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M/s. HLL Biotech Limited, Rep. by its Chief Executive Officer, Kanchipuram v/s The Chairman, Micro and Small Enterprises Facilitation Council, Tamilnadu & Another

    W.P. No. 26365 of 2021 & W.M.P. No. 27835 of 2021
    Decided On, 28 March 2022
    At, High Court of Judicature at Madras
    By, THE HONOURABLE MS. JUSTICE V.M. VELUMANI
    For the Petitioner: V. Kamala Kumar, Advocate. For the Respondents: R1, R. Kumaravel, Additional Government Pleader, R2, P. Vasudevan, Advocate.


Judgment Text
(Prayer: Writ Petition is filed under Article 226 of the Constitution of India, praying for issuance of a Writ of Certiorarified Mandamus, calling for the records on the file of the First Respondent relating to the order dated 23.02.2021 in MSEFC/CR/422/2019, passed by the First Respondent Council and quash the same and consequently direct the First Respondent Council to initiate and conduct fresh proceedings in consonance with the provision of MSMED Act.)

1. This Writ Petition is filed challenging the order of the 1st respondent dated 23.02.2021 and for a direction to the 1st respondent to initiate and conduct fresh proceedings.

2. The petitioner is carrying on business of manufacturing vaccines for the National Family Welfare Program and Government of India's Universal Immunization Program (UIP). The petitioner entered into a contract with the 2nd respondent, but subsequently due to paucity of project fund, work at IVC was stopped. The 2nd respondent filed application before the 1st respondent under Section 18(1) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as the 'Act'). In the hearing held before the 1st respondent on 29.01.2021, the petitioner and 2nd respondent agreed for freezing a sum of Rs.4,51,86,104/- and petitioner agreed to pay the said sum in installments. According to the petitioner, the 1st respondent instead of conducting conciliation proceeding as contemplated under Section 18(2) of the Act, adjourned the hearing to 23.02.2021 and on that day, the 1st respondent directed the petitioner to pay a sum of Rs.4,51,86,104/- together with compound interest. Challenging the said proceedings dated 23.02.2021, the petitioner has come out with the present Writ Petition.

3. The learned counsel appearing for the petitioner contended that on the application made before the 1st respondent under Section 18(1) of the Act, the 1st respondent must conduct conciliation either by itself or refer the matter or seek the assistance of any institution or centre providing alternate dispute resolution services. After conducting conciliation, if no settlement is arrived at in the conciliation proceedings, the 1st respondent itself or through alternative dispute resolution centre conduct arbitration proceedings as per the provisions of Section 65 to 81 of the Arbitration and Conciliation Act, 1996. In the present case, the 1st respondent neither conducted conciliation proceedings nor arbitration, but passed the impugned order as though it is a Civil Court. The learned counsel further submitted that as per the order of this Court dated 17.02.2022, the petitioner paid a sum of Rs.2,25,93,052/- (50% of Rs.4,51,86,104/-) of the agreed principal amount. The learned counsel appearing for the petitioner prayed for setting aside the order of the 1st respondent as the 2nd respondent filed application as per provisions of Section 18(1) of the Act.

4. The learned Additional Government Pleader appearing for the 1st respondent contended that the petitioner agreed to pay a sum of Rs.4,51,86,104/- in installments. The 1st respondent considered the application filed by the 2nd respondent and passed order. There is no illegality in following the statutory provisions by the 1st respondent. The impugned order is legal, valid, enforceable and prayed for dismissal of the Writ Petition.

5. The learned counsel appearing for the 2nd respondent contended that the Writ Petition is not maintainable as the petitioner failed to deposit 75% of the amount ordered as per Section 19 of the Act. The petitioner agreed to pay a sum of Rs.4,51,00,000/- in installment and therefore impugned order passed by the 1st respondent is valid and legal and prayed for dismissal of the Writ Petition.

6. Heard the learned counsel appearing for the petitioner, the learned Additional Government Pleader appearing for the 1st respondent as well as the learned counsel appearing for the 2nd respondent and perused the entire materials on record.

7. From the materials on record, it is seen that the 2nd respondent has made an application before the 1st respondent under Section 18(1) of the Act. When such an application is made, the 1st respondent must initiate conciliation proceedings either itself or refer the dispute to any institution or centre for conducting conciliation proceedings. When a supplier makes a reference under Section 18(1) of the Act to the Micro Small Enterprises Facilitation Council, the Council as per Section 18(2) of the Act must conduct conciliation either by itself or seek the assistance of any Institution or Centre providing Alternate Dispute Resolution services by making a reference to such an Institution or Centre. Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 are applicable to such conciliation. If settlement is arrived at in the conciliation proceedings, the 1st respondent has to pass orders as per settlement. If no settlement is arrived at in the conciliation proceedings, the 1st respondent has to close the conciliation proceedings and the 1st respondent itself has to take up the dispute for Arbitration or refer the dispute to any Institution or Centre providing Alternate Dispute Resolution services for arbitration. Such reference shall be made as if such arbitration is in pursuance to arbitration agreement, referred to in Section 7(1) of the Arbitration and Conciliation Act, 1996. Such arbitration has to be conducted as per the provisions of the said Act.

8. A perusal of the impugned order clearly shows that the 1st respondent after terminating the conciliation proceedings, as no settlement is arrived, failed to conduct arbitration proceeding itself or refer the dispute to any other Institution to conduct Arbitration. The 1st respondent failed to comply with Section 18(3) of Micro, Small and Medium Enterprises Development Act, 2006 and therefore, the impugned order passed by the 1st respondent is not a decree, an Award or order. In view of the same, the impugned order is liable to be set aside.

9. The contention of the learned counsel appearing for the 2nd respondent that the Writ Petition is not maintainable as petitioner failed to deposit 75% of the amount as per Section 19 of the Act is not acceptable as the order impugned in this Writ Petition is not an order passed

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as per Section 18(3) of Micro, Small and Medium Enterprises Development Act, 2006. 10. The procedure contemplated under Section 18(2) & (3) of the Act is mandatory and the 1st respondent is bound to follow the procedure. The 1st respondent has failed to follow the procedure contemplated in Section 18 of the Act and hence, the impugned order is invalid and illegal. 11. For the above reasons, the impugned order of the 1st respondent is set aside and the 1st respondent is directed to conduct fresh proceedings as per Section 18 of the Act. 12. With the above observations, the Writ Petition is allowed. Consequently, the connected Miscellaneous Petition is closed. No costs.
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