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Allahabad High Court Clarifies Legal Recourse for Challenging Arbitral Awards Under MSMED Act
Allahabad High Court Clarifies Legal Recourse for Challenging Arbitral Awards Under MSMED Act
Introduction:
In a recent landmark ruling, the Allahabad High Court shed light on the proper legal avenues available for challenging arbitral awards made under Section 18 of the Micro, Small, and Medium Enterprises Development Act, 2006 (MSMED Act). This clarification reinforces the significance of following the prescribed procedures under the MSMED Act and the Arbitration and Conciliation Act, 1996, especially in cases involving disputes between private parties registered under the MSMED Act.
Understanding the Legal Landscape:
The Allahabad High Court's ruling centers around a contractual dispute between a petitioner and a respondent company, both falling under the purview of the MSMED Act. Despite attempts at conciliation, the matter proceeded to arbitration under Section 18 of the MSMED Act. The petitioner raised objections during the arbitration proceedings but faced difficulties due to COVID-19-related restrictions, leading to the issuance of an arbitral award on March 23, 2021, unbeknownst to the petitioner until recovery proceedings began in November 2022.
Section 19 of the MSMED Act:
The court emphasized the importance of Section 19 of the MSMED Act, which outlines the procedure for challenging decrees, awards, or orders issued by the Council or any alternate dispute resolution institution under the MSMED Act. Notably, the court highlighted the requirement for appellants to deposit 75% of the decretal amount before their application is entertained by any court.
Application of Section 34 of the Arbitration and Conciliation Act:
Respondents argued against the maintainability of a writ petition, asserting that the petitioner should have sought recourse under Section 34 of the Arbitration and Conciliation Act, 1996, coupled with Section 19 of the MSMED Act. They contended that the dispute was of a private nature and, therefore, fell outside the jurisdiction of the High Court to hear a writ petition.
Judicial Precedent and Alternative Statutory Remedies:
The court referred to the Supreme Court's decision in Bhaven Construction vs. Sardar Sarovar Narmada Nigam Ltd., emphasizing the need for judicial interference to be exercised sparingly when alternative statutory remedies exist. It stressed that the petitioner had an available remedy under Section 34 of the Arbitration and Conciliation Act, 1996, read in conjunction with Section 19 of the MSMED Act, to address the grievances raised in the writ petition.
Timeliness of Challenges:
The Allahabad High Court underscored the significance of timely challenges, pointing out that Section 36 of the Arbitration and Conciliation Act, 1996, imposes specific time frames for challenging awards. As the mandatory time period had lapsed, the court dismissed the writ petition, reiterating that writ petitions are not maintainable against arbitral awards in private disputes.
Conclusion:
This ruling by the Allahabad High Court serves as a critical clarification on the proper legal recourse for challenging arbitral awards under the MSMED Act. It highlights the need for parties to adhere to the specified procedures outlined in both the MSMED Act and the Arbitration and Conciliation Act, 1996. The judgment reinforces the principle that judicial interference should be the last resort, especially when alternative statutory remedies are available, and underscores the importance of timely action in arbitration proceedings.
- Allahabad High Court has shed light on the proper legal avenues available for challenging arbitral awards made under Section 18 of the Micro, Small, and Medium Enterprises Development Act, 2006.
- The court emphasized the importance of Section 19 of the MSMED Act, which outlines the procedure for challenging decrees, awards, or orders issued by the Council.
- It stressed that the petitioner had an available remedy under Section 34 of the Arbitration and Conciliation Act, 1996, read in conjunction with Section 19 of the MSMED Act.
