Summary
The Court set aside closure of an MSME Facilitation Council reference and the High Court’s direction to pursue an award challenge. The Council had stopped at conciliation without following the statutory sequence. It could not adjudicate the disputed evidence as conciliator, but failed conciliation required arbitration, either before the Council or through a referred institution, with arbitral powers to take evidence. The matter was remitted for fresh proceedings under Section 18, to conclude within six months of receipt of the order.
Issues
- Whether a reference closed at the conciliation stage could be treated as an arbitral award challengeable under Section 34.
- What procedure and powers applied to the Council’s successive conciliation and arbitration roles.
Provisions considered
- Section 18(1)–(5), read with Section 24, Micro, Small and Medium Enterprises Development Act, 2006The statutory reference procedure required conciliation and, upon its unsuccessful termination, arbitration by the Council or a referred institution. The special procedure prevailed to the extent of inconsistency with other law. (¶¶ 9, 9.1, 9.2, 9.3, 10, 11, 12)
- Sections 65–81, particularly Sections 67, 73, 74 and 76; Section 34, Arbitration and Conciliation Act, 1996Conciliation sought voluntary settlement and did not adjudicate the contested claim. The arbitration stage and consequent award challenge could arise only after following the requisite statutory transition. (¶¶ 9.1, 9.2, 9.3, 10, 11)
Held
- The parties were admittedly governed by the MSMED Act. Its special procedure required the Council first to conduct or arrange conciliation and, if it failed without settlement, to take up arbitration or refer the dispute for arbitration. The Council could not simply terminate the reference by declaring the disputed documents beyond its remit. (¶¶ 9, 9.1, 9.2, 9.3, 10)
- As conciliator, the Council assisted independent and impartial settlement rather than conducting a full evidentiary adjudication. But as arbitrator after unsuccessful conciliation, it possessed the powers available under the Arbitration Act, including examination of evidence. Its general assertion that it lacked power to enquire and take evidence was therefore incorrect. (¶¶ 9.1, 9.3, 10, 11)
- The order arose only at the conciliation stage; arbitration had not commenced through the prescribed process. The High Court’s treatment of it as an award requiring a Section 34 challenge could not stand. Both orders were set aside without deciding the supply claim on its merits. (¶¶ 3, 4, 9.3, 10, 12)
- The reference was remitted to the Facilitation Council for fresh lawful consideration following Section 18. Given its age, proceedings were directed to be completed within six months of receipt of the order, without costs. (¶ 12)
Result
Council and High Court orders quashed. Reference remitted for fresh proceedings under Section 18, to conclude within six months of receipt of the order; no costs.