MSEF Council’s Order Without Following Due Procedure Can’t Be Termed As Award: Madras High Court

The bench of Justice S. Sounthar held that since such an order is not an award, it need not be challenged under Section 34 of the A&C Act r/w Section 19 of the MSMED Act as otherwise, the party aggrieved by such an order would have to deposit 75% of the awarded amount which would imbalance the equities.

The Court held that the aggrieved party can directly invoke the writ remedy available under Article 226 of the Constitution of India.

Facts

The parties entered into an agreement dated 03.07.2018. A dispute arose between the parties regarding the payment withheld by the petitioners. Accordingly, the respondent no. 2 filed its reference before the MSEF Council (1^st respondent) under Section 18 of the MSMED Act.

The Facilitation Council Council initiated the conciliation proceedings, however, without any notice to the petitioner, the Council initiated arbitration proceedings and passed the consequent award/order on the same date. The award was passed without affording the parties to file their pleadings or to examine evidences. In terms of the award, the petitioner was directed to pay an amount of Rs. 19,07,382/-.

Aggrieved by the award/order, the petitioner challenged it under Article 226 of the Constitution of India.

Contention of the Parties

The respondent objected to the maintainability of the petition on the following grounds:

• The remedy of writ petition cannot be used to challenge an arbitral award.
• The writ is also not maintainable as there is an alternative statutory remedy available to the petitioner under Section 34 of the A&C Act.
• The grievance of the petitioner regarding non-service of notice or recording of evidence falls squarely within the purview of Section 34, therefore, the award has to be necessarily challenged under the provisions of the A&C Act only.

Analysis by the Court

The Court observed that the Facilitation Council, without any notice to the petitioner, initiated arbitration proceedings and passed the consequent award/order on the same date. It observed that the award was passed without affording to the parties an opportunity to file their pleadings or examine their witnesses as the award was passed on the same day when the arbitration proceedings were taken up.

The Court held that an order passed by the MSEF Council without issuing notice of arbitration, opportunity to parties file their pleadings and recording evidence as per the provisions of A&C Act cannot be termed as award.

The Court held that since such an order is not an award, it need not be challenged under Section 34 of the A&C Act r/w Section 19 of the MSMED Act as otherwise, the party aggrieved by such an order would have to deposit 75% of the awarded amount which would imbalance the equities.

The Court held that the aggrieved party can directly invoke the writ remedy available under Article 226 of the Constitution of India.

Accordingly, the Court allowed the petition and remanded the matter back to the Facilitation Council with a direction to conduct the arbitration by following the provisions of the MSMED Act r/w with A&C Act and pas the award within a period of 90 days.

Case Title: Feeback Infra Pvt Ltd v. MSEF Council, Chennai – W.P. No. 25062 of 2023

Citation: 2023 LiveLaw (Mad) 302

Date: 29.09.2023

Counsel for the Petitioner: Mr. Naveenkumar Murthy

Counsel for the Respondent: Mrs. S. Anitha for R.1 and Ms. V. Kamala Kumar for R. 2&3.

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