M/S. VIJETA CONSTRUCTIONversusM/S. INDUS SMELTERS LTD. & ANR.

798                      [2021]REPORTS
               SUPREME COURT   11 S.C.R. 798                [2021] 11 S.C.R.


A                       M/S. VIJETA CONSTRUCTION
                                         v.
                    M/S. INDUS SMELTERS LTD. & ANR.
                          (Civil Appeal No. 5934 of 2021)
B                             SEPTEMBER 23, 2021
                  [M. R. SHAH AND A. S. BOPANNA, JJ.]
              Micro Small and Medium Enterprises Development Act, 2006
      – Arbitration and Conciliation Act, 1996 – s.34 – Respondent’s case
      that it supplied TMT bar to the appellant valuing Rs.2,44,92,846/-
C
      out of which it received Rs.1,24,50,000/- – It was alleged that
      appellant had not made the payment of the remaining amount –
      Respondent approached the Chairman, Micro Small and Medium
      Enterprises Facilitation Council – Facilitation Council closed the
      proceedings by observing that Facilitation Council was constituted
D     with a limited object, jurisdiction and it had no jurisdiction to make
      enquiry, take evidence and decide truth about the challenged
      document – Writ petition by the respondent – The High Court
      dismissed the writ petition by observing that order passed the
      Facilitating Council can be said to be an award u/s.18 of the
      MSMED Act and provision of Arbitration Act shall apply to the
E
      dispute and such an order would be amenable to appeal u/s.34 of
      the 1996 Act – On appeal, held: If there is any dispute between the
      parties governed by the MSMED Act, the said dispute has to be
      resolved through procedure prescribed u/s.18 of the MSMED Act –
      As per sub-section (2) of s.18, on receipt of a reference under sub-
F     section (1), the Council shall have to resolve the dispute through
      Conciliation either by the Council itself or seek the assistance of
      any institution or centre providing alternate dispute resolution (ADR)
      services by making reference to such an institution or centre, for
      conducting conciliation and the provisions of section 65 to 81 of
      the Arbitration and Conciliation Act shall apply to such dispute as
G
      if the conciliation was initiated under Part-III of the Arbitration Act
      – If Conciliation initiated is not successful, it will stand 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 arbitration – In the instant
H     case, the Facilitating Council has not followed the procedure as
                                        798
  M/S. VIJETA CONSTRUCTION v. M/S. INDUS SMELTERS LTD.                          799


was required to be followed u/s.18 of the MSMED Act r/w. ss.65 to               A
81 of the Arbitration Act – Once the Conciliation fails, the
arbitration proceedings commences and the Council as an arbitrator
shall have all the powers of the arbitrator as are available under
the provisions of the Arbitration Act – However, no such procedure
was followed – Therefore, matter is remitted to the Facilitation
                                                                                B
Council to follow the procedure u/s.18 of the MSMED Act.
        CIVIL APPELLATE JURISDICTION: Civil Appeal No.5934 of
2021.
      From the Judgment and Order dated 12.03.2012 of the High Court
of Chattisgarh at Bilaspur in W. P. No.418 of 2012.                             C
        Ms. Akanksha Sisodia, Anup Jain, Advs. for the Appellant.
        Nitin Gaur, Ranjit Kumar Sharma, Advs. for the Respondents.
        The Order of the Court was passed by
        M. R. SHAH, J.
                                                                                D
        Delay condoned.
        Leave granted.
       1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 12.03.2012 passed by the High Court of Chhattisgarh at
Bilaspur in writ petition (c) No.418 of 2012, by which the High Court           E
has dismissed the said writ petition as not maintainable in view of remedy
available to the original petitioner under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the Arbitration Act),
the original respondent No.1 has preferred the present civil appeal.
       2. That the dispute arose between the parties which could not be         F
resolved. The case on behalf of the respondent herein was that it supplied
TMT bar to the appellant herein valuing Rs.2,44,92,846/- out of which it
received Rs.1,24,50,000/-. The appellant had not made payment of the
remaining amount, therefore, the respondent being supplier approached
the Chairman, Micro Small and Medium Enterprises Facilitation Council
(hereinafter referred to as the Facilitation Council) constituted under the     G
Micro Small and Medium Enterprises Development Act, 2006 (hereinafter
referred to as the MSMED Act) for small scale industries.
       3. By order dated 10.01.2012 the Facilitation Council closed the
said proceedings by observing that Facilitation Council has been
constituted with limited object and jurisdiction and the Facilitation Council   H
800             SUPREME COURT REPORTS                          [2021] 11 S.C.R.


A     has no jurisdiction to make thorough enquiry and take evidence and decide
      truth about the challenged document. The Facilitation Council also
      observed that parties are at liberty to move before the competent court.
             4. Feeling aggrieved and dissatisfied with the order dated
      10.01.2012, the respondent herein preferred writ petition (C) No.418 of
B     2012 before the High Court of Chhattisgarh at Bilaspur. By the impugned
      order, the High Court has dismissed the said writ petition by observing
      that order passed by the Facilitation Council rejecting the application
      can be said to be an award under Section 18 of the MSMED Act and as
      per Section 18 (2) and (3), the provision of the Arbitration Act shall
      apply to the dispute as if the arbitration was in pursuance of an arbitration
C     agreement referred to Sub-Section (1) of Section 7 of the MSMED Act
      and therefore such an order would be amenable to the appeal under
      Section 34 of the Arbitration Act before the district court. Thus by the
      impugned order the High Court has dismissed the said writ petition on
      the ground of availability of an alternate remedy of filing an appeal against
D     the order passed by the Facilitation Council dated 10.01.2012.
             5. Feeling aggrieved and dissatisfied with the impugned order
      passed by the High Court dismissing the writ petition preferred by the
      respondent herein however holding that the order passed by the Facilitation
      Council rejecting the application can be said to be an award and therefore
      as per the provision of the Arbitration Act shall apply to the dispute as if
E     the arbitration was in pursuance of an arbitration agreement referred to
      Sub-Section (1) of Section (7) of the Arbitration Act and therefore against
      such an order appeal under Section 34 of the Arbitration Act shall be
      maintainable, the original respondent has preferred the present appeal.
             6. Learned counsel appearing on behalf of the appellant has
F     vehemently submitted that in the facts and circumstances of the case
      the order of the Facilitation Council impugned before the High Court
      cannot be said to be an award as by such an order the Facilitation Council
      did not conclusively settle the dispute and rejected the application simply
      on the ground of jurisdiction and on the ground that the Facilitation Council
      has no jurisdiction to make thorough enquiry and take evidence and decide
G     the truth about the challenged document.
             6.1 It is submitted by the counsel appearing on behalf of the
      appellant that therefore when the order passed by the Facilitation Council
      impugned before the High Court cannot be said to be an award, the
      same was not amenable to the appeal before the district court under
H     Section 34 of the Arbitration Act.
  M/S. VIJETA CONSTRUCTION v. M/S. INDUS SMELTERS LTD.                             801
                     [M. R. SHAH, J.]

       7. Per contra learned counsel appearing on behalf of the                    A
respondent – original applicant has vehemently submitted that the order
passed by the Facilitation Council rejecting the application can be said to
be an “award” and therefore such an order of rejecting the claim petition/
application before the Facilitation Council can be challenged before the
district court under Section 34 of the Arbitration Act.
                                                                                   B
       7.1 It is further submitted that as such the Facilitation Council
was not justified in observing that it has no jurisdiction to make thorough
enquiry and take evidence and that the Facilitation Council has been
constituted with limited object and jurisdiction. Heavy reliance is placed
on Section 27 of the Arbitration Act. It is submitted that the Facilitation
                                                                                   C
Council has all the jurisdiction which are available to the Arbitrator under
the provisions of the Arbitration Act including taking the evidence.
      8. We have heard the learned counsel appearing on behalf of the
respective parties at length.
        9. At the outset, it is required to be noted and it is not in dispute      D
that the parties are governed by the provisions of MSMED Act. As per
the MSMED Act if there is any dispute between the parties the dispute
is required to be resolved by following the procedure as prescribed under
Section 18 of the MSMED Act. It cannot be disputed that the MSMED
Act being a Special Act the procedure as prescribed under the MSMED
                                                                                   E
Act is required to be followed if there is any dispute between the parties.
Section 15 of the MSMED Act provides for liability of the buyer to
make payment to micro small and medium enterprises. Section 16 of the
MSMED Act provides for the interest payable. Section 17 of the MSMED
Act provides for any goods supplied or services rendered by the supplier,
the buyer shall be liable to pay the amount with interest thereon as provided      F
under section 16. Section 18 of the MSMED Act provides for resolution
of the dispute between the supplier – micro and small enterprises and
the buyer. Section 19 of the MSMED Act further provides that 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
                                                                                   G
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.
                                                                                   H
802            SUPREME COURT REPORTS                            [2021] 11 S.C.R.


A           Section 15 to Section 19 of the MSMED Act which are relevant
      for our purpose 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
B          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.
C           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
D           supplier on that amount from 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.
            17. Recovery of amount due.—For any goods supplied or services
            rendered by the supplier, the buyer shall be liable to pay the amount
E           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
F          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
G          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
H          dispute for arbitration or refer it to any institution or centre providing
  M/S. VIJETA CONSTRUCTION v. M/S. INDUS SMELTERS LTD.                         803
                     [M. R. SHAH, J.]

      alternate dispute resolution services for such arbitration and the       A
      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
                                                                               B
      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         C
      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     D
      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              E
      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.
       9.1 Therefore as per the scheme of the MSMED Act when there
is a dispute between the micro and small enterprises – supplier and            F
buyer, the same is required to be resolved by following the procedure as
prescribed under Section 18 of the MSMED Act, reproduced
hereinabove. As observed hereinabove, the MSMED Act is a Special
Act and as per Section 24 of the MSMED Act, the provisions of Section
15 to 23 shall have overriding effect notwithstanding inconsistent therewith   G
contained in any other law for the time being in force. Therefore, Section
18 of the MSMED Act would have overriding effect over any other law
for the time being in force including the Arbitration Act (to the extent
inconsistent) and therefore if there is any dispute between the parties
governed by the MSMED Act the said dispute has to be resolved only
through the procedure as provided under Section 18 of the MSMED                H
804             SUPREME COURT REPORTS                           [2021] 11 S.C.R.


A     Act. As per Sub-Section (1) of Section 18, 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, may
      approach by way of a reference/application to the Micro and Small
      Enterprises Facilitation Council. As per Sub-Section (2) of Section 18,
      on receipt of a reference under sub-section (1), the Council shall have
B
      to resolve the dispute through conciliation either by the Council itself or
      seek the assistance of any institution or centre providing alternate dispute
      resolution (ADR) 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 shall apply to such a
C     dispute as if the conciliation was initiated under Part III of the Arbitration
      Act. Thus at the stage of conciliation the council/conciliator have to
      bear in mind the provisions of sections 65 to 81 of the Arbitration Act,
      which read as under:-
              “65. Submission of statements to conciliator.—(1) The conciliator,
D            upon his appointment, may request each party to submit to him a
             brief written statement describing the general nature of the dispute
             and the points at issue. Each party shall send a copy of such
             statement to the other party (2) The conciliator may request each
             party to submit to him a further written statement of his position
             and the facts and grounds in support thereof, supplemented by
E            any documents and other evidence that such party deems
             appropriate. The party shall send a copy of such statement,
             documents and other evidence to the other party. (3) At any stage
             of the conciliation proceedings, the conciliator may request a party
             to submit to him such additional information as he deems
F            appropriate. Explanation.—In this section and all the following
             sections of this Part, the term “conciliator” applies to a sole
             conciliator, two or three conciliators, as the case may be.
             66. Conciliator not bound by certain enactments.—The conciliator
             is not bound by the Code of Civil Procedure, 1908 (5 of 1908)or
G            the Indian Evidence Act, 1872 (1 of 1872).
             67. Role of conciliator.—(1) The conciliator shall assist the parties
             in an independent and impartial manner in their attempt to reach
             an amicable settlement of their dispute. (2) The conciliator shall
             be guided by principles of objectivity, fairness and justice, giving
H
M/S. VIJETA CONSTRUCTION v. M/S. INDUS SMELTERS LTD.                        805
                   [M. R. SHAH, J.]

   consideration to, among other things, the rights and obligations of      A
   the parties, the usages of the trade concerned and the
   circumstances surrounding the dispute, including any previous
   business practices between the parties. (3) The conciliator may
   conduct the conciliation proceedings in such a manner as he
   considers appropriate, taking into account the circumstances of
                                                                            B
   the case, the wishes the parties may express, including any request
   by a party that the conciliator hear oral statements, and the need
   for a speedy settlement of the dispute. (4) The conciliator may, at
   any stage of the conciliation proceedings, make proposals for a
   settlement of the dispute. Such proposals need not be in writing
   and need not be accompanied by a statement of the reasons                C
   therefor.
   68. Administrative assistance.—In order to facilitate the conduct
   of the conciliation proceedings, the parties, or the conciliator with
   the consent of the parties, may arrange for administrative assistance
   by a suitable institution or person.                                     D
   69. Communication between conciliator and parties.—(1) The
   conciliator may invite the parties to meet him or may communicate
   with them orally or in writing. He may meet or communicate with
   the parties together or with each of them separately. (2) Unless
   the parties have agreed upon the place where meetings with the           E
   conciliator are to be held, such place shall be determined by the
   conciliator, after consultation with the parties, having regard to
   the circumstances of the conciliation proceedings.
   70. Disclosure of information.—When the conciliator receives
   factual information concerning the dispute from a party, he shall        F
   disclose the substance of that information to the other party in
   order that the other party may have the opportunity to present
   any explanation which he considers appropriate: Provided that
   when a party gives any information to the conciliator subject to a
   specific condition that it be kept confidential, the conciliator shall
                                                                            G
   not disclose that information to the other party.
   71. Co-operation of parties with conciliator.—The parties shall in
   good faith co-operate with the conciliator and, in particular, shall
   endeavour to comply with requests by the conciliator to submit
   written materials, provide evidence and attend meetings.
                                                                            H
806      SUPREME COURT REPORTS                          [2021] 11 S.C.R.


A     72. Suggestions by parties for settlement of dispute.—Each party
      may, on his own initiative or at the invitation of the conciliator,
      submit to the conciliator suggestions for the settlement of the
      dispute.
      73. Settlement agreement.—(1) When it appears to the conciliator
B     that there exist elements of a settlement which may be acceptable
      to the parties, he shall formulate the terms of a possible settlement
      and submit them to the parties for their observations. After
      receiving the observations of the parties, the conciliator may
      reformulate the terms of a possible settlement in the light of such
      observations. (2) If the parties reach agreement on a settlement
C     of the dispute, they may draw up and sign a written settlement
      agreement. If requested by the parties, the conciliator may draw
      up, or assist the parties in drawing up, the settlement agreement.
      (3) When the parties sign the settlement agreement, it shall be
      final and binding on the parties and persons claiming under them
D     respectively. (4) The conciliator shall authenticate the settlement
      agreement and furnish a copy thereof to each of the parties.
      74. Status and effect of settlement agreement.—The settlement
      agreement shall have the same status and effect as if it is an
      arbitral award on agreed terms on the substance of the dispute
E     rendered by an arbitral tribunal under section 30.
      75. Confidentiality.—Notwithstanding anything contained in any
      other law for the time being in force, the conciliator and the parties
      shall keep confidential all matters relating to the conciliation
      proceedings. Confidentiality shall extend also to the settlement
F     agreement, except where its disclosure is necessary for purposes
      of implementation and enforcement.
      76. Termination of conciliation proceedings.—The conciliation
      proceedings shall be terminated— (a) by the signing of the
      settlement agreement by the parties, on the date of the agreement;
G     or (b) by a written declaration of the conciliator, after consultation
      with the parties, to the effect that further efforts at conciliation
      are no longer justified, on the date of the declaration; or (c) by a
      written declaration of the parties addressed to the conciliator to
      the effect that the conciliation proceedings are terminated, on the
      date of the declaration; or (d) by a written declaration of a party
H     to the other party and the conciliator, if appointed, to the effect
M/S. VIJETA CONSTRUCTION v. M/S. INDUS SMELTERS LTD.                          807
                   [M. R. SHAH, J.]

   that the conciliation proceedings are terminated, on the date of           A
   the declaration.
   77. Resort to arbitral or judicial proceedings.—The parties shall
   not initiate, during the conciliation proceedings, any arbitral or
   judicial proceedings in respect of a dispute that is the subject-
   matter of the conciliation proceedings except that a party may             B
   initiate arbitral or judicial proceedings where, in his opinion, such
   proceedings are necessary for preserving his rights.
   78. Costs.—(1) Upon termination of the conciliation proceedings,
   the conciliator shall fix the costs of the conciliation and give written
   notice thereof to the parties. (2) For the purpose of sub-section          C
   (1), “costs” means reasonable costs relating to— (a) the fee and
   expenses of the conciliator and witnesses requested by the
   conciliator with the consent of the parties; (b) any expert advice
   requested by the conciliator with the consent of the parties; (c)
   any assistance provided pursuant to clause (b) of sub-section (2)
   of section 64 and section 68. (d) any other expenses incurred in           D
   connection with the conciliation proceedings and the settlement
   agreement. (3) The costs shall be borne equally by the parties
   unless the settlement agreement provides for a different
   apportionment. All other expenses incurred by a party shall be
   borne by that party.                                                       E
   79. Deposits.—(1) The conciliator may direct each party to deposit
   an equal amount as an advance for the costs referred to in sub-
   section(2) of section 78 which he expects will be incurred. (2)
   During the course of the conciliation proceedings, the conciliator
   may direct supplementary deposits in an equal amount from each             F
   party. (3) If the required deposits under sub-sections (1) and (2)
   are not paid in full by both parties within thirty days, the conciliator
   may suspend the proceedings or may make a written declaration
   of termination of the proceedings to the parties, effective on the
   date of that declaration. (4) Upon termination of the conciliation
   proceedings, the conciliator shall render an accounting to the parties     G
   of the deposits received and shall return any unexpended balance
   to the parties.
   80. Role of conciliator in other proceedings.—Unless otherwise
   agreed by the parties,—
                                                                              H
808             SUPREME COURT REPORTS                             [2021] 11 S.C.R.


A            (a) the conciliator shall not act as an arbitrator or as a representative
             or counsel of a party in any arbitral or judicial proceeding in respect
             of a dispute that is the subject of the conciliation proceedings; (b)
             the conciliator shall not be presented by the parties as a witness in
             any arbitral or judicial proceedings.
B            81. Admissibility of evidence in other proceedings.—The parties
             shall not rely on or introduce as evidence in arbitral or judicial
             proceedings, whether or not such proceedings relate to the dispute
             that is the subject of the conciliation proceedings,— (a) views
             expressed or suggestions made by the other party in respect of a
             possible settlement of the dispute; (b) admissions made by the
C            other party in the course of the conciliation proceedings; (c)
             proposals made by the conciliator; (d) the fact that the other party
             had indicated his willingness to accept a proposal for settlement
             made by the conciliator.”
              9.2 As per Sub-Section (3) of Section 18 after conciliation fails
D     under Sub-Section (2) of Section 18 of the MSMED Act, and conciliation
      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
E     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 sub-section (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
F     then apply.
              9.3 In light of the aforesaid statutory provisions under the MSMED
      Act as well as the Arbitration Act, the order passed by the Facilitation
      Council dated 10.01.2012 which was the subject matter before the High
      Court is required to be tested. From the order passed by the Facilitation
G     Council rejecting/dismissing the reference/application and the stage at
      which such an order was passed we are of the opinion that the Facilitation
      Council has not followed the procedure as was required to be followed
      under Section 18 of the MSMED Act read with Sections 65 to 81 of the
      Arbitration Act, as reproduced hereinabove. It is required to be noted
H     that at the initial stage the Facilitation Council was performing the duty
  M/S. VIJETA CONSTRUCTION v. M/S. INDUS SMELTERS LTD.                              809
                     [M. R. SHAH, J.]

as a Conciliator for which the provisions of Sections 65 to 81 shall be             A
applicable. It is true that at the stage of conciliation, the role of the
conciliator (Facilitation Council) is to assist the parties to reach an
amicable settlement of their dispute as provided under Section 67 of the
Arbitration Act. At that stage the parties are not required to lead the
evidence and at that stage the role of the conciliator is not to adjudicate
                                                                                    B
the dispute between the parties, but to reach an amicable settlement of
the dispute between the parties. Once the conciliation fails thereafter as
per Sub-Section (3) of Section 18 of the MSMED Act, the arbitration
proceedings commences and the conciliation proceedings stands
terminated and thereafter the Facilitation Council shall either itself take
up the dispute for arbitration or refer it to any institution or centre providing   C
ADR services for such arbitration and the provisions of the Arbitration
Act shall then apply to the dispute as if the arbitration is in pursuance of
an arbitration agreement referred to Sub-Section (1) of Section 7 of the
Arbitration Act. At that stage and thereafter the Facilitation Council
shall act as an Arbitrator and the provisions of Arbitration Act shall then
                                                                                    D
apply to the dispute as if arbitration was in pursuance of an arbitration
agreement referred to Sub-Section (1) of Section 7 of the Arbitration
Act including the appeal under Section 34 to the district court against the
award declared by the Facilitation Council or any institution or centre
providing alternate dispute resolution (ADR) services to whom the dispute
is referred for arbitration.                                                        E
        10. In the present case no such procedure has been followed by
the Facilitation Council as required to be followed under Section 18 of
the MSMED Act. It is to be noted that the proceedings before the
Facilitation Council/Conciliator was at the stage of conciliation. It is true
that at the stage of conciliation under Sub-Section (2) of Section 18, the          F
conciliator (Facilitation Council) was not required to permit the parties
to lead the evidence and adjudicate the dispute. At the same time, if
there was no amicable settlement during the conciliation or under Sub-
Section (2) of Section 18 then the arbitration proceedings were required
to be initiated as provided under Sub-Section (3) of Section 18 which
have not been initiated in the present case. Therefore, as such, the matter         G
is required to be remitted to the Facilitation Council to follow the procedure
under Section 18 of the MSMED Act by quashing and setting aside the
order dated 10.01.2012 passed by the Facilitation Council as well as the
impugned judgment and order passed by the High Court in writ petition
No.418 of 2012.                                                                     H
810                SUPREME COURT REPORTS                        [2021] 11 S.C.R.


A            11. Now so far as the observations made by the Facilitation
      Council, Chhattisgarh, Raipur in order dated 10.01.2012 that the
      Facilitation Council has been constituted with limited object and jurisdiction
      and the council has no jurisdiction to make thorough enquiry and to take
      evidence is concerned, the aforesaid cannot be accepted. As per the
      scheme of the MSMED Act, the Facilitation Council has a dual role to
B
      play, one as a Conciliator as per Sub-Section (2) of Section 18 and
      thereafter in case the conciliation is unsuccessful as an Arbitrator as per
      Sub-Section (3) of Section 18. As a Conciliator the role of the Conciliator
      - Facilitation Council is, as observed hereinabove, to assist the parties in
      an independent and impartial manner in their attempt to reach an amicable
C     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 proceedings commences
      as per Sub-Section (3) of Section 18, the Council as an arbitrator shall
D
      have all the powers of the arbitrator as are available under the provisions
      of the Arbitration Act. Therefore the Facilitation Council is not right in
      observing that the council has no jurisdiction to make thorough enquiry
      and take evidence and that the council has been constituted with limited
      object and jurisdiction.
E            12. In view of the above and for the reasons stated above, the
      order passed by the Micro Small and Medium Enterprises Facilitation
      Council, Chhattisgarh, Raipur dated 10.01.2012 in case No.26/MSTFC/
      2009 as well as the impugned judgment and order passed by the High
      Court in writ petition (c) No.418 of 2012 are hereby quashed and set
F     aside. Matter is remitted to the Micro Small and Medium Enterprises
      Facilitation Council, Chhattisgarh, Raipur to decide case No. 26/MSTFC/
      2009 afresh in accordance with law and on its own merits after following
      the procedure as required under Section 18 of the MSMED Act and as
      per the observations made hereinabove. As the dispute is very old, the
      Facilitation Council is directed to complete the proceedings within a period
G     of six months from the date of receipt of this order. There shall be no
      order as to costs.
             Pending applications, if any stand disposed of.

      Ankit Gyan                                                Matter remitted back.
H