instituted by the respondent No.1, without following
due procedure contemplated under Arbitration and Conciliation
Act, 1996, is also not maintainable.
10.4 Any other relief/reliefs, which this Hon'ble Court may
think fit and proper in the facts and circumstances of the case,
with cost of the petition, may also please be granted to the
petitioner.
10.5 This Hon'ble Court may kindly be pleased to issue writ
in the nature of certiorari and quash the order dated 12.10.2021.”
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10.Subsequently, the writ petition was amended stating that the
objection of the appellant was rejected arbitrarily by an order dated
12.10.2021 wherein it was also wrongly recorded that final arguments were
heard at length. The said order also came to be impugned by way of
amendment.
11.The learned Single Judge disposed of the writ petition as follows:
“10.Considered on the submissions.
11.According to the facts present, the petitioner had
earlier preferred WP227 No.22/2021, which was decided by
this Court vide order 12.4.2021 and directions were issued to
the respondent No.2 to take up proceedings of conciliation as
required under Section 18(2) of the Act, 2006 before
proceeding under Section 18(3) of the Act, 2006. The sitting
of the respondent No.1 was held on 3.8.2021. The minutes of
this proceeding mentions about the order dated 12.4.2021 of
WP227 No.22/2021. The minutes further mentions that both
the parties made a declaration that there can be no
conciliation between them, therefore, the proceeding under
Section 18(2) of the Act, 2006 was closed and proceeding
under Section 18(3) of the Act, 2006 was initiated.
12.The minutes of the proceeding held on 3.8.2021 are
not very specific regarding the role of the members of
respondent No.1 in the conciliation proceeding, but it is very
specific that there is a declaration of the parties that there is
no possibility of any conciliation between them, hence, it
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cannot be said with affirmation that the members of the
respondent No.1 had in fact acted to conciliate on the dispute
present between the parties.
13.The question raised by the petitioner is legal on the
basis of the facts present, that the respondent No.1 had itself
taken up the conciliation proceeding under Section 18(2) of
the Act, 2006 and, therefore, the arbitration proceeding by the
respondent No.1 itself is against the provision under Section
80 of the Act, 1996. Although the Single Bench of the High
Court of Karnataka has in the case of M/s Pal Mohan
Electronics (supra) expressed a view that the Section 80 of
the Act, 1996 expresses against the empowerment of the
facilitation Committee to act as a arbitrator, subsequent to
being a conciliator, but this view has not been supported or
rectified of any other High Court. The view of Allahabad High
Court in the case of M/s Cummins Technologies India(supra),
in the case of Supreme Court in Bhaven Construction through
Authorised Signatory Premjibhai k. shah (supra), in the case
of Delhi High Court in Bata India Limited Vs. AVS
International Private Limited (supra), in the case of Patna
High Court in the Best Towers Private Limited (supra), in the
case of Madras High Court in Eden Exports Company (supra)
and similar view is expressed in the case of Delhi High Court
in Badri Singh Vinimay Private (supra) are to this effect that
the bar under Section 80 of the Act, 1996 shall not be
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applicable to the proceeding before the facilitation Committee
under the provisions of the Act, 2006 and, further, that the
Section 24 of the Act, 2006 is very clear on this point showing
that the provisions under the Act, 2006, have overriding effect
over the provision under Page No.9 any other act including
the Act, 1996. Hence, I am of this view that the petition filed is
without any substance, which is liable to be dismissed.”
12.The Act of 2006 was enacted to provide for facilitating promotion and
development and enhancing competitiveness of micro, small and medium
enterprises and for matters connected therewith or incidental thereto.
13.Chapter V of the Act of 2006 relates to 'delayed payments to micro
and small enterprises'. Chapter V contains Sections 15 to 25, imposing an
obligation upon the buyer to make payment and providing for an
adjudicatory forum in the event of there being any dispute between a buyer
and supplier. Section 15 of the Act of 2006 deals with liability of buyer to
make payment. Section 16 lays down the date from which and the rate at
which interest is payable. Section 17 obligates the buyer to pay the amount
due with interest for any goods supplied or services rendered by the
supplier. Section 18 provides for making a reference to the Facilitation
Council with regard to any amount due under Section 17.
14.Section 18(1), (2), (3), (4) of the Act of 2006 is relevant for the
purpose of our case and therefore, the same is extracted hereinbelow:
“18. Reference to Micro and Small Enterprises Facilitation
Council.—(1) Notwithstanding anything contained in any
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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 to it 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 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
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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.”
15.Section 20 of the Act of 2006 provides that the State Government
shall, by notification, establish one or more Facilitation Councils, at such
places, exercising such jurisdiction and for such areas, as may be specified
in the notification.
16.Mr. Ashish Shrivastava, learned senior counsel for the appellant
submits that Section 80 of the A&C Act prohibits a conciliator to act as an
arbitrator and in gross violation of the same, the Facilitation Council, which
acted as a conciliator, also started conducting arbitration proceeding and
as such, the entire proceeding is vitiated. It is submitted that the learned
Single Judge did not advert to the contention raised by the appellant that
composition of the Facilitation Council, which is in even number, is in
violation of Section 10 of the A&C Act and the same goes to the root of the
matter. He has further submitted that without giving declaration in terms of
Section 12 of the A&C Act that the Members of the Facilitation Council is
not having any interest in respect of the arbitration proceeding, the
arbitration proceeding initiated is vitiated. It is also submitted that no finding
has been recorded with regard to the contention advanced that due to non-
recording of terms of reference, arbitration proceeding initiated cannot be
sustained in law. He has submitted that in gross violation of Sections 21,
23 and 24 of the A&C Act, the arbitration proceeding was commenced
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without giving adequate opportunity to the parties for filing their statement
of claims and counter-claims, etc and only on the basis of the pleadings in
the conciliation proceeding, Facilitation Council has started the arbitration
proceeding. It is contended that the dispute as raised by the respondent
No. 2, which includes the claim towards price escalation, is beyond the
purview of the Facilitation Council and the Facilitation Council did not
consider this aspect of the matter though it goes to the root of the
controversy.
17.Learned senior counsel for the appellant relies on the decisions of the
Hon'ble Supreme Court in M/s. Vijeta Construction v. M/s. Indus Smelters
Ltd. & Another, rendered on 23.09.2021 in Civil Appeal No. 5934 of 2021,
Jharkhand Urja Vikas Nigam Limited v. State of Rajasthan & Others,
reported in 2021 SCC OnLine SC 1257, and the decision of the Madras
High Court in Ved Prakash v. P. Ponram, rendered in Original Side Appeal
No. 231 of 2019 on 23.01.2020, the decision of the Karnataka High Court
in M/s. Pal Mohan Electronics Pvt. Ltd. v. The Secretary, Department of
Small Scale Industries & Others (WP No. 9485 of 2017) on 27.03.2019, the
decision of the Madhya Pradesh High Court in Sasan Power Limited,
Singrauli v. Madhya Pradesh Micro and Small Enterprises Facilitation
Council and Another, reported in 2020 SCC OnLine MP 2976, the decision
dated 06.08.2018 of the Bombay High Court in Gujarat State Petronet Ltd.
v. Micro & Small Enterprises Facilitation Council & Others (Writ Petition No.
5459 of 2015).
18.Ms. Ginni Jaitley Rautray, learned counsel for the respondent No. 2
submits that pursuant to the order of this Court dated 12.04.2021, date of
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conciliation proceeding was fixed on 13.07.2021 and the conciliation
having failed, conciliation proceeding was terminated by the Facilitation
Council and arbitration proceeding was initiated. It is submitted that the
pleadings before the Facilitation Council were completed and oral
arguments of the parties on merits of the case were heard and the parties
were directed to file their written submission on or before 22.10.2021 and
accordingly, the parties had also filed their written submissions before the
Facilitation Council on 22.10.2021. It is submitted that the quorum of the
Facilitation Council which took part in the conciliation proceeding under
Section 18(2) of the Act of 2006, is no longer available as the term is over
and therefore, the matter would have to be heard by a new quorum of
Facilitation Council, and as such, on facts, the plea taken by the appellant
that the Facilitation Council having taken up the conciliation proceedings is
debarred from initiating the arbitration proceeding, is not tenable. It is
submitted that there is no illegality in the Facilitation Council taking up the
arbitration proceeding after termination of the conciliation proceeding and
in this connection, she places reliance on the decisions rendered by the
Allahabad High Court in M/s. Cummins Technologies India Pvt. Ltd. v.
Micro and Small Enterprises Facilitation Council & Others (WPC No.
7785/2020), by the Patna High Court in The Best Towers Pvt. Ltd. v.
Reliance Communication Limited (LPA No. 1036/2018), the Madras High
Court in M/s. Refex Energy Limited v. Union of India, reported in 2016-3-
L.W. 711, Eden Exports Company v. Union of India, reported in 2012 SCC
OnLine Mad 4570, and a decision of this High Court in M/s. JMS Mining
Services Pvt. Ltd. v. State of Chhattisgarh & Others, rendered in WA No.
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100-103 of 2017.
19.On the basis of the above judgments, it is submitted by Ms. Rautray
that in view of Section 24 of the Act of 2006, the provisions of Section 18 of
the Act of 2006 would have an overriding effect over any other law for the
time being in force including the A&C Act.
20.It is submitted that Section 10 of the A&C Act will have no application
and the same is inconsistent with the provisions of Section 21(1) of the Act
of 2006. She submits that in statutory arbitration under the Act of 2006,
notice under Section 21 of the A&C Act is not required to be given.
Disclosure under Section 12 of the A&C Act is not necessary as the
arbitration is being conducted by the Facilitation Council. It is further
submitted that there is no merit in the contention that the claim made on
account of price escalation cannot be adjudicated by the Facilitation
Council while it conducts arbitration proceeding. The appellant had filed
written statement on 03.04.2019. The appellant had filed its reply and
counter claim dated 03.08.2021 to the rejoinder filed by the respondent No.
2 on 23.11.2020 and the respondent No. 2 had also filed reply to the reply
and counter claim filed by the appellant on 24.08.2021.
21.Sections 21 and 24 of the Act of 2006 are relevant and they are
extracted hereinbelow:
“21. Composition of Micro and Small Enterprises Facilitation
Council.—
(1) The Micro and Small Enterprise Facilitation Council shall
consist of not less than three but not more than five members
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to be appointed from among the following categories,
namely:—
(i) Director of Industries, by whatever name called, or any
other officer not below the rank of such Director, in the
Department of the State Government having administrative
control of the small scale industries or, as the case may be,
micro, small and medium enterprises; and
(ii) one or more office-bearers or representatives of
associations of micro or small industry or enterprises in the
State; and
(iii) one or more representatives of banks and financial
institutions lending to micro or small enterprises; or
(iv) one or more persons having special knowledge in the
field of industry, finance, law, trade or commerce.
(2) The person appointed under clause (i) of sub-section (1)
shall be the Chairperson of the Micro and Small Enterprises
Facilitation Council.
(3) The composition of the Micro and Small Enterprises
Facilitation Council, the manner of filling vacancies of its
members and the procedure to be followed in the discharge
of their functions by the members shall be such as may be
prescribed by the State Government.
xxx xxx xxx
24. Overriding effect. — The provisions of sections 15 to 23
shall have effect notwithstanding anything inconsistent
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therewith contained in any other law for the time being in
force.
22.Section 80 of the A&C Act reads as under:
“80. Role of conciliator in other proceedings.- Unless
otherwise agreed by the parties,—
(a) the conciliator shall not act as an arbitrator or as a
representative or counsel of a party in any arbitral or judicial
proceeding in respect of a dispute that is the subject of the
conciliation proceedings;
(b) the conciliator shall not be presented by the parties as a
witness in any arbitral or judicial proceedings.”
23.Part III of the A&C Act is under the heading 'Conciliation'. It begins
with Section 61 and ends with Section 81.
24.Section 75 of the A&C Act is as follows:
75.Confidentiality - Notwithstanding anything contained in
any other law for the time being in force, the conciliator and
the parties shall keep confidential all matters relating to the
conciliation proceedings. Confidentiality shall extend also to
the settlement agreement, except where its disclosure is
necessary for purposes of implementation and enforcement.
25.In M/s Vijeta Constructions (supra), the Hon’ble Supreme Court while
dealing with the clauses of conciliation of the Council observed that
conciliators are to assist the parties in an independent and impartial
manner in their attempt to reach an amicable settlement of their dispute
and at that stage the Facilitation Council is not required to adjudicate the
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dispute. At that stage the Facilitation Council has no jurisdiction to make
thorough enquiry and take evidence. However, once the conciliation fails
and the settlement is not arrived at during the conciliation and thereafter
when the arbitration proceeding commences as per Section 18(3), the
Facilitation Council as an arbitrator shall have all the powers of the
arbitrator as are available under the provisions of the A & C Act.
26.In Jharkhand Urja Vikas Nigam Limited (supra), the Hon’ble Supreme
Court at paragraphs 9, 11 and 12 observed as follows:
“9. Only on the ground that even after receipt of
summons the appellant has not appeared the Facilitation
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 Facilitation 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.
11. From a reading of Section 18(2) and 18(3) of the
MSMED Act it is clear that the Facilitation 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
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said Act. Under Section 18(3), when conciliation fails and
stands terminated, the dispute between the parties can be
resolved by arbitration. The Facilitation 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 Facilitation 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.
12. 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.”
27.In Ved Prakash (supra), the Madras High Court held as follows:
“8.6Section 18 of the MSMED Act has been upheld
by the Division Bench of this Court in M/s Refex Energy
Limited, by its Managing Director Vs. Union of India and
another dated 02.06.2016 referred supra, in which it has
been held as follows.
18
“20. A cursory reading of the aforesaid provision
makes it clear that a conciliator could not act as an
arbitrator. It is no doubt true that sections 18(2),
18(3) and 18(4) have given dual role for the
Facilitation Council to act both as Conciliators and
Arbitrators. According to the learned counsel for
the appellants, the Facilitation Council should not
be allowed to act both as Conciliators and
Arbitrators. This contention, though prima facie
appears to be attractive, it is liable to be rejected
on a closer scrutiny. Though the learned counsel
would vehemently contend that the Conciliators
could not act as Arbitrators, they could not place
their hands on any of the decisions of upper
forums of law in support of their contentions. As
rightly pointed out by the learned single Judge,
section 18(2) of MSMED Act has borrowed the
provisions of sections 65 to 81 of the Arbitration
and Conciliation Act for the purpose of conducting
conciliation and, therefore, section 80 could not be
a bar for the Facilitation Council to conciliate and
thereafter arbitrate on the matter. Further the
decision of the Supreme court in (1986) 4 SCC
537 (Institute of Chartered Accountants of India v.
L.K. Ratna), on this line has to be borne in mind.
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One should not forget that the decision of the
Facilitation Council is not final and it is always
subject to review under Article 226 of the
Constitution of India and, therefore, the appellants
are not left helpless.”
8.7 Thus, the issue involved is no longer res integra.
Therefore, there is no bar to proceed further after the
termination of conciliation proceedings. However, as
discussed by us earlier, such proceedings by way of an
arbitration shall not be conducted by the very same
persons, who acted as conciliators. Thus, we hold so by
taking note of Section 75 of the Arbitration and
Conciliation Act, 1996, which lays emphasis on the
confidentiality of the conciliator. When a conciliator is
expected to maintain confidentiality of the matters
conveyed to him, he cannot thereafter change his role by
involving himself in a continuing process, such as,
arbitration. As Section 65 to 81 of the Arbitration and
Conciliation Act, 1996, are applicable to the proceedings
under Section 18 of the MSMED Act, such conciliators,
after termination, shall not act as arbitrators. We may
also note that this aspect of the matter has not been
dealt with by the Division Bench of this Court, which
rightly held that the Facilitation Council perform the twin
roles. As there is a marked difference between the role
20
of the Facilitation Council and the person appointed by it
to perform as arbitrator, one shall not perform the twin
roles unless and of course parties voluntarily affirm to it.”
28.In M/s Pal Mohan Electronics (supra), the Karnataka High Court at
paragraphs 12, 13, 14, 15 held as follows:
“12. The controversy in the present writ petition is in
reading the provisions of section 18(3) of the MSMED Act.
A Facilitation Facilitation Council, as provided under section
18 (2) of the MSMED Act, may itself conduct conciliation
proceedings or refer conciliation proceedings to another
institution or centre which offers such services; and section
18 (3) of the MSMED Act stipulates that if the conciliation
proceedings under section 18 (2) of the MSMED Act stands
terminated without any settlement, the Facilitation Council
may either itself take up the dispute for arbitration or refer
the dispute for arbitration to another institution/centre which
offers alternate dispute redressal services. If a Facilitation
Council after conducting a failed conciliation proceedings,
could also take up arbitration of the dispute, then such
Facilitation Council would be acting both as a conciliator
and an arbitrator in a given dispute. This would not be
permissible if the provisions of the Arbitration Act apply as
the provisions of Section 80, stipulate that unless the
parties have agreed to the contrary, a conciliator shall not
act as an arbitrator in any arbitral proceedings where
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conciliation proceedings were conducted by such arbitrator.
The provisions of Section 80 of the Arbitration Act reads as
follows:
Role of conciliator in other proceedings.--Unless
otherwise agreed by the parties,--
(a) the conciliator shall not act as an arbitrator or
as a representative or counsel of a party in any
arbitral or judicial proceeding in respect of a
dispute that is the subject of the conciliation
proceedings;
(b) the conciliator shall not be presented by the
parties as a witness in any arbitral or judicial
proceedings.
13. Therefore, the question is whether the restriction
under section 80 of the Arbitration Act would apply to the
Facilitation Council. The provisions of section 18 (3) of
the MSMED Act is categorical that the Arbitration Act
shall apply to a dispute taken up for arbitration after the
failure of the conciliation as if such arbitration was in
pursuance of an arbitration agreement referred to in
subsection (1) of section 7 of the Arbitration Act
inasmuch as it says that 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
22
section 7 of that Act. The MSMED Act not only provides
for an arbitration even though there may not be an
agreement for referring the dispute between a "buyer"
and a "supplier" to an arbitration, but also stipulates that
the provisions of the Arbitration Act shall apply to such
arbitration. There is nothing in the provisions of section
18 (3) of the MSMED Act to indicate that any particular
provision of the Arbitration Act is intended to be excluded
to an arbitration provided for under section 18 (3) of the
Act.
14. The next incidental question is, should any exclusion
be read because of the provisions of section 24 of The
MSMED Act which reads as follows:
"24. Overriding Effect- The provisions of
sections 15 to 23 shall have effect
notwithstanding anything inconsistent therewith
contained in any other law for the time being in
force."
It is obvious from a plain reading of the provisions of
section 24 of the MSMED Act that overriding effect is
given to the provisions of sections 15 to 23 thereof
wherever any law is inconsistent with the provisions
thereof. Indeed, the objective of the provisions of Chapter
- V of the Act, which includes provisions of section 15 to
23, is to provide for an expedited and efficacious closure
23
of a dispute, either by conciliation or by arbitration. But,
from this alone should it be inferred that a Facilitation
Council could act both as a Conciliator and Arbitrator,
merely because Section 18(3) of the MSMED Act
stipulates that the Facilitation Council could take up the
dispute for arbitration if the conciliation proceedings fail
and a contrary intent is not obvious from the plain
reading of the provisions of section 18 (3) of the Act.
15. The provisions of section 80 of the Arbitration Act
incorporates a salutary principle that a conciliator cannot
act also as an arbitrator, and this salutary principle
cannot be whittled down or excluded by inferring a
contrary intent in the provisions of Section 18(3) of the
MSMED Act and applying the provisions of section 24 of
the Act. A learned single judge of the High Court of
Judicature at Patna in the decision rendered on
19.6.2018 in Reliance Communications Ltd versus the
State of Bihar and others (WP No. 8077 of 2018) has
considered similar questions, and concluded thus:
"The existence of an arbitration agreement is
assumed through the deeming fiction in section 18 (3)
of the MSMED Act with reference to section 7 (1) of
the Arbitration Act, and must be understood as being
merely for the purposes of statutorily fulfilling the
foundational requirement of an arbitration agreement
24
for proceeding under the Arbitration Act. This is the
extent of the deeming fiction which does not go to
suggest the existence of any further agreement
between the parties for the purpose of section 80 of
the Arbitration Act to the effect that they have agreed
that a conciliator would also be competent to act as
arbitrator. As stated above, section 18 (2) and 18 (3)
of the MSMED Act both seek to adopt the provisions
of section 80 of the Arbitration Act. Further, section 24
of the MSMED Act with its overriding effect comes
into play only in cases of inconsistencies between the
two enactments. A harmonious reading of these
provisions clearly indicates that section 80 of the
Arbitration Act has been adopted and requires to be
given full effect to. Accordingly, the Facilitation
Council may act either as conciliator or as arbitrator
or it may choose to refer the dispute at either or both
stages to any centre or institution providing alternate
dispute resolution services, but it cannot act as both
conciliator and arbitrator itself.”
29.In Sasan Power Limited (supra), the Madhya Pradesh High Court at
paragraphs 48 and 49 observed as follows:
“48.The different High Courts have taken different views
on the interpretation of Section 18 of the Act of 2006. The
Bombay High Court in certain cases opined that the Council
25
cannot act as conciliator as well as arbitrator. The Madras
High Court opined that the same person, who has acted as
conciliator cannot act as an arbitrator. The Division Bench of
Patna High Court in Best Towers Pvt. Ltd. (supra) has given a
totally different interpretation to Section 18 aforesaid and
clarified that the Council can act as an arbitrator upon the
failure of conciliation proceedings.
49. At the cost of repetition, it is apposite to mention that
if a plausible view is taken by the Council, it does not warrant
interference by this Court. The impugned decision taken by
Council is in consonance with the view taken by certain High
Courts. Thus, no interference can be made by this Court at
this Court at this stage under Article 226/227 of the
Constitution. However, it will be open for the Council to
proceed with arbitration proceedings by excluding Shri C.K.
Minj as a Member of arbitral body or refer the matter to any
other institute or center proceeding alternative dispute
resolution service.”
30.In Gujarat State Petronet Limited (supra), the Bombay High Court at
paragraphs 17, 18, 19, 21 and 22 observed as follows:
“17.This takes us to consider the next issue raised by Mr.
Kane, learned counsel for the petitioner that the respondent
No.1 – MSEFC having itself conducted the conciliation
proceedings, could not have decided to itself initiate the
arbitration proceedings under Section 18(3) of the MSMED
26
Act. We find merit in this submission.
18. Section 18(1) of the MSMED Act provides for
reference to the Council of a dispute with regard to any
amount due under Section 17. Sub-section (2) of the Section
18 contemplates of conduct of conciliation either by Council
itself or by seeking assistance of any institution or centre
providing alternate dispute resolution services. For purpose
of such conciliation proceedings, the provisions of Sections
65 to 81 of the Arbitration and Conciliation Act, 1996 are
applicable. Sub-section (3) thereof, makes a provision for
arbitration if the conciliation proceedings between the parties
are not successful and stand terminated without any
settlement either by the Council itself or by reference to any
institution or centre providing alternate dispute resolution
services. To such arbitration, the provisions of Section 65 to
81 of the Arbitration and Conciliation Act, 1996 are made
applicable.
19. A plain reading of sub-sections (2) and (3) of Section
18 of the MSMED Act makes it clear that it is obligatory for
the Council to conduct conciliation proceedings either by
itself or seek assistance of any institute or centre providing
alternative dispute resolution services. The provisions of
Sections 65 to 81 of the Arbitration Act 1996 are made
applicable to conciliation proceedings. In the event, the
conciliation proceedings are unsuccessful and stand
27
terminated, the Council can either itself take up the dispute
for arbitration or refer it to any institution or centre providing
alternate dispute resolution services for such arbitration. The
provisions of Arbitration Act 1996, in its entirety, are made
applicable as if the arbitration was in pursuance of the
arbitration agreement referred to in sub-section (1) of Section
7 of the Arbitration Act, 1996.
20. xxx xxx xxx
21. A Harmonious reading of these provisions clearly
indicate that Section 80 of the Arbitration Act, 1996 is
applicable to conciliation as well as arbitration proceedings
under sub-sections (2) and (3) of Section 18 of the MSMED
Act. Section 80 of the Arbitration Act, 1996 reads thus:
xxx xxx xxx
22. A plain reading of Section 80 makes it clear that the
conciliator cannot act as an arbitrator or his representative or
counsel of a party in any arbitral or judicial proceedings in
respect of a dispute. It is thus evident that the MSEFC cannot
act as conciliator as well as arbitrator, or it may choose to
refer the dispute to any centre or institution providing
alternate dispute resolution services for the parties to
conciliation or arbitration. However, once the MSEFC acts as
conciliator, in view of provisions of Section 80, it is prohibited
from acting as arbitrator.”
28
31.The view taken in the aforesaid cases is that once the Facilitation
Council acts as a conciliator, in view of provision of Section 80 of the A&C
Act, it is prohibited from acting as arbitrator.
32.Now we take note of the judgments cited by Ms. Rautray.
33.In M/s Cummins Technologies India Pvt. Ltd. (supra), the question
posed was as to whether after the Facilitation Council had attempted to
conciliate between the parties, it can act as an arbitrator for adjudication of
the dispute. The Allahabad High Court observed as follows at paragraphs
37, 40, 43, 46, 47, 54, 55, 56, 57, 58, 59, 62 & 63:
“37. Therefore, sub-section (2) of Section 18 leaves it
open to discretion of MASEF Council to either itself
proceed on the Reference by first conducting
Conciliation or refer the matter to an Institution or
Centre providing alternate dispute resolution services
to conduct Conciliation. In either case, Reference
made under sub-section (1) shall first proceed for
conciliation and when such Conciliation is proceeded,
for the purpose of procedure, Sections 65 to 81 of Act,
1996 shall apply as if conciliation was initiated under
Part-III of Act, 1996. As we have already said, Part-III
of Act, 1996 deals with 'Conciliation'. It takes into its
ambit Sections 61 to 81. For the purpose of sub-
section (2), entire Part-III has not been made
applicable and it is only Sections 65 to 81, which have
29
been made applicable by virtue of sub-section (2) of
Section 18 of MSMED Act, 2006. The obvious reason
is that these provisions deal with the procedure for
Conciliation after application for Conciliation is made
and Conciliators are appointed under Act, 1996. This
procedure has been applied by conciliation which is to
be made under Section 18(2) of MSMED Act, 2006.
This is called legislation by Reference. Sections 65 to
81 of Act, 1996 have been made applicable for
conciliation under Section 18(2) of MSMED Act, 2006
by making provision of Act, 1996 applicable by
legislative reforms.
40. Sections 61 to 64 have not been made applicable to
the Conciliation proceedings as contemplated in Section
18(2) of MSMED Act, 2006 for the reason that when a
Reference is made, MASEF Council shall proceed with
the conciliation either itself or refer the matter to an
Institution or Centre and therefore, stage up to
appointment of 'Conciliator' is already covered by
Section 18 sub-sections (1) and (2). That is why, only
further procedure provided under Sections 65 to 81 has
been made applicable for Conciliation under Section
18(2) of MSMED Act, 2006. Sections 65 to 81 have been
made applicable by Section 18(2) of MSMED Act, 2006
with respect to Conciliation as contemplated under sub-
30
section (2) and not for arbitration contemplated by sub-
section (3). Therefore, applicability of Sections 65 to 81
will be confined only to the Conciliation proceedings
under Section 18(3) and not beyond that.
43. Even otherwise, by virtue of Section 61 of Act, 1996
the provisions of Part-III would be applicable so long as
otherwise it is not provided by any other law or parties
have decided or agreed and therefore, the provisions of
Part-III will not prevail over otherwise provisions of
MSMED Act, 2006 and, on the contrary, will have to sub-
serve and surrender to the provisions of MSMED Act,
2006.
46. Moreover, Section 80 of Act, 1996 by virtue of
Section 61 of said Act, cannot override provisions of
MSMED Act, 2006 and therefore, it cannot be said that
Section 80 of Act, 1996 will exclude MASEF Council to
act as Arbitrator, since it has been Conciliator in the
dispute and arbitration therefore cannot be proceeded by
it. This argument in fact suppresses and goes contrary to
what has been specifically provided in Section 18(3) and
(4) of MSMED Act, 2006.
47. When read conjointly Section 24 is further
clarificatory and fortifies what we have said earlier. Again
it provides that Sections 15 to 23 of MSMED Act, 2006
shall have effect over any otherwise law. This is an
31
overall overriding effect given by Section 24 to Section
18 of MSMED Act, 2006 and in that view of matter
Section 18 of MSMED Act, 2006 cannot be read so as to
render subordinate to Section 80 of Act, 1996. The
counsel for petitioner advancing argument otherwise, in
our view, is not correct and the same is accordingly
rejected.
54. To us, the two parts of the judgment of Bombay High
Court in Gujarat State Petronet Ltd. (Supra) are
contradictory. We find ourselves with great respect in
disagreement to the aforesaid view taken by Bombay
High Court in paragraphs 20 and 21 of the judgment for
the reason that Sections 65 to 81 have been applied by
Reference under Section 18(2) to conciliation but under
sub-Section (3) entire Act, 1996 has been applied, which
includes Section 61 of Act, 1996 also. Simultaneously,
sub-section (4) of Section 18 very specifically states that
notwithstanding anything provided otherwise, MASEF
Council shall have jurisdiction to arbitrate when the
'Supplier' is located within its local jurisdiction and 'Buyer'
is within India and in such a case when a declaratory
and mandatory provision is provided in sub-section (4),
Section 80 of Act, 1996 could not have been given
overriding effect so as to denude MASEF Council its
authority to act as Arbitrator. We accordingly hold and
32
find ourselves unable to be persuaded by the aforesaid
Division Bench decision of Bombay High Court.
55. Then there is a Single Judge judgment of Karnataka
High Court in Pal Mohan Electronics Pvt. Ltd. Vs. The
Secretary, Department of Small Scale Industries and
others, 2019 (5) Kar.LJ. 72. Therein M/s Pal Mohan
Electronics Pvt. Ltd. (hereinafter referred to as "PMEPL")
was engaged in the business of electronics. Maharashtra
State Electricity Distribution Co. Ltd. (hereinafter referred
to as "MSEDCL"), invited bids for supply, installation,
connection and commission of GSM and GPRS Modems
for HT Consumers' Meters, LT Consumers' Metes and
Feeder Meters. M/s PMEPL made its bid and was
successful. It was issued Purchase Order dated
28.3.2011. It was subsequently modified on multiple
occasions. Ultimately MSEDCL terminated the contract
with petitioner alleging certain lapses in the working of
the Modem. Reference was made under Section 18(1) of
MSMED Act, 2006 to MASEF Council. Facilitation
Council did enter into dispute for conciliation and when it
failed, proceeded to act as 'Arbitrator'. This was objected
by PMEPL. The Court formulated following question for
adjudication:
"Whether Facilitation Council, having conducted
conciliation proceedings under section 18(2) of
33
the Act could itself conduct arbitration
proceedings under section 18(3) of the Act."
56. Following the same reason as given by Bombay High
Court in Gujarat State Petronet Ltd. Vs. Micro and Small
Enterprises Facilitation Council and others (supra) the
learned Single Judge of Karnataka High Court observed
that Section 80 of Act, 1996 must be read with Section
18(3) of MSMED Act, 2006. Paragraph-13 of judgment
reads as under:
"13. Therefore, the question is whether the
restriction under section 80 of the Arbitration Act
would apply to the Facilitation Council. The
provisions of section 18 (3) of the MSMED Act is
categorical that the Arbitration Act shall apply to a
dispute taken up for arbitration after the failure of the
conciliation as if such arbitration was in pursuance of
an arbitration agreement referred to in subsection (1)
of section 7 of the Arbitration Act inasmuch as it says
that 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. The MSMED Act not only
provides for an arbitration even though there may
not be an agreement for referring the dispute
34
between a "buyer" and a "supplier" to an arbitration,
but also stipulates that the provisions of the
Arbitration Act shall apply to such arbitration. There
is nothing in the provisions of section 18 (3) of the
MSMED Act to indicate that any particular provision
of the Arbitration Act is intended to be excluded to an
arbitration provided for under section 18 (3) of the
Act."
57. We find that learned Single Judge, while considering
Section 18(3) of MSMED Act, 2006 vis-a-vis Section 80 of
Act, 1996 has not at all adverted to Section 18(4) of
MSMED Act, 2006.
58. Next question considered was, should any exclusion
be read because of Section 24 of MSMED Act, 2006 and it
was answered by observing as under:
"It is obvious from a plain reading of the
provisions of section 24 of the MSMED Act that
overriding effect is given to the provisions of
sections 15 to 23 thereof wherever any law is
inconsistent with the provisions thereof. Indeed,
the objective of the provisions of Chapter - V of
the Act, which includes provisions of section 15 to
23, is to provide for an expedited and efficacious
closure of a dispute, either by conciliation or by
arbitration. But, from this alone should it be
35
inferred that a Facilitation Council could act both
as a Conciliator and Arbitrator, merely because
Section 18(3) of the MSMED Act stipulates that
the Facilitation Council could take up the dispute
for arbitration if the conciliation proceedings fail
and a contrary intent is not obvious from the plain
reading of the provisions of section 18 (3) of the
Act."
59. Karnataka High Court in fact followed the judgment of
Bombay High Court in Gujarat State Petronet Ltd. Vs.
Micro and Small Enterprises Facilitation Council and
others (supra) and Gujarat High Court in Principal Chief
Engineer Vs. M/s Manibhai and Brothers (supra). We find
that in para-15, learned Single Judge has observed that
Section 80 of Act, 1996 incorporates a salutary principle
that a 'Conciliator' cannot act also as an Arbitrator and this
salutary principle cannot be whittled down or excluded by
inferring a contrary intent in the provisions of Section 18(3)
and applying Section 24. Unfortunately, when we enquired,
are not shown any such alleged salutary principle which
could have been given an overriding effect over express
statutory provision providing otherwise. Further, we also
find that Section 18(4) has been completely overlooked
and no reason has been given by referring to Section
18(4) as to why MASEF Council cannot act as Arbitrator,
36
when a specific declaration has been made that it shall
have jurisdiction to act an Arbitrator. For application of
Section 18(4) to that extent, there is no such condition
provided. In our view, therefore, aforesaid Single Judge
judgment will not help petitioners and we record our
respectful disagreement with the aforesaid authority of the
learned Single Judge of Karnataka High Court
62. Even otherwise, as we have already discussed,
Section 80 itself permits an otherwise agreement between
the parties. Meaning thereby the embargo that Conciliator
shall not be Arbitral Tribunal is not absolute. That being so,
the mandatory and overriding effect contained in Section
18(3) and 18(4) and Section 24 of MSMED Act, 2006
cannot be whittled down by referring to a salutary principle
though, in our view, no such salutary principle having force
of law to the extent that a legislative provision must be
read as sub-serving is recognized or available.
63. In view of above discussion, we are clearly of the view
that MASEF Council having acted as Conciliator is not
barred from working as Arbitral Tribunal to arbitrate the
dispute under Section 18(3) and such jurisdiction of
MASEF Council has been given overriding effect by virtue
of Section 18(4) and Section 24 which have to be given
complete swing in the area covered by same. The
argument, therefore, advanced otherwise by learned
37
counsel for petitioner is hereby rejected. The question,
formulated above, is answered against petitioner and we
hold that MASEF Council is not prohibited from working as
Arbitrator itself for adjudication of dispute between the
parties and it is not obliged to refer the matter to any other
body. ”
35.In The Best Towers Pvt. Ltd (supra), the Patna High Court in
paragraphs 20, 21 and 22 observed as follows :
“20………… On a dispute being raised with regard to delay
in payments or any amount due, a forum named as a
Facilitation Council is created under Section 18 of the Act
where any party to a dispute may make a reference to the
Facilitation Council. Subsection (2) of Section 18 enjoins
upon the Facilitation Council to either itself conduct a
conciliation or seek the assistance of any Institution or
Centre providing alternate dispute resolution services by
making a reference to it. The provisions of Section 65 to
Section 81 of the Arbitration and Conciliation Act, 1996 are
to apply to such a dispute as if the conciliation was under
Part-III of the 1996 Act. Thus, the first step on the
reference of a dispute is to undertaking a conciliation effort
by the Facilitation Council or reference of such conciliation
to any Institution or center as provided therein. The words
“shall apply” in respect of Section 65 to Section 81 of the
1996 Act, therefore, clearly stipulates that in an effort of
38
conciliation the same process will be adopted in respect of
conciliation proceedings with a specific bar in Section 80
that the Conciliator shall not act as an Arbitrator or as a
representative or Counsel of a party in “any arbitral or
judicial proceedings in respect of a dispute that is the
subject of conciliation proceedings”. Thus, according to
Section 80 the Conciliator cannot act as an Arbitrator. The
question raised before us by the learned counsel for the
respondent petitioner is that if the Facilitation Council acts
as a Conciliator then the Facilitation Council cannot act as
an Arbitrator as in the present case when after having
attempted conciliation proceedings and its termination in
failure, the Facilitation Council itself has proceeded to
arbitrate which it could not have done in terms of Section
80 of the 1996 Act read with Section 18(2) of the 2006 Act.
This argument on behalf of the respondent petitioner has
been accepted by the learned Single Judge that has been
questioned by the appellant contending that Section 24 of
the 2006 Act clearly provides that Sections 15 to 23 thereof
shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in
force. What we find is that sub-section (2) of Section 18
only refers to conciliation and the procedure to be followed
in terms of Part-III of the 1996 Act to the extent of Section
65 to Section 81 thereof. Immediately thereafter, sub-
39
section (3) of Section 18 introduces an absolutely novel
procedure allowing the commencement of arbitration
proceedings with a mandate on the Council that in the
event conciliation ends in failure, 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 1996
Act "shall then" apply to the disputes as if the arbitration
was in pursuance of an agreement. The overriding effect
given to this provision in terms of Section 24 of the 2006
Act, in our opinion, clearly overrides any bar as suggested
by the learned counsel for the respondent petitioner under
Section 80 of the 1996 Act. It is trite law that the meanings
assigned and the purpose for which an enactment has
been made should be construed to give full effect to the
legislative intent and we have no doubt in our mind that the
provisions of Section 18(3) mandates the institution of
arbitration proceedings under the 2006 Act itself and it is
"then" that the provisions of the Arbitration and Conciliation
Act, 1996 shall apply. The institution of arbitration
proceedings would be governed by sub-section (3) of
Section 18 of the 2006 Act which having an overriding
effect cannot debar the Facilitation Council from acting as
an Arbitrator after the conciliation efforts have failed under
sub-section (2) of Section 18 of the Act. A combined
40
reading of sub-section (2) and sub-section (3) of Section
18 of the 2006 Act read with the overriding effect under
Section 24 thereof leaves no room for doubt that any
inconsistency that can possibly be read keeping in view
Section 80 of the 1996 Act stands overridden and the
Facilitation Council can act as an Arbitrator by virtue of the
force of the overriding strength of sub-section (3) of
Section 18 of the 2006 Act over Section 80 of the 1996 Act.
The conclusion of the learned Single Judge that there is a
prohibition on the Council to act in a dual capacity is,
therefore, contrary to the clear intention of the legislature
and, therefore, the verdict that the Facilitation Council
lacked inherent jurisdiction does not appear to be a correct
inference. Thus, on a comparative study of the provisions
referred to hereinabove, there is no scope for any doubt
with regard to the overriding effect of the provisions of the
2006 Act that empowers the Facilitation Council to act as
an Arbitrator upon the failure of conciliation proceedings.
The cloud of suspicion and doubt about the role of the
Facilitation Council, therefore, stands clarified on the basis
of the analysis made by us hereinabove.
21. The second reason why we differ from the view of the
learned Single Judge is that the 2006 Act was enacted as a
complete code in itself and it is for this reason that the
authority to conciliate and arbitrate were enacted and
41
provided for in a different form for the promotion,
development and facilitation of delayed payments arising
out of disputes of small industries under the 2006 Act. The
platform for resolution of disputes was, therefore, created
under Section 18 of the 2006 Act in order to avoid the
rigors and settlement of disputes at a pre-arbitration stage
itself.
22. The status of the 2006 Act conferring the jurisdiction on
the Facilitation Council to resolve disputes is further
fortified by a bare perusal of sub-section (4) of Section 18
to either act as a Conciliator or Arbitrator in respect of a
dispute anywhere in India. The aforesaid provision,
therefore, also clearly rules out the possibility of reading a
bar on the role of the Facilitation Council to act as an
Arbitrator if it has performed the role of Conciliator. The
argument of the learned counsel for the respondent
petitioner, as accepted by the learned Single Judge,
therefore, overlooks the aforesaid intention that can be
easily gathered from a reading of the entire provisions of
the 2006 Act, particularly the provisions of Section 18 and
Section 24 thereof.”
36.In Eden Exports Company (supra), Division Bench of the Madras
High Court at paragraph 22 observed as follows:
“22.A cursory reading of the aforesaid provision makes
it clear that a conciliator could not act as an arbitrator. It is
42
no doubt true that sections 18(2), 18(3) and 18(4) have
given dual role for the Facilitation Council to act both as
Conciliators and Arbitrators. According to the learned
counsel for the appellants, the Facilitation Council should
not be allowed to act both as Conciliators and Arbitrators.
This contention, though prima facie appears to be
attractive, it is liable to be rejected on a closer scrutiny.
Though the learned counsel would vehemently contend
that the Conciliators could not act as Arbitrators, they
could not place their hands on any of the decisions of
upper forums of law in support of their contentions. As
rightly pointed out by the learned single Judge, section
18(2) of MSMED Act has borrowed the provisions of
sections 65 to 81 of the Arbitration and Conciliation Act for
the purpose of conducting conciliation and, therefore,
section 80 could not be a bar for the Facilitation Council to
conciliate and thereafter arbitrate on the matter. Further
the decision of the Supreme court in (1986) 4 SCC 537
(Institute of Chartered Accountants of India v. L.K. Ratna),
on this line has to be borne in mind. One should not forget
that the decision of the Facilitation Council is not final and
it is always subject to review under Article 226 of the
Constitution of India and, therefore, the appellants are not
left helpless.”
37.In M/s. Refex Energy Limited (supra), the Division Bench of the
43
Madras High Court, while considering the challenge made to the validity of
Section 18 of the Act of 2006 on the ground that the same is ultra vires
Article 14 of the Constitution of India, which was earlier held to be valid in
M/s. Eden Exports Company (supra), quoted with approval paragraph 20
thereof which is noticed already.
38.In JMS Mining Services Pvt. Ltd. (supra), one of the questions that
had fallen for consideration of this Court was as to whether the Facilitation
Council having entered into arbitration after it acted as conciliator, the
entire arbitration proceeding by the Facilitation Council is vitiated. The
question was answered at paragraph 7, in the following manner:
“7. Section 24 of the MSM Act provides that the provisions
of Sections 15 to 23 of that Act shall have effect
notwithstanding anything inconsistent therewith contained
in any other law for the time being in force. Therefore, if
the law relating to territorial jurisdiction, subject matter
jurisdiction or pecuniary jurisdiction is referable to any
other law and the provision of any other such law is
inconsistent with the provisions of Sections 15 to 23 of the
MSM Act, the provisions of the MSM Act, in particular,
those contained in Sections 15 to 23 of that Act will have
overriding effect over all such laws. This being the effect of
Section 24 of the MSM Act, primacy to be given is to
Section 18 of the MSM Act insofar as the case in hand is
concerned. Section 18 opens up with yet another non-
obstante clause and provides that any party to a dispute
44
may, with regard to any amount due under Section 17 of
the MSM Act make a reference to the Chhattisgarh
Facilitation Council. Section 17 of the MSM Act provides
that for any goods supplied or services rendered by the
supplier, the buyer shall be liable to pay the amount with
interest thereon as provided under Section 16. What
therefore becomes available for dispute resolution
proceedings provided in Section 18 of the MSM Act is the
statutory eligibility to the amounts that could be treated as
due under Section 17 read with Section 18 of the MSM
Act. When the supplier has invoked the provisions of
Section 18 of the MSM Act, the Chhattisgarh Facilitation
Council is duty bound under sub-section (2) of Section 18
to conduct conciliation. The said sub-section read
alongwith sub-section (3) of Section 18 of the MSM Act
obliges the Chhattisgarh Facilitation Council to proceed to
have arbitration in the event of conciliation failing. On
failure of such conciliation, the Chhattisgarh Facilitation
Council may either itself take up the dispute for arbitration
or refer it to an institution or center providing alternative
dispute resolution services for such arbitration. There is
thus an incorporation by the relevant provisions of the A&C
Act to govern the proceedings which would have
commenced with the application of reference under
Section 18 of the MSM Act. Once statutory sanction is
45
given to a particular authority which is the conciliator, to
be, by itself or himself, the arbitrator, there cannot be any
challenge to the arbitrator's authority on the ground of dual
office or dual responsibility. The proceedings provided
through the various sub-sections of Section 18 of the MSM
Act operates notwithstanding any other law for the time
being in force. Therefore, any inhibition in the realm of law
relating to arbitration including the A&C Act, to a conciliator
being an arbitrator in the same case, does not affect the
arbitral proceedings under sub-sections (2) and (3) of
Section 18 of the MSM Act. This being the net result of the
analysis of the relevant provisions, we are of the view that
the award made by the Chhattisgarh Facilitation Council
under the MSM Act could be challenged only under the
provisions of the A&C Act.”
39.In these decisions, view has been taken that Facilitation Council can
act as arbitrator upon failure of conciliation proceeding.
40.Division Bench of this Court in JMS Mining Services Pvt. Ltd. (supra),
had already held that any inhibition in the realm of law relating to arbitration
including A & C Act, to a conciliator being an arbitrator in the same case,
does not affect the arbitral proceeding under Section 18(2) and 18(3) of the
Act of 2006. Though Section 80 of A & C Act was specifically not taken note
of, the same will not make any difference as we find ourselves in
agreement with the view taken in M/s Cummins Technologies India Pvt.
Ltd. (supra), The Best Towers Pvt. Ltd (supra), M/s. Refex Energy Limited
46
(supra) and Eden Exports Company (supra). The reasonings assigned will
also squarely apply with regard to the contentions urged by Mr. Shrivastava
qua Sections 10, 12, 21, 23 & 24 of the A & C Act.
41.No provision has been brought to our notice by Mr. Shrivastava to
demonstrate that Facilitation Council cannot arbitrate in regard to a claim
towards price escalation while conducting arbitration and therefore, the
submission is without any merit.
42.In view of the above discussion, we find no merit in this appeal and
accordingly, the appeal is dismissed. The parties to this proceeding will
appear before Facilitation Council on 15.06.2022. No cost.
Sd/- Sd/-
(Arup Kumar Goswami) (N.K.Chandravanshi)
CHIEF JUSTICE JUDGE
Hem / Anu
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