The Single-judge bench of the Orissa High Court held that the MSME Facilitation Council does not have the power to adjudicate the challenges to the maintainability of a reference at the conciliation stage, these can be addressed during arbitration proceedings under Section 18(3) of the Act.
In a writ petition challenging an order passed by the Micro & Small Enterprises Facilitation Council, Cuttack, the High Court took up the matter in a hybrid mode. The order dated May 6, 2014, passed by the Council in MSEFC Case No.25 of 2012 was under challenge. The Council had entertained an application filed by the petitioner challenging the maintainability of the reference and had held the petitioner to be a "Buyer," directing the parties to participate in conciliation proceedings.
Mr. Pattanaik learned Senior Advocate for the petitioner, argued that the petitioner, the National Small Industries Development Cooperation, is a supplier under the provisions of Section 2(n) of the Micro, Small and Medium Enterprises Development Act, 2006, and therefore, the reference against the petitioner, being a supplier, is not maintainable. He contended that the petitioner is only a facilitator and cannot be named as a buyer under the Act.
Mr. Acharya, along with Mr. Thakker, learned counsel for Opposite Party No.4, submitted that the role played by the petitioner is covered under Section 2(d) of the Act, and the Council has committed no error in holding the petitioner to be a buyer. They argued that the impugned order was passed pursuant to the petition filed under Annexure-8, and the petitioner should participate in conciliation without causing any hurdle.
After considering the submissions, the High Court noted that conciliation as required under Section 18(2) of the Act had not yet been taken up by the Council. It held that the impugned order passed before the conciliation proceedings, was without jurisdiction and not sustainable. The Court set aside the impugned order and remitted the matter to the Council to proceed with conciliation either by itself or by referring it to an institution providing alternative dispute resolution services. If conciliation fails, the Council will proceed under Section 18(3) of the Act.
The Court clarified that it had not expressed any opinion on the merits of the case and directed both parties to ensure timely disposal of the reference. It also allowed the parties to raise all contentions on facts and law before the Council.