MSMED Act- Facilitation Council Cannot Review Its Own Decisions : Supreme Court

The Supreme Court observed that the Micro, Small and Medium Enterprises Development Act does not empower the Facilitation Council to review its own decisions.

Every decision of the Facilitation Council is an award, the bench of Justices Indira Banerjee and V. Ramasubramanian said.

Ajanta Press and Mechanical Works filed a claim against Bajaj Auto Limited before the Facilitation Council in the year 2009. This claim was rejected by the Council. Ajant Press filed an application for reconsideration. Facilitation Council reviewed its earlier decision and passed an award. Allowing writ petition filed by Bajaj Auto Limited, the High Court set aside both the decisions and remanded the matter back to the Facilitation Council. 

In appeal, the Apex Court bench noted, after referring to Sections 18 and 19, i) that to begin with, the Facilitation Council should conduct conciliation; (ii) that upon failure of conciliation, the dispute is to be arbitrated either by the Facilitation council itself or by an institution to which it is referred; and (iii) that the decision arrived at thereto, constitutes an award.

Allowing the appeal, the bench observed:

"In the case on hand, the claim of respondent no.1 was rejected by the Facilitation Council by the decision dated 17.02.2009. Since the claim stood rejected, it was like an award and respondent no.1 ought to have initiated other proceedings to challenge the award. Instead, he chose to put repeated pressure on the Facilitation Council to review its earlier decision. Unmindful of the fact that they have no such power, the Facilitation Council reopened its earlier decision and passed the award. The High Court completely overlooked the inherent lack of jurisdiction on the part of the Facilitation Council to pass the award dated 27.01.2016"

Case details

Bajaj Auto Limited vs Ajanta Press and Mechanical Works | 2022 LiveLaw (SC) 769 | CA 6555/2022 | 13 September 2022 | Justices Indira Banerjee and V. Ramasubramanian

Counsel: Sr. Adv Jaideep Gupta and AOR E. C. Agrawala for appellant, Adv Ashok Arora for respondent, Adv Suresh Dhole for State

Headnotes

Micro, Small and Medium Enterprises Development Act, 2006 ; Section 18,19 - MSMED Act does not empower the Facilitation Council to review its own decisions - i) that to begin with, the Facilitation Council should conduct conciliation; (ii) that upon failure of conciliation, the dispute is to be arbitrated either by the Facilitation council itself or by an institution to which it is referred; and (iii) that the decision arrived at thereto, constitutes an award. (Para 14-16)

Micro, Small and Medium Enterprises Development Act, 2006 ; Section 8(1) - MSMED Act is not applicable to transactions which took place even before the Act was enacted and that by taking recourse to Section 8(1) of the Act and filing a memorandum, a person cannot assume the legal status conferred under the Act to claim retrospectively - MSMED Act was not intended to provide a gateway for hopelessly time barred claims. (Para 12,17)

Click here to Read/Download Order