Tirumala Tirupathi Devasthanams vs. M/S Micro And Small Enterprises Facilitation Council

Held

The Court held that the proceedings before the Facilitation Council/Institute/Centre, acting as an arbitrator or Arbitral Tribunal under Section 18(3) of the MSMED Act, 2006, are governed by the Arbitration Act, 1996. The Court referred to the decision in Bhajrang Cranes v. Shiram Transport Finance Company Ltd., which stated that once arbitration has commenced, parties must wait until the award is pronounced unless a right of appeal is available under Section 37 of the Act. The High Court would not interfere with orders passed by the arbitrator or arbitral tribunal during the course of arbitration proceedings, except in exceptional cases where a party is remediless or clear bad faith is shown. The Court found that the petitioner had a remedy under Section 34 of the Act to challenge the award by way of an appeal after the completion of arbitral proceedings. Therefore, the contentions raised by the petitioner could not be accepted. The Court also noted that the Council has no power to review its own order once conciliation is closed and posted for arbitration under Section 18(3). Consequently, the writ petition was dismissed as lacking merit, and the proceedings under challenge were not interfered with.

Facts

The petitioner, Tirumala Tirupathi Devasthanams (TTD), filed a writ petition challenging proceedings initiated by the Micro and Small Enterprises Facilitation Council (MSMEFC), the first respondent. The MSMEFC issued an intimation demanding Rs. 58,50,23,610/-. TTD had previously challenged this in another writ petition, where it was permitted to treat the intimation as a show cause notice. Subsequently, claims by respondents 2 and 3 were settled, and TTD requested the MSMEFC to drop proceedings. However, respondents 2 and 3 contested this, stating the no-due certificate was "forced out." TTD argued that the MSMEFC should have dropped proceedings, but it continued to entertain requests from respondents 2 and 3, forcing TTD to participate. Respondents 2 and 3 had also initiated arbitration proceedings, which TTD challenged, leading to a stay order from the High Court. Respondents 2 and 3 later withdrew their claims before the arbitrator after their dues were settled. Despite this, they filed a complaint before the MSMEFC seeking a significantly larger sum, which TTD deemed illegal and arbitrary.

Key Issues

1. Whether the Micro and Small Enterprises Facilitation Council (MSMEFC) has jurisdiction to continue proceedings under Reference No. 21C/IFC/2022/1669 and Application No. UDYAMAP100007461/S/00002, given that the claims between the petitioner and respondents 2 and 3 were settled and the application was withdrawn by respondent 2, thereby exceeding the scope of the MSMED Act, 2006? Petitioner's arguments: The petitioner contended that the MSMEFC should have dropped all further proceedings in light of the settlement and withdrawal of claims. They argued that the MSMEFC was entertaining requests from respondents 2 and 3 to adjudicate on a withdrawn application, which was illegal and arbitrary. The petitioner also highlighted that the construction agreement stipulated arbitration only for disputes below Rs. 50,000/-, and claims above that amount were to be adjudicated by a civil court, suggesting the MSMEFC's jurisdiction was questionable. Respondents' arguments: The respondents (2 and 3) denied the allegations and stated that they had lodged online complaints for substantial principal amounts. They acknowledged that one application was withdrawn and had become infructuous. They also argued that proceedings before the Facilitation Council, acting as an arbitrator under Section 18(3) of the MSMED Act, 2006, are governed by the Arbitration Act, 1996, and the Council is competent to rule on its own jurisdiction under Section 16 of the Arbitration Act, 1996.