Hon'ble Ravi Nath Tilhari,J.
1. We have heard Sri Sudeep Harkauli for the petitioner; Ms. Kritika Singh, Additional Chief Standing Counsel, for the respondent no.1; and have perused the record.
2. By this petition, the petitioner-company (for short petitioner) has prayed for setting aside of an award dated 29.09.2020 passed by the U.P. Micro, Small and Medium Enterprises Facilitation Council, Kanpur (for short the Council). The petitioner has also challenged the order dated 06.03.2020 by which the Council reserved its verdict after proceeding upon the reference under the provisions of the Arbitration and Conciliation Act, 1996 (for short Act, 1996) read with the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (for short Act, 2006).
3. A brief narration of facts, as could be elicited from the petition and documents annexed therewith, relevant to understand the controversy, is as follows:-
The petitioner was awarded a works contract for a power project. The third respondent (hereinafter referred to as the claimant), which is registered with the Director of Industries, Noida, Gautam Budh Nagar (U.P.) as a small enterprise under the provisions of the Act, 2006, with Entrepreneur No.09/010/12/03128, dated 29.09.2009, as also SSI Registration No.20/78/3597/PMT/SSI/12, dated 08.12.2004, was roped in as supplier of parts and services by the petitioner under work order/ contract dated 15.05.2014. On 04.01.2018, a claim petition was filed by the claimant before the Council stating therein that the petitioner is liable to pay, according to sections 16 and 17 of Act, 2006, Rs.5,14,42,053 (principal Rs.3,81,14,766 plus interest Rs.1,33,27,287 on delayed payments till July, 2018) and pendente lite and future interest. The claim petition was registered on 30th January, 2018 and the Council issued notices dated 01.02.2018 to the parties to appear and to submit settlement proposal. By letter dated 13.02.2018, the petitioner intimated the Council that discussions are on for settlement. Upon which, the Council gave one month time for settlement. Thereafter, it appears from the impugned award that the petitioner again applied on 17.04.2018 to the Council for extension of time. Upon which, on 17.4.2018, the Council accorded further 30 days time for submission of settlement failing which, the conciliation proceeding would be deemed terminated. It appears from the impugned award that, thereafter, on 16.09.2019, the claimant by enclosing settlement agreement dated 22.06.2018 informed the Council that the petitioner had agreed to pay Rs. 350 lacs out of which 135 lacs was paid in June 2018 and Rs.135 lacs paid in August 2018 but the third instalment of Rs.80 lacs has not been paid, therefore a prayer was made that the claimant be provided the balance amount. The Council in its meeting dated 16.09.2019 took up the matter and directed that as per M.O.U. last instalment be paid within 15 days failing which the matter will be decided on merits on the basis of documents on record. It appears that the petitioner did not respond and, consequently, the Council proceeded to hear the matter on merit, reserved its verdict by impugned order dated 06.03.2020 and, ultimately, on 29.09.2020 delivered the impugned award thereby holding that the claimant is entitled to Rs. 80 lacs as principal; Rs.29,13,933 as interest upto 06.03.2020, totalling Rs.1,09,13,922, thereafter compound interest with monthly rests in accordance with Act, 2006 till the entire amount is paid.
4. The learned counsel for the petitioner has challenged the impugned award, inter alia, on the following grounds:
(a) the award is ex facie without jurisdiction inasmuch as once settlement had been reached between the parties, the parties were bound by the settlement, which partakes the character of an award by virtue of section 74 of the Act, 1996 read with sub-section (2) of section 18 of the Act, 2006, and, therefore, no separate award could have been passed;
(b) the petitioner was not heard before discarding a part of the settlement;
(c) that if the Council believed that the conciliation had failed or the settlement could not be arrived at, then, under section 18(3) of the Act, 2006, arbitration proceeding were to be initiated and notice ought to be issued and served on the petitioner, which was not done and, thereby, the Council committed manifest error of law by seemingly merging conciliation and arbitration proceedings, which is not permissible, hence the award is ex facie bad in law.
5. The learned Additional Chief Standing Counsel, who appears for the first respondent, submitted that as the settlement was not under sub-section (2) of Section 18 of the Act, 2006, the provisions of Section 65 to 81 of the Arbitration and Conciliation Act, 1996 would not get attracted to such settlement and that settlement would not therefore partake the character of an arbitral award hence the Council would have jurisdiction to proceed on the claim of the third respondent and as it proceeded on the claim and passed the award, the remedy for the petitioner lies under Section 34 of the Arbitration and Conciliation Act, 1996 to apply for setting aside of the award. Hence, the writ petition is liable to be dismissed on ground of availability of alternative remedy.
6. We have considered the rival submissions and have perused the record carefully. Before we proceed to weigh the rival submissions, it may be observed, at the outset, that the learned counsel for the petitioner does not dispute that by virtue of the provisions of sub-section (3) of section 18 of the Act, 2006 the provisions of the Act, 1996 are applicable and, therefore, read with section 19 of the Act, 2006, there is an alternative remedy available against the impugned award under section 34 of the Act, 1996. The thrust of the submissions of the learned counsel for the petitioner, however, is that as there had been settlement between the parties, after filing of the claim/reference application with the Council, that settlement partakes the character of an award by virtue of Section 74 of the Act, 1996 and, therefore, no further arbitral proceedings can be undertaken and, as such, the award of the Council is without jurisdiction and void.
7. To appreciate the aforesaid submission we have gone through the records carefully. From the materials brought on record it is not clear that the settlement dated 22.06.2018 between the parties was upon a conciliation conducted either by the Council itself or, upon a reference by the Council, by an institution or centre providing alternate dispute resolution services. Although one thing is clear from the record that the settlement was arrived at after submission of the reference application. The terms of the settlement dated 22.06.2018 are as follows:
"That both the parties amicably agreed for a lump sum settlement amount of Rs.3,50,00,000/- (Rs. Three crores fifty lakhs only) which shall be released by NCC to Roots Cooling System Pvt. Ltd in three instalments as detailed below:
(a) 1st instalment of Rs.1,35,00,000/- (Rupees One crore thirty five lakhs only) will be released during June, 2018;
(b) 2nd instalment of Rs.1,35,00,000/- (Rupees One crore thirty five lakhs only) will be released in first week of August, 2018;
(c) third instalment of Rs.80,00,000 (Rupees Eighty lakhs only) plus interest cost from the date of this agreement (as is awarded to NCC by the owner in the arbitration or under any other judicial process) shall be released by NCC. This is subject to winning of arbitration or under any other judicial process by NCC. The arbitration is currently in progress between NCC and the owner."
8. It appears from a perusal of the impugned award that when the third instalment payable under the settlement was not disbursed to the claimant (third respondent), the claimant pressed for completion of the proceedings brought on the reference application in terms of the settlement dated 22.06.2018. Pursuant thereto, the Council issued notice to the petitioner but as the petitioner did not respond to the notice, the Council proceeded to pass the impugned award by noticing the settlement and adjusting the payment thereunder. The relevant portion of the impugned award (at its internal page 6) is extracted below:
"The opposite party has not filed the objection to the Claim Petition on merits. Under the Agreement Clause I, the IIIrd instalment of Rs.80.00 Lacs is to be paid subject to winning of Arbitration or under any other judicial process by NCC i.e. opposite party. The opposite party has not produced/submitted any documents showing that apart from this Arbitration some other Arbitration is pending between the parties & any in other judicial process.
As the settlement arrived at between the parties. The payment has to be made in accordance to terms of settlement. In accordance to settlement Rs.270 lacs in 2 instalments already been paid and IIIrd instalment of Rs.80 lacs as per terms of agreement is to be paid from the date of the agreement subject to decision of various Arbitration and judicial process. The Applicant has invoked the jurisdiction of Facilitation Council under the M.S.M.E.D Act 2006 to arbitrate the matter and opposite party has submitted itself before Facilitation Council. The condition of payment of 80 lacs is not binding on Facilitation Council. In accordance to Section 16 of M.S.M.E.D. Act 2006 if Buyer fails to make the payment amount to the Supplier, the Buyer shall notwithstanding anything contained in any agreement between Buyer and Supplier or any law is liable to pay compound interest with monthly rest. U/s 17 the Buyer shall be liable to pay the amount with interest thereon payable under section 16. The amount due as per settlement Rs.350 lacs, out of which 270 lacs has already been paid in 2 instalments and IIIrd instalment of Rs.80 lacs is due which has not been paid by opposite party. The opposite party cannot withhold the IIIrd instalment of Rs.80.00 lacs with interest subject to condition laid down in settlement. The said condition is not applicable on Facilitation Council. The Arbitration before Facilitation Council is statutory arbitration and will override the condition of IIIrd instalment..."
9. From above, it is clear that no doubt there is a settlement between the parties after filing of reference application but it is not substantiated on the record that the said settlement was on the basis of conciliation conducted by the Council or, upon a reference by the Council, by an institution or Centre providing alternate dispute resolution services. The settlement thus, in our view, would not, ipso facto, partake the character of an award under section 74 of the Act, 1996 read with sub-section (2) of section 18 of the Act, 2006. Because for applicability of Part III of Act, 1996 to such settlement, the conciliation must be as contemplated under sub-section (2) of section 18 of the Act, 2006 which is that it must be conducted by the Council itself or, upon reference by the Council, by an institution or Centre providing alternate dispute resolution services. Whereas, in this case, it is not clear from the record whether such settlement took place in a conciliation proceeding as contemplated under section 18(2) of the Act, 2006, Thus, such settlement, in our view, does not completely oust the jurisdiction of the Council to proceed under section 18(3) of the Act, 2006 and, therefore, on that score, the award cannot be considered ex facie void.
10. The second submission of the learned counsel for the petitioner is that no opportunity was given to the petitioner before passing the arbitral award. This is a factual aspect which may be raised and substantiated before the appropriate forum but it would not render the award ex facie void because the award recites that despite notice, the opposite party (the petitioner herein) did not respond. Another limb of this submission is that if opportunity had been provided, the petitioner could have demonstrated that the third instalment became payable only upon culmination of the judicial or arbitral process between the petitioner and its owner. In this context, the Council has observed that the condition of that settlement was not binding on it by virtue of Section 16 of the Act, 2006. More so, because, despite notice, the opposite party (petitioner herein) had not disclosed pendency of any other judicial or arbitral process. Thus, as we have already found that the settlement does not appear to have been arrived at in a conciliation proceeding contemplated under sub-section (2) of the Act, 2006, the same would not partake the character of an award under section 74 of the Act, 1996 so as to oust the arbitral jurisdiction of the Council. Hence, on that ground also, the award in our view cannot be termed ex facie void or without jurisdiction so as to warrant interference in writ jurisdiction.
11. The third contention of the learned counsel for the petitioner that the award is ex facie void because the Council has actually merged the conciliation and arbitral procedure, which is in the teeth of the provisions of sub-sections (2) and (3) of section 18 of the Act, 2006, is also not acceptable because, from the impugned award, it appears that the Council by its order dated 17.04.2018 had put parties on notice that if settlement is not arrived at within 30 days the conciliation proceeding will automatically be treated to have come to an end. Admittedly, the settlement was not arrived at within that period. Further, parties were put to notice to appear but the petitioner failed to appear. Under these circumstances, we are unable to hold the impugned award ex facie void on the grounds urged before us.
12. For all the reasons stated above and by keeping in mind the provisions of sub-section (3) of Section 18 of the Act, 2006 that 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 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, we are of the considered view that the arbitral award can be subjected to challenge on an application under Section 34 of the Act, 1996 read with Section 19 of the Act, 2006 therefore, we decline to entertain a challenge to the impugned award in our writ jurisdiction. The writ petition is therefore dismissed on ground of availability of statutory alternative remedy. It is however clarified that any observation made by us in this order is with a view to assess whether the impugned award can be termed ex facie void, being without jurisdiction, for the purposes of entertaining a challenge to it in the writ jurisdiction therefore any observation made by us should not be treated as a binding opinion on the issues discussed here, while addressing a challenge to the award in appropriate proceeding.
Order Date :- 18.2.2021 AKShukla/-