Tribunal's Award However Erroneous, Must Be Challenged U/S 34 Of Arbitration Act, Court Cannot Exercise Writ Jurisdiction: Bombay HC

The Bombay High Court Bench of Justice Arun R. Pedneker held that when the 'Award' is made by the Facilitation Council / Tribunal by exercising jurisdiction vested in it, however erroneous the 'Award' may be, the same has to be challenged only by invoking Section 34 of the Arbitration Act. This court would not exercise jurisdiction under Articles 226 and 227 of the Constitution of India, only to avoid the aggrieved party from the hardship of deposit of 75% of the award amount in terms of Section 19 of the MSMED Act. Brief Facts The petitioner is a private limited company registered under the provisions of the Companies Act having its registered office at Sanaswadi, Nagar Road, Pune. The petitioner entered into a supplier agreement with respondent no.3 effective from April 12, 2019. The petitioner, also entered into separate agreements i.e. duroshox supplier agreement and duroshox supplier quality agreement dated May 7, 2019 reflected in e-mail dated June 3, 2019 and December 22, 2019 and other correspondence between the parties, which includes supply manual and other forms of binding contracts between the parties. It is the contention of the petitioner that respondent no.3 was mandated to manufacture and supply the material, as specified in the agreement and in the purchase orders raised by the petitioner. It is contended that the petitioner later on realized that the material supplied by respondent no.3 was lacking in quality and faulty in nature and the same was duly communicated to respondent no.3 along with the demand of undertaking corrective measures. As respondent no.3 failed to remediate / replace defective supplies, the petitioner was exposed to incur huge remediation costs, cost for replacement of materials, transportation cost and cost for packaging It is further stated that the petitioner in response to the claim had filed the details reply dated May 2, 2023 and a counter claim dated 02.05.2023 and an application under Section 25 of the Arbitration and Conciliation Act, 1996. It is further stated that the matter was then taken up by the court, on 16.05.2023, wherein respondent no.3 was given time till 29.05.2023 to file reply to the counter claim dated 02.05.2023 and application under Section 25 of the Arbitration Act. Respondent no.3 submitted its reply to the application under Section 25 dated 26.05.2023 and reply to the counter claim dated 26.05.2023. It is further stated that on 07.07.2023, the petitioner via purshis made an application to respondent no.2 that no settlement being arrived between the parties. Respondent No.2 under provisions of Section 18(3) of the Act ought to have referred the matter for arbitration in accordance with the provisions of the Arbitration Act. Thereafter, respondent no.2 passed final order dated 02.02.2024, ordering the petitioner to pay outstanding amount of Rs.4,53,87,615/- amongst other directions. The order dated 02.02.2024 is challenged in the present proceedings on various grounds. Contentions The petitioner submitted that there was no notice regarding termination of conciliation proceedings and the commencement of arbitration proceedings and that respondent no.2 has violated the provisions of Section 18(3) of the MSMED Act, which mandates that in case of failure of the conciliation proceedings, arbitration in accordance with the Arbitration Act must be conducted and also violated principles of natural justice. It was further contended that as per Section 18(3) of the MSMED Act, if conciliation is not successful, the said proceedings stands terminated. The said section makes it clear that when the arbitration is initiated all the provisions of the Arbitration Act will apply as if the arbitration was in pursuance of the arbitration agreement referred under Sub-Section 1 of Section 7 of the said Act. It was further submitted the impugned order is passed in violation of Sections 65, 67, 76 and 80 of the Arbitration Act. It is stated that the respondent has not conducted the conciliation as contemplated under Section 65 to 81 of the Arbitration Act. Per contra, the respondent submitted that there is statutory remedy of appeal available to challenge the impugned order and that the present is not the case for invoking the writ jurisdiction of the court as the judgment is passed by the authority constituted under the MSMED Act. It was further submitted that the award passed under Section 18 has to be only challenged by invoking Section 34 of the Arbitration Act. The writ jurisdiction was invoked only to bypass the statutory deposit of 75% required to be made under Section 19 of the MSMED Act. It was further submitted that there is the statutory remedy available to the parties and that the writ jurisdiction has to be exercised only in case of exceptional circumstances. Issue Before Court Whether the jurisdiction of the High Court under ...

Tribunal's Award However Erroneous, Must Be Challenged U/S 34 Of Arbitration Act, Court Cannot Exercise Writ Jurisdiction: Bombay HC

Mohd Malik Chauhan

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