JHARKHAND URJA VIKAS NIGAM LIMITED versus THE STATE OF RAJASTHAN & ORS.

Citation: [2021] 9 S.C.R. 497 · Decided: 15-12-2021 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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JHARKHAND URJA VIKAS NIGAM LIMITED
v.
THE STATE OF RAJASTHAN & ORS.
(Civil Appeal No. 2899 of 2021)
DECEMBER 15, 2021
[INDIRA BANERJEE AND R. SUBHASH REDDY, JJ.]
Micro, Small and Medium Enterprises Development Act, 2006
– s.18(2), (3) – Claim by respondent no.3-supplier against appellant
before the Rajasthan Micro and Small Enterprises Facilitation
Council for payment of bill – Appellant did not appear before the
Council on which Council directed the appellant to make payment
as claimed – Challenge against – Held: Under s.18(3), when
conciliation fails and stands terminated, 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 – The
order of Council was a nullity and patently illegal – When
conciliation was not successful, the said proceedings stood
terminated and thereafter the Council ought to have proceeded to
initiate arbitration proceedings – Arbitration and Conciliation Act,
1996.
Allowing the appeal, the Court
HELD : 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. 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, 06.08.2012, 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. The Facilitation Council did not initiate
arbitration proceedings in accordance with the relevant provisions
   [2021] 9 S.C.R. 497
497
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SUPREME COURT REPORTS
[2021] 9 S.C.R.
of the Arbitration and Conciliation Act, 1996. The order dated
06.08.2012 is a nullity and runs contrary not only to the provisions
of MSMED Act but contrary to various mandatory provisions of
Arbitration and Conciliation Act, 1996. There is no arbitral award
in the eye of law. It is true that under the scheme of the Arbitration
and Conciliation Act, 1996 an arbitral award can only be questioned
by way of application under Section 34 of the Arbitration and
Conciliation Act, 1996. At the same time when an order is passed
without recourse to arbitration and in utter disregard to the
provisions of Arbitration and Conciliation Act, 1996, Section 34
of the said Act will not apply. [Paras 11, 12, 13][504-C-G]
Rajkumar Shivhare v. Asst. Director, Directorate of
Enforcement & Anr. (2010) 4 SCC 772 : [2010] 4
SCR 608 – referred to
Case Law Reference
[2010] 4 SCR 608
referred to
Para 6
CIVIL APPELLATE JURISDICTION : Civil Appeal No.2899
of 2021.
From the Judgment and Order dated 11.12.2017 of the High Court
of Judicature for Rajasthan Bench at Jaipur in D. B. Special Appeal
Writ No.1854 of 2017.
Anup Kumar, Saurabh Jain, Ms. Neha Jaiswal, Shivam Kumar,
Ms. Shruti Singh, Advs. for the Appellant.
Dr. Manish Singhvi, Kailash Vasdev, Sr. Advs., Milind Kumar,
Nishit Agrawal, Shrey Kapoor, Harsh Mishra, Ms. Upasna Agrawal,
Advs. for the Respondents.
The Judgment of the Court was delivered by
R. SUBHASH REDDY, J.
1. In this civil appeal, challenge is to the order dismissing the intra-
court appeal preferred by the appellant in D.B. Special Appeal Writ
No.1854 of 2017 passed by the High Court of Judicature at Rajasthan,
Jaipur Bench, vide judgment and order dated 11.12.2017, confirming the
order of the learned Single Judge in W.P. No.11657 of 2017. In the writ
petition, the order dated 06.08.2012 passed by the 2nd respondent, i.e.,
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Rajasthan Micro & Small Industries Facilitation Council, Jaipur (in short,
‘Council’) was questioned.
2. The appellant herein, which is the successor company of
erstwhile Jharkhand State Electricity Board, entered into a contract with
the 3rd respondent - M/s. Anamika Conductors Ltd., Jaipur, for supply of
ACSR Zebra Conductors. Respondent No.3 claiming to be a small scale
industry, has approached the Rajasthan Micro and Small Enterprises
Facilitation Council, claiming an amount of Rs.74,74,041/- towards the
principal amount of bills and an amount of Rs.91,59,705.02 paise towards
interest

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