CASE TITLE:
M/S. Unicon Engineers Vs M/S. Jindal Steel and Power Ltd
DATE OF JUDGEMENT:
July 26, 2022
BENCH:
Justice. Prateek Jalan
PARTIES:
Petitioner– M/S. Unicon Engineers
Respondents – M/S. Jindal Steel and Power Ltd
SUBJECT
- The petition was filed by the petitioner seeking the execution of the orders passed by the Micro & Small Enterprises Facilitation Council, Coimbatore Region, on the ground that the same arbitral award was passed under section 36 of the Arbitration and Conciliation Act, 1996.
ISSUES RAISED
- Whether the order passed by the Facilitation Council constitutes arbitral award under the section 36 of Arbitration and Conciliation Act, 1996?
- Whether the order passed is valid even after the termination of conciliation proceedings?
IMPORTANT PROVISIONS
SECTION 18 OF THE MICRO, SMALL & MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT): The section provides for any party to the dispute to make reference to Micro and Small Enterprises Facilitation Council to either conduct the conciliation proceedings or to seek assistance of any institution for the same.
SECTION 15 OF THE MICRO, SMALL & MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSMED ACT): This section deals with the liability of the buyer to make payment before the date agreed upon between them in writing or any appointed day, when no such period is given then forty-five days from the day of acceptance of such goods.
SECTION 16 IN THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006: This section provides for the liability of the buyer to pay the principal amount along with the interest he is liable to pay from the date agreed upon at an interest rate of three times of the bank rate notified as per the Reserve Bank of India.
OVERVIEW
- The respondent issued a work order to the petitioner for the pollution control equipment. The petitioner claimed that the respondent failed to clear the dues thus he filed a petition under the section 18 of the Micro, Small & Medium Enterprises Development Act, 2006.
- The respondents failed to appear for the hearings and after the lapse of six hearings it was held that there was no conciliation between the both the parties and the council issued final orders directing the respondent to pay for the outstanding dues as per the sections 15 and 16 of the Micro, Small & Medium Enterprises Development Act, 2006.
ARGUMENTS ADVANCED BY THE PETITIONER
- The counsel on behalf of the petitioner submitted that there is a mismatch in the calculation of the amount to be payable since the interest payable was not calculated appropriately and thus the execution is only with reference to the interest component that has been directed by the council.
- The counsel further submitted that respondents have failed to challenge the order of the council stating that it is not an arbitral award they cannot further challenge the execution of the same.
- The counsel further submitted that both the parties have admitted the sums to be payable along with the interest amount as per the Micro, Small & Medium Enterprises Development Act, 2006, during the conciliation proceedings thus the same shall be regarded as an arbitral award.
ARGUMENTS ADVANCED BY THE RESPONDENTS
- The counsel on behalf of the respondent submitted that the proceedings for execution are not maintainable as the order that has been awarded was not arbitral award.
- The counsel further submits that the conciliation proceedings taken up by the council had failed and the same required to refer to arbitration but the same was not followed and direct order was issued as to the payment of the dues.
- The counsel further relied upon the judgement of the case Jharkhand Urja Vikas Nigam Limited vs The State of Rajasthan & Ors.[Civil Appeal No. 2899/2021] and held that when the conciliation proceedings are failed or terminated the matter has to be resolved by arbitration. And any arbitration proceedings initiated inconsistent to the relevant provisions of the Arbitration & Conciliation Act, 1996 the order passed also becomes nullified and does not amount to arbitral award.
JUDGEMENT ANALYSIS
- The court after observing contentions of both the parties it has held that the order issued was after the conciliation proceedings got terminated. The procedure to be followed was to provide for the matter to be resolved by arbitration process but the same was not taken up.
- The court held that the council held that the council had failed to follow the procedure as per the Arbitration and Conciliation Act, 1996 under sections 20, 23, 24 and 25.
- The court also referred to the judgement in the case Jharkhand Urja Vikas Nigam Limited vs The State of Rajasthan & Ors. [Civil Appeal No. 2899/2021]and held that the proceedings of arbitration and conciliation cannot be clubbed together and held that the procedure adopted by the council was inconsistent. Thus, the order passed was nullified and does not even constitute an arbitral award.
CONCLUSION
- Thus, the court held that the execution proceedings of the order are not maintainable as the order passed does not amount to the arbitral award as per the Arbitration and Conciliation Act, 1996. The court further held that the above findings shall not affect the petitioner’s right to seek the amount that has to be recovered initially. The court further referred the petitioner as to approach for the pending arbitrary proceedings enabling for the amendment of the claims. The court suggested the tribunal may consider the petitioner’s claims in accordance with the law.
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