Biswanath Rath, J
1. The Writ Petition involves a challenge to the order passed by the Competent Authorities involving MSEFC Case No.14/2016 at Annexure-9.
2. Factual background involving the Case is, the Petitioner-Company registered under the Companies Act, 1956 on 9.4.2015 placed an order on O.Ps.1 & 2 for supply of refractory materials including the work of packing, forwarding and storage. Accordingly, technical specifications along with all required conditions were provided in the agreement made between the Parties. For a further contingency and as agreed, payment and warranty terms in the agreement were amended on 23.4.2015. Copies of purchase order dated 9.4.2015 indicating conditions therein and the amended purchase order dated 23.4.2015 are all available at Annexure-1 series. In the above terms and conditions, O.Ps.1 & 2 came on for supply of materials. Initially a security deposit of Rs.92.00, vide cheque dated 28.8.2015 was submitted by the O.Ps. In terms of Clause-14 of the purchase order, the materials were sent to the Laboratory of the Research and Development Centre for Iron and Steel, Steel Authority of India Ltd. for testing but the testing result dated 21.9.2015 declared that the materials supplied by the O.Ps. did not meet the technical specification, which was also communicated to the O.Ps., vide letter dated 30.9.2015. It is here on the request of the Petitioner, a joint inspection was conducted in presence of the representatives of both the Companies, samples were collected and sent to CGRI, Kolkata and an MOU was signed by the Parties conditioning that they would agree by the testing report. The testing report of the CGRI indicated deviation of the specification provided in the purchase order, which would also adversely affect the life of the Plant. Vide letter dated 18.11.2015 the Petitioner forwarded the testing report to the O.Ps. clearly stating therein that the Alumina percentage and the CCS of the materials were below the minimum assured benchmark and delay in commissioning of the Project will result in loss of approximately Rs.25.00 lakh per day. The Petitioner requested the O.Ps. to replace the materials and also issued a reminder dated 23.11.2015 in that regard finds place at Annexure-4. In the meantime, the security cess submitted by O.Ps.1 & 2 also expired on 30.11.2015. In a subsequent development, vide letter dated 30.11.2015, O.Ps.1 & 2 did not dispute the test result, O.P.1, however, in a vague manner stated that any refractory problem during production shall not affect the working of the plant, as such the refractory problem occurred quite often. While the matter stood thus, the Petitioner while communicating, vide e-mail dated 1.12.2015 to O.Ps.1 & 2 by furnishing a comparison of materials supplied by them and the deviation therein also by letter dated 14.12.2015 disputed the contents of the letter dated 30.11.2015. The Petitioner specifically brought out the breach of contract committed by O.Ps.1 & 2 and also the loss occurred due to such breach. The Petitioner requested for settling the issue, particularly on the quality aspect and request for providing immediate replacement to avoid further delay in commissioning of the Project, with a caveat in the event there is no attending to the call of the Petitioner, the Petitioner will be constrained to initiate appropriate legal steps against O.Ps.1 & 2, as finds place at Annexure-5. The Petitioner pleaded, unfortunately instead of meeting the compliance, O.Ps.1 & 2, vide letter dated 8.12.2015 started raising frivolous and baseless allegations along with a claim of Rs.36,62,197/-. The Petitioner strongly refuted the same through its letter dated 12.1.2016, but however, and as a last chance requested O.Ps.1 & 2 to replace the materials within seven days. Finding no response and O.Ps.1 & 2 continued with the same mischief, the Petitioner, vide letter dated 29.1.2016 requested O.Ps.1 & 2 to furnish a bank guarantee of Rs.5,14,31,796/- till resolution of the above correspondence finds place at Annexure-6 series. Failure on the part of O.Ps.1 & 2, the Petitioner was constrained to file an Application under Section 9 of the Arbitration and Conciliation Act, 1996 (herein after called as, Act, 1956”) bearing ARBP No.2/2016. Learned District Judge issued notice in the arbitration proceeding and it is claimed that the proceeding is still pending. Vide e-mail dated 29.7.2016 the Petitioner again communicated the last damage taking place to the Industries for poor supply of materials thereby causing hindrance in the functioning of the Plant, vide Annexure-7. While the matter stood thus, O.Ps.1 & 2 with ulterior motive filed an Application bearing MSEFC No.14/2016 before the MSME Council praying for an award of Rs.35,36,683/- along with interest. The Petitioner appearing therein filed its denying liability response at the same time also pointing out the breach of contract committed by O.Ps.1 & 2. Petitioner specifically pleaded for the clear Clause of arbitration, the dispute between the Parties does not come under the Micro, Small and Medium Enterprises Development Act, 2006 (herein after called as “the MSME Act”), as O.Ps.1 & 2-Company is not a Supplier in terms of Section 2(n) of the MSME Act. It is alleged, the MSME Council, vide letter dated 7.2.2017 while rejecting the claim of jurisdictional question allowed the claim of O.Ps.1 & 2 without assigning any reason and in non-consideration of the counter, which resulted in filing the present Writ Petition by the Petitioner. Copy of the order dated 7.2.2017 finds place at Annexure-9.
3. Mr.T.Mishra, learned counsel for the Petitioner taking this Court to the grounds of attack challenged the impugned order on various grounds. Firstly, the Petitioner’s objection on maintainability of the Application has not been taken into account in proper perspective. Secondly, once the ground of entertainability of the Application is raised, there should have been independent consideration of the same before proceeding to finalizing the proceeding pending. Thirdly, there has been failure in appreciation of the fact that O.Ps.1 & 2 did not come within the definition of Section 2(n) of the MSME Act, fourthly, the impugned order also remains contrary to the provision of Sub-Section (2) of Section 1 of the MSME Act and fifthly, the Council has authority to pas final order considering its limited scope in Section 18 of the Act. Taking reference to the Notification No.S.O.1722(E) dated 5.10.2006, Mr.Mishra, learned counsel for the Petitioner attempted to satisfy that there has been no consideration of this provision by the Council involved herein. In reference to the audit balance sheet of O.Ps.1 & 2 as on 31.3.2007, Mr.Mishra, learned counsel for the Petitioner submitted that the audit balance sheet discloses the Plant and Machinery as Rs.3,29,42,824/- and the cost of finance was Rs.3,16,45,066/- and the cost of mobile grant Rs.93,600/-. It is taking into account all these above aspects, Mr.Mishra, learned counsel for the Petitioner contended, the investment in the Plant and Machinery works out at Rs.6,46,81,490/-. Mr.Mishra further contended, once the value exceeds to Rs.5.00 crore, O.Ps.1 & 2 cannot be treated as Small Enterprise under the provisions of the MSME Act. Keeping in view the Notification of the Government of India in the Ministry of Industries Department (Industrial Development) dated 25.7.1991, the Petitioner enclosed the audit balance sheet to the Writ Petition as at Annexure-11. Taking through the pleadings in Paragraphs-15, 16, 17 & 18 of the Writ Petition, Mr.Mishra, learned counsel for the Petitioner contended, in the stated scenario, O.P.1 is neither a small Enterprise, as claimed in Claim Application nor entitled to the benefit of Chapter-V of the MSME Act. It is thus claimed that the Council failed in appreciating that the Petitioner therein did not come within its jurisdiction and any reference under Section 18 therein could not have been maintainable. Reading through the provision at Section 18 of the MSME Act and taking this Court to the sequence in the resolution of the dispute between the Parties, Mr.Mishra also alleged that there has been no following of the provision of the MSME Act. Taking this Court to the observations in the impugned order and giving a full reading of the impugned order at Annexure-9, Mr.Mishra, learned counsel for the Petitioner also contended, the Council straightway jumped to award without deliberating the disputed questions raised therein and passed the impugned award and the Council followed a principle unknown to law and there has been no dealing with any of the objections raised by the Petitioner, O.P. therein. Mr.Mishra, learned counsel for the Petitioner taking this Court to the chronology in the proceeding, particularly taking to the proceedings dated 26.2.2016, 8.4.2016, 22.8.2016 & 31.8.2016 contended, up till the last date there was simply direction by the Council to this Petitioner to file its counter within fifteen days, of course based on a recording of service of copy of the Claim Application of the Petitioner therein, present O.Ps.1 & 2 serving copy of the Claim Application then and there itself. It is next taking to the proceeding at Annexure-9, the proceeding was next taken up on 7.2.2017, on which date the impugned order was passed by the Council itself. It is here reading through the provision at Section 18 of the MSME Act, Mr.Mishra claimed, there is serious violation of the mandatory requirement through the provision at Section 18 of the MSME Act by the Council.
4. Mr.Mishra, learned counsel for the Petitioner also took aid of the decisions, vide Jharkhand Urja Vikas Nigarm Ltd. vrs. State of Rajasthan & ors.: 2021 SCC Online SC 1257, Orissa State Cooperation Marketing Federation Ltd. vrs. Tulasi Modern Rice Mill, Kendrapara & anr. : WP(C) No.39436 of 2021, Indur District Cooperative Marketing Society Ltd. vrs. Microplex India : 2015 SCC Online Hyd. 494, Ramesh Conductor Pvt. Ltd. vrs. M & SE Faciliation Council : 2015 SCC Online Mad. 13110, M/s.Unicon Engineers vrs. M/s.Jindal Steel & Power Ltd. : 2022 SCC OnLine Del 2215, M/s.Bajaj Electricals Ltd. vrs. Micro Small and Enterprisers Facilitation & anr. : 2022 SCC OnLine Ori 77. In his attempt to satisfy the allegations, Mr.Mishra took this Court to the impugned order at Annexure-9 so also the objection of the Petitioner before the Council specifically reading Paragraphs-14 & 41 therein attempted to satisfy the Court that there was clear raising of disputes in the claim.
5. Mr.Mohapatra, learned counsel for O.Ps.1 & 2 in his opposition while attempting to justify the impugned order claiming that there is strict compliance of the provision at Section 18 of the MSME Act, in his attempt through their counter in clear denial of each and every allegation raised by the Petitioner in the Writ Petition contended that the Claim Application of the Petitioner under the factual scenario indicated by the Petitioner therein was very much maintainable. Mr. Mohapatra, learned counsel, however has no dispute with regard to mandatory requirement under Section 18 of the MSME Act and the definition of Section 2(n) of the MSME Act being one within the purview of the small Industry and the statutory provision of Section 8 of the said Act. On reiteration of the claim of O.Ps.1 & 2 adjudicated by the Council, Mr.Mohapatra, learned counsel for O.Ps.1 & 2 took this Court to their response through the counter affidavit through various paragraphs and then reading through the observations of the Council taking down the case of the Parties through the impugned order attempted to submit that the Council has taken down properly the claim and objection of the respective Parties in the impugned order, and therefore, attempted to neutralise the complain of the Council of the learned counsel for the Petitioner in a bizarre disposal of the proceeding by the Council involved. It is in the premises, on the failure of the Petitioner herein giving compliance to the agreed conditions between the Parties, Mr.Mohapatra, learned counsel for the Petitioner contended, there was no difficulty in allowing the claim of O.Ps.1 & 2 by the Council at all and for the detailed discussions therein, there remains no scope for interfering in the impugned order. Taking this Court through the documents appended to the preliminary counter/objection of these O.Ps. and reading through some such documents, Mr.Mohapatra, learned counsel for O.Ps.1 & 2 attempted to take support through the impugned order. Mr.Mohapatra also took support of some decisions, vide Tirupati Steels vrs. Shubh Industries : (2022) 7 SCC 429, Trupti Automotives vrs. MSEFC : WP(C) No.11145 of 2019, M/s.Anupam Industries Ltd. vrs. State of Odisha & ors. : WP(C) No.220234/2020, Rolta India Ltd. vrs. MSEFC & anr. : WP(C) No.28464/2020, M/s.JSW Steel Ltd. vrs. MSEFC & ors. : 2022 SCC OnLine 806 , JSPL vrs. MSEFC, : WP(C) No.6328/2016, Vishwabandhu vrs. Sri Krishna : 2021 SCC Online SC 828, CC Alavi Haji vrs. Palapetty Muhameed : (2007) 6 SCC 555 and Quippo Construction Equipment Ltd. vrs. Janardan Nirman Pvt. Ltd. : (2020) 18 SCC 277.
6. Keeping in view the rival contentions and as this Court finds, both Parties relied on Section 18 of the MSME Act to find the scope and limitation in the Council, further course required to be followed in the present contingency, this Court here likes to take down the provision of Section 18 of the MSME Act, which reads as follows :-
“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.”
7. Reading through the aforesaid provision, this Court finds, for the provision in placing their claim under Section 18(1) provides, there shall be making of reference by any Party to a dispute to the Micro and Small Enterprises Facilitation Council with regard to any amount due under Section 17. Sub-Section (2) of Section 18 of the MSME Act provides, on receipt of a reference, 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. Sub-Section (3) of Section 18 provides, in the event a conciliation under Sub-Section (2) remains unsuccessful and stands terminated without any settlement between the Parties, the Council shall either take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and in such event, the provision of the Act, 1996 shall apply considering reference of such dispute comes under the provision of Sub-Section (1) of Section 7 of the Act. As per Sub-Section (4) of Section 18 of the Act, the Council or the centre providing alternate dispute resolution services shall have the jurisdiction to even act as an Arbitrator or Conciliator. The Supplier involved in the dispute located in its jurisdiction and the Buyer located anywhere in India. In the above legal background, this Court now proceeds to find through the Notification dated 5.10.2006 at Annexure- 10. This Notification involves exclusion of the cost of certain items while calculating the investment in Plant and Machinery in the case of Enterprise mentioned in Section 7(1)(a) of the Act.
8. It is at this stage, taking into consideration the grievance of the Petitioner against the objection/counter statement through Paragraph-4 at Page-504 of the Brief, Paragraph-14 at Page-312 and Paragraph-41 at Page-318 of the Brief, it appears, the present Petitioner not only disputed the entertainability of the claim but it also appears, the Petitioner herein was also contemplating to undertake arbitration exercise for recovery of damages. While also indicating in Paragraph-39 that it has already undertaken an arbitration exercise before the learned District Judge, Sundargarh pending, vide ARBP No.2/2016. It is keeping this in view, this Court here considering the claim of the Petitioner that the Council undertaking a conciliation exercise on the premises of no objection or agreement by the Petitioner to the claim of the Petitioner is misconceived and erroneous. It is at this stage of the matter, this Court looks to the provision at Section 18(1) & 18(2) of the Act taken note herein and observes, in the event there was objection to the conciliation by the Council, which is ultimately demonstrated through the objection of the Petitioner before it, the Council failed in prohibiting their action in disposal of the proceeding in exercise of power under Section (2) of Section 18 of the Act instead referring the matter for arbitration for there is failure in conciliation required to be awarded in exercise of power under Sub-Section (3) of Section 18 of the MSME Act.
9. Now it is coming to peruse the impugned order at Annexure-9, this Court finds, there cannot be any dispute that this is an award by the Council undisputedly in purported exercise of power under Sub-Section (2) of Section 18 of the Act. Reading through the award of the Council, this Court finds, the award starts from Page-72 of the Brief. Page-73 of the Brief discloses history of the case, Page-74 is the discussion on the counter filed by the Petitioner and continues till mid-Page-76 of the Brief, Middle-Page-76 of the Brief records the rejoinder submission of the Petitioner therein continuing for almost up till Paragraph-26 at Pages-82 & 83 of the Brief. At Page-83 of the Brief, this Court finds, before the award the Council simply has recorded the presence of the Parties in its 51st sitting held on 7.2.2017. The Council even after recording the submission of the Advocate for the Petitioner, the O.P. therein that the case is not maintainable straightway jumped to pass the award in one paragraph also available at Page-83. This Court first of all observes, undisputedly there was no consensus between the Parties to conciliate the proceeding at the stage of conciliation looking to the provision at Section 18(2) of the Act. Secondly, the Council has adopted a procedure being authorized to either resolve the dispute on conciliation or in case of failure to make a reference to the dispute to the Arbitrator under the provision of Section 18(3) of the Act has not given any reason even passing an award in favour of O.P.2. It is here observed, yes, if there is conciliation, there is no dispute in passing an award. The entire award nowhere discloses that the Petitioner had any consent to the claim of the Claimant therein. In such event, the only requirement is that the Council was to pass failure report instead of giving an award in favour of O.Ps.1 & 2. Further, the Council has adopted a procedure only disclosing the claim of the rival Parties and in one paragraph jumping straightway passed the award, which is never the purpose of the Act and the procedure adopted by the Council appears to be unknown to judicial history.
10. Now this Court undertaking the exercise through Section-7, particularly, keeping in view the challenge of the Petitioner herein to the entertainability of the Claim Application by O.Ps.1 & 2, the Claimants therein, finds, Sub-Section (1) of Section 7 of the MSME Act reads as follows :-
“7. Classification of enterprises.—(1) Notwithstanding anything contained in section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Central Government may, for the purposes of this Act, by notification and having regard to the provisions of sub-sections
(4) and (5), classify any class or classes of enterprises, whether proprietorship, Hindu undivided family, association of persons, co-operative society, partnership firm, company or undertaking, by whatever name called, -
(a) in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951),as--
(i) a micro enterprise, where the investment in plant and machinery does not exceed twenty five lakh rupees;
(ii) a small enterprise, where the investment in plant and machinery is more than twenty-five lakh rupees but does not exceed five crore rupees; or
(iii) a medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees;
(b) in the case of the enterprises engaged in providing or rendering of services, as--
(i) a micro enterprise, where the investment in equipment does not exceed ten lakh rupees;
(ii) a small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; or
(iii) a medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.
Explanation 1.--For the removal of doubts, it is hereby clarified that in calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded.
Explanation 2.- It is clarified that the provisions of section 29B of the Industries (Development and Regulation) Act, 1951 (65 of 1951), shall be applicable to the enterprises specified in sub-clauses (i) and (ii) of clause (a) of sub-section (1) of this section.”
Reading through Section 7 Clause (a)(ii) & (iii) of the Act, this Court finds, a small enterprise has been defined to be the investment in equipment does not exceed Rs.5.00 crore. Since O.Ps.1 & 2 claimed they are in category of Small Enterprise, looking to the serious objection on the entertainability of the claim, for the opinion of this Court, at the first instance, the Council ought to have rendered an exercise in deciding the maintainability of the proceeding. The Council here failed absolutely in understanding such grave implication involved therein.
11. Considering the citations cited by learned counsel for O.Ps.1 & 2 through Writ Appeal No.684 of 2022, this Court finds, the Writ Appeal arises out of the judgment passed by this Court in W.P.(C) No.39436/2021. The case involved if the Council after coming to observe that there was failure in conciliation, if justified in undertaking the arbitration exercise itself and deciding the Writ Petition, this Court interfering with the Council’s finding therein remitted the matter to the Section 18(3) of the Act stage. The difference in the case at hand is that even no recording by the Council on the failure of conciliation, if any and the impugned order involved herein appearing to have been passed in exercise of power under Section 18(2) of the Act.
12. Section 18 of the MSME Act making the stage involving such dispute clear. From the narrations herein above, this Court finds, there is serious violation of stages required to be followed following the direction through Section 18 of the Act making the impugned order otherwise bad.
13. This Court finds full support of the claim of the Petitioner through the decision in Jharkhand Urja Vikas Nigam Ltd. vrs. State of Rajasthan & ors. : 2021 SCC Online SC 1257. This Court here takes note of Paragraphs-5, 11, 12, 13 & 16, which are re-produced as follows :-
“ 5. It is mainly contended by learned counsel for the appellant, as there were some disputes on the supplies made by the 3rd respondent, the bill amount due was not paid immediately. It is submitted that only on the ground that the appellant has not responded in the conciliation proceedings, straightaway the order was passed by the Council without giving proper opportunity. The order impugned in the writ petition was passed, in utter disregard to the mandatory provision under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (for short ‘MSMED Act’) and the provisions of Arbitration and Conciliation Act, 1996. It is submitted that even after the order passed by the Council on 06.08.2012, the appellant after inspecting the records, has paid the due amount Rs. 63,43,488/- to the 3rd respondent. Such amount was paid after inspecting the records to the 3rd respondent, who had received that amount without any protest. After a period of three years thereafter, 3rd respondent has filed Execution Case No. 69 of 2016 before the Civil Judge, Ranchi which ultimately ended in dismissal on the ground of maintainability. When the said order was challenged by way of writ petition, said writ petition was subsequently dismissed as withdrawn. It is submitted that when the conciliation fails, as per Section 18(3) of the MSMED Act, Council has to initiate arbitration proceedings. On failure of conciliation, the Council shall either itself take up the dispute for arbitration or refer to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of Arbitration and Conciliation Act, 1996 shall apply to the dispute, as if the arbitration was in pursuance of arbitration agreement referred to under sub-section (1) of Section 7 of Arbitration and Conciliation Act, 1996. It is submitted that in this case without following the procedure, straightaway the order impugned in the writ petition was passed without giving any opportunity to the appellant to participate in the arbitration proceedings. It is submitted, as the said order was passed in utter disregard to the mandatory provisions of Arbitration and Conciliation Act, 1996 the said order is a nullity and cannot be termed as an award under provisions of Arbitration and Conciliation Act, 1996. It is further submitted that as per the terms of the contract any dispute was subject to jurisdiction of civil courts at Ranchi and the 3rd respondent having agreed to such terms, had approached the Council in the State of Rajasthan. Thus it is submitted that the order passed by the Council is without jurisdiction and contrary to terms and conditions of the agreement.
11. From a reading of Section 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, particularly Sections 20, 23, 24, 25.
12. 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 Indian Evidence Act may not apply. Unless otherwise agreed, oral hearings are to be held.
13. 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.
16. For the aforesaid reasons, this civil appeal is allowed, the impugned judgment and order is set aside. Consequently, the order/award dated 06.08.2012 passed by the 2nd respondent stand quashed. However, it is open to the 2nd respondent-Council to either take up the dispute for arbitration on its own or refer the same to any institution or centre providing alternate dispute resolution services, for resolution of dispute between the parties. It is needless to observe that for such arbitration, the Council shall follow the provisions of Arbitration and Conciliation Act, 1996 before passing any award. As we have not gone into merits of the claim made by 3rd respondent, it is open for the arbitral tribunal, to decide the matter on its own merits.”
Through the findings of the Hon’ble apex Court in Paragraphs-12 & 13, Hon’ble apex Court has made a clear distinction between the arbitration and conciliation and through Paragraph-13, Hon’ble apex Court clearly observed, even assuming that the Appellant in the Hon’ble Supreme Court had not submitted its reply at the conciliation stage and failed to appear before the Facilitation Council, the Council could, at best, have recorded the failure of conciliation and proceeded to initiate arbitration proceedings to adjudicate the dispute and make an award. It has been also categorically held, the proceedings for conciliation and arbitration cannot be clubbed. The case at hand even involves a serious objection of the Petitioner herein to the claim, this Court finds, there is serious error on facts committed by the Council involved herein compelling this Court in interfering with the impugned order at Annexure-9 and setting aside the same. This Court finds it appropriate to mention here that through the entire reading of the order-sheet placed, the proceeding was always at the stage of conciliation and there is also no denial that the proceeding, vide Annexure-9 has been culminated even in absence of conciliation between the Parties while allowing the claim of the Petitioner therein, which is not permissible in the eye of law.
14. In the circumstance, setting aside the order at Annexure-9, the matter is relegated back to the stage of Section 18(2) of the Act directing the Council first to decide the entertainability of the claim and if finds, the proceeding maintainable then to attend for conciliation between the Parties. In the event the conciliation failure report exists, the reference be made to Arbitrator, as disclosed undertaking an exercise through Section 18(3) of the Act. Parties are directed to appear before the Authority concerned within fifteen days of this judgment to facilitate the Council to proceed further but in strict terms of Section 18 of the Act.
15. The Writ Petition succeeds but with an order of remand. In the circumstances, there is no order as to cost.
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