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TMI Blog2016 (6) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... llant herein preferred present First Appeal. 2.0. The facts leading to the present First Appeal in nutshell are as under: 2.1. That the appellant herein is a registered Small Scale Manufacturer, who has established a Factory for manufacture of goods, such as Prestressed Monoblock Concrete Sleepers, that are being supplied to the Western Railways. That the dispute arose between the appellant and the Railway Authority with respect to Contract CS 160, entered into between the parties, on 20102008. It appears that prior thereto one Contract CS 156 was entered into between the parties. It was the case of the Railways Authority that so far as CS 156 is concerned, appellant failed to supply the requisite quantity of Sleepers against the total ordered quantity and therefore, as per clause in the said contract the appellant was liable to pay Liquidated Damages at 5% of the cost of the stores. Therefore, the Railways Authority calculated the cost of the unsupplied quantity of sleepers i.e. 1,65,997 at Rs.23,81,57,164.81 and Liquidated Damages at 5%, amounting to Rs.1,19,07,858.00. The aforesaid came to be recovered by the Railways Authority from the bill of the appellant to be paid under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant herein - Railways Authority has preferred present First Appeal. 3.0. Shri Mukesh Patel, learned advocate appearing on behalf of the appellant has vehemently submitted that the learned Council has materially erred in not properly appreciating scope and ambit of the Arbitration Act, 1996. 3.1. It is submitted that once there is an arbitration agreement in existence, the dispute is required to be referred for arbitration. It is submitted that therefore, when in view of the dispute between the parties and the appellant submitted the application under Section 8 of the Arbitration Act, 1996 for referring the dispute for arbitration, the Council ought to have allowed the said application and ought to have referred the matter for arbitration. 3.2. It is vehemently submitted by Shri Patel, learned advocate for the appellant that the learned Council has materially erred in holding that it not a Judicial Authority and therefore, it has no jurisdiction to entertain the application under Section 8 of the Arbitration Act, 1996. 3.3. Shri Patel, learned advocate for the appellant has heavily relied upon the decision of the Hon'ble Supreme Court in the case of Morgan Securities and Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aived its rights under the Act, 2006 and therefore, now it cannot be permitted to invoke the provisions of the Act, 2006 in view of mandatory in nature of agreement as well as provision of Section 8 of the Arbitration Act, 1996. Making above submissions and relying upon the above decisions, it is requested to allow the present appeal and quash and set aside the impugned judgment and order passed by the Council and consequently allowed the application under Section 8 of the Act, 1996 and refer the dispute for arbitration under the provisions of the Arbitration Act, 1996. 4.0. Present appeal is vehemently opposed by Shri Shukla, learned advocate for the respondent no.2 that in the facts and circumstances of the case and considering the provision of Section 18 of the Act, 2006, the learned Council has rightly rejected the application under Section 8 of the Arbitration Act, 1996 on the ground that it had no jurisdiction to entertain the application under Section 8 of the Arbitration Act and refer the dispute between the parties to arbitration. 4.1. It is further submitted that considering Section 18 of the Act 2006, where after following due procedure under Section 18; the Council it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se on hand. It is submitted that the decision of the Bombay High Court is not binding to this Court. Therefore, the considering the decision of the Allahabad High Court in the case of Paper and Board Convertors (supra), it is requested to taken independent view and hold that the Council has no jurisdiction to entertain the application under Section 8 of the Arbitration Act, 1996. 4.6. Now, so far as submission made by Shri Patel, learned advocate for the appellant that once the Division Bench of this Court in its order dated 11.04.2012 in Letters Patent Appeal No. 1997 of 2011 had directed the Council to consider the application under Section 8 of the Act, thereafter it is not open for the Concil not to entertain the said application is concerned, it is submitted that in the order dated 11.04.2012 in Letters Patent Appeal No. 1997 of 2011 the Division Bench never directed to entertain the application preferred by the appellant under Section 8 of the Act and to refer the parties to arbitration. It is submitted that by aforesaid order the Division Bench simply directed the authority to decide the application under Section 8 of the Act. It is submitted that therefore, the issue wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed with the arbitration proceedings and after serving a copy of the same on the appellant, thereafter, shall proceed to fix the date for parties to lead the evidence in support of respective claims and thereafter fix the date for hearing after giving sufficient notice to the parties and thereafter proceed to pass arbitral award in accordance with law. The order dated 11.10.2011 passed by the learned Single Judge in Special Civil Application No.1997 of 2011 is set aside. It shall be open to the parties to raise all objections which have been raised in this Appeal and the writ petition which they want to raise before the counsel. The council shall decide the application dated 5.11.2009 preferred by appellant under section 8 of the Act as expeditiously as possible. As the Appeal is allowed, Civil Application does not survive." 5.1. That thereafter, pursuant to the direction issued by the Division Bench directing the Council to decide the application dated 5.11.2009 preferred by the appellant under Section 8 of the Act, 1996, vide impugned order Council has rejected the said application by observing that it has no jurisdiction to entertain the application. On considering the order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding 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. 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute is required to be resolved only through the procedure as provided under Section 18 of the Act, 2006. Thus, considering Section 18 of the Act, 2006, after conciliation has failed as per Section 18(2) of the Act, 2006, thereafter as per subsection (3) of Section 18, where the conciliation initiated under subsection (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 subsection (1) of section 7 of that Act. In the present case, therefore, after unsuccessful conciliation which was conducted as per subsection (2) of Section 18 the Council shall have jurisdiction to take up dispute for arbitration. Therefore, once the Council itself is acting as an Arbitrator in that case, thereafter the Council who acts as an Arbitrator has no authority and / or jurisdiction to entertain the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on contained in subsection (1) of Section 18 and again in subsection (4) of Section 18 operates to ensure that it is a Facilitation Council which has jurisdiction to act as an arbitrator or Conciliator in a dispute between a supplier located within its jurisdiction and a buyer located anywhere in India. The Facilitation Council had only one of the two courses of action open to it : either to conduct an arbitration itself or to refer the parties to a centre or institution providing alternate dispute resolution services stipulated in subsection (3) of Section 18. 7.1. After observing as above, the Division Bench of the Allahabad High Court has set aside the order passed by the Facilitation Council directing the parties to place it version before the sole arbitrator in terms of the rate contract agreement and restored the proceedings back to the Council and directed the Council to act in accordance with the provisions of subsection (3) of Section 18 and either conduct the arbitration itself or refer the arbitral proceedings to any institution or centre providing alternate dispute resolution services. 8.0. Now, so far as reliance placed upon the decision of the Division Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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