Orissa high court criticises hasty awards by facilitation councils

Cuttack: Orissa high court has expressed displeasure at the practice of facilitation councils passing awards “in undue haste” and “without compliance with the discipline of the Arbitration and Conciliation Act”.

The bench of Justice S K Panigrahi made the observation recently while considering a petition filed by Hindustan Copper Ltd, a Govt of India enterprise, challenging the July 30, 2024 award by Micro, Small and Medium Enterprises Facilitation Council (MSMEFC), Rourkela. The council had directed the company to pay an interest of Rs 6.80 crore to a private supplier in a delayed payment dispute dating back to 2010.

“This court cannot ignore the growing trend of facilitation councils rendering so-called awards which are bereft of reasoning, passed in undue haste, and without compliance with the discipline of the Arbitration and Conciliation Act,” Justice Panigrahi said.

He set aside the arbitral award, observing that such orders, passed without adequate reasoning, undermine the statutory dispute resolution mechanism under the MSME Development (MSMED) Act.

“An award is not a mere direction to pay/not to pay; it is a solemn adjudication which must record the rival claims, weigh the evidence, and set forth reasons that disclose the pathway of thought from contention to conclusion,” Justice Panigrahi observed in his judgment dated Sept 20 and uploaded on Sept 25.

While quashing the award, the bench remanded the matter back to the council for fresh hearing, directing that the case be decided within three months, after giving both parties a reasonable opportunity to be heard.

The dispute arose after Hindustan Copper floated a tender for 700 metric tonnes of iron balls, which the private company was selected to supply. However, the petitioner alleged that due to non-supply within the scheduled time, extraction and delivery operations were delayed, causing losses and subsequent delay in payments to the supplier.

The private company later moved the council, which directed payment of interest under Section 16 of the MSMED Act. Challenging the order, Hindustan Copper contended that the award lacked basic reasoning.

Calling the requirement for reasoning in arbitral awards “indispensable”, Justice Panigrahi said, “The council, as a quasi-judicial authority, cannot abdicate its duty to provide reasoned determinations under the guise of efficiency.”