Violation Of Provisions Of Arbitration Act Or MSMED Act Can Be Adjudicated By Court U/S 34 Of Arbitration Act: Orissa High Court

An Orissa High Court bench of Justice K.R. Mohapatra has dismissed a writ petition upon holding that the petitioner, without availing the efficacious statutory remedy u/s 34 of the Arbitration Act had approached the Court under Articles 226 and 227 of the Constitution for which the Court was not inclined to exercise its discretionary power to entertain it.

Additionally, the court held that violation of any provisions of the Arbitration Act and/or the MSMED Act can be effectively adjudicated by the competent Court in an application under Section 34 of the Arbitration Act read with Section 19 of the MSMED Act.

Brief Facts:

The petitioner is a dealer of coir mattresses, and Opposite Party No.2 approached the petitioner to sell its mattresses with various lucrative offers/schemes. The Opposite Party No.2 supplied its product to the petitioner and raised invoices at different points of time. Then dispute arose between the parties and both parties agreed to resolve their disputes within the jurisdiction of Bhubaneswar.

However, the Opposite Party No.2 made a reference under Section 18(1) of the Micro, Small and Medium Enterprises Development Act, 2006 before the Council at Nagpur, Maharashtra, which had no jurisdiction to entertain and arbitrate the dispute. Then, the Council at Nagpur passed an ex-parte award/order and the Opposite Party No.2 filed an Execution Petition before the Commercial Court, Bhubaneswar.

The petitioner filed a petition under Section 47 of CPC contending that the ex-parte award put to execution is a nullity, as it was passed without following mandatory provision of law under the MSMED Act and the Arbitration Act.

The application under Section 47 CPC was dismissed and then the petitioner filed a writ petitioner before the High Court challenging the award/order passed by the Micro, Small Enterprises Facilitation Council, Nagpur.

The petitioner relied on the judgment in Kusum Ingots and Alloys Limited Vs. Union of India and another (2004) and contended that the court has jurisdiction to entertain the writ petition filed under Article 227 of the Constitution against the impugned order/award, although the same was passed by the Council at Nagpur, as the cause of action for the disputed claim arose within the jurisdiction of this Court and the parties have mutually submitted to the jurisdiction of Bhubaneswar to resolve their disputes.

However, the Opposite Party No.2 argued that despite sincere efforts by the Council the Petitioner did not participate and cooperate, so the impugned award was passed. As such, the only remedy available to the petitioner is under Section 34 of the Arbitration Act read with Section 19 of the MSMED Act for redressal of its grievances. The writ petition under Article 227 of the Constitution would not be maintainable before this Court.

Observations:

The court noted that the issue raised in the writ petition about the inherent jurisdiction of the Council as well as compliance with mandatory provisions of the MSMED Act could have been raised by the petitioner by participating in the proceeding before the Council.

Additionally, the court observed that although a part of the cause of action arose within the local jurisdiction of this Court, that itself does not compel this Court to decide the matter on merit.

Further, the court held that violation of any provisions of the Arbitration Act and/or the MSMED Act can be effectively adjudicated by the competent Court in an application under Section 34 of the Arbitration Act read with Section 19 of the MSMED Act.

Thereafter, the court held that the petitioner, without availing the efficacious statutory remedy, has approached this Court under Articles 226 and 227 of the Constitution for which this Court is not inclined to exercise its discretionary power under Article 227 to entertain the instant writ petition. Then, the court dismissed the writ petition.

Case Title: Rajdhani Coir V. Micro, Small Enterprises Facilitation Council, Nagpur, Maharashtra

Case Number: W.P.(C) No.22514 of 2022

Counsel for the Petitioner: Mr.Rama Chandra Panigrahy, Advocate

Counsel for the Opposite Parties: Mr. Shib Shankar Mahanty, Advocate (For Opposite Party No.2)

Date of Judgment: 17.01.2025

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