1

AFR

HIGH COURT OF CHHATTISGARH, BILASPUR

WPC No. 221 of 2022

The Collector And District Mission Director, Office Of The District

Project, Rajiv Gandhi Shiksha Mission (SSA), District Balrampur -

Ramanujganj Chhattisgarh - 497119.

---- Petitioner

Versus

1.The Micro and Small Enterprises Facilitation Council, Chhattisgarh

Director Of Industries, Chhattisgarh Udhyog Bhawan, Ring Road

No.1, Telibandha, Raipur Chhattisgarh - 492001.

2.M/S Noybl Infotech Pvt. Ltd., Through Its Director, Sh. Vishal

Rampuria, Having Its Office At - 54/602, Dangania, Near CSEB Office,

Raipur, District - Raipur Chhattisgarh - 492013.

----Respondents

For Petitioner : Ms. Akanksha Jain,Advocate.

For Respondent No.2 : Shri Ashutosh Singh Kachhawaha,

Advocate.

Hon'ble Shri Justice Rakesh Mohan Pandey

Order on Board

11.03.2024

1)The petitioner has filed this petition seeking the following relief(s):-

"10.1 That the Hon’ble Court may kindly be pleased to call

for the entire records pertaining to the case of the

impugned order dated 16.2.2021 (Annexure P/1) from the

possession of Respondent No.1, for its kind perusal.

10.2 That the Hon’ble Court may kindly be pleased to

quash the order dated 16.2.2021 pronounced on

29.5.2021 passed by respondent No.1 (Annexure P/1).

10.3 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.”

2)The facts of the present case are that the petitioner is the District

Mission Director of Rajiv Gandhi Shiksha Mission (SSA), District 2024:CGHC:8649

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Balrampur-Ramanujganj. The Mission is an autonomous registered

Society. The petitioner entered into an agreement with respondent

No. 2 for the sale and supply of a Biometric Unit (Finger Print

Scanner and Tablet, Standalone or embedded) and for the creation

of a website based District School Management Information

System (MIS) at the District Level along with the operation,

management and maintenance of the hardware and software for a

period of one year. The agreement was made effective from

25.10.2014. A total of 1235 units of fingerprint scanners and 1235

units of tablets were purchased and installed as per the terms of

the agreement. The work order was issued on 25.10.2024.

Respondent No. 2 raised bills from time to time according to the

terms of the contract. It is further pleaded in the Writ Petition that

the petitioner was paid in accordance with the terms of the contract

through various cheques. The details are as under:

“The amount to the tune of Rs. 9,73,200/- via cheque

no. 000334 dated 29/11/2014, Rs. 20,85,000/- via

cheque no. 000335 dated 24/03/2015, Rs. 9,61,029/- via

cheque no. 000339 dated 15/04/2015, Rs. 24,45,651/-

via cheque no. 000341 dated 09/06/2015, Rs.

31,96,584/- via cheque no. 003448 dated 21/10/2015,

Rs. 41,67,500/- via cheque no. 007626 dated

18/03/2016, Rs. 41,67,250/- via cheque no. 007629

dated 31/03/2016, Rs. 67,47,300/- via cheque no.

003444 dated 06/08/2016, Rs. 22,100,76/- through RTG

from the office of District Education Officer and Rs.

29,27,167/- via cheque no. 003445 dated 26/08/2016

were paid to the Respondent No. 2 alongwith VAT and

TDS, as full and final payment, in consonance with the

agreement.”

3)The biometric machines were installed by respondent No. 2 in four

phases between the period from 01.01.2015 to 19.12.2015 and bills

inclusive of the periodic management, maintenance and up-

gradation costs were raised by respondent No. 2 and the same

were cleared by the petitioner. Respondent No. 2 raised a bill in 2024:CGHC:8649

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relation to periodic maintenance from 01.05.2016 to 30.04.2017 to

the tune of Rs. 75,00,000/- and for new parts of hardware of

biometric machine Rs.21,12,708/-, a total of Rs.96,12,708/-. The

bills were not cleared therefore respondent No. 2 approached

respondent No. 1 i.e. Micro and Small Enterprises Facilitation

Council, Chhattisgarh (MSEFC) for the resolution of dispute under

Section 18(1) of the Micro, Small and Medium Enterprises

Development Act, 2006 (MSMED Act, 2006). Respondent No. 1

passed an award against the petitioner on 29.05.2021 and directed

the petitioner to make payment of Rs. 96,12,708/-, the outstanding

amount of the bills raised by respondent No. 2 and the interest part

to the tune of Rs. 77,60,813/-, a total of Rs. 1,73,73,521/- within a

period of 30 days. The petitioner has challenged the award passed

by respondent No. 1.

4)Learned counsel for the petitioner would submit that the impugned

order dated 16.02.2021 pronounced on 29.05.2021 has been

passed by respondent No. 1 in a cryptic manner and without

jurisdiction. It is further argued that the proceedings were

conducted by respondent No. 1 against the principles of natural

justice and public policy. The provisions of the MSMED Act, 2006

were not invoked and followed. It is also submitted that respondent

No. 2 cannot be said to be a ‘supplier’ and the petitioner to be a

‘buyer’ within the definition contained under Sections 2(n) and 2(d)

of the MSMED Act, 2006. It is also argued that no conciliation

proceeding was conducted by respondent No. 1 according to

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

proceeded for arbitration. The arbitration proceedings were 2024:CGHC:8649

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conducted by the same composition of the members of the Council

who were in the conciliation proceedings. It is further contended

that the conciliation and arbitration proceedings were concluded on

the same day and respondent No. 1 subsumed the role of the

arbitrator and concluded the arbitration proceedings. It is also

contended that the conciliation proceedings were never terminated,

no order was passed for the appointment of an arbitrator and no

summons was issued to the petitioner in this regard. It is also

argued that according to the mandate of Section 18(2) of the Act,

2006, the Council is under obligation to conduct conciliation

proceedings in accordance with Sections 65 to 81 of the Arbitration

and Conciliation Act, 1996 (hereinafter referred to as ‘Act, 1996’). It

is also submitted that according to the mandate of Section 18(3) of

the Act, 2006 in the event conciliation fails there should be specific

order in this regard. Learned counsel for the petitioner would further

argue that the order passed by respondent No. 1 cannot be termed

as an award as the same has not been passed in accordance with

the provisions of Section 18 of the Act, 2006.

5)In support of her contention, she placed reliance on the judgments

passed by the Hon’ble Supreme Court in the matter of Jharkhand

Urja Vikas Nigam Limited vs. The State of Rajasthan and Ors.

reported in 2021 SCC Online SC 1257, paras 10, 11 and 13 and

the matter of M/s. Vijeta Construction vs. M/s. Indus Smelters

Ltd. And Anr. reported in 2021 SCC Online SC 3436, paras 9.1,

9.2, 9.3 and 11.

6)On the other hand, learned counsel for respondent No. 2 would

oppose the submissions made by counsel for the petitioner. He 2024:CGHC:8649

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would submit that the writ petition under Article 226 of the

Constitution of India is not maintainable as there is an efficacious

alternative remedy to challenge the award by filing an application

under Section 34 of the Act, 1996. He would further submit that the

work order was issued in favour of respondent No. 2 on

25.10.2014. He would refer to clause B of the agreement dated

25.10.2014 which specifically deals with scope and says that

operation, management and maintenance of the Hardware and

Software for the period of one year from the date of completion of

the Pilot project at Raipur Block or the date of completion of Scaled

Up project in the entire District, as and when the circumstances fit

so, further extendable based on project requirement. He would also

submit that on 22.04.2015, another work order was issued to

complete the scaled-up project at different sites in Balrampur

District. Similarly, on 22.07.2015, the third work order was placed

for the installation of 612 biometric machines across different sites

in Balrampur District. On 21.10.2015, the fourth work order for the

installation of 500 biometric attendance machines was issued by

the petitioner. He would contend that by virtue of the above-stated

work orders, a total of 1413 biometric attendance machines were

installed by respondent No. 2. He would submit that the work order

comprised of three components:-

“A – The answering respondent has to supply and install

the biometric attendance machine in the selected

government schools of Balrampur District and the supplier

would be entitled to get installation charges;

B – After installation, respondent No.2 would be entitled to

get fees for software development; and,

C – The cost of annual periodic maintenance and up-

gradation and respondent No. 2 would get its cost as per

agreement.” 2024:CGHC:8649

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7)Learned counsel for respondent No. 2 would further submit that

respondent No. 2 installed devices and software from 01.05.2015

to 30.04.2017 and therefore, he raised bills for supply, periodic

maintenance and up-gradation from 01.04.2015 to 27.12.2016 and

thereafter, from the year 2016 to 2017. He would further submit that

the claim of respondent No. 2 was denied, therefore, he

approached respondent No. 1 according to Section 18(1) of the Act,

2006 being micro industry. He would also submit that respondent

No. 2 was registered under the MSMED Act as a Micro Industry on

05.03.2010. The order sheet of respondent No. 1 would show that a

claim was made under Section 18 of Act, 2006 by respondent No. 2

against the petitioner on 19.09.2019. On 03.10.2019, the summons

was issued to the petitioner through speed post. The summons was

issued according to the provisions of Section 18 of the Act, 2006 for

conducting conciliation in the matter for resolving the disputes

through MSEFC and if the conciliation fails in the disputed matter,

the arbitration proceeding would be initiated and the award would

be passed. The petitioner did not appear therefore another

summons was issued on 07.01.2020 through speed post noting

that the case is fixed for hearing on 20.01.2020 and the petitioner

as well as respondent No. 2 was intimated to appear on the said

date and time before the Council along with necessary

documents/reply. On 31.01.2020, a similar summons was sent

through speed post. On 03.12.2020, the parties were granted time

to file a written statement / reply / application / correspondence /

document. On 16.12.2020, again summons was issued to the

parties. In the summons dated 28.01.2021, respondent No. 1 2024:CGHC:8649

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specifically observed in the note that the non-applicant is required

to submit a written statement / response in respect of the

applicant’s application dated 27.05.2020 and thereafter, on

16.02.2021 / 29.05.2021 the award was passed. He would contend

that sufficient opportunity was afforded to the petitioner and

thereafter, an award has been passed. He would further contend

that according to provisions of Section 19 of the Act, 2006 the

petitioner has to deposit 75% of the award amount to challenge the

award and just to avoid such mandatory provision, the petitioner

has filed this petition.

8)In support of the submissions, he placed reliance on the judgments

passed by the Hon’ble Supreme Court in the matter of Tirupati

Steels vs. Shubh Industrial Components and Anr., reported in

(2022) 7 SCC 429 , Bhaven Construction vs. Executive

Engineer, Sardar Sarovar Narmada Nigam Limited, reported in

(2022) 1 SCC 75, Gujarat State Civil Supplies Corporation Ltd.

vs. Mahakali Foods Pvt. Ltd. (Unit 2) and Anr., reported in (2023)

6 SCC 401.

9)I have heard learned counsel appearing for the parties and perused

the documents present on the record.

10)The petitioner has challenged the award dated 16.02.2021

pronounced on 25.09.2021 on the ground that the opportunity of

hearing was not afforded and the same cannot be termed as an

‘award’ according to provisions of Section 18(3) of MSMED Act,

2006.

11)From a perusal of the summons issued to the petitioner on

03.10.2019 according to provisions of Section 18 of the Act, 2006 2024:CGHC:8649

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for conducting conciliation it would be evident that there was

specific noting that if the conciliation fails in the disputed matter, the

arbitration proceeding would be initiated. On 07.01.2020, again

summons was issued to the petitioner whereby the petitioner was

granted time to file necessary documents/reply. On 31.01.2020, a

similar summons was again sent through speed post. On

03.12.2020, the parties were granted time to file a written

statement/ reply/ application/ correspondence/ document.

Thereafter, the summons was again issued on 16.12.2020. In the

summons dated 28.01.2021, respondent No. 1 specifically

observed in the note that the non-applicant is required to submit a

written statement / response in respect to the applicant’s application

dated 27.05.2020 and thereafter, the award was passed.

12)In the matter of Jharkhand Urja Vikas Nigam Limited (supra), the

Hon’ble Supreme Court set aside the impugned arbitral award as

the entire proceeding was conducted by the Council without

affording any opportunity of hearing and the procedure

contemplated under Section 18 of the MSMED Act, 2006 was not

complied with. In the aforesaid matter, the Council issued a

summons on 18.07.2012 for the appearance of the appellant before

the Council on 06.08.2012 and on 06.08.2012 itself the award was

passed. In relevant paragraphs 2, 10, 11 & 13, it was observed and

held as under:-

“2. The appellant herein, which is the successor company

of erstwhile Jharkhand State Electricity Board, entered into

a contract with the 3rd respondent - M/s. Anamika

Conductors Ltd., Jaipur, for supply of ACSR Zebra

Conductors. Respondent No.3 claiming to be a small scale

industry, has approached the Rajasthan Micro and Small

Enterprises Facilitation Council, claiming an amount of

Rs.74,74,041/- towards the principal amount of bills and an

amount of Rs.91,59,705.02 paise towards interest. On the 2024:CGHC:8649

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ground that the appellant has not responded to earlier

notices, the Council issued summons dated 18.07.2012 for

appearance of the appellant before the Council on

06.08.2012. Only on the ground that on 06.08.2012 the

appellant has not appeared, the order dated 06.08.2012

was passed by the Council directing the appellant to make

the payment to the 3

rd

respondent, as claimed, within a

period of thirty days from the date of the order.

10. 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.

11. 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.

13. 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. The submission

of the learned senior counsel appearing for the 3rd

respondent that there was delay and laches in filing writ

petition also cannot be accepted. After 06.08.2012 order,

the appellant after verification of the records has paid an

amount of Rs.64,43,488/- on 22.01.2013 and the said

amount was received by the 3rd respondent without any

protest. Three years thereafter it made an attempt to

execute the order in Execution Case No.69 of 2016 before

the Civil Judge, Ranchi, which ultimately ended in

dismissal for want of territorial jurisdiction, vide order dated

31.01.2017. Thereafter S.B. Civil Writ Petition No.11657 of

2017 was filed questioning the order dated 06.08.2012

before the Rajasthan High Court. In that view of the matter 2024:CGHC:8649

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it cannot be said that there was abnormal delay and laches

on the part of the appellant in approaching the High Court.

As much as the 3rd respondent has already received an

amount of Rs.63,43,488/- paid by the appellant, without

any protest and demur, it cannot be said that the appellant

lost its right to question the order dated 06.08.2012.

Though the learned counsel appearing for the respondents

have placed reliance on certain judgments to support their

case, but as the order of 06.08.2012 was passed contrary

to Section 18(3) of the MSMED Act and the mandatory

provisions of the Arbitration and Conciliation Act, 1996, we

are of the view that such judgments would not render any

assistance to support their case.”

13)The facts of the present case are distinguishable from the facts of

Jharkhand Urja Vikas Nigam Limited (supra). In the present

case, despite the service of summons, the petitioner did not turn

up, therefore, the conciliation proceeding was closed, and the

arbitration proceeding was initiated and thereafter an award was

passed.

14)In the matter of M/s Vijeta Construction (supra), while dealing

with a similar issue the Hon’ble Supreme Court in paragraphs 9.1,

9.2, 9.3 and 11 held as under:

“9.1 Therefore as per the scheme of the MSMED Act when

there is a dispute between the micro and small enterprises

– supplier and buyer, the same is required to be resolved

by following the procedure as prescribed under Section 18

of the MSMED Act, reproduced hereinabove. As observed

hereinabove, the MSMED Act is a Special Act and as per

Section 24 of the MSMED Act, the provisions of Section 15

to 23 shall have overriding effect notwithstanding

inconsistent therewith contained in any other law for the

time being in force. Therefore, Section 18 of the MSMED

Act would have overriding effect over any other law for the

time being in force including the Arbitration Act (to the

extent inconsistent) and therefore if there is any dispute

between the parties governed by the MSMED Act the said

dispute has to be resolved only through the procedure as

provided under Section 18 of the MSMED Act. As per Sub-

Section (1) of Section 18, 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, may approach by way of a reference/

application to the Micro and Small Enterprises Facilitation

Council. As per Sub-Section (2) of Section 18, on receipt of

a reference under sub-section (1), the Council shall have

to resolve the dispute through conciliation either by the 2024:CGHC:8649

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Council itself or seek the assistance of any institution or

centre providing alternate dispute resolution (ADR)

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 shall apply to such a dispute as if the conciliation was

initiated under Part III of the Arbitration Act. Thus at the

stage of conciliation the council/conciliator have to bear in

mind the provisions of sections 65 to 81 of the Arbitration

Act, which read as under:—

“65. Submission of statements to conciliator.—(1)

The conciliator, upon his appointment, may request

each party to submit to him a brief written statement

describing the general nature of the dispute and the

points at issue. Each party shall send a copy of such

statement to the other party (2) The conciliator may

request each party to submit to him a further written

statement of his position and the facts and grounds

in support thereof, supplemented by any documents

and other evidence that such party deems

appropriate. The party shall send a copy of such

statement, documents and other evidence to the

other party. (3) At any stage of the conciliation

proceedings, the conciliator may request a party to

submit to him such additional information as he

deems appropriate. Explanation.—In this section

and all the following sections of this Part, the term

“conciliator” applies to a sole conciliator, two or three

conciliators, as the case may be.

66. Conciliator not bound by certain enactments.—

The conciliator is not bound by the Code of Civil

Procedure, 1908 (5 of 1908) or the Indian Evidence

Act, 1872 (1 of 1872).

67. Role of conciliator.—(1) The conciliator shall

assist the parties in an independent and impartial

manner in their attempt to reach an amicable

settlement of their dispute. (2) The conciliator shall

be guided by principles of objectivity, fairness and

justice, giving consideration to, among other things,

the rights and obligations of the parties, the usages

of the trade concerned and the circumstances

surrounding the dispute, including any previous

business practices between the parties. (3) The

conciliator may conduct the conciliation proceedings

in such a manner as he considers appropriate,

taking into account the circumstances of the case,

the wishes the parties may express, including any

request by a party that the conciliator hear oral

statements, and the need for a speedy settlement of

the dispute. (4) The conciliator may, at any stage of

the conciliation proceedings, make proposals for a

settlement of the dispute. Such proposals need not

be in writing and need not be accompanied by a

statement of the reasons therefor. 2024:CGHC:8649

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68. Administrative assistance.—In order to facilitate

the conduct of the conciliation proceedings, the

parties, or the conciliator with the consent of the

parties, may arrange for administrative assistance

by a suitable institution or person.

69. Communication between conciliator and parties.

—(1) The conciliator may invite the parties to meet

him or may communicate with them orally or in

writing. He may meet or communicate with the

parties together or with each of them separately. (2)

Unless the parties have agreed upon the place

where meetings with the conciliator are to be held,

such place shall be determined by the conciliator,

after consultation with the parties, having regard to

the circumstances of the conciliation proceedings.

70. Disclosure of information.—When the conciliator

receives factual information concerning the dispute

from a party, he shall disclose the substance of that

information to the other party in order that the other

party may have the opportunity to present any

explanation which he considers appropriate:

Provided that when a party gives any information to

the conciliator subject to a specific condition that it

be kept confidential, the conciliator shall not disclose

that information to the other party.

71. Co-operation of parties with conciliator.—The

parties shall in good faith co-operate with the

conciliator and, in particular, shall endeavour to

comply with requests by the conciliator to submit

written materials, provide evidence and attend

meetings.

72. Suggestions by parties for settlement of dispute.

—Each party may, on his own initiative or at the

invitation of the conciliator, submit to the conciliator

suggestions for the settlement of the dispute.

73. Settlement agreement.—(1) When it appears to

the conciliator that there exist elements of a

settlement which may be acceptable to the parties,

he shall formulate the terms of a possible settlement

and submit them to the parties for their

observations. After receiving the observations of the

parties, the conciliator may reformulate the terms of

a possible settlement in the light of such

observations. (2) If the parties reach agreement on a

settlement of the dispute, they may draw up and

sign a written settlement agreement. If requested by

the parties, the conciliator may draw up, or assist

the parties in drawing up, the settlement agreement.

(3) When the parties sign the settlement agreement,

it shall be final and binding on the parties and

persons claiming under them respectively. (4) The 2024:CGHC:8649

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conciliator shall authenticate the settlement

agreement and furnish a copy thereof to each of the

parties.

74. Status and effect of settlement agreement.—The

settlement agreement shall have the same status

and effect as if it is an arbitral award on agreed

terms on the substance of the dispute rendered by

an arbitral tribunal under section 30.

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.

76. Termination of conciliation proceedings.—The

conciliation proceedings shall be terminated— (a) by

the signing of the settlement agreement by the

parties, on the date of the agreement; or (b) by a

written declaration of the conciliator, after

consultation with the parties, to the effect that further

efforts at conciliation are no longer justified, on the

date of the declaration; or (c) by a written

declaration of the parties addressed to the

conciliator to the effect that the conciliation

proceedings are terminated, on the date of the

declaration; or (d) by a written declaration of a party

to the other party and the conciliator, if appointed, to

the effect that the conciliation proceedings are

terminated, on the date of the declaration.

77. Resort to arbitral or judicial proceedings.—The

parties shall not initiate, during the conciliation

proceedings, any arbitral or judicial proceedings in

respect of a dispute that is the subject-matter of the

conciliation proceedings except that a party may

initiate arbitral or judicial proceedings where, in his

opinion, such proceedings are necessary for

preserving his rights.

78. Costs.—(1) Upon termination of the conciliation

proceedings, the conciliator shall fix the costs of the

conciliation and give written notice thereof to the

parties. (2) For the purpose of sub-section (1),

“costs” means reasonable costs relating to— (a) the

fee and expenses of the conciliator and witnesses

requested by the conciliator with the consent of the

parties; (b) any expert advice requested by the

conciliator with the consent of the parties; (c) any

assistance provided pursuant to clause (b) of sub-

section (2) of section 64 and section 68. (d) any

other expenses incurred in connection with the

conciliation proceedings and the settlement 2024:CGHC:8649

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agreement. (3) The costs shall be borne equally by

the parties unless the settlement agreement

provides for a different apportionment. All other

expenses incurred by a party shall be borne by that

party.

79. Deposits.—(1) The conciliator may direct each

party to deposit an equal amount as an advance for

the costs referred to in sub-section(2) of section 78

which he expects will be incurred. (2) During the

course of the conciliation proceedings, the

conciliator may direct supplementary deposits in an

equal amount from each party. (3) If the required

deposits under sub-sections (1) and (2) are not paid

in full by both parties within thirty days, the

conciliator may suspend the proceedings or may

make a written declaration of termination of the

proceedings to the parties, effective on the date of

that declaration. (4) Upon termination of the

conciliation proceedings, the conciliator shall render

an accounting to the parties of the deposits received

and shall return any unexpended balance to the

parties.

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.

81. Admissibility of evidence in other proceedings.—

The parties shall not rely on or introduce as

evidence in arbitral or judicial proceedings, whether

or not such proceedings relate to the dispute that is

the subject of the conciliation proceedings,— (a)

views expressed or suggestions made by the other

party in respect of a possible settlement of the

dispute; (b) admissions made by the other party in

the course of the conciliation proceedings; (c)

proposals made by the conciliator; (d) the fact that

the other party had indicated his willingness to

accept a proposal for settlement made by the

conciliator.”

9.2 As per Sub-Section (3) of Section 18 after conciliation

fails under Sub-Section (2) of Section 18 of the MSMED

Act, and conciliation initiated under sub-section (2) is not

successful, conciliation stands terminated without any

settlement between the parties, the Council shall either

itself take up the dispute for arbitration or refer it to any

institution or centre providing ADR services for such

arbitration and the provisions of the Arbitration and

Conciliation Act, 1996 shall then apply to the dispute as if 2024:CGHC:8649

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the arbitration was in pursuance of an arbitration

agreement referred to in subsection (1) of section 7 of that

Act. Therefore only after the procedure under Sub-Section

(2) of Section 18 is followed and the conciliation fails and

then and then only the arbitration proceedings commences

and thereafter the provisions of the Arbitration Act shall

then apply.

9.3. In light of the aforesaid statutory provisions under the

MSMED Act as well as the Arbitration Act, the order

passed by the Facilitation Council dated 10.01.2012 which

was the subject matter before the High Court is required to

be tested. From the order passed by the Facilitation

Council rejecting/dismissing the reference/application and

the stage at which such an order was passed we are of the

opinion that the Facilitation Council has not followed the

procedure as was required to be followed under Section 18

of the MSMED Act read with Sections 65 to 81 of the

Arbitration Act, as reproduced hereinabove. It is required to

be noted that at the initial stage the Facilitation Council

was performing the duty as a Conciliator for which the

provisions of Sections 65 to 81 shall be applicable. It is true

that at the stage of conciliation, the role of the conciliator

(Facilitation Council) is to assist the parties to reach an

amicable settlement of their dispute as provided under

Section 67 of the Arbitration Act. At that stage the parties

are not required to lead the evidence and at that stage the

role of the conciliator is not to adjudicate the dispute

between the parties, but to reach an amicable settlement of

the dispute between the parties. Once the conciliation fails

thereafter as per Sub-Section (3) of Section 18 of the

MSMED Act, the arbitration proceedings commences and

the conciliation proceedings stands terminated and

thereafter the Facilitation Council shall either itself take up

the dispute for arbitration or refer it to any institution or

centre providing ADR services for such arbitration and the

provisions of the Arbitration Act shall then apply to the

dispute as if the arbitration is in pursuance of an arbitration

agreement referred to Sub-Section (1) of Section 7 of the

Arbitration Act. At that stage and thereafter the Facilitation

Council shall act as an Arbitrator and the provisions of

Arbitration Act shall then apply to the dispute as if

arbitration was in pursuance of an arbitration agreement

referred to Sub-Section (1) of Section 7 of the Arbitration

Act including the appeal under Section 34 to the district

court against the award declared by the Facilitation Council

or any institution or centre providing alternate dispute

resolution (ADR) services to whom the dispute is referred

for arbitration.

11.Now so far as the observations made by the Facilitation 

Council, Chhattisgarh, Raipur in order dated 10.01.2012

thattheFacilitation Council has been constituted with limited 

objectandjurisdiction and the council has no jurisdiction to 

make thoroughenquiry and to take evidence is concerned, 

the aforesaid cannot beaccepted. As per the scheme of the 

MSMED Act, the FacilitationCouncil has a dual role to play,  2024:CGHC:8649

16

one as a Conciliator as per SubSection (2) of Section 18 a

nd thereafter in case the conciliation isunsuccessful as an 

Arbitrator as per SubSection (3) of Section 18. As a

Conciliator   the   role   of   the   Conciliator     Facilitation

Council is, as observed hereinabove, to assist the parties i

n anindependent and impartial manner in their attempt to r

each an amicable   settlement   of   their   dispute   and at

thatstagetheFacilitation Council is not required to adjudicat

e the dispute. Atthat stage the Facilitation Council has no j

urisdiction to make thorough enquiry and

takeevidence.However,oncetheconciliation fails and the set

tlement is not arrived at during the conciliation   and  

thereafter when  the arbitration proceedings

commences as per SubSection (3) of Section 18, the Coun

cil asan arbitrator shall have all the powers of the arbitrator 

as areavailable under the provisions of the Arbitration Act. 

Therefore theFacilitation Council is not right in observing th

at the council hasno jurisdiction to make thorough enquiry 

and take evidence and that the council has been

constituted with limited object and jurisdiction.”

15)In the matter of Vijeta Construction (supra) the Hon’ble Supreme

Court has held that the dispute between the supplier and buyer

should be resolved by following the procedure as prescribed under

Section 18 of the MSMED Act, 2006. It is further observed that the

MSMED Act, 2006 is a Special Act and as per Section 24 of the

MSMED Act, the provisions of Sections 15 to 23 of the MSMED Act

shall have overriding effect notwithstanding inconsistent therewith

contained in any other law for the time being in force. Sections 65

to 81 of the Act, 1996 shall apply to such a dispute. If conciliation is

not successful, it would stand terminated without any settlement

between the parties and the Council shall either take up the dispute

for arbitration or refer it to any institution. In the present case, the

petitioner did not appear, therefore, the Council itself took up the

dispute for arbitration and again summons was issued to the

petitioner but he did not appear. It is not a case where no

opportunity was afforded to the petitioner and the award was

passed, therefore the judgment cited by the petitioner is of no help. 2024:CGHC:8649

17

16)Some provisions of the Micro, Small and Medium Enterprises

Development Act, 2006 are quoted herein below for reference

which would be relevant for the disposal of this petition:-

Section 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.

Section 19: Application for setting aside decree,

award or order:-

No application for setting aside any decree, award or 2024:CGHC:8649

18

other order made either by the Council itself or by any

institution or centre providing alternate dispute resolution

services to which a reference is made by the Council,

shall be entertained by any court unless the appellant

(not being a supplier) has deposited with it seventy-five

per cent. of the amount in terms of the decree, award or,

as the case may be, the other order in the manner

directed by such court:

Provided that pending disposal of the application to set

aside the decree, award or order, the court shall order

that such percentage of the amount deposited shall be

paid to the supplier, as it considers reasonable under the

circumstances of the case, subject to such conditions as

it deems necessary to impose.

17)From a perusal of the documents annexed to the writ petition and

the return filed by the respondents, it is quite vivid that the Council

has followed the procedure contemplated under Section 18 of the

MSMED Act, 2006. With regard to the issue of jurisdiction, there is

no such provision which bars the jurisdiction of the Facilitation

Council from arbitrating the dispute between the parties.

18)In the matter of Tirupati Steels (supra), the Hon’ble Supreme

Court observed and held that the High Court permitting the

proceedings under Section 34 of the Arbitration Act, 1996 without

insistence for making a pre-deposit of 75% of the awarded amount

is unsustainable and the same deserves to be quashed. It reads

thus:-

8. The question which is posed for consideration of this

Court is, whether, the pre-deposit of 75% of the awarded

amount as per Section 19 of the MSMED Act, 2006, while

challenge to the award under Section 34 of the Arbitration

Act, 1996, is made mandatory or not, is now no longer res

integra in view of the decision of this Court in Gujarat

State Disaster Management Authority v. Aska Equipments

Ltd., (2022) 1 SCC 61 While interpreting Section 19 of the

MSMED Act, 2006 and after taking into consideration the

earlier decision of this Court in Goodyear India Ltd. v.

Norton Intech Rubbers (P) Ltd., (2012) 6 SCC 345, it is

observed and held that the requirement of deposit of 75%

of the amount in terms of the award as a pre-deposit as 2024:CGHC:8649

19

per Section 19 of the MSMED Act, is mandatory. It is also

observed that however, at the same time, considering the

hardship which may be projected before the appellate

court and if the appellate court is satisfied that there shall

be undue hardship caused to the appellant/applicant to

deposit 75% of the awarded amount as a pre-deposit at a

time, the court may allow the pre-deposit to be made in

instalments. Therefore, it is specifically observed and held

that pre-deposit of 75% of the awarded amount under

Section 19 of the MSMED Act, 2006 is a mandatory

requirement.

9. In para 13 of the aforesaid judgment, (2022) 1 SCC 61,

it is observed and held as under : (Aska Equipments case,

(2022) 1 SCC 61 p. 64, para 13)

“13. On a plain/fair reading of Section 19 of the

MSME Act, 2006, reproduced hereinabove, at the

time/before entertaining the application for setting

aside the award made under Section 34 of the

Arbitration and Conciliation Act, the appellant-

applicant has to deposit 75% of the amount in terms

of the award as a pre-deposit. The requirement of

deposit of 75% of the amount in terms of the award

as a pre-deposit is mandatory. However, at the same

time, considering the hardship which may be

projected before the appellate court and if the

appellate court is satisfied that there shall be undue

hardship caused to the appellant-applicant to deposit

75% of the awarded amount as a pre-deposit at a

time, the court may allow the pre-deposit to be made

in instalments.”

10. In view of the aforesaid decision of this Court in Aska

Equipments case, (2022) 1 SCC 61, the impugned order

passed by the High Court permitting the proceedings

under Section 34 of the Arbitration Act, 1996 without

insistence for making pre-deposit of 75% of the awarded

amount is unsustainable and the same deserves to be

quashed and set aside.

19)In the matter of Bhaven Construction (supra) the Hon’ble

Supreme Court observed and held thus:-

17. Thereafter, Respondent 1 chose to impugn the order

passed by the arbitrator under Section 16(2) of the

Arbitration Act through a petition under Articles 226/227 of

the Indian Constitution. In the usual course, the Arbitration

Act provides for a mechanism of challenge under Section

34. The opening phase of Section 34 reads as 2024:CGHC:8649

20

“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)”.

(emphasis supplied)

The use of term “only” as occurring under the

provision serves two purposes of making the

enactment a complete code and lay down the

procedure.

18. In any case, the hierarchy in our legal framework,

mandates that a legislative enactment cannot curtail a

constitutional right. In Nivedita Sharma v. COAI, (2011) 14

SCC 337, this Court referred to several judgments and

held : (SCC p. 343, para 11)

“11. We have considered the respective

arguments/submissions. There cannot be any dispute

that the power of the High Courts to issue directions,

orders or writs including writs in the nature of habeas

corpus, certiorari, mandamus, quo warranto and

prohibition under Article 226 of the Constitution is a

basic feature of the Constitution and cannot be

curtailed by parliamentary legislation — L. Chandra

Kumar v. Union of India, (1997) 3 SCC 261. However,

it is one thing to say that in exercise of the power

vested in it under Article 226 of the Constitution, the

High Court can entertain a writ petition against any

order passed by or action taken by the State and/or its

agency/instrumentality or any public authority or order

passed by a quasi-judicial body/authority, and it is an

altogether different thing to say that each and every

petition filed under Article 226 of the Constitution must

be entertained by the High Court as a matter of course

ignoring the fact that the aggrieved person has an

effective alternative remedy. Rather, it is settled law

that when a statutory forum is created by law for

redressal of grievances, a writ petition should not be

entertained ignoring the statutory dispensation.”

20)In the matter of Bhaven Construction (supra), the Hon’ble

Supreme Court in clear terms held that the challenge to the ruling

of the arbitrator passed under Section 16 of the Act, 1996 under

Article 226/227 of the Constitution of India is not permissible except

in exceptionally rare circumstances and discretion cannot be

exercised to allow judicial interference beyond procedure

established under the Act, 1996. 2024:CGHC:8649

21

21)In the matter of Gujarat State Civil Supplies Corpn. Ltd. (supra)

it was observed and held by the Hon’ble Supreme Court that the

MSMED Act, 2006 being a special law and the Arbitration Act, 1996

being a general law, the provisions of the MSMED Act would have

precedence over or prevail over the Arbitration Act, 1996. It was

also observed and held that even if the Arbitration Act, 1996 is

treated as a special law, then also the MSMED Act, 2006 having

been enacted subsequently in point of time i.e. in 2006, it would

have an overriding effect, more particularly in view of Section 24 of

the MSMED Act, 2006 which specifically gives an effect to the

provisions of Sections 15 to 23 of the Act over any other law for the

time being in force, which would also include the Arbitration Act,

1996. It reads thus:-

42. Thus, the Arbitration Act, 1996 in general governs the

law of Arbitration and Conciliation, whereas the MSMED

Act, 2006 governs specific nature of disputes arising

between specific categories of persons, to be resolved by

following a specific process through a specific forum.

Ergo, the MSMED Act, 2006 being a special law and the

Arbitration Act, 1996 being a general law, the provisions of

the MSMED Act would have precedence over or prevail

over the Arbitration Act, 1996. In Silpi Industries case,

(2021) 18 SCC 79, also, this Court had observed while

considering the issue with regard to the maintainability

and counter-claim in arbitration proceedings initiated as

per Section 18(3) of the MSMED Act, 2006 that the

MSMED Act, 2006 being a special legislation to protect

MSMEs by setting out a statutory mechanism for the

payment of interest on delayed payments, the said Act

would override the provisions of the Arbitration Act, 1996

which is a general legislation. Even if the Arbitration Act,

1996 is treated as a special law, then also the MSMED

Act, 2006 having been enacted subsequently in point of

time i.e. in 2006, it would have an overriding effect, more

particularly in view of Section 24 of the MSMED Act, 2006

which specifically gives an effect to the provisions of

Sections 15 to 23 of the Act over any other law for the

time being in force, which would also include the

Arbitration Act, 1996.

22)In the matter of  M/s India Glycols Limited & Anr Vs. Micro and 2024:CGHC:8649

22

Small Enterprise Facilitation Council, Civil appeal No.

7491/2023  the Hon’ble Supreme Court clearly held that the

deviation from statutory provisions is not permissible. It was a case

where the Facilitation Council passed an award and a Writ Petition

under Article 226/227 of the Constitution of India was filed directly

challenging such award, which was dismissed by the High Court.

The Hon’ble Supreme Court in para-10 to 13 held as under:-

“10. In terms of Section 19, an application for setting aside

an award of the Facilitation Council cannot be entertained

by any court unless the appellant has deposited seventy-

five per cent of the amount in terms of the award. In view

of the provisions of Section 18(4), where the Facilitation

Council proceeds to arbitrate upon a dispute, the

provisions of the Act of 1996 are to apply to the dispute as

if it is in pursuance of an arbitration agreement under sub-

section (1) of Section 7 of that Act. Hence, the remedy

which is provided under Section 34 of the Act of 1996

would govern an award of the Facilitation Council.

However, there is a super added condition which is

imposed by Section 19 of MSMED Act 2006 to the effect

that an application for setting aside an award can be

entertained only upon the appellant depositing with the

Council seventy-five per cent of the amount in terms of the

award. Section 19 has been introduced as a measure of

security for enterprises for whom a special provision is

made in the MSMED Act by Parliament. In view of the

provisions of Section 18(4), the appellant had a remedy

under Section 34 of the Act of 1996 to challenge the

award which it failed to pursue.

11. In the judgment of this Court in Gujarat State Civil

Supplies Corporation Limited (supra), a two-Judge Bench

of the Court has observed, in the course of drawing its

conclusions, that: “The proceedings before the Facilitation

Council/ institute/ Centre acting as an arbitrator/Arbitral

Tribunal under Section 18(3) of the MSMED Act 2006

would be governed by the Arbitration Act, 1996.”

12. The appellant failed to avail of the remedy under

Section 34. If it were to do so, it would have been required

to deposit seventy-five per cent of the decretal amount.

This obligation under the statute was sought to be

obviated by taking recourse to the jurisdiction under

Articles 226/227 of the Constitution. This was clearly

impermissible.

13. For the above reasons, we are in agreement with the

view of the Division Bench of the High Court that the writ

petition which was instituted by the appellant was not 2024:CGHC:8649

23

maintainable.”

23)Taking into consideration the facts discussed above and the law

laid down by the Hon’ble Supreme Court, in my considered opinion,

no case is made out for interference.

24)Accordingly, this petition fails and is hereby dismissed. However,

the petitioner would be at liberty to avail the remedy available under

the law.

Sd/-

(Rakesh Mohan Pandey)

Judge

Nimmi 2024:CGHC:8649