Sadbhav Engineering LTD vs. Micro And Small Enterprises Facilitation Council West & Ors.

Facts

The appellant, Sadbhav Engineering Ltd., is challenging a High Court Single Judge's order that dismissed its writ petition. The writ petition sought to quash an arbitration order and a communication from the Micro and Small Enterprises Facilitation Council (MSEFC). The dispute originated from a work order issued by the appellant to respondent No. 2, M/s S.K. Timber Traders, for hiring scaffolding materials. A settlement agreement was reached in January 2018 for Rs. 70,22,747/-. Subsequently, respondent No. 2 raised an invoice in March 2019 for Rs. 82,86,842/- towards damaged materials, claiming part payment was made. Respondent No. 2, registered as an MSME, made a reference under Section 18(1) of the MSMED Act for delayed payments amounting to Rs. 22,32,523/-. Conciliation failed, and the matter was referred to arbitration under Section 18(3) of the MSMED Act. The appellant challenged the arbitrator's jurisdiction under Section 16(3) of the Arbitration and Conciliation Act, 1996, which was dismissed. The writ petition challenging these actions was also dismissed.

Held

The Court held that the writ petition was not maintainable. It reasoned that once arbitration proceedings have commenced and an application under Section 16(3) of the Arbitration and Conciliation Act, 1996, has been decided by the Arbitral Tribunal, courts should not interfere under Article 226 or 227 of the Constitution. This principle, established in *SBP & Co. v. Patel Engineering Limited & Anr.* and reiterated in *Sterling Industries vs. Jayprakash Associates Ltd*, emphasizes minimizing judicial intervention during arbitration. The Court also cited *Bhaven Construction Vs. Executive Engineer, Sardar Sarovar*, which held that orders under Section 16 of the Arbitration Act can only be assailed through a challenge to the final award under Section 34. Regarding the factual dispute of whether services were rendered post-MSME registration, the Court noted the Sole Arbitrator's finding that respondent No. 2 was a registered MSME unit during the relevant supply period, making the appellant's argument nugatory. The Court also agreed with the learned Single Judge that disputed questions of fact, such as the correctness of the invoice or whether services were rendered, cannot be examined in writ proceedings. The appeal was dismissed.

Key Issues

1. Whether the writ petition filed by the appellant was maintainable challenging the jurisdiction of the MSEFC and the Sole Arbitrator, given that arbitration proceedings had commenced and an application under Section 16(3) of the Arbitration and Conciliation Act, 1996, had been dismissed? The appellant argued that the writ petition was maintainable because it challenged the inherent lack of jurisdiction of respondent No. 1 (MSEFC) and respondent No. 3 (DIAC) to adjudicate the reference, especially since the invoice was raised after respondent No. 2's MSME registration and did not confer jurisdiction. They relied on *Silpi Industries & Ors. Vs Kerala State Road Transport Corporation & Anr.* and *Gujarat State Civil Supplies Corporation Ltd. Vs. Mahakali Foods Pvt. Ltd. (Unit 2)*. 2. Whether the Sole Arbitrator correctly found that the claimant (respondent No. 2) supplied its services after obtaining MSME registration, thereby entitling it to have its claim adjudicated? The appellant contended that no services were rendered post-registration. The judgment does not record arguments from the respondents on these specific points, but their stance is implied by their participation in the proceedings.