MANVEER OBEROI v. MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL, KERALA & M.R. SUBRAHMANIAN

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY FRIDAY, THE 26TH DAY OF FEBRUARY 2021 / 7TH PHALGUNA, 1942 ## WA NO. 1593 OF 2020 [AGAINST THE JUDGMENT DATED 24.01.2020 IN WP(C) NO. 3143/2018 OF HIGH COURT OF KERALA] ## APPELLANT/PETITIONER: MANVEER OBEROI, AGED 40 YEARS DIRECTOR, M/S. H.S. OBEROI BUILD TECH PVT. LTD. 365, 1ST FLOOR, SULTANPUR, MEHRAULI, NEW DELHI - 110030. BY ADV. R.AZAD BABU ## RESPONDENTS/RESPONDENTS: - 1 MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL, KERALA, REPRESENTED BY CHAIRMAN, (DIRECTOR OF INDUSTRIES AND COMMERCE), VIKAS BHAVAN, THIRUVANANTHAPURAM - 695001. - 2 M.R. SUBRAHMANIAN, MANAGING DIRECTOR, M/S. ADTECH SYSTEM LTD., THE CHIEF ELECTION COMMISSIONER, SRIRAM, TC-8/1128-1, PARAKOIL ROAD, VETTAMUKKU, THIRUMALA, THIRUVANANTHAPURAM - 695006. BY ADVS. SRI.SANTHOSH MATHEW SRI.M.S.AMAL DHARSAN BY SENIOR GOVERNMENT PLEADER SRI. V. TEK CHAND THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 26.02.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.A.1593/2020 2 ## **JUDGMENT** ## **S. Manikumar, CJ** Petitioner is the appellant. The appeal is filed challenging the judgment of the learned single Judge dated 24.01.2020 in W.P.(C) No.3143 of 2018, by which, the following reliefs sought for in the writ petition were declined: a) Call for the records leading to Exhibit-P4 award passed by the 1[st] respondent viz., the Micro and Small Scale Facilitation Council, Kerala, represented by Chairman (Director of Industries & Commerce), Thiruvananthapuram, dated 27.10.2017, examine the legality of the proceedings and quash the same. b) Direct the 1[st] respondent Facilitation Council, to consider the contentions of the petitioner following the procedure prescribed under the Arbitration and Conciliation Act, 1996. 2. The subject issue arises from Exhibit-P4 award dated 27.10.2017, passed by the Micro and Small Enterprises Facilitation Council, (hereinafter called as, the 'Council'), constituted under the Micro Small and Medium Enterprises Development Act, 2006, W.A.1593/2020 3 (hereinafter called as, the 'Act, 2006'). The 2[nd] respondent is one Mr. M.R.Subramanian, who is the Managing Director of M/s. Adtech System Ltd., an organisation registered under the Act, 2006, enabling it to seek reliefs under the provisions of the Act, 2006. 3. Apparently, the 2[nd] respondent raised a claim, by making a reference against the appellant before the Council, for a sum of Rs.14,47,930/-, consequent to which, the Council issued a notice to the appellant on 27.11.2015. It seems, on appearance, the appellant, as well as the 2[nd] respondent, expressed willingness to settle the matter and thereupon, the parties were referred for conciliation, in contemplation of Section 18(2) of the Act, 2006. 4. Before the Conciliation Committee, appellant, as well as 2[nd] respondent, submitted that they are ready for a settlement and sought time. Accordingly, the Conciliation Committee advised the parties to settle the case through mutual negotiation on or before 21.03.2017. The Council considered the case again on 04.04.2017, 16.06.2017 and 29.08.2017, however, no action was taken to settle by and between the W.A.1593/2020 4 parties and accordingly, proceeded to consider the claim raised by the 2[nd] respondent on merits. After consideration, an award was passed in favour of the 2[nd] respondent for an amount of Rs.13,47,180/- with compound interest, calculated at three times of bank rate notified by the Reserve Bank, as provided under Section 16 of Act, 2006 from 2.9.2014 till the date of realisation. Challenging the said award, writ petition has been filed. 5. Before the writ court, the 2[nd] respondent has filed a counter affidavit, _inter alia_ , contending that the writ petition is not maintainable, since under the Act, 2006, there is a clear remedy prescribed to challenge the award. Any how, taking into account the entire pros and cons, learned single Judge has dismissed the writ petition, holding that as per Section 18 of the Act, 2006, an award passed is to be challenged as provided under Section 34 of the Arbitration and Conciliation Act, 1996, and in order to maintain a challenge, the petitioner had to make a pre-deposit, in contemplation of Section 19 of Act, 2006. That apart, the 2[nd] respondent has relied on W.A.1593/2020 5 the decisions in **Ballarpur Industries Ltd. v. Andhra Pradesh Micro, Small Enterprises Facilitation Council, Hyderabad and Anr.** (AIR 2015 NOC100), **Modern Industries v. SAIL** [(2010) 5 SCC 5], and **Goodyear India Ltd. v. Norton Intech Rubbers (P) Ltd.** [(2012) 6 SCC 345] to substantiate his contentions, and prayed for dismissal of the writ petition. 6. After considering the submissions advanced and the statutory provisions, by the impugned judgment, writ court dismissed the writ petition, holding as under: “In the light of the said provision, as pointed out by the learned counsel for the second respondent, in order to invoke the remedy under Section 34 of the Arbitration and Conciliation Act 1996, the aggrieved person is obliged to make a pre-deposit. Unlike other statutes containing similar provisions where a discretion is given to the court concerned to waive the said obligation cast on the aggrieved party in appropriate cases, such discretion is not given to the court under this statute. The reason for the same is obvious from the proviso to Section 19 of the Act which provides that once the deposit is made and an appeal is preferred on that basis, the court shall order that W.A.1593/2020 6 such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose. In other words, the requirement to make the predeposit is mandatory under the Act in order to challenge an award passed under Section 18(3) of the Act. It is therefore clear that if the High Court entertains a writ petition challenging the award made under Section 18 (3) of the Act in exercise of the power under Article 226 of the Constitution, the aggrieved party would be able to bypass the statutory requirement of pre-deposit. True, there would be exceptional cases where the High Court has to invoke the extraordinary jurisdiction under Article 226 of the Constitution notwithstanding the alternate remedy available to the party. This is certainly not an extraordinary case to entertain a writ petition challenging an award under Section 18(3) of the Act, for, it is seen from the materials on record that it is a case where the petitioner admits the liability and the entire exercise is for the purpose of availing time. In the circumstances, I am of the view that in a case of this nature, it is inappropriate for this court to entertain a writ petition challenging an award under Section 18(3) of the Act under Article 226 of the Constitution. I am fortified in the aforesaid view by the observation made by the Apex Court in a similar case, viz, _**Modern Industries (M/s.) v. M/s. Steel Authority of India**_ W.A.1593/2020 7 _**Ltd. and Others**_ (2010 KHC 4250) that the High Court ought not have permitted a party aggrieved by the award under Section 18(3) of the Act to challenge the same in a proceedings under Section 226 of the Constitution bypassing the statutory remedy available to them on the facts of that case.” 7. It was thus challenging the judgment of the learned single Judge dated 24.01.2020, this appeal is preferred. 8. We have heard learned counsel for the appellant Mr. R. Azad Babu, learned counsel for the 2[nd] respondent Mr. Amal Dharsan, and perused the pleadings and materials on record. 9. The sole question emerges for consideration in this intra court appeal is, whether the appellant has made out a case for interference with the impugned judgment. 10. Normally in an appeal, the question that would be considered is, as to whether there is any error or illegality committed by the learned single Judge in the matter of exercise of discretion under Article 226 of the Constitution of India. As we have pointed out W.A.1593/2020 8 above, the issue as regards maintainability of the writ petition is to be considered, guided by the specific provisions of Act, 2006. 11. It is undisputed that the 2[nd] respondent company is a registered entity as per the provisions of Act, 2006. It is also an admitted fact that there were trade relations by and between the appellant and 2[nd] respondent. Therefore, it is unequivocal that the provisions of Act, 2006, would come into play. As per Section 15, whenever any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor, on or before the date agreed upon between him and the supplier in writing or where there is no agreement in this behalf before the appointed date. The proviso thereto makes it clear that in no case, the period agreed upon between the supplier and the buyer, in writing, shall exceed 45 days from the date of acceptance or the day of deemed acceptance. 12. As per Sections 16 and 17 of Act, 2006, the supplier is entitled to secure interest and recover the same from the buyer respectively. Section 18 is the eminent provision that comes into play in the matter W.A.1593/2020 9 ## of consideration of the issue raised in the appeal, which reads thus: “ **18. Reference to Micro and Small Enterprises** — **Facilitation Council.** (1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council. (2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under subsection (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 W.A.1593/2020 10 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act. (4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. (5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.” 13. Reading of sub-section (2) of Section 18 of Act, 2006 makes it clear that on receipt of a reference under Section 18(1), the Council is entitled as of right to conduct conciliation in the matter or seek assistance of any institution or centre providing alternate dispute resolution. Evidently, the matter was referred for conciliation and even though the parties have agreed before the Conciliation Committee that they are agreeable for a settlement, in effect, no W.A.1593/2020 11 settlement was arrived at. Thereafter, the matter was posted again before the Council and the Council proceeded to hear the matter on merits. Accordingly, Exhibit-P4 award was passed on 27[th] October, 2017. Reading of Exhibit-P4 award, makes it clear that the Facilitation Council had considered the trade transactions by and between the parties, the numerous efforts made by the 2[nd] respondent, by issuing notices, emails and reminders to effect the payment, and further that, the buyer failed to make the payment to the supplier. 14. It is also clear from Exhibit-P4 award dated 27.10.2017, that the requirement of resolving the matter through conciliation was attempted by the Facilitation Council and, in fact, it was on the basis of the suggestions made by the parties, in the conciliation, the parties were directed to settle the matter and report accordingly to the Council. The Council proceeded to consider the matter on merits only because of the failure of the parties to settle the transaction through conciliation. Anyhow, the matter was considered on merits and an award was passed. Therefore, the question remains for consideration W.A.1593/2020 12 is, whether the appellant had an effective remedy under Act, 2006 to challenge the award. 15. Section 19 of Act, 2006 makes it explicit that there is a clear cut procedure contemplated thereunder for challenging the award, which reads thus: ## “ **19. Application for setting aside decree, award or order** No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court: PROVIDED that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose.” W.A.1593/2020 13 16. Therefore, on assimilation of facts and circumstances, it is evident that the basic requirements were followed by the Facilitation Council, respondent No.1, in accordance with the statutory prescriptions and accordingly, the appellant was duty bound to seek the remedy, in contemplation of Section 18 of Act, 2006, by which, he was liable to be proceeded under Section 34 of the Arbitration and Conciliation Act, 1996, as amended from time-to-time. Section 34 of the Arbitration and Conciliation Act reads thus: “ **34. Application for setting aside arbitral award** .—(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). - (2) An arbitral award may be set aside by the Court - only if— - (a) the party making the application furnishes proof that— - (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or W.A.1593/2020 14 (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that— (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. [Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the W.A.1593/2020 15 fundamental policy of Indian law shall not entail a review on the merits of the dispute. [(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.] (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings W.A.1593/2020 16 or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. [(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.]” 17. After evaluation of facts, circumstances, and the law, the learned single Judge had found that the attempt of the appellant by filing the writ petition was to tide over the pre-deposit, as is provided under Section 19 of Act, 2006, and there was no illegality or arbitrariness justifying the invocation of power conferred under Article 226 of the Constitution of India, or there was any extraordinary situation or circumstances to interfere with the award impugned, in a writ petition under Article 226 of the Constitution. W.A.1593/2020 17 18. In our considered opinion, when there was a clear procedure prescribed under the statute, to tackle the situation, normally and ordinarily, the appellant ought to have invoked the said remedy. Merely because the statutory provision makes a condition for predeposit of the amounts, that is not an enabling circumstance for thinking that the remedy is not efficacious justifying the appellant to invoke the writ jurisdiction available under Article 226 of the Constitution of India. 19. It is well settled that when there is a remedy provided under a statute, a person aggrieved by the order/award passed by the statutory authority has to resort to the remedy so provided. We are also of the view that if there was any illegality on the part of the Facilitating Council, it was a subject matter for challenge under Section 34 of the Arbitration and Conciliation Act, 1996, since subsections (2) and (3) of Section 18 of Act, 2006 make it clear that the statutory remedy prescribed under Act, 2006 is one under the Arbitration and Conciliation Act, 1996. W.A.1593/2020 18 20. Analysing the situations, both legally and factually, we are of the view that the learned single Judge was right in dismissing the writ petition by the impugned judgment. Needless to say, the appellant has not made out a case for interference of the judgment of the learned single Judge. Upshot of the above discussion is that, writ appeal fails and accordingly, it is dismissed. Sd/S. Manikumar Chief Justice Sd/Shaji P. Chaly Judge krj //TRUE COPY// P.A. TO C.J.