Case Note & Summary
The petitioner, Bhagwat Enterprises, challenged an order dated 11/01/2022 passed by the Micro and Small Enterprises Facilitation Council (respondent No.1) allowing a claim of Rs.21,53,217/- in favor of respondent No.2, M/s. Bharat Shipping Agency, under Sections 15 and 16 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The respondent No.2 had filed a petition under Section 18 read with Sections 15, 16, and 17 of the MSMED Act before the Council, claiming to be a supplier under Section 2(n) of the Act, seeking recovery of balance payment and interest on delayed payment. The petitioner filed a written statement denying all allegations. After considering the material, the Council passed the impugned award. The petitioner argued that the Council had conducted conciliation proceedings between the parties, which were terminated as unsuccessful, and thereafter the same Council acted as an arbitrator, which is prohibited under Section 80 of the Arbitration and Conciliation Act, 1996. The petitioner relied on the Supreme Court judgment in Union of India v. U.P. State Bridge Corpn. Ltd. The respondent No.2 did not dispute the facts. The High Court held that Section 80 of the Arbitration and Conciliation Act, 1996 clearly prohibits a conciliator from acting as an arbitrator in the same dispute. Since the Council conducted conciliation and then arbitrated, the award is invalid. The court set aside the impugned order and remitted the matter back to the Council to proceed afresh from the stage of reference to arbitration, in accordance with law.
Headnote
A) Arbitration Law - Conciliation and Arbitration - Section 80 of Arbitration and Conciliation Act, 1996 - Prohibition on Conciliator Acting as Arbitrator - The Micro and Small Enterprises Facilitation Council conducted conciliation proceedings between the parties which were terminated as unsuccessful. Thereafter, the same Council proceeded to arbitrate and passed an award. Held that Section 80 of the Arbitration and Conciliation Act, 1996 prohibits a conciliator from acting as an arbitrator in the same dispute. The award is therefore invalid and liable to be set aside. (Paras 6-9)
Issue of Consideration
Whether the Micro and Small Enterprises Facilitation Council can act as an arbitrator after having conducted conciliation proceedings between the same parties, in light of Section 80 of the Arbitration and Conciliation Act, 1996.
Final Decision
The impugned order dated 11/01/2022 is quashed and set aside. The matter is remitted back to the respondent No.1 - Micro and Small Enterprises Facilitation Council to proceed afresh from the stage of reference to arbitration, in accordance with law. Rule is made absolute in those terms.
Law Points
- Section 80 of Arbitration and Conciliation Act
- 1996 prohibits conciliator from acting as arbitrator
- MSMED Council's dual role as conciliator and arbitrator invalidates award
