Case Note & Summary
The matter arose from a writ petition filed by the first respondent, M/s BVS Distilleries Private Limited, challenging an award dated 28.12.2022 passed by the Micro and Small Enterprises Facilitation Council, Chennai Region. The primary contention in the writ petition was that the Council had not followed the mandatory procedure of conducting conciliation and arbitration as separate proceedings. It was argued that upon failure of conciliation, the Council must formally close the conciliation proceedings by recording an order and thereafter commence arbitration afresh under the Arbitration and Conciliation Act, 1996. The writ petitioner emphasized that discussions during conciliation could not be relied upon in arbitration, as the two proceedings are distinct and independent under the applicable Act and Rules. The learned single judge, accepting this ground, remanded the matter back to the Facilitation Council for fresh proceedings in accordance with law. The third respondent in the writ petition, M/s UGP Engineering Private Limited, being aggrieved by the remand order, preferred the present writ appeal before the Division Bench under Clause 15 of the Letters Patent. The appeal sought to set aside the remand order. The Division Bench heard the arguments of both sides, noting the core legal issue concerning the procedural distinction and sequential conduct of conciliation and arbitration before the Council. The excerpted portion of the judgment does not contain the final decision of the Division Bench on the appeal.
Headnote
A) Dispute Resolution under MSMED Act - Conciliation and Arbitration Proceedings - Distinctness and Procedural Compliance - Micro, Small and Medium Enterprises Development Act, 2006 and Arbitration and Conciliation Act, 1996 - The writ petition challenged the Council's award on the ground that conciliation proceedings were not properly closed and arbitration not separately commenced, violating the distinct nature of the two proceedings; the single judge remanded the matter for fresh proceedings, and the writ appeal thereagainst was heard (Para 2).
Issue of Consideration
Whether the Micro and Small Enterprises Facilitation Council must follow separate conciliation and arbitration proceedings before passing an award, and whether the single judge was correct in remanding the matter for procedural compliance
Law Points
- Conciliation proceedings and arbitration proceedings are distinct and independent
- discussions during conciliation cannot be relied upon in arbitration
- formal closure of conciliation and fresh commencement of arbitration is required under the Act and Rules
Case Details
2025 LawText (MAD) (03) 50
S.M. Subramaniam, K. Rajasekar
Mr. G. Ashokapathy for M/s Pass Associates for Appellant; Ms. Syeda Nadiya for Mr. G. Muthukumar for R1
M/s UGP Engineering Private Limited, rep by its Managing Director Mr. S. Umapathy
1. M/s BVS Distilleries Private Limited, rep by its Director Mr. B.V. Subba Rao; 2. The Chairperson, Micro and Small Enterprises Facilitation Council, Chennai Region; 3. The Secretary, Micro and Small Enterprises Facilitation Council, Chennai Region
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Writ Appeal challenging a single judge order remanding a dispute to the Micro and Small Enterprises Facilitation Council for proper conciliation and arbitration procedure
Remedy Sought
Appellant sought to set aside the remand order and presumably uphold the original award or dismiss the writ petition
Filing Reason
Writ petition was filed challenging the Council's award on the ground that conciliation and arbitration proceedings were not conducted separately and the proper procedure was not followed; the single judge remanded the matter; the appellant appealed against the remand.
Previous Decisions
Single Judge of the Madras High Court in W.P.No.23032 of 2023 by order dated 29.09.2023 remanded the matter back to the Micro and Small Enterprises Facilitation Council for fresh proceedings in accordance with law.
Issues
Whether conciliation proceedings and arbitration proceedings under the Micro, Small and Medium Enterprises Development Act, 2006 and the Arbitration and Conciliation Act, 1996 are distinct and must be conducted separately by the Facilitation Council.
Whether the single judge was correct in remanding the matter for fresh proceedings.
Submissions/Arguments
The writ petitioner (first respondent) contended that the Council failed to conduct conciliation as a separate proceeding, did not formally close conciliation, and did not commence arbitration afresh; that conciliation discussions cannot be used in arbitration; and that the procedures are distinct and independent under the Act and Rules.
Judgment Excerpts
The ground mainly raised in the writ petition is that conciliation proceeding must be conducted by the Council to resolve the issues between the parties. In the event of failure, the conciliation proceeding must be closed by recording and passing an order and thereafter, arbitration proceeding under the Arbitration and Conciliation Act must be commenced afresh by affording opportunity to the parties. Proceedings of conciliation cannot be equated with the arbitration proceedings. That apart, the discussions made during the conciliation proceedings cannot be relied upon during the arbitration proceedings, as the conciliation proceedings and arbitration proceedings are distinct and different and independent proceedings are contemplated both under the Act and Rules.
In the present case, since the date of closure and commencement of arbitration has not been done in accordance with the provisions of the Act, the learned single Judge has remanded the matter back to the Micro and Small Enterprises Facilitation Council to
Procedural History
The first respondent filed W.P.No.23032 of 2023 challenging the award dated 28.12.2022 passed by the Micro and Small Enterprises Facilitation Council. The single judge of the High Court by order dated 29.09.2023 remanded the matter back to the Council for fresh proceedings. The third respondent in the writ petition, being aggrieved, filed the present writ appeal.
Acts & Sections
- Arbitration and Conciliation Act, 1996:
- Micro, Small and Medium Enterprises Development Act, 2006:
