M/s Associated Lighting Company v. Counsel for the

partnership firm engaged in the business of manufacturing and assembling electrical lamps, seeking quashing of order/arbitration award dated 11.07.2016 passed by the Respondent No. 2, Uttarakhand State Micro & Small Enterprises Facilitation Council (hereinafter “the Facilitation Council”) in Case No. 98 of 2015 titled M/s Priyadarshi Print-O- Pack vs. M/s Associated Lighting Company.

2. The Facilitation Council, proceeded with arbitration under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and passed an ex parte award dated 11.07.2016 against the Petitioner. The Petitioner claims it was neither properly served with the documents nor afforded a fair opportunity to contest the proceedings. Writ Petition No. (M/S) 3517 of 2018-----M/s Associated Lighting Company M/s Priyadarshi Print-O- Pack & Another 1 Ashish Naithani J.

3. Subsequently, the award was sought to be executed through Arbitration Execution Case No. 56/2017 before the 5th Additional District Judge, Dehradun, which culminated in an execution certificate dated 07.09.2017 being transmitted to the District Judge, Gautam Buddh Nagar, Uttar Pradesh. Heard learned counsel for the parties and perused the records.

4. The learned Counsel for the Petitioner submitted that the arbitration award dated 11.07.2016, passed by the Uttarakhand State Micro & Small Enterprises Facilitation Council in Case No. 98 of 2015, was wholly without jurisdiction. It was contended that the Petitioner, M/s Associated Lighting Company, had no contractual relationship or dealings with respondent no. 1, M/s Priyadarshi Print-O- Pack, and that the invoices and purchase orders forming the basis of the claim were not issued to the Petitioner but to a distinct legal entity, namely, M/s Associated Lighting System Pvt. Ltd.

5. It was further submitted that the Facilitation Council issued the award ex parte without determining whether the Petitioner was a party to the alleged transaction or bound by any arbitration agreement. Learned counsel for the Petitioner pointed out that the initial notice was replied to by the Petitioner denying any connection with the subject matter, yet no opportunity was provided thereafter to address the matter further, nor were any supporting documents shared with the Petitioner.

6. The Petitioner’s learned counsel also drew the Court’s attention to the absence of any arbitration clause between the Petitioner and the respondent. It was contended that such absence struck at the root of the Council’s jurisdiction under Section 18 of the Micro, Small and Medium Writ Petition No. (M/S) 3517 of 2018-----M/s Associated Lighting Company M/s Priyadarshi Print-O- Pack & Another 2 Ashish Naithani J. Enterprises Development Act, 2006, which incorporates the provisions of the Arbitration and Conciliation Act, 1996.

7. On the other hand, the learned counsel Respondent No. 1 contended that the Facilitation Council acted within its authority under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006and the award, once passed, could only be challenged under Section 34 of the Arbitration and Conciliation Act.

8. It was further argued that the present writ petition under Article 227 was not maintainable, especially when an alternate remedy was unavailable and was not availed of within the prescribed limitation period.

9. The learned counsel for Respondent No. 1 also submitted that the Petitioner and the entity involved in the transactions, M/s Associated Lighting System Pvt. Ltd., are functionally the same, having common management and directors. It was contended that the Petitioner was fully aware of the arbitration proceedings but deliberately chose to remain absent, and therefore cannot now be permitted to challenge the award on technical grounds.

10. In response, the learned counsel for the Petitioner reiterated that both entities, namely the Petitioner and the private limited company, are separate legal persons in the eyes of the law, each having distinct registration, identity, and place of business. According to counsel, the attempt to conflate the two was nothing more than an afterthought to justify execution against an unrelated entity.

11. It was further argued that the principle of lifting the corporate veil has no application without a finding of fraud or misuse of legal personality, which was neither pleaded nor established before the Facilitation Council. Writ Petition No. (M/S) 3517 of 2018-----M/s Associated Lighting Company M/s Priyadarshi Print-O- Pack & Another 3 Ashish Naithani J.

12. Upon perusal of the record and after considering the rival submissions, this Court proceeds to examine the core issue, which is whether the arbitration award dated 11.07.2016 passed by the Uttarakhand State Micro & Small Enterprises Facilitation Council in Case No. 98 of 2015 suffers from jurisdictional infirmity or procedural impropriety so as to warrant interference under Article 227 of the Constitution of India.

13. It is admitted that the Facilitation Council proceeded ex parte against the Petitioner and passed the impugned award. The Petitioner contends that it had no contractual dealings with Respondent No. 1 and that the claim arose fromthe transactions with an entirely separate legal entity, namely M/s Associated Lighting System Pvt. Ltd., a private limited company. In support, the Petitioner has placed on record registration certificates and other documents evidencing that both entities are distinct in law and fact. The invoices and purchase orders, on which the claim was founded, have also been annexed to demonstrate that the transactions did not involve the Petitioner firm.

14. The Facilitation Council does not appear to have addressed this foundational jurisdictional issue in its award. There is no specific finding regarding an arbitral agreement between the Petitioner and Respondent No. 1, which is a necessary precondition for invoking arbitration, even under the MSMED Act. Moreover, the record reveals that upon receiving initial notice, the Petitionerhad specifically denied any business relationship and sought relevant documentation, which was allegedly never provided.

15. The counter affidavit filed by Respondent No. 1 seeks to rely on the argument that both the Petitioner firm and the private limited company are under common management, Writ Petition No. (M/S) 3517 of 2018-----M/s Associated Lighting Company M/s Priyadarshi Print-O- Pack & Another 4 Ashish Naithani J. and that the Petitioner was aware of the proceedings but chose not to participate. However, even if presumed, common management does not by itself dissolve the separate legal identities of two distinct entities.

16. Further, the principle of lifting the corporate veil cannot be invoked in an arbitration proceeding in the absence of any pleadings or findings on fraud or evasion of legal obligations.

17. The burden of establishing that the Petitioner was a party to the contract or arbitration agreement rested upon the claimant, and this burden does not appear to have been discharged.

18. This Court also takes note that the award was challenged not merely on merits but fundamentally on the ground of jurisdiction. The assertion that there was no arbitration agreement between the Petitioner and the claimant goes to the root of the arbitral authority and is not a question of evidence or assessment of contractual performance.

19. In the considered view of this Court, the absence of any arbitration agreement between the Petitioner and Respondent No. 1 strikes at the very root of the jurisdiction assumed by the Facilitation Council. The Hon’ble Supreme Court in SBP & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618, authoritatively held that the existence of an arbitration agreement is a jurisdictional prerequisite, and its determination is a matter within the domain of the judicial authority. This principle was reaffirmed by the Constitution Bench in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, wherein the Court observed that arbitration is founded on consent, and no party can be compelled to arbitrate in the absence of a valid and enforceable agreement. In the absence of such an agreement, any continuation of Writ Petition No. (M/S) 3517 of 2018-----M/s Associated Lighting Company M/s Priyadarshi Print-O- Pack & Another 5 Ashish Naithani J. arbitral proceedings would amount to a jurisdictional error, warranting interference under Article 227 of the Constitution of India.

20. Jurisdictional error, particularly in cases involving non-parties to the arbitration, can be examined by this Court under Article 227, even if an alternate statutory remedy exists. ORDER In view of the above, this Court is satisfied that the arbitration award dated 11.07.2016 passed by the Uttarakhand State Micro & Small Enterprises Facilitation Council in Case No. 98 of 2015 is vitiated by jurisdictional error and is liable to be quashed. Accordingly, the writ petition is allowed. The arbitration award dated 11.07.2016 is hereby set aside. All consequential proceedings, including the execution proceedings initiated before the 5th Additional District Judge, Dehradun and the certificate of decree dated 07.09.2017, shall also stand quashed. There shall be no order as to costs. Dt: 06.06.2025 SB ___________________ ASHISH NAITHANI, J. Writ Petition No. (M/S) 3517 of 2018-----M/s Associated Lighting Company M/s Priyadarshi Print-O- Pack & Another 6 Ashish Naithani J.