TaxTMI 
TaxTMI 
2026 (7) TMI 1778
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....Limited. The respondent M/s Gillooram Gauri Shankar who was the petitioner before the MSME Council is respondent no.3 herein in both the writ petitions. 3. Since, the writ petitioners, in both the writ petitions, have questioned the Award passed by MSME Council contained in Memo No.304 dated 25.01.2016 therefore, both the instant petitions are being disposed of by this common order. Prayer 4. In the writ petition being W.P.(C) No.1593 of 2016 the following prayer has been made: "1.(i) To quash/set aside the order contained in memo no. 304 dated 25.1.2016 issued under the pen and signature of Deputy Director of Industries, Directorate of Industries, Jharkhand Micro Small and Medium Enterprises Facilitation Council, whereby and whereunder, the petitioner has been directed to pay a sum of Rs. 26,92,957.00, as principal amount and interest to the respondent no.3. (ii) During the pendency of this writ petition, the operation of the impugned order dated 25.1.2016 (signed on 21.1.2016) may kindly be stayed. (iii) For any other appropriate relief/reliefs to which the petitioner is found to be entitled in the facts and circumstances of this case as also t....
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....on the grounds that the payment should be made by the BSEB (now known as Bihar State Power Holding Company Limited). It is further case of Respondent no.3 that BSEB is also not making payment on the plea that the payment should be made by JSEB. The respondent no.3, therefore, prayed for payment of bill amounting to Rs. 11,55,881.52. The respondent no.3 further claimed for refund of the penalty deducted from the bills, which is to the tune of Rs. 57,70,570.18. The respondent no.3 further claimed towards price variation amount of Rs. 39,84,120.93, as also certain ancillary interest, which is given in the application filed by the respondent no.3 dated 04.11.2006 to the council. Upon notice, BSEB/Bihar State Power Holding Co. Ltd. appeared and filed a petition on 27.04.2015 before the council and claimed for dismissal of the claim of the respondent no.3 against BSEB on the ground that the alleged dues are related to the payment of the place/territory which now falls within the territorial jurisdiction of Jharkhand State Electricity Board (now Jharkhand Urja Vikas Nigam Ltd.) The JSEB came into existence w.e.f. 01.04.2001 and thereafter a sum of Rs. 29,79,783.34 have been pa....
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.... Hence, claims prior to 15.11.2000 is payable by BSEB, Bihar in terms of the contract. Further, the remaining 3 nos. of purchase order were issued by BSEB after bifurcation of states and the supply pertains to Bihar State. While determination of Principal outstanding, the council has taken into consideration the deductions from Suppliers bills towards the Bank Guarantee, penalties imposed on the claimant and other deductions that has been made. In this context, it is stated that such deductions have been made by erstwhile BSEB and hence it shall be the sole liability of BSEB to pay any such amount as deducted or penalized by them. Another writ petition being W.P.(C) No. 1593 of 2016 was filed Bihar State Power Holding Company Limited wherein vide order dated 30.01.2018, the Hon'ble Court has been pleased to stay the operation of the order dated 25.01.2016 passed by the Council in Case No. JHMSEFC-04/2013. 8. It would be evident from order dated 22.04.2026 and 29.04.2026 passed by this Court that Mr. M.S. Mittal, learned senior counsel appearing for the respondent no.3 has raised the preliminary issue of maintainability of the present writ petitions. 9. This Court ha....
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....n 21 of the Act, 2006 and even accepting the jurisdictional error of the Council, the only forum available to the writ petitioners are Section 34 of the Arbitration and Conciliation Act, 1996. 16. It has been contended that the remedy is already available under the Arbitration and Conciliation Act, 1996 wherein all the issues including the issues of jurisdiction can be agitated, hence, the present writ petition is not maintainable. 17. It is submitted that the challenge to composition of Tribunal is well within the scope of Section 16 of the Arbitration Act, wherein a party can challenge as to whether the Arbitral Tribunal has been properly constituted. It is therefore submitted that the Petitioner has waived its right to challenge the constitution of the Arbitral Tribunal i.e., Facilitation Council. Hence Petitioner is not entitled to any relief in the present Writ Application. The learned counsel for respondent no.3 has placed his reliance on the judgment rendered by the Hon'ble Apex Court in the case of Bhaven Construction v. Executive Engineer, Sardar Sarovar Narmada Nigam Limited and Anr. [(2022) 1 SCC 75]. 18. The learned senior counsel for the respondent no. 3 has s....
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....ether since both are interlinked with each other. 22. This Court, before considering the aforesaid issues, needs to refer herein that the object and intent of the Arbitration and Conciliation Act, 1996 is the expeditious disposal of the commercial disputes without consuming much time. 23. The Arbitration and Conciliation Act, 1996 is a self-contained Code having provisions to raise all the issues depending upon the terms and conditions of the contract. For the purpose of resolution of dispute, as per the condition of arbitration clause, if available in the contract, the application is to be filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator said to be in terms of the contract. If the contract reflects that it will be sole arbitrator, then the High Court exercising the power under Section 11(6) of the Arbitration and Conciliation Act, 1996 will appoint the sole arbitrator but if the contract reflects that the dispute is to be resolved by the Arbitration Tribunal, then while exercising the power conferred under Section 11(6) of the Arbitration and Conciliation Act, 1996, the Court will appoint the Arbitration Tribunal. 24. T....
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....at an award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33....
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....ection shall affect or takeaway any right to appeal to the Supreme Court." 26. The aforesaid arrangement was available till enactment of Commercial Courts Act, 2015 wherein the forum has been provided after enactment of the Act, 2015 i.e., by filing appeal under Section 13(1A) which is for the basic purpose of expeditious disposal of the appeal. 27. The MSME Act, 2006 (Act 2006) has been enacted with the sole object to have the security in the mind of small entrepreneurs on the issue of the resolution of the commercial dispute by way of expeditious disposal. 28. The issue of dispute of the entrepreneurs who are being covered under the Act, 2006 is to be dealt with under the provision of Section 18 which is being referred herein :- "18. Reference to Micro and Small Enterprises Facilitation Council. - (1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council. (2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek....
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....r made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent. of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court: Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose." 32. The Act, 2006, therefore, is also a self-contained Code but the Council before adjudicating the issue is to take help of the Arbitration and Conciliation Act, 1996, as would be evident from Section 18(2) wherein it has been mandated that the Council on its own or by appointing a Conciliator is to resolve the issue failing which the Council will adjudicate in view of the provision of Section 18(3). 33. It is, thus, evident that while resolving the dispute th....
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....le in the present case is that the dispute arose in between the parties and when the dispute has not been resolved, then the Council was approached and accordingly the impugned order dated 25.01.2016 has been passed. 37. The question which has been raised on behalf of the petitioners is that the Coram of Council is to be as per the provision of Section 21 of the Act, 2006, i.e., in between 3 to 5 but the number of members of the Council who have passed the said Award is 8 and, therefore, the Award has been questioned by giving a declaration to that effect before this Court that it is without jurisdiction being adjudicated by the Council not in consonance with the provision of Section 21 of the Act, 2006. 38. Per contra respondent no.3 has contended that there is no scope of challenge of the impugned Award on the ground that the constitution of the Council was in teeth of Section 21 of the MSMED Act and accordingly, the only remedy left to the petitioner was to challenge the Award before the Commercial Court, under Section 34 of the Arbitration Act and further the said issue has never been raised before the council, therefore the present writ petitions are not maintainable. ....
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....fact, pursuant to the said Rule, the Council was even constituted by the State Government with nine members. Clearly the constitution of the said Council was in accordance with Rule 4 of the 2007 Rules, whereas in clear contravention of Section 21 of the MSMED Act. In case, the petitioner is forced to challenge the impugned Award before the Commercial Court, under Section 34 of the Arbitration Act, the only answer that is likely to come from the Commercial Court is that the constitution of the Council was in accordance with the Rules, which was binding on the Commercial Court, and as there is no scope for the Commercial Court to entertain the appeal on the ground that Rule 4 of 2007 Rules was ultra-vires Section 21 of the Act. Accordingly, no effective and efficacious remedy was available to the petitioner before the Commercial Court. Indeed there is no alternative remedy to the petitioner to challenge the notices issued by the Council, as no appeal is provided against the notice issued by the Council, either under the MSMED Act, or under Section 37 of the Arbitration Act. In that view of the matter, we are of the considered view that the arguments of the learned Additional Advocat....
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....usive finding holding the Award to be passed by the authority having no jurisdiction being contrary to its constitution in the teeth of Section 21 of the Act, 2006, for ready reference, the relevant paragraphs of the order passed by the Division Bench is being referred herein:- 11.--Thus, it is evident that where a Court lacks inherent jurisdiction in passing a decree or making an order, a decree or order passed by such court would be without jurisdiction, non est and void ab initio. The defect of jurisdiction of the court goes to the root of the matter and strikes at the very authority of the Court to pass a decree or make an order. Such defect has always been treated as basic and fundamental and a decree or order passed by a Court or an authority having no jurisdiction is a nullity. Validity of such decree or order can be challenged at any stage, even in execution or collateral proceedings. 13. Thus, it is evident that the provision of Section 21 of the Act, 2006 provides composition of the Council cannot be less than three or more than five members and if the Council has been constituted of members having less than three or more than five, it will be said to be....
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....illegal since is passed contrary to the parent Act, which provides a provision as under Section 21 of the Act, 2006 and the Rule of the year 2007, which has been held to be invalid. Admittedly, the State Government has amended the provision of Rules, 2007 by bringing the amended Rules, 2017 but the impugned order which is the subject matter of the lis herein has been passed during the period when the provision of Rules, 2007 was in vogue and that is the reason, Mr. Manoj Tandon, learned counsel for respondent no. 2 has taken an additional ground that the Constitution of Council which was consisting of eight members cannot be said to be invalid since was constituted in terms of provision of Rules, 2007. However, the Co-ordinate Division Bench of this Court has considered Rules, 2007 to be invalid more so in the meanwhile amended Rule, 2017 has come as also even the parent Act, 2006 under Section 21, the composition of Coram of Council has been provided but admittedly the constitution of Coram was not in terms of Section 21 of the Act, 2006 and even then it was in terms of Rules, 2007 but the constitution of Council in terms of provision of Section 21 of the Act, 2006 cannot be said ....
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....ovision of Rule 2007 has been declared to be invalid having not been in consonance with the provision of Section 21 of the MSMED Act, 2006, as contained under paragraph 24 of the aforesaid judgment. Therefore, the moment the provision of Rule 2007 which contains a provision as under Rule 4 stipulates therein about the number of coram of facilitation council since has been declared to be invalid, therefore, it will be treated to be not in existence from the date when it has been promulgated. As such the implied meaning of the same will be that there is no provision of Rule 2007 which contains a provision as under Rule 4 stipulating therein about the number of coram of facilitation council. Therefore, in absence of any rule having not been formulated by the State of Jharkhand, the provision of Rule 21 of the MSME Act, 2006 will automatically be operative which provides the minimum as well as maximum number of coram of the facilitation council. 20. Even otherwise also if any law has been formulated and the aforesaid law if is in the teeth of the parent Act as in the given case, the law which is not in consonance with the parent Act is required to be ignored. However, such sit....
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....fore the forum under Section 34 of the Act, 1996. Reliance has been placed upon the judgment rendered by the Hon'ble Apex Court in the case of India Glycols Ltd. v. MSEFC(supra). 46. The factual background of the said case is that on 28-10-2021, the Facilitation Council decreed the claim in the principal sum of Rs 40,29,862, on which interest with monthly rests at three times the bank rate prevailing as on the date of the award was granted under Section 16 from the appointed day till final payment. The award of the Facilitation Council was challenged in a petition under Articles 226/227 of the Constitution. By a judgment and order dated 14-9-2022 a Single Judge of the High Court of Telangana allowed the writ petition and set aside the award on the ground that the claim was barred by limitation. 47. In an appeal by the second respondent, the Division Bench by its judgment dated 21-3-2023, reversed the view of the Single Judge. The Division Bench has come to the conclusion that the writ petition instituted by the appellant was not maintainable in view of the specific remedies which are provided under the special statute. The High Court held that the appellant ought to have take....
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.... in inherent jurisdiction and, when there is no semblance of "Award" as contemplated under Section 18 of the MSMED Act. 52. This Court is not in dispute that the issue of jurisdiction is based upon the mixed question of law and fact which is to be agitated under Section 34 of the Act, 1996 for the purpose of its adjudication by leading evidence under Section 34 of the Act, 1996. 53. But the question herein is that as to whether the constitution of forum if found to be not in consonance with the statutory mandate as provided under Section 21 of the Act, 2006, will it be said to be mixed question of law and fact involving the jurisdictional issue. 54. This Court is of the view that there is wide difference in between the mixed question of law and fact involving the jurisdictional issue and the constitution of the forum if the specific provision has been provided under the Act. 55. The constitution of Council whether it is to be in consonance with the Act 2006 is the main plank of the argument of the writ petitioners. 56. The law is well settled that the constitution of Council is to be as per the mandate of the statute. It has been mandated under Section 21 of the Act,....
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....ary to the provision of Section 21 of the Act, 2006. 62. This Court, therefore, is of the view that the constitution of Council itself is in the teeth of Section 21 of the Act, 2006 and the same has been taken into consideration by the Division Bench of this Court in its judgment dated 17/11/2022 passed in L.P.A. No. 242 of 2022, as such, by following the principle of judicial discipline, this Court is of the considered view that since the Award communicated dated 25.01.2016 which has been passed by the MSME Council is without jurisdiction, as such the said award is void ab-initio therefore, the recourse of Section 34 of Arbitration Act is not required to be adhered to. 63. Further, it needs to refer herein that it is true that Article 226 of the Constitution of India being constitutional provision would not be subject to rigor of Act 2006 but for the application the Article 226 the circumstances should be there. Article 226 of the Indian Constitution grants the High Court broad jurisdiction to impose orders and writs on any individual or entity but before the court can grant a writ or issue an order, the party filing the petition must show that his rights are being illegally....
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....jurisdiction without any legal foundation, reference in this regard be made to the judgment rendered by Hon'ble Apex Court in the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Others reported in (1998) 8 SCC 1. The relevant paragraph of the aforesaid judgment is being referred hereunder as :- ""15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. --." 68. The Hon'ble Apex Court in State of Tripura Vs. Manoranjan Chakraborty & Ors., report....