2022 (9) TMI 845 - SC - Indian Laws

Reopening of award by the Facilitation Council - Sub-section (3) of Section 18 of MSMED Act - HELD THAT - In the case on hand, the claim of respondent no.1 was rejected by the Facilitation Council by the decision dated 17.02.2009. Since the claim stood rejected, it was like an award and respondent no.1 ought to have initiated other proceedings to challenge the award. Instead, he chose to put repeated pressure on the Facilitation Council to review its earlier decision. Unmindful of the fact that they have no such power, the Facilitation Council reopened its earlier decision and passed the award. The High Court completely overlooked the inherent lack of jurisdiction on the part of the Facilitation Council to pass the award dated 27.01.2016. What is worse is the fact that the illegality committed by the Facilitation Council in the year 2016 has now received a stamp of approval, by the High Court remanding the matter back to the Facilitation Council. The High Court has failed to examine the powers conferred upon the Facilitation Council. The High Court has also omitted to take note of the fact that MSMED Act was not intended to provide a gateway for hopelessly time barred claims. The appeal is allowed and the impugned order of the High Court is set aside.

Summary

Issues:
1. Entertaining a claim under the MSMED Act for a transaction predating the Act.
2. Validity of the decision of the Facilitation Council.
3. Jurisdiction of the Facilitation Council to review its decisions.
4. Legality of the award passed by the Facilitation Council.
5. High Court's authority in remanding the matter back to the Facilitation Council.

Entertaining a claim under the MSMED Act for a transaction predating the Act:
The Supreme Court questioned the Facilitation Council's decision to entertain a claim in 2009 for a transaction that occurred in 1989-90, before the MSMED Act came into force. Referring to a previous judgment, the court clarified that the Act does not apply retrospectively to transactions predating its enactment. The court deemed the Facilitation Council's initial acceptance of the claim in 2009 as erroneous.

Validity of the decision of the Facilitation Council:
The Facilitation Council rejected the claim in 2009, citing a settlement reached between the parties in 2004. Subsequently, the respondent filed a writ petition in 2013 challenging this decision. The court highlighted the delay in filing the writ petition and deemed it an inappropriate remedy. It noted that the Facilitation Council's rejection of the claim in 2009 should have been treated as an award, and any challenge should have followed the appropriate legal procedures.

Jurisdiction of the Facilitation Council to review its decisions:
The court criticized the Facilitation Council for reviewing its decision in 2016 without the authority to do so. It emphasized that the council's power is limited to conciliation and arbitration as per the MSMED Act. The court highlighted that the council's decision should have been final unless challenged through proper legal channels.

Legality of the award passed by the Facilitation Council:
The court found the award passed by the Facilitation Council in 2016 to be without authority, as the council lacked the power to revisit its earlier decision. The court emphasized that every decision of the council constitutes an award, and reopening a rejected claim without proper legal basis is impermissible.

High Court's authority in remanding the matter back to the Facilitation Council:
The High Court's decision to remand the matter back to the Facilitation Council was deemed flawed by the Supreme Court. The High Court failed to consider the council's jurisdictional limitations and the inappropriateness of entertaining time-barred claims under the MSMED Act. The Supreme Court set aside the High Court's order, dismissing the writ petition filed by the respondent and allowing the appellant's petition while also nullifying the award issued by the Facilitation Council.