Cwp No. 6498/202 vs The Chairman on 11 July, 2025

Himachal Pradesh High Court

Cwp No. 6498/202 vs The Chairman on 11 July, 2025

Neutral Citation No. ( 2025:HHC:22357 )

IN THE HIGH COURT OF HIMACHAL PRADESH,
SHIMLA

.

CWP No. 6498 of 2021
a/w Arb. Case No. 72 of 2021
Reserved on 27.06.2025
Pronounced on: 11.07.2025

1. CWP No. 6498/2021.

The Bihar Medical Services and Infrastructure Corp.

         Ltd. Patna                          .....Petitioner.

                              Versus

The Chairman, the HP Micro and Small Enterprises

Facilitation Council and Ors.

…..Respondents.

_____________________________________________________________

2. Arb. Case No. 72/2021.

The Bihar Medical Services and Infrastructure Corp. Ltd.

Patna
…..Petitioner
Versus

The Himachal Pradesh Micro and Small Enterprises

Facilitation Council Shimla and others.

….Respondents.

Coram:

The Hon’ble Mr. Justice G.S. Sandhawalia, Chief Justice.
The Hon’ble Mr. Justice Ranjan Sharma, Judge.

Whether approved for reporting? Yes.

CWP No.6498/2021.

For the petitioner: Mr. Umesh Prasad Singh, Senior
Advocate (through V.C) and Mr.
Shrawan Dogra, Senior Advocate with

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Mr. Kumar Manish, Ms. Divya Sood
(through V.C.), Mr. Tejasvi Dogra,
Mr.Shubham Sood and Ms. Bhanvi
Negi, Advocates.

.

For the respondents: Respondents No.1 and 2 ex-parte.

Mr.Samman Vardhan Gautam, Mr.

Sahil Thakur, Mr. Yuyutsu Thakur, Mr.
Priyam Tiwari, Mr. Harsh Raj, Ms.
Khushi Sharma, and Mr. Praphull
Kumar, Advocates for respondent
No.3.

Arb. Case No.72 of 2021

For the Petitioner:

r to
Mr. R.K Bawa, Senior Advocate with
Mr.Basant Pal Thakur, Advocate.

For the respondents Respondent No.1 ex-parte.

Mr.Samman Vardhan Gautam, Mr.

Sahil Thakur, Mr. Yuyutsu Thakur, Mr.
Priyam Tiwari, Mr. Harsh Raj, Ms.
Khushi Sharma, and Mr. Praphull
Kumar, Advocates for respondent

No.3.

G.S. Sandhawalia, Chief Justice.

Present proceedings arise out of an Arbitral

Award passed by respondent No.2 against the

petitioner/appellant at the instance of respondent No.3-M/s

Medipole Pharmaceutical India Pvt. Ltd (hereinafter referred

to as ‘the Supplier’).

2. Both the matters, i.e., Writ petition and the

Arbitration case being inter connected, are being taken up

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together since primarily, the issue is regarding the Award

passed by the Arbitrator dated 06.04.2021 in Reference

.

Case No. 49 of 2017, filed before the respondent No.1-

Council

3. It is pertinent to mention here that after the

Arbitration Case as such was filed and notice issued on

27.07.2021, under Section 34 of the Arbitration and

Conciliation Act, 1996, (hereinafter referred to as ‘the 1996

Act’) for quashing of the Award dated 06.04.2021 the

purchaser/petitioner had also preferred Writ petition

whereby, at the first instance on 26.10.2021, operation and

execution of the said Award had been ordered to be stayed.

The Arbitration case as such was only thereafter on

10.03.2022, directed to be listed along with the Writ petition

and both were admitted on 16.06.2022 with Rule DB due to

which we propose to decide both together.

4. Vide an ex parte Award in question, the

Arbitrator dealt with the claim of the Supplier for recovery of

Rs.29,83,80,909.00/- and allowed the Supplier as such to

file a revised claim for Rs.66,50,74,160.00/- along with up to

date penal interest as on 30.11.2019 since the matter had

been remanded earlier by this Court. Therefore, while

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keeping in view the report of a Chartered Accountant,

justified the up to date claim of Rs. 95,00,70,208.00/- plus

.

up to date penal interest and GST on the interest as on

01.04.2021 till its final realization under Section 16 of The

Micro, Small and Medium Enterprises Development Act,

2006 (hereinafter referred to as ‘the MSMED Act, 2006‘) and

awarded the same. The Arbitrator thereafter directed that

the original of the Award be sent to the Buyer and Supplier

and third Award and stamp papers be sent along with the

relevant record to the Chairman of respondent No. -1-

Himachal Pradesh Micro and Small Enterprises Facilitation

Council, Shimla (hereinafter referred to as ‘the council’) for

record while answering the reference.

Argument on behalf of the Petitioner/Buyer.

5. Learned Senior Counsel Mr. R.K. Bawa with other

counsel Mr. Umesh Prasad Singh Senior Advocate (through

V.C.) and Shri Shrawan Dogra, Senior Advocate for the

Buyer as such have argued that the ex parte proceedings

are liable to be set aside as the proceedings were

conducted during the time of Covid-19 and therefore, the

Buyer as such could not put in appearance before the

Arbitrator who had proceeded to pass an ex parte Award on

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19.03.2021. The Head Office of the Buyer was at Patna in

the State of Bihar and there were issues regarding distant

.

travelling and transportation was not easily available at that

point of time. The proceedings have been conducted in

utmost haste in as much as the matter had been taken up

on firstly 16.2.2021 and due to the reference being received

from respondent No-1-Council. That the authorized

representatives and the Council of the Supplier had already

appeared on their own account and accepted the service.

The Buyer as such was stated to have served through

registered speed post but not present and therefore, on the

basis of the mail track consignment, proceedings had been

conducted ex parte on 19.03.2021. The Statement of

Claims were also only filed then and the matter had been

fixed for 5th of April, 2021. The affidavit in support of the

claimant’s claim had been produced on 05.04.2021 and

Award had been passed on the very next day and

therefore, misconduct on the part of the Arbitrator is

evident and therefore, the Award is not sustainable.

Accordingly, it is contended that the defence could have

been struck off and liberty could have been given as such to

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the Buyer to join the proceedings while referring to the

record of the Arbitration proceedings.

.

6. It was accordingly argued that the first claim was

of Rs.14.50 crores while referring to the order dated

28.06.2016 (Annexure P-19) passed inter se the parties in

the High Court at Patna wherein the said dues had been

claimed and directions had been issued to pass a speaking

order on the representation made way back on 17.12.2015.

It was submitted that the second claim was enhanced to

(Rs.29,83,909.00/-), inclusive of interest when the reference

was filed before the respondent No.1-Council on

05.10.2017, on the basis of which Council had issued notice

dated 27.11.2017. While referring to the Statement of claim

made before the earlier Arbitrator on 23.06.2018 (Annexure

P-31), it is pointed out from the file that at that point of time

recovery of Rs.33,77,25,952/- as principal amount plus

interest to the last date had been claimed. The claim had

been enhanced to Rs.66,50,74,190.00/- for the fourth time

as on 17.03.2021, while referring to the record of the

present Arbitrator/respondent No.2. The last and final

enhancement, as noticed earlier, was made on 01.04.2021,

during the pendency of the proceedings before respondent

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No.2 within 15 days to the tune of Rs.95,71,00,208.00/-

along with future interest from 01.04.2021, till the date of

.

realization as per the provisions of the MSMED Act, 2006,

while referring to the affidavit which was given before the

Arbitrator by way of evidence of the Liaison Officer Shri

Chaman Lal Dhiman of the Supplier.

7. It was accordingly argued that the earlier

directions had been issued by the learned Single Judge in

CWP No.1865 of 2018 inter se the parties wherein on

26.08.2019, the writ petition had been allowed and the

earlier orders wherein the matter had been referred to

Arbitration on 18.03.2018 had been set aside with the

directions that the matter be proceeded in terms of the

provisions of sub-Rule 7 of Rule 4 of the Himachal Pradesh

Micro and Small Enterprises Facilitation Council Rules,

2007, (hereinafter referred to as ‘the 2007 Rules’) after

getting response from the Buyer. It was thus argued that

there was misconduct apparent on the part of the Arbitrator

and there was no requirement of deposit of 75% of the

amount for entertaining the said proceedings against the

Award which was subject matter of consideration while

placing reliance upon the judgment of a Single Judge of

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Punjab and Haryana High Court in M/s Pratibha

Industries Ltd. vs M/s Reva Industries Ltd. (2016) 2

.

PLR 839.

8. The issue of jurisdiction was also raised while

referring to the agreement dated 04.10.2013 inter se the

parties wherein in view of Clause 26, the dispute was to be

subject to the jurisdiction of the High Court of Bihar at Patna

on account of the Buyer as such having the office there at

Bihar. It was pointed out that there was a large number of

petitions which had been preferred in the High Court itself

at Patna between the period 2014 to 2017 before changing

of the course to seek the reference proceedings before

respondent No-1-Council under the MSMED Act, 2006.

Resultantly, it was further argued that the objection being

taken to the maintainability of the writ petition, in view of

the law laid down by the Apex Court in India Glycols Ltd.

and another vs. Micro and Small Enterprises

Facilitation Council, Medchal-Malkajgiri and others,

2023 SC Online SC 1852, would be without any basis

since the matter had been referred to a larger Bench by the

Apex Court in 2025 SCC OnLine SC 127, M/s. Tamil

Nadu Cements Corporation Ltd. Vs. Micro and Small

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Enterprises Facilitation Council and Anr., on

22.01.2025.

.

Arguments on behalf of Respondent/Supplier.

9. In response, the Counsel for the Supplier has

argued that the 2006 Act is a special statute and would

have overriding effect and once the Supplier has supplied

the goods, the Buyer has to make the payment and after

the period is exceeded by 45 days, under Section 15, the

interest is to be paid by way of compound interest with

monthly rests from the appointed date at the date agreed

upon at three times of the bank rate as notified by the

Reserve Bank. In these circumstances, on account of the

payments having not been made since 2014, the amounts

had gone up by way of geometric progression and

therefore, justified the enhanced claim which had been

made from Rs.14.50 crores to Rs.95.71 crores. It was

accordingly argued that Section 18 (4) provides that the

Council shall take up the disputes to arbitration while

referring to an institution providing alternate dispute

resolution service and the Council as such would have

jurisdiction to act as an Arbitrator in any dispute even if the

Supplier is located within its jurisdiction or even the Buyer is

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located any where in India. Reliance was placed upon the

judgment passed by the Apex Court in Harcharan Dass

.

Gupta vs. Union of India 2025 SCC OnLIne SC 1111

wherein the order passed by the Karnataka High Court

holding that the Delhi Arbitration Center lacks jurisdiction

and the seat for Arbitration was to be at Bangalore, was set

aside to contend that the Council as such would have

jurisdiction and resultantly reliance was placed upon the

earlier judgment of the Apex Court passed in Gujarat Civil

Supplies Corporation Ltd vs. Mahakali Foods Pvt. Ltd.

(Unit-2) and another (2023) 6 SCC 401, to plead that

the 2006 Act, as such would have prevalence over the issue

of jurisdiction and the same would be covered under Section

18 (4) of the Act. Resultantly, reliance upon the Division

Bench judgment of the Delhi High Court in State Trading

Corporation of India ltd. vs. Micro and Small

Enterprises Facilitation Council, 2024 SCC Online

Delhi 979 was placed that the writ petition was not

maintainable.

10. Accordingly the passing of the said Award within

25 days was justified on the ground that under Section 18

(5), the reference had to be decided within the period of 90

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days from the date of making such reference and therefore,

the action of Arbitrator was well supported.

.

11. A strong objection has been taken to the

Arbitration Appeal having been filed on account of its lack of

maintainability on account of the fact that 75% of the

amount had not been deposited if the said Award has to be

challenged and the appeal was not liable to be entertained

by any Court. The arbitration matter was to be heard before

the learned Single Judge was pressed upon since there was

right of appeal as such under Section 37 of the 1996 Act

and that right would be be taken away if both the matters

are heard together.

12. A suggestion was given that the delay, if any,

regarding raising the issue as such from the year 2014, till

preferring the proceedings on 24.10.2017, before the

respondent No.1-Council was sought to be justified on the

ground that initially the Council had returned the matter on

28.10.2017, since the goods were supplied in the year 2013

and liberty had been given to re-submit the reference. The

delay had been explained in communication dated

13.11.2017 (Annexure P-13 colly) regarding the earlier

litigation in Patna and that on account of the order dated

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06.09.2017 (Annexure P-20) in the contempt matter

whereby liberty had been given to the petitioner to

.

question the same in appropriate proceedings. The delay

was sought to be explained which, according to the counsel

for the respondents, was accordingly accepted when the

fresh summons were issued on 27.11.2017 (Annexure P-23)

to the Buyer wherein the respondent No.1-Council had

asked the response from the Buyer. Accordingly, it is being

contended that the matter had been brought before the

Council, the Buyer as such had only taken time to make the

payment and it has been pressed upon them several times

as such to settle the matter and they had taken time on

05.11.2020 for the said purpose. It is thus submitted that

time and again the Supplier has not offered to pay for the

goods supplied which were without any defects and it is

accordingly argued that for the 41 items only one of the

items was having defect which had led to the black-listing of

the Supplier.

Background and History of the case at Patna:

13. The background of the case has to be taken into

account before we proceed to decide the issue regarding

the maintainability of the writ petition and also the manner

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in which the arbitration proceedings had been conducted by

the Arbitrator and whether it would fall within Clause 34(2)

.

(iii) and (iv) of the 1996 Act and there is misconduct as

such on the part of the Arbitrator, the manner in which the

arbitration proceedings had been conducted.

14. It is to be noticed that agreement inter se the

parties is dated 04.10.2013 (Annexure P-3) whereby the

Supplier having its registered office in Delhi and factory

premises at Bhud Baddi, District Solan, H.P. had entered

into the agreement with the Petitioner/Buyer at Patna,

which is a corporation having its office at Patna. The drugs

and medicines which have been purchased as such as per

the specification mentioned in the schedule at the prices

with a primary deposit of Rs.43,56,000/-, as security

deposit. As per Clause 25 of the said Agreement, the

dispute inter se the parties was to be decided by the

Managing Director and had to be final and binding and the

jurisdiction as such was of the High Court of Bihar under

Clause 26. The relevant Clauses read as under:

“This Deed of Agreement is made on this 4th day of
October 2013 by M/s. MEOIPOL PHARMACEUTICAL INDIA
LTD. represented by its Proprietor/Managing
partner/Managing Director having its Registered Office at

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128/5, Swiss House, Vishwas Nagar, Delhi-110032 and its
Factory Premises at 1199/3 BHUD BADDI, Distt. Solan
(H.P.) (hereinafter/referred to as “Supplier” which term

.

shall include its successors, representatives heirs,

executors and administrators unless excluded by the
Contract) on one part and Govt. of Bihar, represented by

its Managing Director of Bihar Medical Services and
Infrastructure Corporation Ltd. (BMSICL) having his Office
at Patna (hereinafter referred to as “The Purchaser” which
term shall include its successors, representatives,

executors assigns and administrators unless excluded by
the Contract on the both part.

Whereas the Supplier has agreed to supply to the

Purchaser, the Drugs and Medicines with specifications
mentioned in the Schedule attached here to at the prices

noted there in and in the manner and under the terms and
conditions herein after mentioned and where as the
Supplier has deposited with the Purchaser a sum of Rs

43,56000 (Rupees Fourty three Lacs fifty six thousand
only) as Security Deposit for the due and faithful
performance of this Agreement, to be forfeited in the

event of the Supplier failing duly and faithfully to perform

It. Now these presents witness that for carrying out the
said Agreement in this behalf into execution.

1 to 24 xxx xxx

25.And it is hereby agreed and declared between the
parties hereto that in case any question of dispute arises
touching the construction or wording of any clause
wherein contained on the rights, duties, liabilities of the
parties hereto or any other way, touching or arising out of
the presents, the decision of the Managing Director in the
matter shall be final and binding.

26.In the event of any disputes between the parties, the
disputes would be subject to the jurisdiction of the Court

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of Bihar or Honourable High Court of Bihar. In witness
whereof the Supplier and the General Manager acting for
an on behalf of the ordering authority and Govt. of Bihar,

.

the Purchaser, have set their hands the day, month and

year first above written.”

15. On 25.04.2017, the Supplier was put to notice vide

(Annexure P-4), by the Managing Director that the drugs

supplied by it ‘Cefixime Oral Suspension IP’ had not conformed

to the quality testing and therefore, why penal clause should not

be invoked against the company. In pursuance of the said

show-cause notice, petitioner along with two other companies

was black listed for two years on 13.09.2014 (Annexure P-6).

The writ petition bearing No. 16767 of 2014 was filed before

the High Court at Patna in which orders were passed on

22.10.2014 (Annexure P-7), remanding the matter to the

competent authority by issuing fresh show-cause notice and

giving the right as such to apply for a contract by disclosing this

fact in any tender and subject to final decision to be taken by

the Corporation.

16. Fresh show-cause notice was issued on 25.01.2015

which was responded to on 15.01.2015 (Annexure P-10) by the

Supplier and an order dated 26.04.2015 came to be passed

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black-listing the company for a period of five years. The

Supplier filed Civil Writ Petition No. 7523 of 2015 which was

.

allowed on 03.12.2015 (Annexure P-12) by the Patna High

Court and the said order was set aside on the ground that

opportunity of being heard had been denied.

17. The third writ petition was filed at Patna by the

Supplier that its bills to the tune of Rs.14.50 crores remain

pending and therefore, representation dated 07.12.2015 before

the Managing Director be decided. The writ petition was

disposed of with the directions on 28.06.2016 to consider the

claim of the petitioner and make payment of admissible dues

within three months and in case the dues are found

inadmissible the same may be disposed of by a speaking order.

The rejection was done on 17.07.2017 (Annexure P-20) by the

Managing Director of the Buyer and the representation dated

07.12.2015 was rejected.

18. Vide order dated 05.10.2016, the Managing Director

again black-listed the Supplier for five years keeping in view the

reconsideration which had to be done vide order dated

03.12.2015 in CWP No. 7523 of 2015 (Annexure P-12). The

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Contempt Petition filed in CWP No. 454 of 2016 was filed

before the learned Single Judge at Patna which was disposed

.

of on 06.09.2017 (Annexure P-21) apparently on account of the

fact that the directions to consider the payment of the bills of

14.50 crores still remains pending. It was accordingly brought to

the notice of the said Court that an order had been passed on

17.07.2017 by the Managing Director of the Buyer Corporation

and resultantly, it was held that no case for contempt is made

out and the application was disposed of leaving it open to the

petitioner to question the same in an appropriate proceedings

by filing an appropriate application.

19. It is thereafter on 24.10.2017, Reference was filed

before respondent No.1-Council which, as noticed above, was

returned on 24.10.2017 on the ground that the interests

calculation schedule was not prepared as per the format

devised and the same has not been signed by the competent

persons and that there is delay in filing the reference.

20. Apparently, on 13.11.2017, justification was given

that since an order had been passed on 06.09.2017, (Annexure

P-21) in compliance of the Contempt Petition by the High Court

and liberty had been given to challenge the same and the

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matter was within limitation and therefore, the delay was sought

to be justified leading to the notice dated 27.11.2017 (Annexure

.

P-23) being issued to the Buyer to the effect by respondent

No.1-Council that the claim of Rs.29,83,80,909.00/- plus

interest had been preferred and to file its reply. The litigation at

Patna continued and on 08.03.2018, the writ petition No.

17483/2016 was allowed and liberty was given to fresh issue

show-cause notice and the permission was given to participate

in the tender in the mean time subject to any fresh order of

black-listing. Fresh show-cause notice was issued on

15.06.2018 and vide order dated 30.07.2018 (Annexure P-16)

black-listing of five years as such was made effective from the

date of first order dated 13.09.2014 (Annexure P-6).

21. The Letters Patent Appeal No. 513 of 2018 was filed

before the Patna High Court against the order dated 08.03.2018

which was disposed of on 04.01.2019 on account of the fact

that fresh orders had been passed and therefore, the appeal

had been rendered infructuous.

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Litigation and contest in Himachal Pradesh between
the Parties:

22. Apparently, the Buyer had filed reply on 03.01.2018

.

to the notice dated 27.11.2017 issued by the respondent No-1

Council raising various objections, including the issue of

jurisdiction and that the matter is still pending before the High

Court at Patna, apart from the merits as such of the case

regarding the issue of black-listing. The fact that claim of

payment for the outstanding dues had been rejected by the

order dated 17.07.2017 (Annexure P-20) was also highlighted

while questioning the jurisdiction as such in view of the orders

passed by the Patna High Court. The matter was taken up

before the Council on 06.04.2018 and it was noticed that

dispute is regarding one of its 41 items and payment could be

made regarding other 40 items and thereafter the matter was

listed on 08.05.2018 along with a large number of cases. The

Chairman of the Council as such had handed over the

Reference to Shri L.R. Sharma, District and Sessions Judge

(Retd.), on 28.05.2018 (Annexure P-30) who was on the panel

notified by the State Government, while noting that the

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conciliation proceedings had failed as the Buyer was not

interested to solve the matter.

.

23. Notice was issued by the said Arbitrator on

23.06.2018 (Annexure P-3) to the Buyer to put in appearance

and as noticed, as per the Statement of Claim was for

Rs.33,77,62,592/- was claimed of principle amount plus interest

up to 31.05.2018. On putting appearance, time was taken

initially for filing the reply by the Buyer and eventually, Civil Writ

Petition No.1865 of 2018 came to be filed which was allowed

on 26.08.2019 (Annexure P-34) and the order passed by the

Chairman referring the matter to Arbitrator was quashed by the

learned Single Judge of this Court on the ground that the

Chairperson of the respondent-Council had placed the matter in

routine before the Council and had not dealt with it in

accordance with the Rules. Relevant part of the order reads as

under:

“15.Accordingly, this petition is partly allowed by setting
aside the order passed by the Council in its 37 th meeting
held on 08.05.2018, vide which the Reference filed before
it by respondent No.3 under Section 18 of the Micro,
Small & Medium Enterprise Development Act, 2006 stood
referred for arbitration. The matter is remanded back tot
he Chairperson of respondent No. 1-Council, with the
direction that he shall proceed with the matter in terms of

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the provisions of Sub-rule (7)of Rule 4 of the 2007 Rules,
as envisaged after receipt of the response of the buyer. It
is directed that the said procedure has to be strictly

.

followed by the Chairperson, because the Rules are

statutory Rules and have the force of law and also
because any decision of the Chairperson whether or not

to place the matter before the Council and whether a
case of a delayed payment is made out, shall have civil
consequences as far as either of the parties is concerned.
The decision in this regard shall be a reasoned and

speaking one. However, it is made clear that as far as the
merit of the Reference made before the Council by
respondent No. 3 is concerned, this Court is not making

any observation upon the same and the same shall be
dealt with by the Chairperson independently,

uninfluenced by any observation of this Court in this
judgment. In view of the above discussion, the second
contention raised by learned Senior Counsel with regard

to the maintainability of the Reference is not being
adjudicated upon in terms of Clause-26 of the agreement
entered into between the parties (Annexure P-2). This

Court hopes and expects that the Chairperson of the

Council shall deal with the issue as expeditiously as
possible.

The petition stands disposed of in above terms,so

also pending miscellaneous application, if any.”

24. Thereafter on 18.01.2021 (Annexure P-1) the

Council as such, vide order dated 02.02.2021 (Annexure

P-2) referred the matter again to the Arbitration by

concluding that the Rules had been repealed and

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revised and there was no further scope of re-

conciliation. The relevant portion of the said order reads

.

as under:

“5.Finally the matter was listed before the Facilitation Council

in its 56th meeting held on 18.01.2021. During the meeting,
the claimant pleaded before the Council to refer this case to
arbitrator as there is no further possibility of amicable
settlement.

6. The Member Secretary again informed that Rules of
HPMSEFC were repealed/revised, on 16.04.2018. No such
provision is existing in these revised Rules as was there

earlier in Sub-rule (7) of Rule 4 of the 2007 Rules of

HPMSEFC.

After deliberation and listening to the arguments from both
the sides, the Members of the Council were of the

unanimous opinion that there is no further scope of
reconciliation in this long pending case. Hence, it was

decided by the Council that this reference be referred to the
arbitrator.”

25. Resultantly, while issuing communication dated

08.02.2021, (Annexure P-1) respondent No. 3 Shri J.S.

Mahantan District and Sessions Judge (Retd.) was appointed

as an Arbitrator before whom the matter had come up on

16.02.2021, during Covid period for the first time and counsel

for the Buyer had put in appearance on their own account

without having any notice. Notice had been issued to the

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Supplier for 19.03.2021. On 19.03.2021, ex parte proceedings

were ordered and the Statement of Claim was filed and the

.

case was kept for claimant’s ex parte evidence.

26. A perusal of the file would go on to show that in the

Statement of Claim initially filed on 17.03.2021, a sum of

Rs.66,50,74,119/- was claimed before the Arbitrator. The

affidavit of the Liaison Officer Chaman Lal had been taken on

record. On 06.04.2021 Award was passed, as noticed above,

while taking the evidence by way of affidavit dated 01.04.2021

wherein enhanced amount of Rs.95,71,00,208/- as such had

been claimed on the basis of interest calculation done up to

31.03.2021 as per the certificates of the Chartered Accountant

which were appended as Exts. A-7, A-8 and A-9. The scope as

such of the amount was substantially enhanced more than three

times than what had been claimed at the first instance before

the Council. It is in such circumstances, the matter has reached

before this Court leading to the interim order being passed

staying the operation of the Award in the Writ petition at the first

instance.

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24

Legal provisions governing the field.

27. Sections 15 to 19 and 24 of the 2006 Act are

.

apposite and read as under:

“15. Liability of buyer to make payment- Where any supplier

supplies any goods or renders any services to any buyer, the
buyer shall make payment therefor on or before the date agreed
upon between him and the supplier in writing or, where there is no
agreement in this behalf, before the appointed day:

Provided that in no case the period agreed upon between
the supplier and the buyer in writing shall exceed forty-five days
from the day of acceptance or the day of deemed acceptance.
r This clause seeks to specify the liability of buyer of goods

and services from a supplier to make payment therefor on or before
the date agreed upon between the two parties in writing or, where
there is no agreement in this behalf, before the appointed day. The
proviso to this clause seeks to limit the period agreed upon

between the supplier and the buyer in writing to forty-five days from
the day of acceptance or the day of deemed acceptance.

16. Date from which and rate at which interest is payable-

Where any buyer fails to make payment of the amount to the

supplier, as required under section 15, the buyer shall,
notwithstanding anything contained in any agreement between the
buyer and the supplier or in any law for the time being in force, be

liable to pay compound interest with monthly rests to the supplier
on that amount from time the appointed day or, as the case may
be, from the date immediately following the date agreed upon, at
three times of the bank rate notified by the Reserve Bank.

This clause seeks to specify the date from which and the
rate at which interests will be payable by the buyer to the supplier
in case of the former failing to make payments of the amount to the
supplier, as required under section 15.

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25

17. Recovery of amount due.-For any goods supplied or
services rendered by the supplier, the buyer shall be liable to pay
the amount with interest thereon as provided under section 16.

.

This clause seeks to make the buyer liable to pay the

amount with interest thereon as provided under section 16 for
goods supplied or services rendered by the supplier.

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 stand terminated without any settlement between
the parties, the Coucil 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 disputes 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.

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26

(5) Every reference made under this section shall be decided
within a period of ninety days from the date of making such a
reference.

.

This clause seeks to provide for the jurisdiction of the Micro

and Small Enterprises Facilitation Council for acting as an arbitrator
or conciliator in respect of the matters referred to in clause 17.

19. Application for setting aside decree, award or order- No
application for setting aside any decree, award or other order made
either by the Council itself or by any institution or centre providing
alternate dispute resolution services to which a reference is made

by the Council, shall be entertained by any Court unless the
appellant (not being a supplier) has deposited with it seventy-five
per cent. of the amount in terms of the decree, award or, as the
case may be, the other order in the manner directed by such Court:

Provided that pending disposal of the application to set

aside the decree, award or order, the Court shall order that such
percentage of the amount deposited shall be paid to the supplier, as
it considers reasonable under the circumstances of the case,

subject to such conditions as it deems necessary to impose.

This clause seeks to debar any Court or other authority
from entertaining an appeal against any decree, ward or any other

order unless the appellant (not being a supplier) has deposited with
it seventy-five per cent. of the amount in terms of the decree, award

or other order.

20. to 23. xxx xxxxx

24. Overriding effect. – The provisions of sections 15 to 23
shall have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force.

This clause seeks to give the provisions of clauses 15 to
23 an overriding effect over anything inconsistent therewith in any
other law for the time being in force.”

28. Relevant provisions of Arbitration Act, 1996 read as

under:

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27

.

“18. Equal treatment of parties.- The parties shall be treated

with equality and each party shall be given a full opportunity to
present his case.

19 to 22. xxxx xxxx xxxxx

23. Statement of claim and defence.-(1) Within the period of
time agreed upon by the parties or determined by the arbitral
tribunal, the claimant shall state the facts supporting his claim, the

points at issue and the relief or remedy sought, and the
respondent shall state his defence in respect of these particulars,
unless the parties have otherwise agreed as to the required
elements of those statements.

(2) The parties may submit with their statements all documents

they consider to be relevant or may add a reference to the
documents or other evidence they will submit.

[(2A) The respondent, in support of his case, may also submit a

counter-claim or plead a set-off, which shall be adjudicated upon
by the arbitral tribunal, if such counter-claim or set-off falls within
the scope of the arbitration agreement.]

(3) Unless otherwise agreed by the parties, either party may
amend or supplement his claim or defence during the course of

the arbitral proceedings, unless the arbitral tribunal considers it
inappropriate to allow the amendment or supplement having

regard to the delay in making it.

1[(4) The statement of claim and defence under this section
shall be completed within a period of six months from the date the
arbitrator or all the arbitrators, as the case may be, received
notice, in writing of their appointment.]

24. Hearing and written proceedings.- (1) Unless otherwise
agreed by the parties, the arbitral tribunal shall decide whether to
hold oral hearings for the presentation of evidence or for oral
argument, or whether the proceedings shall be conducted on the
basis of documents and other materials:

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Provided that the arbitral tribunal shall hold oral hearings,
at an stage of the proceedings, appropriate on a request by a
party, unless the parties have agreed that no oral hearing shall be

.

held:

2[Provided further that the arbitral tribunal shall, as far as
possible, hold oral hearings for the presentation of evidence or for

oral argument on day-to-day basis, and not grant any
adjournments unless sufficient cause is made out, and may
impose costs including exemplary costs on the party seeking
adjournment without any sufficient cause.]

(2) The parties shall be given sufficient advance notice of any
hearing and of any meeting of the arbitral tribunal for the purposes
of inspection of documents, goods or other property.
(3) All statements, documents or other information supplied to,

or applications made to the arbitral tribunal by one party shall be

communicated to the other party, and any expert report or
evidentiary document on which the arbitral tribunal may rely in
making its decision shall be communicated to the parties.

25. Default of a party. Unless otherwise agreed by the parties,
where, without showing sufficient cause,-

(a) the claimant fails to communicate his statement of claim in

accordance with sub-section (1) of section 23, the arbitral tribunal
shall terminate the proceedings;

(b) the respondent fails to communicate his statement of defence
in accordance with sub-section (1) of section 23, the arbitral

tribunal shall continue the proceedings without treating that failure
in itself as an admission of the allegations by the claimant [and
shall have the discretion to treat the right of the respondent to file
such statement of defence as having been forfeited];

(c) a party fails to appear at an oral hearing or to produce
documentary evidence, the arbitral tribunal may continue the
proceedings and make the arbitral award on the evidence before
it.

26. to 29. xxxx xxxx xxxx

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29

29A. Time limit for Arbitral award:- (1) The in matters other
than international commercial arbitration shall be made by the
Arbitral tribunal within a period of twelve months from the date of

.

completion of pleadings under sub-Section (4) of Section 23.

34.Application for setting aside arbitral award.- (1) Recourse to
a Court against an arbitral award may be made only by an

application for setting aside such award in accordance with sub-
section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if-

(a) the party making the application 1 [establishes on the basis of

the record of the arbitral tribunal that]-

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which
the parties have subjected it or, failing any indication thereon,

under the law for the time being in force; or

(iii) the party making the application was not given proper notice of
the appointment of an arbitrator or of the arbitral proceedings or
was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or
not falling within the terms of the submission to arbitration or it
contains decisions on matters beyond the scope of the

submission to arbitration:

Provided that, if the decisions on matters submitted to

arbitration can be separated from those not so submitted, only
that part of the arbitral award which contains decisions on matters

not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a provision of
this Part from which the parties cannot derogate, or, failing such
agreement, was not in accordance with this Part; or

(b) the Court finds that-

(i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

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30

¹[Explanation 1- For the avoidance of any doubt, it is clarified that
an award is in conflict with the public policy of India, only if,-

(i) the making of the award was induced or affected by fraud or

.

corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law;
or

(iii) it is in conflict with the most basic notions of morality or
justice.]
[Explanation 2.-For the avoidance of doubt, the test as to whether
there is a contravention with the fundamental policy of Indian law

shall not entail a review on the merits of the dispute.]
2[(2A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside by the
Court, if the Court finds that the award is vitiated by patent

illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on
the ground of an erroneous application of the law or by re-
appreciation of evidence.]”

29. Section 37 of the 1996 Act is also apposite and

reads as under:-

“37. Appealable orders.–(1) ¹[Notwithstanding anything
contained in any other law for the time being in force, an appeal]
shall lie from the following orders (and from no others) to the Court

authorised by law to hear appeals from original decrees of the
Court passing the order, namely:-

2[(a) refusing to refer the parties to arbitration under section 8;

(b) granting or refusing to grant any measure under section 9;

(c) setting aside or refusing to set aside an arbitral award under
section 34.]
(2) An appeal shall also lie to a Court from an order of the arbitral
tribunal.-

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31

(a) accepting the plea referred in sub-section (2) or sub-section (3)
of section 16; or

(b) granting or refusing to grant an interim measure under section

.

17.

(3) No second appeal shall lie from an order passed in appeal
under this section, but nothing in this section shall affect or take

away any right to appeal to the Supreme Court.”

Law on the issue:

30. The issue of power of the Writ Court to entertain the

Award under Articles 226 and 227 of the Constitution was

subject matter of consideration by a three Judge Bench of the

apex Court in India Glycols Ltd. case (supra) and it was

accordingly held that Section 19 of the Act has been

introduced as a measure of security for enterprises for

whom a special provisions have been made in the Act and

the Buyer as such has a remedy to challenge the Award

under Section 34 of the 1996 Act and thus, would be

required to deposit 75% of the decreetal amount. Therefore,

the recourse to Articles 226 and 227 of the Constitution was

impermissible. It was accordingly held that in order to

obviate compliance to the requirement of pre-deposit, the

writ petition would be preferred therefore, the same was not

maintainable. The said view has been doubted in M/s

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Tamil Nadu Cements Corporation Ltd. vs. Micro and

Small Enterprises Facilitation Council and another, on

.

22.01.2025 by a another Three Judge Bench and the matter

has been referred for constitution of a larger Bench

primarily by holding that under the MSMED Act, the interest

rate at three times of the Reserve Bank rate of interest of

9.5% is undoubtedly higher rate of interest with further

compounding monthly rests and therefore, compliance of

the stringent conditions and an absolute and complete bar

to invoke the writ jurisdiction under Article 226 of the

Constitution even in exceptional and rare cases where

fairness, equity and justice may warrant, would be taking

away the access to the High Courts. It was further held that

Rule of exclusion of writ jurisdiction is a rule of discretion

and not a compulsion. Accordingly, the observations were

made by the onerous and burdensome conditions imposed

under the Statute, the alternative remedy as such may not

be equally efficacious and adequate and the statutory right

as such was illusory. Relevant part of the said judgment

reads as under:-

“13. The access to High Courts by way of a writ petition under
Article 226 of the Constitution of India, is not just a constitutional
right but also a part of the basic structure. It is available to every

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citizen whenever there is a violation of their constitutional rights or
even statutory rights. This is an inalienable right and the rule of
availability of alternative remedy is not an omnibus rule of

.

exclusion of the writ jurisdiction, but a principle applied by the

High Courts as a form of judicial restraint and refrain in exercising
the jurisdiction. The power to issue prerogative writs under Article

226 of the Constitution is plenary in nature and the same is not
limited by any provision of the Constitution and cannot be
restricted or circumscribed by a statute. 16 It has been well settled
through a legion of judicial pronouncements of this Court that the

writ courts, despite the availability of alternative remedies, may
exercise writ jurisdiction at least in three contingencies – i) where
there is a violation of principles of natural justice or fundamental
rights; ii) where an order in a proceeding is wholly without

jurisdiction; or iii) where the vires of an Act is challenged.

Noticeably, the MSEFC as a statutory authority performs a
statutory role and functions within the four corners of the law.

14.Following the aforesaid dictum, this Court in Harbanslal Sahnia

and Another v. Indian Oil Corporation and Others, had taken
notice of the fact that the High Court had referred to the arbitration
clause which the writ petitioner could take recourse to, to hold that

the rule of exclusion of writ jurisdiction is a rule of discretion and
not of compulsion. In an appropriate case, in spite of availability of

alternative remedy, the writ courts can exercise its jurisdiction at
least in three contingencies, as referred to above. In the facts of

the said case, this Court interfered observing that there were
peculiar circumstances as the dealership had been terminated on
an irrelevant and non-existence cause. Therefore, there was no
need to drive the parties to initiate arbitration proceedings.
Following the judgments in Whirlpool Corporation v. Registrar of
Trade Marks, Mumbai and Others and Harbanslal Sahnia (supra),
this Court in Radha Krishan Industries v. State of Himachal
Pradesh and Others laid down the following principles:
“27. The principles of law which emerge are that:

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27.1. The power under Article 226 of the Constitution to issue writs
can be exercised not only for the enforcement of fundamental
rights, but for any other purpose as well.

.

27.2. The High Court has the discretion not to entertain a writ

petition. One of the restrictions placed on the power of the High
Court is where an effective alternate remedy is available to the

aggrieved person.

27.3. Exceptions to the rule of alternate remedy arise where: (a)
the writ petition has been filed for the enforcement of a
fundamental right protected by Part III of the Constitution; (b) there

has been a violation of the principles of natural justice; (c) the order
or proceedings are wholly without jurisdiction; or (d) the vires of a
legislation is challenged.

27.4. An alternate remedy by itself does not divest the High Court of

its powers under Article 226 of the Constitution in an appropriate

case though ordinarily, a writ petition should not be entertained
when an efficacious alternate remedy is provided by law.
27.5. When a right is created by a statute, which itself prescribes

the remedy or procedure for enforcing the right or liability, resort
must be had to that particular statutory remedy before invoking the
discretionary remedy under Article 226 of the Constitution. This rule

of exhaustion of statutory remedies is a rule of policy, convenience
and discretion.

27.6. In cases where there are disputed questions of fact, the High
Court may decide to decline jurisdiction in a writ petition. However,

if the High Court is objectively of the view that the nature of the
controversy requires the exercise of its writ jurisdiction, such a view
would not readily be interfered with.”

15.Thus, it would be true to say that the existence of the statutory
remedy does not affect the jurisdiction of the High Court to issue a
writ. Nevertheless, the writ jurisdiction being discretionary by policy,
the writ courts generally insist that the parties adhere to alternative
statutory remedies, as this reinforces the rule of law. However, in
exceptional cases, writ jurisdiction can still be exercised as a power
to access the court for justice and relief. It is in this context, that a

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Constitution Bench of five Judges way back in 1954 in Himmatlal
Harilal Mehta v. State of Madhya Pradesh and Others had observed
that the principle that the High Court should not issue a prerogative

.

writ when an alternative remedy is available may not apply when

the remedy under the statutes is onerous and burdensome in
character, such as when the party has to deposit the whole amount

of the tax before filing an appeal. An alternative remedy must be
equally efficacious and adequate. While examining the scope of the
right to file a writ petition when the statute requires a pre-deposit of
tax-an obligation argued as imposing an onerous condition on the

right to appeal-this Court in Shyam Kishore and Others v. Municipal
Corporation of Delhi and Another, after relying upon several other
decisions, observed that the validity of rigid provisions banning
entertainment of appeal when taxes are not paid have been upheld

so long as the conditions are not so onerous as to amount to

unreasonable restriction. In the alternative, the right is almost
illusory.”

31. Thus, from the above, it would be clear that the

matter is not beyond debate regarding the power of the Writ

Court. Though Mr. Umesh Prasad Singh, Senior Advocate,

appearing for he petitioner has submitted that hearing of

the petition should be deferred till the order is passed by

the Reference Court, but we are of the considered opinion

that in view of the law laid down in Ashok Sadarangani

and another vs. Union of India and others (2012) 11

SCC 321, where it was held that a Court is under a bounden

duty to decide the issue rather to keep the matter in limbo.

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32. The Apex Court in Civil Appeal Nos. 4526-

4527 of 2024 M/s A.P. Electrical Equipment

.

Corporation vs. The Tahsildar and others etc., has

held that if there are two views inconsistent with each other

of the Apex Court, the High Court should not follow the one

and over look the other and should try to reconcile and

respect both of them. It is in such circumstances, we are of

the view that the absolute bar as projected by the Counsel

for the Supplier would not stand in the way of this Court to

do complete justice between the parties as further delay as

such would only enhance the amount claimed and also

cripple both the Supplier and the Buyer.

33. A Five Judge Bench of the Apex Court in

Himmatlal Harilal Mehta vs. State of Madhya Pradesh

and others AIR 1954 SC 403 has held that when the

remedy is of onerous and burdensome character under the

statutory remedy of depositing the whole amount of tax, the

provisions can hardly be described as adequate alternative

remedy. The relevant part of the said judgment reads as

under:-

“9……………..There it was held that the principle that a
Court will not issue a prerogative writ when an adequate
alternative remedy was available could not apply where a

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party came to the court with an allegation that his
fundamental right had been infringed and sought relief
under Art. 226. Moreover, the remedy provided by the Act

.

is of an onerous and burdensome character. Before the

appellant can avail of it he has to deposit the whole
amount of the tax. Such a provision can hardly be

described as an adequate alternative remedy.”

34. Another Five Judge Bench in A.V.

Venkateswaran Collector of Customs, Bombay, vs.

Ramchand Sobhraj Wadhwani and another, AIR 1961

SC 1506, has held that the order passed in violation of

principle of natural justice should be treated as void or non

est and that the Rule of adequate alternative remedy is not

an exhaustive Rule and even beyond that the discretion

vests in the High Court to entertain the petition and to grant

the relief. Resultantly, there was no interference which was

sought to be at the hands of the Collector of the Customs.

Relevant portion of the said judgment reads as under:-

“10.The passages in the judgments of this Court we have
extracted would indicate (1) that the two exceptions which the
learned Solicitor-General formulated to the normal rule as to the
effect of the existence of an adequate alternative remedy were by
no means exhaustive, and (2) that that even beyond them a
discretion vested in the High Court to have entertained the petition
and granted the petitioner relief notwithstanding the existence of
an alternative remedy. We need only add that the broad lines of
the general principles on which the Court should act having been

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clearly laid down, their application to the facts of each particular
case must necessarily be dependent on a variety of individual
facts which must govern the proper exercise of the discretion of

.

the Court, and that in a matter which is thus preeminently one of

discretion, it is not possible or even if it were, it would not be
desirable to lay down inflexible rules which should be applied with

rigidity in every case which comes up before the Court.”

35. In Whirlpool Corporation vs. Registrar of

Trade Marks, Mumbai and others, (1998) 8 SCC 1, the

said view was followed by holding that the High Court

imposes upon itself certain restrictions and where there is

violation of principles of natural justice then circle of

forensic whirlpool has to be cut down and there has to some

exercise of discretion to refuse to interfere and there is no

absolute bar and the writ petition would be entertained in

exceptional circumstances. Reliance was placed upon in

another Constitution Bench decision in Calcutta Discount

Co. Ltd. v. ITO Companies Distt. AIR 1961 SC 372.

Resultantly, it was held that the High Court was not justified

in dismissing the writ petition at the initial stage without

examining the contention that the show-cause notice issued

was wholly without jurisdiction.

36. In M/s Radha Krishan Industries vs. State of

Himachal Pradesh and others AIR 2021 SC 2114, the

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maintainability of the writ petition before the High Court

was one of the moot questions since the petition was

.

dismissed on the ground of alternative remedy wherein

challenge had been raised to the attaching of the appellant

receivable’s from the customers under Section 83 of the

Himachal Pradesh Goods and Services Act, 2017 and the

relevant rules. Resultantly, following principles of law were

laid down while noticing the earlier judgments in Seth

Chand Ratan vs Pandit Durga Prasad (D) By Lrs. &

Ors (2003) 5 SCC 399, Babubhai Muljibhai Patel vs.

Nandlal Khodidas Barot & Ors.,(1974) 2 SCC 706 and

Rajasthan SEB vs. Union of India & Ors. (2008) 5 SCC

632, the judgment of the High Court was set aside

and also the orders of provisional attachment were

quashed. Relevant observations of the said

judgment read as under:-

“27. The principles of law which emerge are that:

(i) The power under Article 226 of the Constitution to issue writs
can be exercised not only for the enforcement of fundamental
rights, but for any other purpose as well;

(ii) The High Court has the discretion not to entertain a writ petition.

One of the restrictions placed on the power of the High Court is
where an effective alternate remedy is available to the aggrieved
person;

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40

(iii) Exceptions to the rule of alternate remedy arise where (a) the
writ petition has been filed for the enforcement of a fundamental
right protected by Part III of the Constitution; (b) there has been a

.

violation of the principles of natural justice; (c) the order or

proceedings are wholly without jurisdiction; or (d) the vires of a
legislation is challenged;

(iv) An alternate remedy by itself does not divest the High Court of
its powers under Article 226 of the Constitution in an appropriate
case though ordinarily, a writ petition should not be entertained
when an efficacious alternate remedy is provided by law;

(v) When a right is created by a statute, which itself prescribes the
remedy or procedure for enforcing the right or liability, resort must
be had to that particular statutory remedy before invoking the
discretionary remedy under Article 226 of the Constitution. This rule

of exhaustion of statutory remedies is a rule of policy, convenience

and discretion; and

(vi) In cases where there are disputed questions of fact, the High
Court may decide to decline jurisdiction in a writ petition. However,

if the High Court is objectively of the view that the nature of the
controversy requires the exercise of its writ jurisdiction, such a view
would not readily be interfered with.”

37. Keeping in mind the said principles of onerous

conditions, we proceed to decide the issue for the reasons

given below.

Reasoning for interference by this Court:

38. Counsel for the respondent-Buyer has vehemently

submitted that in view of the settled position of law, this Court

should not exercise its jurisdiction, both on the Writ as well as

appellate sides, since the Writ would not be maintainable and

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41

the appeal cannot be entertained until there is a pre-deposit of

75% of the amount awarded.

.

39. A perusal of Section 18 (3) of the 2006 Act would

go on to show that the said provisions would come into play

when the Council has taken up the issue for arbitration or

referred it to any institution or Centre providing alternate

disputes resolution services. It is in such circumstances, the

provisions of 1996 Act which have been reproduced above

would also come into play as what is to be seen is that whether

the respondent-Supplier can be given a walk over and the

Buyer cannot even be given an opportunity to put forth its case

once apparently, they were unable to present their case. The

Arbitral Award has also dealt with the dispute which was not

falling within the terms of the submission to the Arbitration

containing the decision on the matters beyond the scope or

submission to the Arbitration on the pecuniary aspect of the

claim itself.

40. It has to be noticed and argued by the Counsel for

the petitioner that the amount has been excessively enhanced

over a period of time and the Reference at the last point of time,

after the remand, as such by the Council is regarding a sum of

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42

Rs.29,83,80,909.00/- principle amount plus interest as on

08.02.2021, which would be clear from (Annexure P-1).

.

41. The audacity as such of the Buyer to have

claimed enhanced amount of Rs.33,77,25,952/- (Annexure

P-31) as the principle amount and interest was already

there before the first Arbitrator which proceedings had been

nixed by this Court on a different issue that the Chairman

had referred the matter to the Council without keeping in

mind the Rules in question. The claim had thereafter been

enhanced to Rs.66,50,74,160.00/- even though the

Reference was for a less amount of Rs.29,83,80,909.00/-.

The Arbitrator further permitted the enhancement to

Rs.95,71,00,208.00/-. Therefore, in the opinion of this Court,

it has opened up the scope of Reference to contain a

decision beyond the scope of decision to Arbitration under

Section 34 (2) sub Clause 2 (2A) and thus has apparently

misconducted himself on the face of the record.

42. The fact also remains, as noticed, in the manner

in which the Arbitrator has proceeded, which would be clear

from the proceedings conducted, which would go on to

show that the Buyer as such was unable to present his case

during time when the Country was in the grip of Covid-19

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43

pandemic. The Buyers as such were from Patna/Bihar who

had been, prior in point of time, successfully putting in

.

appearance and contesting the matter. The old adage that

“justice hurried is justice buried” comes to mind in the

manner in which the proceedings had been conducted by

the Arbitrator. The proceedings conducted would go on to

show that on 16.02.2021, the Supplier had themselves

appeared on their own before the Arbitrator though they

were not even aware that the matter was liable to be taken

up on 16.02.2021. Thereafter proceedings were conducted

ex pate on 19.03.2021, and at that point of time, the claim

had been filed which was over and above the amount which

had been referred to, as noticed above. The principle

amount was thus successively enhanced. The Buyer was

never aware of this development and by its own affidavit

given on 05.04.2021, the amount was further enhanced by

the affidavit of the Liaison Officer of the Supplier whereby

the principle amount itself was further enhanced and the

Award came to be passed on the very next day. Thus, on

two occasions, the enhancement was done even without

putting the Buyer to notice of the said fact. The claimants

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44

had thus gone from Rs.29,83,80,909.00/-, to claim

Rs.95,71,00,208.00/-.

.

43. The provisions of Arbitration Act, as referred to

above, would go on to show that apart from the equal

treatment which was to be given to each party and full

opportunity to present their case. Under Section 18 of the

2006 Act, the Supplier will put forward the Statement of

Claims stating the facts supporting his claim and points at

issue. The relief or remedy is provided under Section 23 (1)

sub-Clause (3) of the 1996 Act, unless otherwise agreed by

the parties and either party may amend or supplement his

claim or during the course of Arbitral proceedings, unless

the Arbitral Tribunal considers it inapropriate to allow

amendment or supplement it. The said procedure was to be

completed within a period of six months from the date, the

Arbitrator received notice in writing of their appointment.

This has to be read in conjunction as such with Section 18 of

the 2006 Act which provides that any party to the dispute

with regard to the money due under Section 17 to make a

Reference to the respondent-Council. Though there is

notwithstanding clause as such and on the reference being

received, the Conciliation has to take place and only if the

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Conciliation is not successful, the matter has to be referred

as such in pursuance of the 1996 Act. Thus, apparently, the

.

reference as such at that particular point of time has to be

qua the amount which was pending before the respondent-

Council and if the amount had to be enhanced, it was the

bounden duty of the Arbitrator to have issued notice to the

Buyer. Section 24 further provides that sufficient advance

notice of any hearing has to be given of the meeting of the

Arbitral Tribunal and there is also power to impose

exemplary costs and there is a power as such to continue

with the proceedings if the parties fails to appear at an oral

hearing. The time limit as such provided is 12 months from

the date of completion of pleadings under Section 23(4) of

the Act which is further extendable. Thus, keeping in view

the cumulative facts as such, more so, that the physical

proceedings were being conducted by the Arbitrator and the

benefit of Covid-19 period is also liable to be granted is an

aspect which weighs with us very heavily, as no such effort

as such was made by the Arbitrator even to put the Buyer

to notice regarding the enhanced claim, during Covid-19

period.

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44. In such circumstances, we are of the considered

opinion that the principle of natural justice have been

.

violated and therefore, this Court would have jurisdiction

under the Writ jurisdiction also to quash the order and

therefore, the requirement of pre-deposit as such would

have to be given a go by in the peculiar facts and

circumstances while exercising our discretion under Article

circumstance.

r to
226 of the Constitution by treating it as an exceptional

45. The orders passed by the Arbitrator in the

proceedings would show the manner in which the

proceedings were conducted. The said orders read as

under:-

“16.02.2021.

Present: None for the parties.

This Reference No.49/2017 received from the HP Micro &
small enterprises facilitation Council Shimla. Heard. Issue

notice to the parties through registered speed post for
19.03.2021.

At this stage Shri Chaman Dhiman, Authorised,
Representative with Shri Atul Jhingan Ld. Counsel
appeared of their own and accepted the service on behalf
of the claimant, hence no notice to the claimant is
required to be issued.

ARBITRATOR

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19.03.2021.

Present: Shri Atul Jhingan Ld counsel for claimant with
Shri Chaman Dhiman, Authorised, Representative in

.

person.

Respondent served through registered speed post
but not present till 4:00 PM. I have scrutinized the Indian

mail track consignment record placed on file which shows
that the respondent was properly and legally served on
23.02.2021 at 15:25.03 by registered speed post as is
evident from Mail Track Consignment placed on record

but not present. I am satisfied that proper and legal
service has been affected on-respondent for 19.03.2021
but not present, hence proceeded against ex parte.

Statement of Claim filed. Now to come up for claimant’s

ex parte evidence on 05.04.2021.

ARBITRATOR.

05.04.2021

Shri Atul Jhingan Ld counsel for claimant with Shri
Chaman Dhiman Authorised, representative in person.
Respondent already ex parte.

Shri Chaman Dhiman Authorised, representative has

sworn an affidavit in support of claimant’s claim alongwith
documents relied upon and closed exparte evidence of
claimer claim Arguments heard. To come up for award on

06.04.2021.

ARBITRATOR
06.04.2021
Present: Shri Atul Jhingan Ld counsel for claimant with
Shri chaman Dhiman Authorised, representative in
person.

Respondent already ex parte.

The entire claim of the claimant /suppler alongwith
uptodate penal interest till its final realisation and other
incidental charges is admitted and allowed vide my

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separate award announced today. Let the copies of award
be given to the parties fourthwith. File after completion
be sent to the Chairman HP Micro & small enterprises

.

facilitation Council, Udyog Bhawan Shimla for Information,

Record and further necessary action.

Announced

06.04.2021 Jagmohan Singh Mahantan,
District & Sessions Judge (Retd.)
Sole Arbitrator Shimla”

46. One has to go through the Award as such passed

by the Arbitrator. It is therein also recorded that a large

number of invoices remained unpaid of Rs.14,87,60,705/- till

filing of the case with the MSME Council. The Arbitral

Tribunal also noticed in the proceedings before the Council

that the claimant had filed a revised Reference on

20.12.2019, seeking a claim of Rs.66,50,74,190/- on

30.11.2019 and therefore, came to the conclusion that the

enhancement as such before him was justified. He has

relied upon the report of the Chartered Accountant,

justifying the up to date claim to award the same while

noting that the initial amount was only Rs.29,83,80,909/-

when the initial challenge had been made before the

learned Single Judge of this Court. Neither any Reference

has been made to the Court proceedings which carried on at

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Patna from the year 2014 till the year 2017 nor any

Reference has been made to the reply dated 03.01.2018

.

submitted by the Buyer to the initial notice also dated

27.11.2017. A specific objection was taken regarding the

jurisdiction inter se the parties as per Clause 26 and the

pendency of the Letters Patent Appeal before the Patna

High Court and the earlier litigation that in case, the drugs

failed in quality testing, no payment will be made against

the supplies and the fact that the company had been black-

listed with immediate effect for five years, on account of the

failure as such of the ‘Cefixime Oral Suspension IP 50 mg’

having failed in the quality check test. It was also

highlighted that similar order of black-listing had been

passed by the Kerala Medical Services and Infrastructure

Corporation since the company had failed to fulfill the

eligibility criteria and therefore, the Reference as such for

arbitration had been opposed and issue of maintainability

had been raised.

47. The Award as such on merit is silent about the

background of the case while taking in to consideration only

the contention put forwarded on account of the supplier,

thus, violating the provisions of the Arbitration Act, whereas

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Section 18 of the 1996 Act specifically provided that the

parties have to be treated with equality and each party

.

have to be given full opportunity to present his case.

48. Viewed thus, this Court is of the considered

opinion that the Award is vitiated by a patent illegality

appearing on the face of it while dealing with the issue both

on the Appellate side as well as on the Writ side. This Court

would not as such be a silent spectator to the injustice

which is being met out at the hands of over eager Supplier.

49. It is to be noticed that under Section 19 of the

2006 Act, the pre-deposit of 75% of the amount in terms of

the Award is to be in the manner directed by such Court

though it starts with the wording “no application would be

filed setting aside any decree Award or other Order made by

the Council neither it shall be entertained by any Court

unless the Supplier/appellant has deposited 75% of the

amount.”

50. Though the Apex Court has also in Goodyear

India Ltd. v. Norton Intech Rubbers (P) Ltd. (2012) 6

SCC 345, held that in view of the provision of Section 19 of

the 2006 Act, the power as such or discretion is only to

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51

allow the Court to allow pre-deposit to be made if felt

necessary by way of installments.

.

51. Such onerous condition to deposit 75% amount

of Rs.95 crores, in our considered opinion, would not be

liable to be met in the peculiar facts and circumstances of

the case. Therefore, the argument as such raised that the

amount should be firstly deposited, before the appeal can

be heard, is liable to be rejected as it would bring the

Corporation to its knees if the amount of Rs.72 crores is to

be deposited before the matter can be heard on merits

when there is patent illegality, irregularity and mis-conduct

on the part of the Arbitrator in the manner in which the

proceedings had been conducted, by violating the principle

of natural justice.

Benefit of Covid-19 Period.

52. It is also to be noticed that the Apex Court in Suo

Motu Writ Petition (Civil) No.3 of 2020 In Re:

Cognizance for Extension of Limitation had noticed that

the Courts and Tribunals as such are functioning either

physically or by virtual mode and therefore, while extending

the period of limitation from 15.03.2020 till 28.02.2022,

excluded the same and benefit was granted to the public

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and even Reference was made to the provisions of Section

23 (4) and 29A of the 1996 Act while disposing of the matter

.

on 10.01.2022. The dates before the Arbitrator are covered

under the said period which was taken up on 16.02.2021

and culminated on 06.04.2021 and therefore, keeping view

the directions issued by the Apex Court also, we are of the

considered opinion that the benefit has to be granted as

such to the writ petitioner-appellant for non-appearance on

19.03.2021. The final order passed on 10.01.2022 reads as

under:

“I. The order dated 23.03.2020 is restored and in continuation
of the subsequent orders dated 08.03.2021, 27.04.2021 and

23.09.2021, it is directed that the period from 15.03.2020 till
28.02.2022 shall stand excluded for the purposes of limitation
as may be prescribed under any general or special laws in

respect of all judicial or quasi-judicial proceedings.
II. Consequently, the balance period of limitation remaining as

on 03.10.2021, if any, shall become available with effect from
01.03.2022.

III. In cases where the limitation would have expired during the

period between 15.03.2020 till 28.02.2022, notwithstanding the
actual balance period of limitation remaining, all persons shall
have a limitation period of 90 days from 01.03.2022. In the
event the actual balance period of limitation remaining, with
effect from 01.03.2022 is greater than 90 days, that longer
period shall apply.

IV. It is further clarified that the period from 15.03.2020 till
28.02.2022 shall also stand excluded in computing the periods
prescribed under Sections 23 (4) and 29A of the Arbitration and
Conciliation Act, 1996, Section 12A of the Commercial Courts

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53

Act, 2015 and provisos (b) and (c) of Section 138 of the
Negotiable Instruments Act, 1881 and any other laws, which
prescribe period(s) of limitation for instituting proceedings,

.

outer limits (within which the court or tribunal can condone

delay) and termination of proceedings.

V. As prayed for by learned Senior Counsel, M.A. No. 29 of 2022
is dismissed as withdrawn.”

53. It has been specifically pleaded in the appeal by

the occupation Manager (Finance) of the appellant-

Corporation that the Covid wave created alarming situation

and traveling long distances was not advisable and

therefore, the presence on 19.03.2021 could not be put in

and the proceedings were conducted in utter haste and

without providing adequate opportunity. No intimation was

also given of the next date for hearing after the proceedings

ex parte had been initiated, and therefore, the claim of

misconduct on the part of respondent No.2 which as

noticed, we have accepted.

Aspects of limitation and Jurisdiction.

54. Another aspect which rankles us is that it is not

an open and shut case as contended by the Counsel for the

Supplier. As noticed, the petitions were pending at Patna

from the year 2014 whereby the black-listing was subject

matter of challenge on several occasions and non-payment

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of the outstanding dues in which the directions had been

issued and the representation had been rejected on

.

17.7.2017. Merely because the Contempt Court had

accepted the prayer that the Supplier was at liberty to

pursue his remedy, did not, in our considered opinion, prima

facie give the Supplier a right to change the Forum of

jurisdiction.

55.

The cause of action is sought to be invoked by

the Supplier on the basis of the order dated 06.09.2017

(Annexure P-21) which reads as under:

“06.09.2017.

Heard Mr. Sanjeev Kumar, learned counsel

appearing for the petitioner and Mr. Lalit Kishore, learned
Advocate General for the State.

In view of the order preset at Annexure ‘A’ to the

show cause filed on behalf of opposite party nos. 2 to 5 no
case for contempt is made out and the contempt

application is disposed of leaving it open for the petitioner
to question the same in an appropriate proceeding by

filing and appropriate application.”

56. The Order dated 06.09.2017 as reproduced

above may give a cause of action as such, but the issue of

limitation would still apply which was an aspect which the

Arbitrator would have to consider as apparently, a period of

over 3 years had expired before the Application was filed

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before respondent No.1-Council outside the jurisdiction of

the Bihar Court. These are vexed questions which were to

.

be decided by the Arbitrator and therefore, we are of the

considered opinion that the issue of limitation and

jurisdiction have not been allowed to be raised by the

Arbitrator in the manner in which he has conducted the

proceedings and concluded it by allowing enhanced claim

at the back of the Buyer which has constrained us to

come to a finding that mis-conduct is apparent on the

face of the record.

57. In Silpi Industries and others vs. Kerala

State Road Transport Corporation and another,

(2021) 18 SCC 719, it was held that the limitation Act is

applicable to the arbitration covered under Section 18 (3)

of the 2006 Act and even counter-claim can be filed as

such while referring to Section 23 (2A) of the 1996 Act.

Two specific issues as such were framed and while

referring to Section 43 of 1996 Act, it was held that the

limitation would be applicable to the arbitration

proceedings and the provisions of Limitation Act, 1963

would apply to the arbitration covered under Section 18

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(3) of the 2006 Act and resultantly the Apex Court chose

not to interfere with the order of remand of the Kerala

.

High Court. Similarly, it was held that counter-claim as

such was also liable to be filed before the Arbitrator and

therefore, keeping in view the rights of the Buyer as such

also, and the plea that on account of the sample as such

being mis-branded, the right to claim damages has been

taken away. The seminal issue would arise that both the

parties had to be given a right as such and to be treated

equally by the Arbitral Tribunal under Section 18 rather

than giving pre-dominence only to the Supplier which has

been done by respondent No. 2- Arbitrator. The relevant

portions of the said judgment read as under:

“26. Applicability of the Limitation Act, 1963 to the arbitrations is

covered by Section 43 of the 1996 Act. The High Court, while
referring to abovesaid provisions and the judgment of this Court in
A.P. Power Coordination Committee v. Lanco Kondapalli Power

Ltd. has held that the Limitation Act, 1963 is applicable to the
arbitrations covered by Section 18(3) of the 2006 Act. A reading of
Section 43 itself makes it clear that the Limitation Act, 1963 shall
apply to the arbitrations, as it applies to proceedings in court.
When the parties is not under Section 18 of the 2006 Act,
necessarily, the Micro and Small Enterprises Facilitation Council
shall take up the dispute for arbitration under Section 18(3) of the
2006 Act or it may refer to institution or centre to provide alternate
dispute resolution services and provisions of the Arbitration and

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Conciliation Act, 1996 are made applicable as if there was an
agreement between the parties under sub-section (1) of Section 7
of the 1996 Act.

.

27. In view of the express provision applying the provisions of the

Limitation Act, 1963 to arbitrations as per Section 43 of the
Arbitration and Conciliation Act, 1996, we are of the view that the

High Court has rightly relied on the judgment in A.P. Power
Coordination Committee and held that the Limitation Act, 1963 is
applicable to the arbitration proceedings under Section 18(3) of
the 2006 Act. Thus, we are of the view that no further elaboration

is necessary on this issue and we hold that the provisions of the
Limitation Act, 1963 will apply to the arbitrations covered by
Section 18(3) of the 2006 Act. We make it clear that as the
judgment of the High Court is an order of remand, we need not

enter into the controversy whether the claims/ counterclaims are

within time or not. We keep it open to the primary authority to go
into such issues and record its own findings on merits.

28. to 39. xxx xxx xxx

40. For the aforesaid reasons and on a harmonious construction
of Section 18(3) of the 2006 Act and Section 7(1) and Section
23(2-A) of the 1996 Act, we are of the view that counterclaim is

maintainable before the statutory authorities under the MSMED
Act”

58. If one goes through the judgment in McLeod

and company Ltd. vs. State of Orissa and others

(1984) 1 SCC 434, the issue of jurisdiction as such would

also arise which would have to be kept in mind by the

Arbitrator, keeping in view the fact that the agreement as

such was entered into at Patna and there was an

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exclusion Clause as such and only the Courts at Bihar

would have jurisdiction.

.

Objection regarding matter being taken up by

the Division Bench.

59. The right to file appeal under Section 37 of the

1996, Act would be covered in view of the fact that under

the Notification issued on 17.10.2022, in exercise of

powers vested under Section 29 read with Sections 10

and 11 of the Himachal Pradesh Courts Act, 1976 which

was in super-session of the Notification dated 03.10.2013,

the jurisdiction of the District Judge/Additional District

Judge has been restricted to below rupees one crore. The

relevant portion of the said Notification reads as under:

“NOTIFICATION
The High Court of the Himachal Pradesh, in exercise of

the powers vested under Sections 10 and 11 of the
Himachal Pradesh Courts Act, 1976 as well as in super-

session of the Notification dated 03.10.2013, has been
pleased to pass the following orders:-

1. District Judge/Additional District Judge.

The Court of District Judge/Additional District Judge shall
have the pecuniary jurisdiction in all Original Civil Suits,
the value of which exceeds Rs.60,00,000/- (Rupees Sixty
Lakhs) but does not exceed Rs.1,00,00,000/- (Rupees
One Crore).”

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60. It is in such circumstances, the matter was filed

before this Court and on normal circumstances, the

.

application under Section 34 of the 1996 Act, could be

filed before the District Judge being the principal Civil

Court of Original jurisdiction under Section 2 (e) (i) of the

1996 Act. Since the matter was intrinsically linked with

the writ petition, the learned Single Judge had directed

that the matter be heard along with the writ petition and

while admitting the matter for regular hearing on

16.06.2022, Rule DB was directed and said order was

never assailed, due to which, this Court is seized of the

matter. Therefore, the objection which has been taken

that the matter should be heard by the learned Single

judge, would also be of no avail in the facts and

circumstances of the case.

61. In such circumstances, we are constrained to

set aside the impugned Award passed by respondent No.2

and resultantly, we direct the respondent-Council as such

to nominate a fresh and different Arbitrator from its panel

for settlement of dispute inter se the parties.

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62. Needless to say that the observations made by

us both for the purposes of jurisdiction and limitation are

.

only for the purpose of coming to the prima facie,

conclusion that the Ex parte Award passed by respondent

No. 2 as such is not legally sustainable. It will be open to

the Arbitrator as such to decide the said issues fresh by

taking into consideration the evidence which comes on

record and in view of the legal provisions.

63. Accordingly, both Writ petition and Arbitration

case are disposed of, as indicated hereinabove, along

with pending application(s) if any.

(G.S. Sandhawalia)
Chief Justice

(Ranjan Sharma)
Judge
July 11, 2025.

(cm Thakur)

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