Summary
The Court quashed a Facilitation Council’s payment order made solely because the buyer did not appear in conciliation, without initiating arbitration. Conciliation and adjudicatory arbitration were distinct stages under Section 18 of the MSMED Act. The Council could record failed conciliation and commence or refer arbitration, but could not combine the stages and decree the claim by default. The order was a nullity rather than an arbitral award requiring challenge under Section 34. Fresh arbitration remained open, and the underlying monetary claim was left undecided.
Issues
- Whether nonappearance in conciliation permitted the Council to issue a payment award without commencing arbitration.
- Whether absence of a Section 34 challenge or the buyer’s later payment barred writ relief against such an order.
Provisions considered
- Section 18(2) and (3), Micro, Small and Medium Enterprises Development Act, 2006Failed conciliation had to be followed by arbitration conducted by the Council or an appropriate institution under the Arbitration Act. (¶ 8-12)
- Sections 20, 23, 24 and 25, Arbitration and Conciliation Act, 1996The Council had to follow applicable arbitration procedure and adjudicate the claim on evidence, rather than treating absence at conciliation as sufficient proof. (¶ 9-12)
- Section 34, Arbitration and Conciliation Act, 1996The impugned order was not an arbitral award in law because arbitration had never been undertaken; failure to seek setting aside under Section 34 did not defeat relief. (¶ 13)
Held
- Conciliation assists a consensual settlement; arbitration adjudicates a claim which must be proved. Where the buyer did not reply or appear in conciliation, the Council could record failure and initiate arbitration, but the two stages could not be clubbed. (¶ 8-12)
- The Council ordered payment on the first scheduled appearance solely because of nonappearance, without conducting arbitration under the mandatory procedure. That order was patently illegal and a nullity, so the objection that only Section 34 could be invoked was rejected. (¶ 12-13)
- The subsequent payment of an amount found due after verification did not waive the right to challenge the order. The chronology, including the supplier’s later unsuccessful execution attempt, also defeated the delay-and-laches objection on these facts. (¶ 13)
- The High Court judgment and Council order were set aside. The Council remained free to conduct or refer arbitration in compliance with the Arbitration Act, and the tribunal could decide the claim on its merits. (¶ 14)
Result
Appeal allowed; High Court judgment and Council payment order quashed, with liberty for lawful arbitration; claim merits left open.