Telangana High Court
M/D Deccan Power Products Pvt Ltd., … vs M/S Hyderabad Metro Water Supply And … on 4 September, 2024
Author: P.Sam Koshy
Bench: P.Sam Koshy, N.Tukaramji
IN THE HIGH COURT FOR THE STATE OF TELANGANA: HYDERABAD
***
CIVIL MISCELLANEOUS APPEAL No.310 of 2015
Between:
M/s. Deccan Power Products Pvt. Ltd
Appellant
VERSUS
M/s. Hyderabad Metro Water Supply
and Sewarage Board and Others
Respondents
JUDGMENT PRONOUNCED ON: 04.09.2024
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE N.TUKARAMJI
1. Whether Reporters of Local newspapers
may be allowed to see the Judgments? : Yes
2. Whether the copies of judgment may be
marked to Law Reporters/Journals? : Yes
3. Whether His Lordship wishes to
see the fair copy of the Judgment? : Yes
__________________
P.SAM KOSHY, J
Page 2 of 23
* THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE SAMBASIVARAO NAIDU
+ CIVIL MISCELLANEOUS APPEAL No.310 of 2015
% 04.09.2024
# Between:
M/s. Deccan Power Products Pvt. Ltd
Appellant
VERSUS
M/s. Hyderabad Metro Water Supply
and Sewarage Board and Others
Respondents
! Counsel for the Appellant : Mr. A.Venkatesh,
learned Senior
Counsel assisted by
Mr. Sathakarni K.
^Counsel for the Respondents : Mr. G.Narender Reddy,
learned Standing
Counsel for HMWS &
SB.
HEAD NOTE:
? Cases referred
1) 1978 (4) ALR 682
2) (1989) 4 SCC 671
3) (1987) 4 Supreme Court Cases 217
4) 2023 SCC OnLine SC 1378
5) 2021 (224) AIC 18
6) Order dated 12.02.2024 in Writ Petition No.1603 of 2023
7) Order dated 18.01.2023 in Writ Petition No.38797 of 2022
Page 3 of 23
8) (2005) 9 SCC 129
9) 2021 SCC OnLine SC 3436
10) (2021) 19 Supreme Court Cases 206
11) Order dated 12.05.2022 in Writ Appeal No.56 of 2022
12) 2024 SCC OnLineJhar 184
13) Order dated 12.11.2019 in Writ Petition No.24112 of 2016
14) 2014(3) SCC 502
Page 4 of 23
THE HONOURABLE SRI JUSTICE P.SAM KOSHY
AND
THE HONOURABLE SRI JUSTICE N.TUKARAMJI
CIVIL MISCELLANEOUS APPEAL No.310 of 2015
JUDGMENT:
(per the Hon’ble Sri Justice P.SAM KOSHY)
Heard Mr. A.Venkatesh, learned Senior Counsel assisted by
Mr. Sathakarni K, learned counsel for the appellant and
Mr. G.Narender Reddy, learned Standing Counsel for HMWS & SB
appearing for the respondents.
2. Aggrieved by the order dated 27.12.2014 passed by the X Addl.
Chief Judge, City Civil Court at Hyderabad (for short the ‘Court below’)
in Arbitration O.P. No.1212 of 2013, the instant appeal under Section
37 of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘Act of
1996’) has been filed by the appellant.
3. The questions of law to be decided in the instant appeal are:-
1. Whether non-compliance of Section 18(2) of the Micro, Small and
Medium Enterprises Development Act, 2006 (hereinafter the ‘Act
of 2006’) would vitiate an award passed?
Page 5 of 23
2. Whether the provisions of Section 18, particularly Sub-Section (2)
of the Act of 2006, is a mandatory provision or not?
4. The facts relevant for adjudication of the present dispute are that
respondent No.1 herein i.e. M/s. Hyderabad Metro Water Supply and
Sewerage Board had invited tenders from the manufacturers of Water
Meters / Authorized Dealers / Agencies for the work of supply, fixing
and maintenance of 1000 Nos. of 15 mm dia single jet water meter
confirming to ISO 4064 Class-B and maintenance of existing working
meters for a period of three years each under O&M Divisions. The
committee constituted for finalization of the tender recommended the
appellant herein (respondent No.1 before the Court below) as an agency
for O&M Division Nos.1, 6, 7, 9 and 10 and an agreement was also
entered into.
5. It was alleged that the appellant failed to execute the work as per
the specifications and it was also alleged that the appellant in spite of
receiving letters from respondent No.1 failed to submit the details of
maintenance as per the agreement. In the process, there was some
dispute and the appellant herein thereafter moved before respondent
No.2 / A.P. State Micro and Small Enterprises Facilitation Council,
Hyderabad (hereinafter the ‘Facilitation Council’). After the notices were
issued, the Facilitation Council without following due process as is
Page 6 of 23
envisaged under the Act of 2006 had passed an award dated
31.03.2012 in Case No.31 of 2011 which was communicated to the
parties on 22.06.2012 and which was subjected to challenge before the
Court below vide Arbitration O.P. No.1212 of 2013 under Section 19 of
the Act of 2006 read with Section 34 (2) (iii) (v) and (b) (ii) of the Act of
1996.
6. The Court below vide the impugned award held that since the
Facilitation Council did not comply with the mandatory provisions
under the Act of 2006, particularly Section 18(2) and (3), the award was
bad in law and the same was set aside. It is this order under challenge
in the instant appeal.
7. Learned Senior Counsel appearing for the appellant only
contended on the aspect of Section 18(2) not being mandatory and it is
only obligatory and therefore the award dated 31.03.2012 was not
required to be interfered with. It was also contended that even
otherwise mere non-compliance of the provisions under Section 18(2)
would not by itself vitiate the award which has been passed after
hearing both the parties and no prejudice as such would be caused only
on account of non-compliance of Section 18(2) of the Act of 2006.
Page 7 of 23
8. It was further contended by the learned Senior Counsel that the
respondents having participated in the arbitration proceedings before
the award was passed and the award being finally passed would
amount to waiving of their objection so far as Section 18(2) of the Act of
2006 is concerned and also by implication it would amount to
respondents having accepted the proceedings to be settled by way of
arbitration and the award so passed therein. According to the learned
Senior Counsel for the appellant, the very purpose of enacting the Act of
2006 was for the early redressal of the grievance of suppliers like the
appellants and it was in this context keeping this in mind that the
Facilitation Council proceeded and decided the case by passing the
award dated 31.03.2012. As such, it does not warrant any interference,
nor can it be said to be contrary to law or contrary to the object and
purpose for which the Act of 2006 was enacted.
9. Learned Senior Counsel for the appellant lastly contended that
the term ‘shall’ used in Section 18(2) of the Act of 2006 has also to be
read as ‘may’ as the provision is not which is mandatory, but is only
obligatory.
10. In support of the said contentions, learned Senior Counsel placed
reliance on the following decisions:
Page 8 of 23
1. Lila Gupta Vs. LaxmiNarain and Ors. 1
2. Owners and Parties interest in M.V. “Valipero” Vs. Fernandeo
Lopez and Ors. 2
3. Prasun Roy Vs. Calcutta Metropolitan Development Authority
and Another 3
4. Mumtaz Yarud Dowla Wakf Vs. Badam Balakrishna Hotel Pvt.
Ltd. and Ors. 4
5. Silpi Industries and Ors. Vs. Kerala State Road Transport
Corporation and Ors. 5
6. M/s Bharat Heavy Electricals Limited Vs. State of Telangana
and Ors. 6
7. M/s. Srirasthu Shopping Mall Vs. Micro And Small
Enterprises and Ors. 7
11. Per contra, the learned Standing Counsel opposing the appeal
contended that upon plain reading of Section 18 of the Act of 2006, it is
very explicit that once when the parties resort to the provisions of the
Act of 2006 or once when the parties approach the Facilitation Council
for redressal of their grievance it is mandatory for the Facilitation
Council to have adhered to the provisions under the Act of 2006.
1
1978 (4) ALR 682
2
(1989) 4 SCC 671
3
(1987) 4 Supreme Court Cases 217
4
2023 SCC OnLine SC 1378
5
2021 (224) AIC 18
6
Order dated 12.02.2024 in Writ Petition No.1603 of 2023
7
Order dated 18.01.2023 in Writ Petition No.38797 of 2022
Page 9 of 23
12. It was also the contention of the learned Standing Counsel that
since admittedly or rather undisputedly as the provisions enshrined
under Section 18 having not been invoked or having not been resorted
to, the Court below was justified in setting aside the award dated
31.03.2012 passed by the Facilitation Council. Thus, the appeal being
devoid of merit, deserves to be dismissed.
13. Before we proceed further, it would be relevant at this juncture to
take note of the mechanism provided for settlement of dispute where
there is delayed payments made to the Micro and Small Enterprises.
Section 17 and Section 18 of the Act of 2006 deals with the procedure
to be followed by the Facilitation Council in the course of proceeding of
recovery of an amount. For ready reference, Section 17 and Section 18
of the Act of 2006 are reproduced herein under:
“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.
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
Page 10 of 23assistance 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 stands terminated without any settlement
between the parties, the Council shall either itself take up the
dispute for arbitration or refer to it 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 dispute 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.
(5) Every reference made under this section shall be decided
within a period of ninety days from the date of making such a
reference.”
Simultaneously, Section 24 of the Act of 2006 further envisages
that the provisions of Section 15 to 23 having overriding effect
Page 11 of 23
notwithstanding anything inconsistent therewith contained in any other
law for the time being in force.
14. From plain reading of the aforesaid statutory provisions, what is
evidently clear is that the Act of 2006 becomes a special Act and further
as per Section 24 of the Act of 2006, the provisions of Section 15 to 23
shall have an overriding effect over any other provisions of law for the
time being in force.
15. The Hon’ble Supreme Court in the case of State of Bihar Vs.
Bihar Rajya M.S.E.S.K.K. Mahasangh and Others 8 in paragraph
Nos.45 and 47 held as under:
“45. A non obstante clause is generally appended to a section
with a view to give the enacting part of the section, in case of
conflict, an overriding effect over the provision in the same or
other Act mentioned in the non obstante clause. It is equivalent to
saying that in spite of the provisions of the Act mentioned in the
non obstante clause, the provision following it will have its full
operation or the provisions embraced in the non obstante clause
will not be an impediment for the operation of the enactment or
the provision in which the non obstante clause occurs.
…. … ..
47. Normally the use of a phrase by the legislature in a statutory
provision like “notwithstanding anything to the contrary8
(2005) 9 SCC 129
Page 12 of 23contained in this Act” is equivalent to saying that the Act shall be
no impediment to the measure (see Law Lexicon words
“notwithstanding anything in this Act to the contrary”). Use of
such expression is another way of saying that the provision in
which the non obstante clause occurs usually would prevail over
other provisions in the Act. Thus, non obstante clauses are not
always to be regarded as repealing clauses nor as clauses which
expressly or completely supersede any other provision of the law,
but merely as clauses which remove all obstructions which might
arise out of the provisions of any other law in the way of the
operation of the principal enacting provision to which the non
obstante clause is attached. (See Bipathumma v. Mariam Bibi
[(1966) 1 Mys LJ 162] ,Mys LJ at p. 165.)”
16. Keeping in view the non-obstante clause i.e. Section 24 of the Act
of 2006, it is evidently clear that the Legislature in its wisdom while
enacting the Act of 2006 specifically wanted those disputes which come
up before the Facilitation Council to be resolved only through the
procedure as is provided under Section 18 of the Act of 2006.
17. The Hon’ble Supreme Court in the case of Vijeta Construction
Vs. Indus Smelters Ltd. and Another 9 held at paragraph No.13 as
under:
“13. As per Sub-Section (3) of Section 18 after conciliation fails
under Sub-Section (2) of Section 18 of the MSMED Act, and9
2021 SCC OnLine SC 3436
Page 13 of 23conciliation initiated under sub-section (2) is not successful,
conciliation stands terminated without any settlement between
the parties, the Council shall either itself take up the dispute for
arbitration or refer it to any institution or centre providing ADR
services for such arbitration and the provisions of the Arbitration
and Conciliation Act, 1996 shall then apply to the dispute as if
the arbitration was in pursuance of an arbitration agreement
referred to in subsection (1) of section 7 of that Act. Therefore only
after the procedure under Sub-Section (2) of Section 18 is followed
and the conciliation fails and then and then only the arbitration
proceedings commences and thereafter the provisions of the
Arbitration Act shall then apply.”
18. The aforesaid principle laid down in Vijeta Construction (supra)
has been further reiterated by the Hon’ble Supreme Court in the case of
Jharkhand Urja Vikas Nigam Limited Vs. State of Rajasthan and
Others 10 wherein in paragraph Nos.14 to 17, it has been held as under:
“14. From a reading of Sections 18(2) and 18(3) of the Msmed Act
it is clear that the Council is obliged to conduct conciliation for
which the provisions of Sections 65 to 81 of the Arbitration and
Conciliation Act, 1996 would apply, as if the conciliation was
initiated under Part III of the said Act. Under Section 18(3), when
conciliation fails and stands terminated, the dispute between the
parties can be resolved by arbitration. The Council is empowered
either to take up arbitration on its own or to refer the arbitration
proceedings to any institution as specified in the said section. It is
open to the Council to arbitrate and pass an award, after10
(2021) 19 Supreme Court Cases 206
Page 14 of 23following the procedure under the relevant provisions of the
Arbitration and Conciliation Act, 1996, particularly Sections 20,
23, 24 and 25.
15. There is a fundamental difference between conciliation and
arbitration. In conciliation, the conciliator assists the parties to
arrive at an amicable settlement, in an impartial and independent
manner. In arbitration, the Arbitral Tribunal/arbitrator
adjudicates the disputes between the parties. The claim has to be
proved before the arbitrator, if necessary, by adducing evidence,
even though the rules of the Civil Procedure Code or the Evidence
Act may not apply. Unless otherwise agreed, oral hearings are to
be held.
16. If the appellant had not submitted its reply at the conciliation
stage, and failed to appear, the Facilitation Council could, at best,
have recorded the failure of conciliation and proceeded to initiate
arbitration proceedings in accordance with the relevant
provisions of the Arbitration and Conciliation Act, 1996, to
adjudicate the dispute and make an award. Proceedings for
conciliation and arbitration cannot be clubbed.
17. In this case, only on the ground that the appellant had not
appeared in the proceedings for conciliation, on the very first date
of appearance, that is, 6-8-2012, an order was passed directing
the appellant and/or its predecessor Jharkhand State Electricity
Board to pay Rs 78,74,041 towards the principal claim and Rs
91,59,705 odd towards interest. As it is clear from the records of
the impugned proceedings that the Facilitation Council did not
initiate arbitration proceedings in accordance with the relevant
provisions of the Arbitration and Conciliation Act, 1996.”
Page 15 of 23
19. The Division Bench of the High Court of Chhattisgarh in the case
of M/s. Sew Infrastructure Limited Vs. Micro and Small Enterprises
Facilitation Council and Another 11 in paragraph No.25 referring to
the judgment passed by the Hon’ble Supreme Court in Vijeta
Construction (supra) has held as under:
“25. In M/s Vijeta Constructions (supra), the Hon’ble Supreme
Court while dealing with the clauses of conciliation of the Council
observed that conciliators are to assist the parties in an
independent and impartial manner in their attempt to reach an
amicable settlement of their dispute and at that stage the
Facilitation Council is not required to adjudicate the dispute. At
that stage the Facilitation Council has no jurisdiction to make
thorough enquiry and take evidence. However, once the
conciliation fails and the settlement is not arrived at during the
conciliation and thereafter when the arbitration proceeding
commences as per Section 18(3), the Facilitation Council as an
arbitrator shall have all the powers of the arbitrator as are
available under the provisions of the A & C Act.”
20. In the instant case also, from the admitted factual matrix, what is
apparent is that since there was a dispute between the appellant and
respondent No.1, the appellant approached the Facilitation Council.
Since the very existence of the Facilitation Council was under the
provisions of the Act of 2006, it was incumbent upon the Facilitation
11
Order dated 12.05.2022 in Writ Appeal No.56 of 2022
Page 16 of 23
Council to have adhered to the procedure prescribed under Section 18.
In the instant case, admittedly neither was there any conciliation
proceedings drawn as is required under Section 18(2), neither was there
any arbitration proceedings drawn under Section 18(3) and the
Facilitation Council straightaway passed an award on 31.03.2012.
21. Recently, the Division Bench of the Jharkhand High Court in the
case of G.P.T. Infraprojects Limited and Another Vs. State of
Jharkhand, through Secretary and Others 12 in somewhat similar
circumstances held at paragraph Nos.33 and 34 as under:
“33. The records of the case indicate that on 02.09.2013 after
refusing to grant further time to the buyer, the Facilitation Council
straightaway proceeded to draw the award and also recorded
that an award was drawn in two copies and was kept in the
record and was to be placed before the Director-cum-Chairman
for his signature/approval and thereafter, the signature on the
award was to be obtained by all the members. The record
indicates that the last proceeding which had taken place in
presence of the parties was on 02.09.2013 and thereafter, there
were internal file notings regarding information obtained about
the status of the supplier as a small-scale industry, quantification
of the award etc. There is neither any material to show that any
proceeding was recorded to indicate that the concilliation had
failed nor there is any proceeding to show that any decision
whatsoever was taken by the Facilitation Council either by12
2024 SCC OnLineJhar 184
Page 17 of 23themselves entering into arbitration upon failure of concilliation or
to refer to any other person for the purposes of arbitration in
terms of section 18(3) of the Act of 2006. Meaning thereby that
the Facilitation Council did not exercise any power whatsoever in
terms of the Act of 1996 read with section 18(3) of the Act of 2006
to enter into reference and it has been established without any
doubt in the mind of this Court that the order/award of the
Facilitation Council which was impugned in the writ petition has
been passed without entering into reference.
34. Considering the narration of the proceedings before the
Facilitation Council from the records of the Facilitation Council as
mentioned in details in the above paragraphs, this Court is of the
considered view that the present case is squarely covered by the
judgment passed by the Hon’ble Supreme Court in the case of
Vijeta Construction (Supra) and Jharkhand UrjaVikas Nigam
Limited (Supra). In such circumstances, the impugned order
passed by the learned writ Court asking the buyer to file petition
under section 34 of the Act of 1996 to challenge the award
passed by the Facilitation Council and impugned before the
learned writ Court cannot be sustained in law as the award
passed by the Facilitation Council is not an award passed under
the Act of 1996 in view of the fact that the Facilitation Council
never entered into reference to act as an Arbitrator to enable them
to pronounce an award which could be subject matter of
challenge under section 34 of the Act of 1996. The so called
award passed by the Facilitation Council and impugned in the
writ proceedings is a nullity in law and is fit to be set aside and
matter is required to be remitted before the Facilitation Council to
proceed as per law laid down by the Hon’ble Supreme Court in
the case of Vijeta Construction (Supra) and Jharkhand UrjaVikas
Nigam Limited (Supra).”
Page 18 of 23
22. This High Court also in the case of M/s. Indu Projects Limited
Vs. Telangana Micro & Small Enterprises Facilitation Council 13
dealing with a similar question of law,held at paragraph Nos.17 to 23 as
under:
“17. Section 18 (2) requires the Council to first explore possibility
of conciliation by itself or by taking assistance of any institution
or centre by making a reference. While conducting conciliation,
Sections 65 to 81 of Act, 1996 are applicable. These sections are
included in Part-III of the Act, 1996. Part-III deals with conciliation
mechanism. Thus, under the Act, 2006, process of conciliation
should start by asking the parties to the dispute to submit brief
written statement describing general nature of the dispute and
the points at issue (Section 65). There upon conciliation process
would proceed and would terminate, resolving the dispute or
otherwise. Termination of conciliation process can be at the
instance of the conciliator(s) or the parties (Section 76).
18. If conciliation process fails to yield result, the Council can
arbitrate the dispute. The provisions of Act, 1996 are applicable
to conduct arbitration proceedings. Act, 2006 makes a departure
from consent to resolve dispute by arbitration to compulsory
arbitration mechanism to resolve the dispute. This is clear from
Section 18(3) of the Act, 2006. On failure of conciliation process
the Council can set in motion Arbitration proceedings and consent
of parties is not required. However, before resorting to
compulsory arbitration and subject the parties to arbitration, the
Council must explore the possibility of conciliation mechanism.
13
Order dated 12.11.2019 in Writ Petition No.24112 of 2016
Page 19 of 23
19. Only when conciliation process is not successful and was
terminated without any settlement, the Council acquires
jurisdiction to assume the role of arbitrator. These two steps are
to be followed sequentially and no power is vested in the Council
to side step and directly jump to the stage of holding arbitration
proceedings. Again at this stage, it can conduct arbitration
proceedings on its own or refer to any institution or centre. Thus,
to reach stage of Sub-section 3, Sub-section 2 of Section 18 has to
be complied. It is a well thought out scheme of the Act. In order to
resolve the dispute amicably conciliation must be held and only if
conciliation fails, the council should move to next stage. That
being the statutory scheme, in the case on hand, on receipt of
claim petition, Conciliation proceedings were not conducted by
the council, but straightaway proceeded to arbitration stage.
20. The Council is creature of the statute and it has to work
within the framework of the statute. When Section 18 of the Act,
2006 prescribes particular mode to resolve a dispute raised
before it, the Council is duty bound to follow the procedure
prescribed and cannot circumvent. No discretion is vested in the
Council to circumvent the procedure, evolve its own procedure
and adopt a particular mode of attending to the dispute. Further,
the objective of Section 18 is very clear i.e., high priority is
assigned to resolution of dispute by conciliation. Thus, holding
conciliation is an essential element of the scheme and can not be
circumvented. The Council comprises experts and they are
supposed to have special skill to hold conciliation and persuade
parties to resolve the dispute. Duty is cast on the Council to first
attempt to resolve dispute by conciliation and only if it has failed,
it should move to the next stage.
21. Learned counsel for 2nd respondent sought to contend that
petitioner admitted in his statement of defence that conciliation
Page 20 of 23proceedings failed between the petitioner and the 2nd
respondent. In view thereof, there is no need for the council to
conduct conciliation proceedings and, therefore, council has not
erred in conducting arbitration proceedings.
22. Said contention is stated to be rejected. A plain reading of
Sub-section (2) of Section 18 of the Act, 2006 makes very clear
that it is mandatory for the council to conduct conciliation and
only on termination of conciliation proceedings without
settlement, it can proceed to the next stage. The failure of
conciliation between the parties before the institution of claim
petition has no relevance to apply the provisions of sub-sections
(2) and (3) of Section 18 of the Act, 2006. The Council must record
reasons on steps taken by it for resolution of dispute by
conciliation and failure thereof and then only should proceed to
hold arbitration proceedings. Further, even assuming what is
stated by Sri Vishnuvardhan Reddy, is true, the Council ought to
have atleast recorded reasons as to why it was resorting to
Arbitration straight away, though Act, 2006 read with Act, 1996
does not vest such discretion in the Council. From the reading of
the decision of the Council, it is seen that there is no whisper on
even the alleged failures of earlier conciliation process, assuming
it can take note of such process.
23. It is settled principle of law that when a statute provides for a
thing to be done in a particular manner the Tribunal established
under that statute must do in that manner and in no other
manner (Deepak Babaria and another vs. State of Gujarat
and others 14). Thus, the Council clearly erred in directly
proceeding to hold the arbitration proceedings. The council further
erred in not adverting to the objection raised by the petitioner on14
2014(3) SCC 502
Page 21 of 23this aspect and recording reasons why said objection is not
valid.”
23. From plain reading of the pleadings and contentions put forth on
either side, what is evidently clear is that the award dated 31.03.2012
which was under challenge before the Court below was not one which
was awarded invoking the provisions of the Act of 1996. At the same
time, the said award dated 31.03.2012 also was not one which was
passed invoking the provisions as is envisaged under Section 18 of the
Act of 2006. In the light of the award dated 31.03.2012 being neither
under the Act of 1996 nor under the provisions of Section 18 of the Act
of 2006, the award becomes nullity in the eye of law and cannot be
sustained irrespective of the fact that considerable period of time has
lapsed since the award was passed.What is illegal at the first instance
would remain illegal for all times to come and the same cannot be
enforceable only on account of efflux of time that has passed.
24. As an outcome of the discussions made in the preceding
paragraphs, this Bench has got no hesitation in reaching to the
conclusion that the two questions of law framed by this Bench is to be
answered in the affirmative.
Page 22 of 23
24.1 This in other words means, because of non-compliance of the
statutory requirement as is envisaged under Section 18, particularly
Section 18(2) and Section 18(3), the award at the first instance if any
passed would stand vitiated.
24.2 At the same time, on the basis of the light of the judicial
pronouncements emphatically dealing with the said subject, forces this
Bench to reach to the only conclusion that can be drawn that of Section
18 being a mandatory provision and those provisions needs to be
adhered to. Non-adherence of the requirement under Section 18,
particularly Section 18(2) and Section 18(3), the award passed in
contravention to the mandatory provisions becomes nullity and void ab
initio.
25. The instant appeal thus is devoid of merit and the same deserves
to be and is accordingly dismissed. Nonetheless, considering the fact
that the award dated 31.03.2012 passed by the Facilitation Council has
been set aside by the Court below, the natural consequence that would
be following is that the dispute stands remitted back to the Facilitation
Council. Given the fact that the award was set aside by the Court below
is one which has been passed in the year 2012 and by now it is almost
twelve years of time that has lapsed, the Facilitation Council is expected
of immediately seizing of the matter and ensuring an early conclusion of
Page 23 of 23
the proceedings as early as possible, preferably within an outer limit of
six months from the date either of the parties enter appearance before
the Facilitation Council. No costs.
26. As a sequel, miscellaneous applications pending if any, shall
stand closed.
__________________
P.SAM KOSHY, J
__________________
N.TUKARAMJI, J
Date: 04.09.2024
Note: LR Copy to be marked.
B/o.GSD