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A.F.R. IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No. 3376 of 2016 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 (In the matter of an application under Articles 226 and 227of the Constitution of India, 1950). State of Odisha & Anr. …. Petitioner(s) -versus- Director of Industries, Micro Small Entrepreneurs Facilitation Council, Odisha, Cuttack & Anr. …. Opposite Party (s) Advocates appeared in the case throughHybrid Mode: For Petitioner(s) For Opposite Party (s) : : Ms. Jyoshnamayee Sahoo, ASC Mr. S. Routray, Adv. CORAM: DR. JUSTICE S.K. PANIGRAHI DATE OF HEARING:-08.04.2025 DATE OF JUDGMENT:-20.06.2025 Dr. S.K. Panigrahi, J. 1. The petitioners, in the present Writ Petition, are challenging the order dated 23.08.2013 passed by the Micro and Small Enterprises Facilitation (MSEF) Council, as well as the order dated 09.03.2015 passed by the learned District Judge, Nuapada in the related execution proceedings, on the ground that both orders are illegal, Page 1 of 12 arbitrary, and passed without jurisdiction, and are therefore liable to Signature Not Verified
Legal Reasoning
Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 be quashed. I. FACTUAL MATRIX OF THE CASE: 2. The brief facts of the caseare asfollows: (i) The State Government, through the Department of Health & Family Welfare, launched a scheme titled the ‘Area Development Programme’ in 1981, with assistance from the Government of the United Kingdom. The said programme was implemented in two phases and formally concluded on 31.03.1996. (ii) In the course of implementation, the Project Director issued Procurement Order No. 2522 dated 08.06.1994 in favour of M/s Steel and Steel Products/Opposite Party No.2, for supply of office steel tables and steel shelving cabinets to various Primary Health Centres in the districts of undivided Kalahandi and Bolangir. (iii) Pursuant thereto, Opposite Party No.2 raised Bill No. 74 dated 25.10.1994 for a sum of ₹1,32,316/-, addressed to the Project Director. Payment was made via Bank Draft No. 456291 dated 14.02.1995, and the same was acknowledged under letter dated 16.02.1996. However, an amount of ₹47,081/- towards transportation, loading, unloading, and packing charges remained unpaid. (iv) In 2007, Opposite Party No.2 submitted a revised claim before the MSEF Council under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006, seeking recovery of ₹47,081/- along with compound interest towards unpaid charges for unloading, transportation, and ancillary services. The claim was founded on a bill dated 19.03.2007. Page 2 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 (v) On 03.12.2010, Opposite Party No.2 filed MSEFC Case No. 26 of 2010 before the Chairman, MSEFC (Odisha), claiming a total of ₹43,96,852.43/-, comprising ₹47,081/- as principal, ₹8,57,180.30/- as interest, ₹2,83,428.50/- towards financial loss, and ₹12,56,243.55/- towards mental agony. (vi) On 23.08.2013, the MSEF Council passed an award directing the Petitioners to pay ₹47,081/- along with compound interest at three times the bank rate notified by the Reserve Bank of India. (vii) Upon receipt of the award, the Principal Secretary, Health & Family Welfare Department, Government of Odisha, vide letter dated 13.10.2014, requested the MSEF Council to re-examine the matter. (viii) Acting on the said request, the MSEF Council called upon Opposite Party No.2 to produce relevant documents. Thereafter, on 11.11.2014, the Council passed an order advising the parties to amicably resolve the dispute. (ix) Despite the above, Opposite Party No.2 initiated Execution Case No. 4 of 2014 before the learned District Judge, Nuapada, for execution of the award dated 23.08.2013 passed in MSEFC Case No. 26 of 2010. (x) The Petitioners filed objections before the executing court, contending, inter alia, that the award dated 23.08.2013 stood impliedly recalled or rendered unenforceable by virtue of the Council’s subsequent direction dated 11.11.2014. Nevertheless, the executing court proceeded to pass an order dated 29.11.2014. (xi) Thereafter, vide Order No. 41 dated 09.03.2015, the District Judge, Nuapada, directed the Petitioners to ensure maintenance of a sufficient amount in their bank account. Subsequently, vide Order No. Page 3 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 II. 3. (i) 25 dated 04.09.2015, the Petitioners were further directed to file an affidavit disclosing their bank account details and particulars of immovable property. SUBMISSIONS ON BEHALF OF THE PETITIONERS: Learned counsel for the Petitioners earnestly made the following submissions in support of his contentions: The Petitioners submitted that the impugned award dated 23.08.2013 passed by the MSEF Council, along with the orders dated 09.03.2015 and 04.09.2015 passed by the District Judge, Nuapada, are illegal, arbitrary, and passed in gross violation of the principles of natural justice, and are therefore liable to be set aside. (ii) The Petitioners submitted that while rendering the impugned award, the MSEF Council did not consider or deal with the documents on record, which is evident from the Council’s subsequent order dated 11.11.2014 directing re-examination of the matter, and hence, the award dated 23.08.2013 is erroneous, bad in law, and liable to be set aside. (iii) The Petitioners submitted that the initiation of proceedings by the MSEF Council under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 was without jurisdiction, as the claim of Opposite Party No.2 pertains to the year 1994, which is prior to the enactment of the said Act. Proceedings before the MSEF Council are maintainable only in respect of claims arising from contracts entered into and executed after the commencement of the Act. Page 4 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 (iv) The Petitioners further submitted that the claim of Opposite Party No.2 pertains to alleged charges for unloading, transportation, and other services in relation to supplies made in the year 1994. The claim, being in the nature of a money claim, was raised after a lapse of sixteen years and is therefore barred by limitation under Article 26 of the Limitation Act, 1963. On this ground as well, the impugned award is liable to be set aside. (v) The Petitioners submitted that the bills on the basis of which M/s. Steel and Steel Products, Opposite Party No.2, has claimed the principal amount of Rs. 47,081/- are disputed, as they are neither authentic nor related to any actual supplies made to the Petitioners. The claims are vexatious, appear to have been made for ulterior purposes, and were raised long after the relevant programme had already been closed and wound up. The Petitioner further submitted that the MSEF Council failed to examine these aspects and, without proper scrutiny, passed an award directing payment of the principal amount along with interest totalling Rs. 97,13,900.66. The award is, therefore, arbitrary, bad in law, and liable to be set aside. (vi) The Petitioners submitted that even assuming, without admitting, that the provisions of the Act of 2006 apply to the present case, the proceedings before the MSEF Council amounted only to conciliation. As per the statute, arbitration could be initiated only after failure of conciliation. Since no conciliation was conducted, the Council lacked authority to pass an award directing payment of Rs. 47,081 with compound interest at three times the RBI bank rate. Page 5 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 (vii) The Petitioners contended that a perusal of the order dated 11.11.2014 shows that the MSEF Council itself found it necessary to re-verify and re-examine the documents forming the basis of Opposite Party No.2’s claim. This indicates that the earlier award was passed without proper evidence, reflects non-application of mind, and is perverse. The award is therefore liable to be quashed. III. SUBMISSIONS ON BEHALF OF THE OPPOSITE PARTIES: 4. (i) The Learned Counsel for the Opposite Parties earnestly made the following submissions in support of his contentions: The arbitral award has attained finality and become enforceable as a decree, as it was not challenged within the statutory period prescribed under Section 34(3) of the Arbitration and Conciliation Act, 1996. It was contended that the present writ petition is not maintainable, since the only remedy was to file an application under Section 34, which the Petitioners failed to pursue within the prescribed time. A challenge under Article 226 is impermissible in view of the self-contained mechanism under the Arbitration Act. (ii) Despite full knowledge of the statutory framework and expiry of limitation, the Petitioner chose to file this writ petition as a belated attempt to delay execution proceedings and seek indulgence for condonation of delay before the appropriate forum. (iii) The Petitioners had admitted to the claim during and after the proceedings before the MSEF Council, including by requesting Opposite Party No. 2 to furnish bank details for disbursement of the awarded amount. They also submitted an application seeking Page 6 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 reduction in interest after the award was passed, which amounts to admission of liability. (iv) The Petitioners never raised objections to jurisdiction or the claims before the MSEF Council, nor did they invoke Section 16 of the Arbitration Act. They are now estopped from challenging the award or jurisdiction in this writ petition. (v) The grounds raised in the present writ were never raised before the MSEF Council or the appropriate forum, and similar objections were already rejected by the executing court in Execution Case No. 04/2014. The petitioners are thus barred from re-agitating the same contentions. (vi) The claim originally filed under the repealed 1993 Act is saved under Section 32(2) of the MSMED Act, 2006, and is well within limitation. The MSEF Council had jurisdiction to adjudicate the dispute. (vii) The award passed by the MSEF Council is valid, reasoned, and based on the Petitioners’ own admissions and representations. The award directs payment of Rs. 47,081 along with statutory interest under the MSMED Act, which the Petitioner had agreed to pay. (viii) Conciliation proceedings were duly conducted, and the Petitioners admitted the claims of Opposite Party No. 2 during the process. On failure to comply, the Council lawfully proceeded to pass the award. IV. COURT’S REASONING AND ANALYSIS: 5. 6. Heard learned counsel for the parties and perused the materials on record. At the outset, it is necessary to delineate the legal framework governing the present dispute. Page 7 of 12 7. The arbitral award in question was rendered by the Micro and Small Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 Enterprises Facilitation Council under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, which provides a special dispute resolution mechanism for claims arising under Section 17, regarding delayed payments to MSMEs. At the relevant time, Section 18 envisaged conciliation as the initial step in the dispute resolution process. The Council could either conduct the conciliation itself or refer the matter to any institution or centre providing alternate dispute resolution services. Upon failure of conciliation, the Council was empowered to act as an arbitral tribunal or refer the matter for arbitration, with the proceedings governed by the Arbitration and Conciliation Act, 1996. The term “conciliation” in Section 18 was subsequently substituted with “mediation” by the Mediation Act, 2023. 8. 9. Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, further mandates resolution of references within ninety days. Therefore, once the Council assumes the role of an arbitral tribunal, the entire process stands subsumed within the framework of the Arbitration and Conciliation Act, 1996. Consequently, any challenge to such an award must be mounted strictly in accordance with Section 34 of the Arbitration and Conciliation Act, 1996, which governs applications for setting aside arbitral awards. 10. Section 34(3)of the Arbitration and Conciliation Act, 1996, prescribes a rigid limitation period of three months from the date of receipt of the award, extendable by a further period of thirty days only upon Page 8 of 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 24-Jun-2025 16:53:36 showing sufficient cause. The proviso makes it abundantly clear that no application shall be entertained beyond this outer limit of 120 days. 11. The Supreme Court in Union of India v. Popular Construction Co.1 observed that the words “but not thereafter” used in the proviso to Section 34(3) constitute a legislative bar to any challenge being entertained beyond the prescribed 120-day period, even by invocation of Section 5 of the Limitation Act. 12. Similarly, in Mahindra & Mahindra Financial Services Ltd. v. MaheshbhaiTinabhaiRathod2, reaffirmed that the strict limitation period for challenging arbitral awards under Section 34(3) of the Arbitration and Conciliation Act, 1996 is absolute and non-extendable beyond 120 days. 13. Furthermore, the Arbitration and Conciliation Act, 1996 is a self- contained code that strictly curtails judicial intervention to the extent expressly permitted under the statute. The invocation of writ jurisdiction under Article 226 to circumvent or override this statutory framework has been consistently discouraged by the courts. 14. In Deep Industries Limited v. ONGC3, the Supreme Court cautioned that High Courts must refrain from entertaining writ petitions under Article 226 or 227 which effectively re-examine issues reserved for arbitral adjudication. It was observed as hereinunder: “22. … The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being