Authority: High Court of Chhattisgarh at Bilaspur

Order Date: 22 June 2026

Case Overview

  • Parties: Petitioner – M/s Jai Balaji Industries Ltd, Borai Industrial Growth Centre, Durg, Chhattisgarh. Respondent – Garuda Ispat Private Limited, Raipur.
  • Nature of Proceeding: Writ petition under Article 227 of the Constitution challenging the validity of an award dated 27‑12‑2022 passed by the Micro and Small Enterprises Facilitation Council (MSME Council) and the subsequent execution proceedings (Case No. TD/82/2024) ordered by the learned 2nd Additional District Judge, Durg on 07‑01‑2025.
  • Background: Jai Balaji Industries issued purchase orders (Nos. EX‑54, EX‑57, EX‑64, EX‑67, EX‑76) to Garuda Ispat in 2016 for steel materials. Material under PO EX‑57 was rejected as defective. Garuda Ispat claimed the rejected material’s value and filed a claim of Rs 9,63,968 under Section 18 of the MSMED Act (Application No. CG14B0010764/S/00002) on 02‑03‑2020.
  • Council Proceedings: Notices issued March & June 2020; matter taken up on 14‑09‑2021; preliminary objection raised on jurisdiction (Kolkata courts exclusive). Conciliation proceedings were adjourned multiple times, an ex‑parte order was scheduled for 09‑11‑2021 but not passed. Fresh notice on 28‑10‑2022; respondent’s rejoinder filed 11‑11‑2022; limitation objection raised; written submissions filed 02‑01‑2023. The Council’s award dated 27‑12‑2022 was released only on 24‑05‑2023 (147‑day delay) without any notice or hearing.
  • Award Details: Council directed petitioner to pay Rs 28,05,929 (principal Rs 9,63,968 + interest Rs 18,41,961) and further interest on non‑payment.
  • Execution Proceedings: Respondent initiated execution under Section 36 of the Arbitration and Conciliation Act, 1996 (Case No. TD/82/2024) on 28‑03‑2024. Petitioner’s application on 02‑07‑2024 sought dismissal of execution on ground that the award was not a valid arbitral award. The executing court rejected the petition and ordered execution on 07‑01‑2025.
  • Petitioner’s Contentions: (i) Council lacked jurisdiction; (ii) Failure to comply with mandatory conciliation‑to‑arbitration transition under Sections 18(2)‑18(3) of the MSMED Act and Sections 65‑81 of the Arbitration Act; (iii) No formal termination of conciliation, no arbitration notice, no pleadings, no evidence, violating natural justice; (iv) Unexplained 147‑day delay and back‑dating; (v) Award therefore void ab initio and unenforceable.
  • Respondent’s Contentions: (i) Award is enforceable; (ii) Petitioner’s challenge under Section 34 of the Arbitration Act was barred by non‑deposit of 75% of award amount under Section 19 of the MSMED Act; (iii) Execution court correctly refused to re‑examine award; (iv) Objections pertain to merits and must be decided in Section 34 proceedings, not in execution.
  • Legal Provisions Cited: MSMED Act 2006 (Section 18, 18(2), 18(3), 18(4)), Arbitration and Conciliation Act 1996 (Sections 23‑25, 34, 36, 47 CPC), Code of Civil Procedure (Order 21 Rule 11), Right to Information Act (for obtaining Council records), Supreme Court precedents – Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan (2021), Feedback Infra Pvt. Ltd. v. MSME Council (2023), Electrosteel Steel Ltd. v. Ispat Carrier Pvt. Ltd. (2024), Gujarat State Civil Supplies Corp. Ltd. v. Mahakali Foods Pvt. Ltd. (2023), Kiran Singh v. Chaman Paswan (1954), Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman (1970), Tamil Nadu Cements Corp. Ltd. v. MSME Council (2025).
  • Court’s Reasoning: The Court examined the statutory scheme of Section 18, noting the absence of any order terminating conciliation and the lack of any arbitration proceedings (no notice, no statements of claim/defence, no evidence, no hearing). It held that without compliance with Sections 18(2)‑18(3) and the Arbitration Act, the Council never acquired arbitral jurisdiction; consequently the award dated 27‑12‑2022 is a nullity. As a nullity, it cannot be executed, and the execution order dated 07‑01‑2025 is likewise void. The Court distinguished between procedural irregularities (which can be addressed only under Section 34) and jurisdictional nullity (which can be raised in execution proceedings under Section 47 CPC).

Final Outcome

  • The award dated 27‑12‑2022 passed by the Micro and Small Enterprises Facilitation Council is set aside.
  • The execution order dated 07‑01‑2025 passed by the 2nd Additional District Judge, Durg, is set aside.
  • The matter is remitted to the MSME Facilitation Council for fresh consideration in accordance with Sections 18 of the MSMED Act and the Arbitration and Conciliation Act, 1996, with adequate opportunity of hearing.
  • The writ petition is allowed; no order as to costs.

Topics: Arbitration Jurisdiction, MSME Council Award