MSE Facilitation Council cannot initiate proceeding under Section 18(3) of MSMED Act, 2006 without recording that the conciliation failed and the proceeding under Section 18(2) is terminated which is mandatory under the Act and non-recording the same is a ground for Writ Petition – Tata Projects Ltd. Vs. SVS & Company – Chhattisgarh High Court
November 7, 2023
In this case, MSE Facilitation Council without recording that conciliation proceeding failed, terminating the conciliation proceeding and initiating proceeding under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006, passed the award under Section 18(3) of the Act of 2006.
Hon’ble High Court held that:
(i) Both the proceedings, one under Section 18 (2) and another under Section 18 (3), are different. One is conciliation and other is arbitration.
(ii) For the proceeding under sub-section (3) of Section 18, the provisions under the Act of 1996 shall apply as if arbitration was in pursuance of an arbitration agreement. From the language used under sub-section (3) of Section 18 of the Act of 2006, it is apt clear that the Arbitrator is to be appointed and before whom there must be a statement of claim, reply to statement of claim and further procedure to be adopted to prove the claim as provided under the Act of 1996. No such procedure is adopted by the Facilitation Council in case at hand, which would lead to conclusion that the award passed by the Facilitation Council is in violation of principles of natural justice.
(iii) As the procedure provided under the Act of 2006 has not been followed by the Council, in the opinion of this Court, writ petition can be allowed only on that ground as the impugned award dated 25.1.2023 is passed in contravention of provision of Rule 18 (3) of the Act of 2006 and various provisions under the Act of 1996. The Council after recording the outcome of the proceedings under Section 18 (2) of the Act of 2006 may proceed further as provided under Section 18 (3) of the Act of 2006.