Writ Petition Is Maintainable Against The Award Of The MSME Council Which Failed To Give A Hearing On Limitation : Orissa High Court

The Single Bench of Justice Arindam Sinha has observed that in cases where an award is passed without hearing a party, the availability of an alternative remedy to challenge the award under S. 19 of the MSMED Act r/w S. 34 of the Arbitration Act shall not be a ground to dismiss the writ petition as compelling the petitioner to challenge the award would require him to comply with the requirement of deposit of 75% of the amount awarded.

Facts

The parties entered into an agreement for the supply of Electricals Conductors. The respondent filed a reference before the MSME Council and claimed payment with respect to certain unpaid bills. The petitioner objected to the maintainability of the reference on the ground that the claims of the respondent were barred by limitation.

The Council allowed the claims of the respondent without determining the issue of claims being barred by limitation.

Contention Of The Parties

The petitioner justified the invocation of the writ jurisdiction of the High Court against the award on the following grounds:

• The Council did not give the petitioner any hearing on the issue of limitation.
• The Council allowed the claims of the respondent without first determining the issue of limitation; therefore, the award is without any reason.
• The Council wrongly allowed the claims on the premise that since MSMED Act is a special legislation, therefore, Limitation Act would not apply.
• The Supreme Court in Silpi Industries (supra) has in express terms held the Limitation Act to be applicable to arbitrations under MSMED Act.

The respondent argued that the present writ petition is not maintainable for the following reasons:

• That the Supreme Court and various High Courts have held that a writ petition is not maintainable against an order of the arbitral tribunal.
• That the MSMED Act is special legislation and S.29 of the Limitation Act excludes its applicability to special legislation and the judgment in Silpi (supra) came only after the award was delivered.
• That the petitioner can challenge the award under S. 34 of the Arbitration Act, therefore, the writ petition is not maintainable as an alternate efficacious remedy is available.

Analysis By The Court

The High Court held that a writ petition would be maintainable against an award rendered by the MSME Council under S. 18 of the MSMED Act wherein the petitioner was not given a hearing on a material issue regarding the maintainability of the case.

"It appears from above extracts of the contentions and basis of award, reproduced in last two preceding paragraphs, the point of limitation was not adjudicated at all. The situation emerged is petitioner was not heard."

The Court agreed with the view canvassed by the respondent that ideally the Court should not interfere in the arbitral process exercising writ jurisdiction, however, this was a situation where the petitioner was not heard at all, therefore, the writ is maintainable.

The Court also observed that in cases where an award is passed without hearing a party, the availability of an alternative remedy to challenge the award under S. 19 of the MSMED Act r/w S. 34 of the Arbitration Act shall not be a ground to dismiss the writ petition as compelling the petitioner to challenge the award would require him to comply with the requirement of deposit of 75% of the amount awarded as it is purely a consequence of the omission of the tribunal.

The Court further relied on the judgment of the Supreme Court in Silpi Industries v. KSRTC, 2021 SCC OnLine SC 439, to hold that provisions of Limitation Act, 1963 apply to arbitration proceedings under MSMED Act.

Consequently, the Court allowed the writ petition to set aside the arbitral award and directed the Council to hear the petitioner on the issue of limitation of the substantive claims.

Case Title: M/s Bajaj Electricals Ltd. v. Micro Small and Enterprises Facilitation and Anr. W.P.(C) No. 7216 of 2020.

Citation: 2022 LiveLaw (Ori) 45

Date: 05.01.2022

Counsel for the Petitioner: Mr. Ram Chandra Panigrahi, Advocate

Counsel for the Opposite Parties: Mr. A.K. Sharma, AGA and Mr. S.P. Mishra, Senior Advocate.

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