Orissa High Court
Case Details
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No. 26911 of 2024 (In the matter of an application under Articles 226 and 227 of the Constitution of India, 1950). M/s. Hindustan Copper Ltd., Kolkata …. Petitioner (s) State of Odisha and Ors. …. Opposite Party (s) -versus- Advocates appeared in the case through Hybrid Mode: For Petitioner (s) For Opp. Party (s) : : Mr. Gautam Mukherjee, Sr. Adv. Along with associates. Mr. Saswat Dash, AGA Mr. Gautam Mishra, Sr. Adv. Along with Mr. Ramesh Agarwal, Adv. (for O.P.3) CORAM: DR. JUSTICE SANJEEB K PANIGRAHI DATE OF HEARING:-18.07.2025 DATE OF JUDGMENT:-20.09.2025 Dr. Sanjeeb K Panigrahi, J. 1. The present Writ Petition has been preferred seeking quashing of the order/ award dated 30.07.2024 passed by the Opposite Party No.2/ Micro Small and Medium Enterprises Facilitation Council, Rourkela in MSEFC Case No.24 of 2010. I. FACTUAL MATRIX OF THE CASE: 2. The brief facts of the case are as follows: Page 1 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 (ii) That, the Petitioner is a Government of India enterprise engaged in manufacturing activities. (iii) The Petitioner floated a tender for 700M/Ts of Iron Balls and the present Opposite Party No. 3 was selected as a supplier in accordance with the terms of notice. A purchase order was, accordingly, issued in favour of O.P. No. 3. (iv) It is alleged that due to non-supply of Iron Balls within the scheduled period, the extraction of ore and subsequent delivery to potential buyers was delayed. The same caused financial losses to the present Petitioner and accordingly, the present Petitioner delayed the release of certain payments to O.P.No. 3. (v) Aggrieved, O.P.No. 3 approached the MSEFC Council alleging delay in payments, and the matter was registered as MSEFC Case No. 24 of 2010. Accordingly, the present Petitioner received notice on 13.9.2011. The present Petitioner filed a preliminary objection raising the issue of jurisdiction, but the MSEFC proceeded with the matter. (vi) The present Petitioner had approached this Court in W.P.(C) No. 10041 of 2015 challenging the vires of the MSMED Act, 2006 and additionally sought quashing of proceedings in MSEFC Case No. 24
Legal Reasoning
of 2010. Vide order dated 3.6.2015, this Court in W.P.(C) No. 10041 of 2015 had stayed further proceedings in MSEFC Case No. 24 of 2010. (vii) However, it appears that despite the stay order, the MSEFC Council had passed final order dated 1.3.2016 in MSEFC Case No. 24 of 2010 directing the Petitioner to pay interest on delayed Page 2 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 payment subject to vacation of stay or disposal of W.P.(C) No. 10041 of 2015. (viii) When this order was brought to the knowledge of this Court, this Court vide order dated 27.7.2023 was pleased to quash the order dated 1.3.2016 in MSEFC Case No. 24 of 2010 and remitted the matter for reconsideration after affording an opportunity of hearing to the Petitioner. (ix) In the meanwhile, it is also pertinent to note, the present Petitioner had invoked the arbitration clause of the contract between the Parties and approached the Chairman-cum-Managing Director for appointment of Arbitrator to adjudicate upon the dispute existing between the Parties. An Arbitral Tribunal was constituted. O.P. No. 3 approached the Madhya Pradesh High Court at Jabalpur in W.P.(C) No. 13550 of 2014 challenging initiation of arbitration. However, vide order dated 1.4.2016 in W.P.(C) No. 13550 of 2014, the Madhya Pradesh High Court at Jabalpur was pleased to dismiss the Writ Petition. Thereafter, both parties participated in the Arbitration Proceeding. However, vide award dated 4.6.2022, the Ld. Tribunal was pleased to arrive at the conclusion that neither of the parties have any claim alive against each other. (x) Consequently, the present Petitioner has approached this Court in Review Petition No. 469 of 2023 arising out of W.P.(C) No. 10041 of 2015, to bring to this Court’s notice that an award has been passed by the Ld. Tribunal, which is still pending. (xi) Qua the MSEFC Council proceeding, it appears that after the matter was remanded for reconsideration by this Court, the MSEFC Page 3 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 Council on 4.10.2023, directed O.P. No. 3 to file a copy of the original claim petition along with supporting documents. Thereafter, the matter was transferred from MSEFC, Cuttack to MSEFC, Rourkela and directed to be ‘reheard’. (xii) On the next date of hearing, i.e. on 30.11.2023, the MSEFC Council advised the parties to go for a mutual settlement. (xiii) On 28.3.2024, the MSEFC Council records that the present Petitioner is not interest in conciliation and as such arbitration starts under Section 18(3) of the MSMED Act, 2006. The Parties were directed to adduce additional affidavits if any to start arbitration. (xiv) On the next date of hearing, i.e. on 30.7.2024, the present Petitioner requested the MSEFC Council to direct O.P. No. 3 to submit a calculation statement. O.P. No. 3 produced a statement calculated up to 30.7.2024. On the self-same day, award was passed directing the present Petitioner to pay interest amount of Rs.6,80,78,336/- u/s
Decision
16 of the MSMED Act, 2006 and the case was disposed of. (xv) Aggrieved, the present Petitioners have approached this Court in the present Petition challenging the order and final award dated 30.7.2024 for having been passed without affording a proper opportunity of hearing to the present Petitioner. (xvi) Now that the facts leading up to the instant Appeal has been laid down, this Court shall endeavour to summarise the contentions of the Parties and the broad grounds that have been raised. Page 4 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 II. PETITIONER’S SUBMISSIONS: 3. The Ld. Counsel for the Petitioner submits that the impugned order dated 30.7.2024 cannot be termed an arbitral award within the meaning of Section 31 of the A & C Act, 1996. No pleadings were exchanged, no opportunity for oral hearing was afforded, and the decision was rendered summarily on the same day a calculation statement was filed by O.P. No. 3. Such a process is contrary to the A&C Act and violates principles of natural justice. Since there was in fact no arbitration, the statutory remedy under Section 34 of the A&C Act is inapplicable, and recourse under Article 226 is both proper and necessary. III. OPPOSITE PARTIES’ SUBMISSIONS : 4. Per contra, the Ld. Counsel for the Respondent submits that the MSMED Act provides a self-contained statutory mechanism, including arbitration under Section 18 and a remedy of challenge under Section 34 of the A&C Act, subject to Section 19’s pre-deposit requirement. The present writ petition is a device to circumvent the mandatory pre- deposit and defeat the legislative scheme intended to protect small enterprises through expeditious enforcement. Even assuming procedural deficiencies, such issues fall within the scope of Section 34, not Article 226. The High Court’s jurisdiction under Article 226, though wide, should be exercised sparingly, and cannot be invoked to bypass the statutory framework enacted by Parliament. IV. ISSUE FOR CONSIDERATION: 5. Having heard the parties and perused the materials available on record, this court here has identified the following solitary to be determined: Page 5 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 A. Whether a writ petition under Article 226 of the Constitution of India is maintainable against an order styled as an “arbitral award” passed by the Micro and Small Enterprises Facilitation Council under Section 18 of the MSMED Act, 2006, when such order is alleged to have been made without adherence to the mandatory procedure prescribed under the Arbitration and Conciliation Act, 1996, and is therefore contended to be a nullity in law? V. ISSUE A: WHETHER A WRIT PETITION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA IS MAINTAINABLE AGAINST AN ORDER STYLED AS AN “ARBITRAL AWARD” PASSED BY THE MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL UNDER SECTION 18 OF THE MSMED ACT, 2006, WHEN SUCH ORDER IS ALLEGED TO HAVE BEEN MADE WITHOUT ADHERENCE TO THE MANDATORY PROCEDURE PRESCRIBED UNDER THE ARBITRATION AND CONCILIATION ACT, 1996, AND IS THEREFORE CONTENDED TO BE A NULLITY IN LAW? 6. This Court notes that the MSMED Act, while creating a beneficial scheme for protecting the interests of micro and small enterprises, does not override the fundamental procedural safeguards enshrined in the A&C Act. Once conciliation fails under Section 18(2), the Facilitation Council assumes the role of an Arbitral Tribunal. At that stage, it is not free to adopt a truncated or summary process but is bound to follow the procedural framework of arbitration. Their omission, therefore, cannot be brushed aside as inconsequential but goes to the root of jurisdiction. An order made without adherence to these safeguards is not an award but an administrative fiat, incapable of legal sanctity. 7. Section 18 of the MSMED Act reads as under: Page 6 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 “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 the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of Section 7 of that Act. (4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. (5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.” Page 7 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 8. From a reading of Sections 18(2) and 18(3) of the MSMED Act it is clear that the Council is obliged to conduct conciliation for which the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 would apply, as if the conciliation was initiated under Part III of the said Act. Under Section 18(3), when conciliation fails and stands terminated, the dispute between the parties can be resolved by arbitration. The Council is empowered either to take up arbitration on its own or to refer the arbitration proceedings to any institution as specified in the said section. It is open to the Council to arbitrate and pass an award, ‘after’ following the procedure under the relevant provisions of the Arbitration and Conciliation Act, 1996. 9. The seminal issue which arises for consideration in the present appeal is whether a writ petition under Article 226 of the Constitution would be maintainable against an order passed by the MSEFC in exercise of power under Section 18 of the MSMED Act, and if yes, under what circumstances. 10. A two-Judge Bench of the Apex Court in Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan1, after interpreting the provisions of the MSMED Act, including the powers of MSEFC under sub-sections (2) and (3) of Section 18, had observed: “14. From a reading of Sections 18(2) and 18(3) of the MSMED Act it is clear that the Council is obliged to conduct conciliation for which the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 would apply, as if the conciliation was initiated under Part III of the said Act. Under Section 18(3), when conciliation fails and 1 (2021) 19 SCC 206 Page 8 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 stands terminated, the dispute between the parties can be resolved by arbitration. The Council is empowered either to take up arbitration on its own or to refer the arbitration proceedings to any institution as specified in the said section. It is open to the Council to arbitrate and pass an award, after following the procedure under the relevant provisions of the Arbitration and Conciliation Act, 1996, particularly Sections 20, 23, 24 and 25. 15. There is a fundamental difference between conciliation and arbitration. In conciliation, the conciliator assists the parties to arrive at an amicable settlement, in an impartial and independent manner. In arbitration, the Arbitral Tribunal/arbitrator adjudicates the disputes between the parties. The claim has to be proved before the arbitrator, if necessary, by adducing evidence, even though the rules of the Civil Procedure Code or the Evidence Act may not apply. Unless otherwise agreed, oral hearings are to be held. 16. If the appellant had not submitted its reply at the conciliation stage, and failed to appear, the Facilitation Council could, at best, have recorded the failure of conciliation and proceeded to initiate arbitration proceedings in accordance with the relevant provisions of the Arbitration and Conciliation Act, 1996, to adjudicate the dispute and make an award. Proceedings for conciliation and arbitration cannot be clubbed.” 11. Thereupon, referring to the facts in the case, the Apex Court had struck down the order dated 6.8.2012 passed by MSEFC as being nullity and contrary to the provisions of the MSMED Act and the mandatory provisions of the A&C Act. The Apex Court observed that the order under challenge was not an award in the eye of the law and hence the recourse to Section 34 of the A&C Act was not required. The writ petition was held to be maintainable notwithstanding the objections on account of delay and laches. Page 9 of 26 12. A three-Judge Bench of the Apex Court in India Glycols Ltd. v. S.R. Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 Technologies2, referring to the judgment in Gujarat State Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd.3, held that a writ petition under Articles 226/227 of the Constitution was not maintainable as Section 18 of the MSMED Act provides for recourse to a statutory remedy for challenging an award under Section 34 of the A&C Act. A particular reference was made to Section 19 of the MSMED Act which states that no application for setting aside a decree, award or order made by MSEFC/institution/centre providing for alternate dispute resolution services shall be entertained by a 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 order in the manner as directed by the court. 13. This is a case of statutory arbitration that is mandatory. It is possible to argue that it bars a party from moving the court of law under Section 9 of the Code of Civil Procedure, 1908 (for short “CPC”). Section 18 also overrides the principle of party autonomy when they enter into an arbitration agreement which prescribes the procedure for the appointment of an arbitrator and conduct of arbitral proceedings. The statute further prescribes an undoubtedly high rate of interest—three times the Reserve Bank rate of interest—presently 6.5% i.e. 19.5%. The interest is compounded with monthly rests. 14. Lastly, an order or award can be challenged by “the buyer” [ Section 2(d) of the Msmed Act defines “buyer” as—“2. (d) “buyer” means