Case Note & Summary
The petitioner, M/s. Duro Shox Pvt. Ltd., a private limited company, challenged an award dated 02.02.2024 passed by the Micro and Small Enterprises Facilitation Council, Aurangabad (respondent no.2) under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The award directed the petitioner to pay Rs.4,53,87,615/- to respondent no.3, M/s. Technomat Springs, along with interest. The petitioner had entered into a supplier agreement with respondent no.3 in 2019, but disputes arose regarding the quality of materials supplied. Respondent no.3 filed a claim before the Facilitation Council, which after conciliation and arbitration proceedings, passed the impugned award. The petitioner contended that the award was passed in violation of the statutory procedure under Section 18(3) of the MSMED Act and the Arbitration and Conciliation Act, 1996, particularly that conciliation proceedings were not properly conducted and no separate arbitration proceedings were initiated. The petitioner invoked the writ jurisdiction under Articles 226 and 227 of the Constitution of India without availing the alternative remedy of appeal under Section 34 of the Arbitration Act. The respondent argued that the writ petition was not maintainable as an efficacious alternative remedy existed, and the petitioner was attempting to bypass the mandatory pre-deposit of 75% of the award amount under Section 19 of the MSMED Act. The court, after hearing both sides, held that the award under Section 18 of the MSMED Act is an arbitral award and can only be challenged under Section 34 of the Arbitration Act. The court found no exceptional circumstances warranting interference under writ jurisdiction, as the petitioner's grievances regarding procedural violations could be raised in the appeal. The court dismissed the writ petition, leaving it open to the petitioner to pursue the statutory remedy of appeal.
Headnote
A) Constitutional Law - Writ Jurisdiction - Alternative Remedy - Maintainability of Writ Petition - Articles 226 and 227 of the Constitution of India - The court held that a writ petition challenging an award under Section 18 of the MSMED Act is not maintainable when an efficacious alternative remedy of appeal under Section 34 of the Arbitration Act is available, and no exceptional circumstances such as lack of jurisdiction or violation of natural justice were made out. (Paras 1-10) B) Arbitration Law - MSMED Act - Award under Section 18 - Challenge under Section 34 of Arbitration Act - Sections 18, 19 of MSMED Act; Section 34 of Arbitration and Conciliation Act, 1996 - The court held that the award passed by the Facilitation Council under Section 18 of the MSMED Act is deemed to be an arbitral award and can only be challenged under Section 34 of the Arbitration Act, which requires a pre-deposit of 75% of the award amount under Section 19 of the MSMED Act. (Paras 3-10) C) Arbitration Law - Conciliation and Arbitration - Procedure under MSMED Act - Section 18(3) of MSMED Act; Sections 65-81 of Arbitration Act - The court noted that the petitioner's grievance regarding non-compliance with conciliation and arbitration procedure could be raised in the appeal under Section 34 of the Arbitration Act, and the writ court cannot examine factual disputes. (Paras 7-10)
Issue of Consideration
Whether a writ petition under Articles 226 and 227 of the Constitution of India is maintainable to challenge an award passed under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, without exhausting the alternative remedy of appeal under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The writ petition is dismissed. The court held that the award under Section 18 of MSMED Act is an arbitral award and can only be challenged under Section 34 of the Arbitration Act. No exceptional circumstances were made out to invoke writ jurisdiction. The petitioner is at liberty to avail the statutory remedy of appeal.
Law Points
- Writ jurisdiction under Articles 226 and 227 of the Constitution of India is not ordinarily exercisable when an alternative statutory remedy of appeal under Section 34 of the Arbitration and Conciliation Act
- 1996 is available
- unless the order is patently lacking in jurisdiction or violates principles of natural justice
- which was not established in this case.
