Case Note & Summary
The present intra-court appeal arose from the dismissal of a writ petition that had challenged an arbitration award passed by the Micro and Small Enterprises Facilitation Council (MSEFC) under the Micro, Small and Medium Enterprises Development Act, 2006. The second respondent, a service provider, had filed a claim before the MSEFC under Section 18(1) of the MSMED Act seeking payment of Rs. 15,49,234 along with interest for services rendered. The Council, after conducting several meetings and attempting conciliation which failed, proceeded with arbitration and passed an award directing the appellant to pay the principal amount with compound interest at three times the RBI bank rate. The appellant filed a writ petition under Article 226 contending that the Council had violated mandatory procedural requirements under the Arbitration and Conciliation Act, 1996, particularly Sections 20, 23, 24 and 25, and that the writ court erred in dismissing the petition. Before the Division Bench, three legal issues were framed: maintainability of the writ petition in view of alternate remedy under the Arbitration Act; validity of the Council taking up conciliation and thereafter arbitration as a continuous process; and whether procedural formalities needed to be repeated when conciliation fails and arbitration commences seamlessly. The appellant relied on Supreme Court judgments to argue that the procedure was fatally flawed, while the respondents maintained that the statutory scheme under Section 18 of the MSMED Act permitted the Council to conduct mediation and, upon its failure, to itself take up arbitration, with all documents already on record. The court meticulously examined the Council's proceedings, noting that multiple meetings were held between August 2022 and March 2023, that both parties participated, that the appellant filed a counter statement, and that the Council perused invoices, GSTR-1 returns, and other documentary evidence. The Bench observed that the transition from conciliation to arbitration was seamless and that no mandatory procedural step had been omitted. The court concluded that the arbitration was conducted in accordance with law and rejected the appellant's contentions. The final operative part of the judgment, however, is not included in the provided excerpt.
Headnote
A) Constitutional Law - Writ Jurisdiction - Maintainability of Writ Petition - Article 226, Constitution of India - Issue raised whether a writ petition under Article 226 is maintainable when an efficacious alternate remedy exists to challenge an arbitration award under the Arbitration and Conciliation Act. Single Judge dismissed the writ petition; appellant argued procedural violations under Arbitration Act justify writ. Court examined but final decision on maintainability not explicitly recorded in provided excerpt. (Paras 4, 11)
B) MSMED Act - Reference to MSEFC - Conciliation and Arbitration Proceedings - Section 18, Micro, Small and Medium Enterprises Development Act, 2006 - Court analyzed whether the Council validly took up the claim for conciliation and, upon failure, proceeded with arbitration as a continuous process without violating the statutory scheme. Perused records showing meetings on 30.08.2022, 09.12.2022, 19.02.2023, 09.03.2023; conciliation efforts failed; Council decided to arbitrate on 09.03.2023 and held arbitration on 23.03.2023. Court observed that the procedure under Section 18 was followed and the transition from conciliation to arbitration was valid. (Paras 13-15)
C) Arbitration Law - Procedural Requirements - Sections 20, 23, 24, 25, Arbitration and Conciliation Act, 1996 - Appellant contended that mandatory arbitration procedures, including notice, filing of written statement, and hearing, were violated. Court examined Council's award and noted that the arbitration was conducted on 23.03.2023 with both parties present, appellant filed a counter statement, invoices and GSTR-1 documents were perused, and sufficient opportunity was afforded. Held that no procedural violation occurred as the parties participated and the Council considered all relevant documents. (Paras 16-18)
Issue of Consideration
(1) Whether a writ petition under Article 226 of the Constitution of India is maintainable, when an efficacious alternate remedy is contemplated under the provisions of the Arbitration and Conciliation Act for setting aside the award passed under the Arbitration Act? (2) Whether the claim petition filed under Section 18(1) of the MSMED Act was validly taken up for conciliation by the Council, and whether the Council's decision to proceed with the arbitration upon the failure of conciliation proceedings is valid? (3) When the conciliation proceedings and consequential arbitration proceedings are taken up by the Council as a continuous process, whether certain procedures under the Arbitration Act need to be repeated?
Final Decision
Decision not clearly stated
Law Points
- Legal points not extracted
- Reference to MSEFC under Section 18 of MSMED Act
- Conciliation and arbitration as continuous process
- Applicability of Arbitration and Conciliation Act
- 1996 after conciliation failure
- Procedure under Sections 20
- 23
- 24
- 25 not violated if parties participate and documents considered
- Writ petition not maintainable when statutory alternative remedy exists
Case Details
2025 LawText (MAD) (02) 167
WA No. 284 of 2025 and CMP No. 2215 of 2025
S.M. Subramaniam, K. Rajasekar
Citation not available, 2025:MHC:915
For Appellant: Mr. D. Prabhu Mukunth Arun Kumar for M/s. G. Derrick Sam; For Respondent 1: Mr. T. Chandra Sekaran, Special Government Pleader; For Respondent 2: Mr. Mohanaselvan for Mr. E. Shankar
M/s. Vee Kay Logistics, Rep. by its Partner, Mathew.J
1. The Micro And Small Enterprises Facilitation Council, Chennai Region; 2. M/s. Eco Care Pest Control Services
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Nature of Litigation
Intra-court appeal against dismissal of writ petition challenging an arbitration award passed by the Micro and Small Enterprises Facilitation Council under the MSMED Act
Remedy Sought
Appellant sought to set aside the Single Judge's order dated 05.01.2024 dismissing WP No. 36067 of 2023, and consequently quash the Council's award dated 23.03.2023 directing payment of Rs.15,49,234 with compound interest
Filing Reason
Appellant contended that the Council did not follow procedures under the Arbitration and Conciliation Act while conducting arbitration after failed conciliation, particularly Sections 20, 23, 24, 25, and that the writ court erred in dismissing the writ petition despite patent procedural violations
Previous Decisions
The MSEFC, by order dated 23.03.2023, held appellant liable to pay Rs.15,49,234 with compound interest at three times the RBI bank rate. The appellant filed WP No. 36067/2023 before the Madras High Court, which was dismissed by a Single Judge on 05.01.2024.
Issues
Whether a writ petition under Article 226 is maintainable when an efficacious alternate remedy exists under the Arbitration and Conciliation Act.
Whether the claim petition under Section 18(1) of the MSMED Act was validly taken up for conciliation by the Council and whether the decision to proceed with arbitration upon failure of conciliation is valid.
When conciliation and arbitration proceedings are continuous, whether certain procedures under the Arbitration Act need to be repeated.
Submissions/Arguments
Appellant argued that the Council violated Sections 20, 23, 24 and 25 of the Arbitration and Conciliation Act, no notice was issued for arbitration, and the procedures for filing written statement and hearing were not followed; relied on Supreme Court judgments.
Respondents argued that the procedures under the MSMED Act and Arbitration Act were duly followed, the proceedings were continuous, documents were already on record from conciliation, and the writ petition was not maintainable due to alternate remedy.
Ratio Decidendi
The court held that the MSEFC followed the procedure under Section 18 of the MSMED Act by first attempting conciliation and, upon failure, taking up arbitration as a continuous process. The participation of both parties, filing of a counter statement, and perusal of documents such as invoices and GSTR-1 satisfied the requirements of the Arbitration Act, and no mandatory procedure was violated.
Judgment Excerpts
Three key issues arise for consideration in the present lis on hand, as under; (1) Whether a writ petition under Article 226 of the Constitution of India is maintainable, when an efficacious alternate remedy is contemplated under the provisions of the Arbitration and Conciliation Act for setting aside the award passed under the Arbitration Act? (2) Whether the claim petition filed under Section 18(1) of the MSMED Act was validly taken up for conciliation by the Council, and whether the Council's decision to proceed with the arbitration upon the failure of conciliation proceedings is valid? (3) When the conciliation proceedings and consequential arbitration proceedings are taken up by the Council as a continuous process, whether certain procedures under the Arbitration Act need to be repeated?
A perusal of the impugned dated 23.03.2023, reveals that the claim petition was filed before the Council on 23.06.2022 under Section 18(1) of MSMED Act. The Council held its meetings on 30.08.2022, 09.12.2022, 19.02.2023 and 09.03.2023. During the course of meetings conducted in the aforesaid dates, relevant documents were also verified by the Council. From paragraph 6 of the order reveals that the sufficient opportunities were afforded to the parties for conciliation. Since the conciliation proceedings did not fructify, the Council held that the conciliation proceedings failed.
The Council has gone through the invoices and other relevant documents including GSTR-1 documents. Respondent denied liability and contended that the claim of the Petitioner is inflated. Respondent in their counter statement has contended that according to the unwritten agreement between the buyer and supplier of fumigation services rendered to the clients, a sum of Rs.250/-per import container, during the period between 2018 to 2021, and thereafter upto 2021-2022 a sum of Rs.500/- per import container, are the only mutually agreed rates for the supply of fumigation services.
Procedural History
Claim petition filed before MSEFC on 23.06.2022 under Section 18(1) of MSMED Act. Council held meetings on 30.08.2022, 09.12.2022, 19.02.2023, and 09.03.2023; conciliation failed. Arbitration meeting held on 23.03.2023, resulting in award directing appellant to pay Rs.15,49,234 with compound interest. WP No. 36067/2023 filed and dismissed by Single Judge on 05.01.2024. WA No. 284 of 2025 filed and heard on 27.02.2025.
Acts & Sections
- Micro, Small and Medium Enterprises Development Act, 2006: 15, 16, 17, 18, 19
- Arbitration and Conciliation Act, 1996: 7(1), 20, 23, 24, 25
- Mediation Act, 2023:
- Constitution of India: Article 226
