Award Under MSMED, Can’t Challenge In Writ Petition For Not Granting Adjournment Sought: Calcutta High Court

The bench of Sabyasachi Bhattacharyya held that a party aggrieved by an award passed under MSMED Act has to challenge it under Section 34 of the A&C Act r/w Section 19 of the MSMED Act and the remedy of writ petition to challenge such award would not be available unless it is shown that the award has resulted in the failure of justice.

The Court held that if a party was given a hearing by the arbitral tribunal and despite the opportunity the party chose not to put up a defence and sought adjournment which was refused by the arbitral tribunal then the consequent award cannot be challenged under Article 226 of the Constitution on the ground of suffering from vice of violation of natural justice.

It held that the party aggrieved by such an award can challenge it under Section 34(2)(a)(iii) on the ground that it was not given sufficient opportunity to prove its case, however, the limited scrutiny permissible under writ jurisdiction in view of availability of an alternative remedy does not permit the writ court to examine it unless it results in palpable violation of the law or patent arbitrariness.

Facts

The parties entered into an agreement. A dispute arose between the parties which was referred to MSEF Council by the respondent. Upon the failure of the conciliation proceedings, the parties were referred to arbitration and the impugned award was passed in favour of the respondent.

Aggrieved by the award, the petitioner challenged it under in a writ petition.

Grounds of Challenge

The petitioner challenged the award on the following grounds:

• The arbitrator failed to issue a pre-emptory notice to the petitioner and the award was passed ex-parte.
• The award suffers from the vice of violation of principles of natural justice as the petitioner was not given a chance to represent its case as its application for adjournment of proceedings to allow it to prepare its defence and submit it counter-claims was refused by the arbitral tribunal and the same has severely prejudiced the petitioner.
• The petitioner cannot be forced to exhaust the alternative remedy of challenging the award under Section 34 of the A&C Act in view of requirement to mandatorily deposit 75% of the awarded amount as a pre-condition to the petition, such a recourse would further prejudice the petitioner.

Analysis by the Court

The Court observed that the petitioner was given a hearing by the arbitral tribunal, however, it chose to not put out its defence at that stage. Thereafter, an e-mail was sent to it by the tribunal wherein it was informed that the final hearing for the matter has been fixed, however, instead of appearing on the said date, the petitioner sent an email requesting the tribunal for an adjournment to allow it to file the statement of defence and counter-claims. The arbitral tribunal did not accede to the request of the petitioner and passed the award. In these circumstances, the Court observed that it cannot be said that the petitioner was not given any opportunity at all.

The Court held that an arbitration award passed under MSMED Act cannot be challenged in a writ petition merely on the ground that the petitioner’s request for adjournment was refused by the arbitrator. It that a party aggrieved by an award passed under MSMED Act has to challenge it under Section 34 of the A&C Act r/w Section 19 of the MSMED Act and the remedy of writ petition to challenge such award would not be available unless it is shown that the award has resulted in the failure of justice.

The Court held that if a party was given a hearing by the arbitral tribunal and despite the opportunity the party chose not to put up a defence and sought adjournment which was refused by the arbitral tribunal then the consequent award cannot be challenged under Article 226 of the Constitution on the ground of suffering from vice of violation of natural justice.

It held that the party aggrieved by such an award can challenge it under Section 34(2)(a)(iii) on the ground that it was not given sufficient opportunity to prove its case, however, the limited scrutiny permissible under writ jurisdiction in view of availability of an alternative remedy does not permit the writ court to examine it unless it results in palpable violation of the law or patent arbitrariness.

Accordingly, the Court dismissed the petition with a liberty to the petitioner to challenge the award in terms of provisions of Section 34 of the A&C Act.

Case Title: Spectrum Infra Ventures v. WBSMEFC, WPA No. 11265 of 2023

Date: 12.10.2023

Counsel for the Petitioner: Mr. Utpal Bose, Ankan Rai and Sayantan Das

Counsel for the Respondent: Mr. T.M. Siddique and Suddhadev Adak

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