Case Note & Summary
The petitioner, National Textile Corporation Ltd., filed two petitions under Section 34 of the Arbitration and Conciliation Act, 1996, challenging awards passed by the Facilitation Council (Respondent No. 2) under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The respondent No. 1, Elixir Engineering Pvt. Ltd., was the supplier. The petitioner contended that the Facilitation Council lacked jurisdiction because the respondent was not a 'supplier' under the MSMED Act. The court examined the scheme of the MSMED Act, particularly Section 18, which provides for reference to arbitration. The court held that the Facilitation Council had jurisdiction and the awards were not patently illegal. The court also noted that the petitioner had deposited 75% of the awarded amount as required under Section 19 of the MSMED Act. The court dismissed the petitions, upholding the awards.
Headnote
A) Arbitration - Challenge to Award - Section 34 of Arbitration and Conciliation Act, 1996 - Jurisdiction of Facilitation Council under MSMED Act - The petitioner challenged the awards on the ground that the Facilitation Council lacked jurisdiction as the respondent was not a 'supplier' under the MSMED Act. The court held that the Facilitation Council had jurisdiction and the awards were not patently illegal. (Paras 1-10)
B) MSMED Act - Reference to Arbitration - Section 18 of Micro, Small and Medium Enterprises Development Act, 2006 - The court examined the scheme of the MSMED Act and held that the reference to arbitration under Section 18 is valid and the Facilitation Council can act as an arbitral tribunal. (Paras 11-20)
C) Arbitration - Pre-deposit - Section 19 of MSMED Act - The petitioner deposited 75% of the awarded amount as required under Section 19 of the MSMED Act. The court noted that the pre-deposit condition is mandatory for challenging the award. (Paras 2-3)
Issue of Consideration
Whether the awards passed by the Facilitation Council under the MSMED Act are liable to be set aside under Section 34 of the Arbitration Act on the ground of lack of jurisdiction or patent illegality.
Final Decision
The court dismissed the petitions, upholding the awards passed by the Facilitation Council.
Law Points
- Jurisdiction of Facilitation Council under MSMED Act
- Section 34 of Arbitration and Conciliation Act
- 1996
- Section 18 of Micro
- Small and Medium Enterprises Development Act
- 2006
- Reference to arbitration under MSMED Act
- Pre-deposit requirement under Section 19 of MSMED Act
Case Details
2023 LawText (BOM) (03) 63
Commercial Arbitration Petition No. 326 of 2018 with Commercial Arbitration Petition No. 303 of 2018
Mr. Siddhesh Sutar i/by Mr. Anjani Kumar Singh, for the Petitioner in Commercial Arbitration Petition No. 326 of 2018; Mr. Shardul Singh, Ms. Swapnila Rane and Ms. Vanita Kakar, for Petitioner in Commercial Arbitration Petition No. 303 of 2018; Mr. Suresh Dhole, Mr. S. Shamin, Mr. Murtuza Statwala i/by Shamin & Co., for Respondent No. 1 in both the petitions; Mr. Himanshu B. Takke, AGP for Respondent No. 2 – State in both matters.
National Textile Corporation Ltd.
Elixir Engineering Pvt. Ltd. & Anr.
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Nature of Litigation
Petitions under Section 34 of the Arbitration and Conciliation Act, 1996 challenging awards passed by the Facilitation Council under the MSMED Act.
Remedy Sought
Setting aside of the awards on the ground of lack of jurisdiction and patent illegality.
Filing Reason
The petitioner was aggrieved by the awards passed by the Facilitation Council under the MSMED Act.
Previous Decisions
The Facilitation Council passed awards in favor of Respondent No. 1. The petitioner deposited 75% of the awarded amount as required under Section 19 of the MSMED Act.
Issues
Whether the Facilitation Council had jurisdiction to pass the awards under the MSMED Act.
Whether the awards are patently illegal and liable to be set aside under Section 34 of the Arbitration Act.
Submissions/Arguments
The petitioner argued that the Facilitation Council lacked jurisdiction because the respondent was not a 'supplier' under the MSMED Act.
The respondent contended that the awards were valid and the Facilitation Council had jurisdiction.
Ratio Decidendi
The Facilitation Council under the MSMED Act has jurisdiction to adjudicate disputes and pass awards, and such awards are not patently illegal merely because the respondent is a supplier under the Act. The challenge under Section 34 of the Arbitration Act must fail if the award is within jurisdiction and not contrary to public policy.
Judgment Excerpts
The Petitioner – National Textile Corporation Ltd. in these two petitions is aggrieved by awards passed by the Facilitation Council i.e. Respondent No. 2 under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as the “MSMED Act”).
As per the requirements of the MSMED Act, the Petitioner deposited 75% of the awarded amount in both these petitions.
Procedural History
The Facilitation Council passed awards in favor of Respondent No. 1. The petitioner filed petitions under Section 34 of the Arbitration Act challenging the awards. The court reserved judgment on 8th February 2023 and pronounced on 21st March 2023.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34
- Micro, Small and Medium Enterprises Development Act, 2006: Section 18, Section 19
