1 CGHC010415862025 2026:CGHC:31023-DB AFR HIGH COURT OF CHHATTISGARH AT BILASPUR ARBA No. 71 of 2025 1. Chhattisgarh Samvad Through- General Manager, Sector-19, North Block, Atal Nagar, Nava Raipur, District- Raipur (C.G.) ... Appellant Versus 1. M/s Chhattisgarh Packagers Pvt Ltd 4/1, Nehru Nagar, Bhilai, Bhilai, District- Durg (C.G.) ... Respondent For Appellant : Mr. Ankit Singhal & Mr. Ashish Mittal, Advocates For Respondent : Mr. Amit Soni & Mr. Deepak Sharma, Advocates DB: Hon’ble Mr. Justice Parth Prateem Sahu,J & Hon’ble Mr. Justice Sachin Singh Rajput, J Order on Board Per Parth Prateem Sahu, J 21.07.2026 1. Appellant has filed this arbitration appeal against the order dated 08.08.2025 passed in Arb. M.J.C. No.04/2021 by the Commercial Court (District Level) Nawa Raipur, District Raipur. 2. Learned counsel for appellant submits that respondent is registered as a micro small and medium enterprise having SYED ROSHAN ZAMIR ALI Digitally signed by SYED ROSHAN ZAMIR ALI 2 registration No.220101201832 dated 29.07.2013 issued by the District Trade and Industry Centre, Durg. Appellant had placed with respondent work order of printing tin board and in lieu of aforementioned work, respondent has submitted the bills/invoices for a total sum of Rs.1,58,04,864/- against which respondent has disbursed a sum of Rs.70,95,744/- only. Aggrieved with non-payment of entire bills raised, respondent filed an application under Section 18 (1) of the Micro, Small and Medium Enterprise Development Act, 2006 (for short ‘the Act of 2006’) before the Chhattisgarh Micro and Small Enterprises Facilitation Council, Raipur (for short ‘the Council’) on 30.3.2015. Upon service of notice issued under Section 18 (2) of the Act of 2006, appellant appeared before the Council on the date fixed in the notice, however, without following due process as provided under Section 18 (2) and (3) of the Act of 2006, the Council has passed the award on 23.12.2020. Even the procedure as prescribed under the Arbitration and Conciliation Act, 1996 (for short ‘the Act of 1996’) was not followed. 3. He contended that under Section 18 (3) of the Act of 2006 it is specifically provided that where conciliation initiated under sub-section (2) of Section 18 is not successful, the proceeding under Section 18 (2) of the Act of 2006 has to be terminated and thereafter the Council shall either itself take 3 up the dispute for arbitration or refer it to any institution or center for such arbitration proceeding. In a proceeding of arbitration arising out of the provision under Section 18 (3) of the Act of 2006, the provisions under the Arbitration and Conciliation Act, 1996 (for short ‘the Act of 1996’) will apply. However, in the present case, the Council has firstly not terminated the proceeding of conciliation and further not recorded that the Council itself is taking up the dispute for arbitration directing the respondent to file statement of claim and thereafter fixing the date for submission of written statement on statement of claim. Procedure as provided under Section 23 of the Act of 1996 is followed. Hence, the Council has committed legal misconduct in passing the award dated 20.2.2020. 4. Aggrieved with said award, appellant filed an application under Section 34 of the Act of 1996 before the Commercial Court (District Judge Level) Raipur, which came to be registered as Arb. MJC No.4/2021. Learned Commercial Court without considering the grounds raised in the application, has dismissed the same observing that appellant has not fulfilled the conditions enumerated under Section 34 of the Act of 1996. It is submitted that to arrive at such a conclusion, learned Commercial Court has taken into consideration the pleadings made in the application under 4 Section 34 of the Act of 1996, in particular Paragraph No.1. The pleading in Para-1 of application is to the effect that the Council has made an attempt to conciliate the parties to the proceedings under Section 18 (2) of the Act of 2006 and when conciliation could not arrive at, the proceeding in terms of Section 18 (3) of the Act of 2006 was commenced. 5. He contended that whether the Council has followed the procedure, as provided under the Act of 2006 as also the Act of 1996 is to be considered and appreciated from the pleadings recorded by the Council in its order sheets and not by erroneous pleadings, if made, in subsequent proceedings by wrong understanding of law. Said pleadings made cannot be used as estoppel. In support of his submission, he places reliance on the decision of Hon’ble Supreme Court in case of Groupe Chimique Tunisien SA vs Southern Petrochemicals Industries Corpn. Ltd., reported in (2006) 5 SCC 275. 6. He next contended that as the procedure provided under Section 18 (2) and (3) of the Act of 2006 has not been complied with by the Council and further the procedure as envisaged under Chapter-V of the Act of 1996, in particular the procedure provided under Section 23, the award passed by the Council is not sustainable. In support of his submission, he places reliance on the decision of Hon’ble Supreme Court in case of Jharkhand Urja Vikas Nigam 5 Limited vs State of Rajasthan and others, reported in (2021) 19 SCC 206; order of this High Court dated 03.12.2024 in WPC No.1440/2023 (Chhattisgarh Samvad vs M/s Shri Ram Printers and Stationers) and the order dated 22.06.2026 in WP227 No.67/2025, parties being M/s Jai Bajrang Industries Ltd. vs Garuda Ispat Private Limited. 7. Learned counsel appearing on behalf of the respondent would vehemently opposes submissions of learned counsel for appellant that the procedure prescribed under Section 18 (2) and (3) of the Act of 2006 has not been followed. The Council after coming to the conclusion that settlement between the parties is not arrived at in conciliation proceeding, has issued notice to the appellant on 6.1.2016 mentioning that proceeding of arbitration is started under Section 18 (3) after terminating the proceeding under Section 18 (2) of the Act of 2006 and date of hearing in the notice is mentioned as ‘30.1.2016’. From the contents of notice, appellant was aware that proceeding of conciliation had been terminated and proceeding of arbitration is initiated. He also referred to the pleadings made in the application under Section 34 of the Act of 1996 filed by appellant and submitted that appellant has clearly mentioned in the application that arbitration proceeding was started after terminating the proceeding of conciliation under Section 18 (2) of the Act of 2006. Learned 6 Commercial Court has rightly taken into consideration aforementioned fact and has passed the impugned order in accordance with law which does not call for any interference. In support of his submission, he referred the documents forming part of paper book. 8. We have heard learned counsel for the parties and perused the documents forming part of the paper book. 9. In the paper book, proceeding of the Council is available from Page No.284 onward. According to proceeding dated 19.5.2015, an application submitted by respondent was registered and notice to appellant herein was proposed. On 15.6.2015, notice to appellant herein was ordered. In the proceedings recorded on 10.7.2015, 2.9.2015, it is only mentioned that the parties are present and similarly on 7.10..2015 same proceeding was recorded. In the proceeding, the Council has not recorded that conciliation proceeding failed and as such proceeding initiated under Section 18 (2) of the Act of 2006 stands terminated. Further, in the proceeding it is recorded that notice be issued for hearing on 30.1.2016. Further proceeding recorded would reflects that the Council has only mentioned about issuance of notice, appearance of parties. In the proceeding dated 24.5.2016, it is mentioned that reply to the letter is filed and thereafter award was passed. 7 10. Before proceeding further, we find it appropriate to extract relevant provisions of the Act of 2006 applicable to the facts of the case. Section 18 (1) to (3) are material for the present case, therefore, the same are reproduced herein below:- “18.Reference to Micro and Small Enterprises Facilitation Council.-- (1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council. (2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under sub- section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act.” 8 11. Bare perusal of afore extracted provisions of the Act of 2006 would show that application before the Council is to be submitted by the parties under sub-section (1) of Section 18 and conciliation proceeding has to be initiated by the Council under sub-section (2) of Section 18, for which provision of Section 65 to 81 of the Act of 1996 shall apply. For initiating proceeding under sub-section (3) of Section 18, the Council has to record that conciliation proceeding initiated under sub- section (2) of Section 18 is not successful and it stands terminated. In case at hand, the Council has not drawn such proceeding in its order sheets but for recording appearance of the parties and further notice was issued for appearance of appellant herein on 30.1.2016. 12. Sub-section (3) of Section 18 of the Act of 2006 clearly envisages that the Council itself can take up the dispute or refer to it any institution or centre providing alternate dispute resolution services for arbitration and further the provision of the Act of 1996 shall then apply to the dispute. For proceeding under Section 18 (3) of the Act of 2006, the procedure as envisaged under Chapter-V of the Act of 1996 shall have to be followed, which deals with conduct of arbitral proceeding. Section 19 of the Act of 1996 talks of determination of rules of procedure which is extracted below for ready reference:- 9 “19. Determination of rules of procedure. - (1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872). (2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. (3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. (4) The power of the arbitral tribunal under sub- section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.” 13. Section 21 of the Act of 1996 talks of commencement of arbitral proceeding, which is also quoted herein below:- “21. Commencement of arbitral proceedings.- (1) Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. 14. Section 23 of the Act of 1996 talks of statement of claim and defence. Section 24 provides for hearing and written proceedings. Both the aforementioned provisions are relevant in the facts of case, therefore, the same are extracted below:- “23. Statement of claim and defence.- (1) Within the period of time agreed upon by the parties or 10 determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements. (2) The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit. (2A) The respondent, in support of his case, may also submit a counterclaim or plead a set-off, which shall be adjudicated upon by the arbitral tribunal, if such counterclaim or set-off falls within the scope of the arbitration agreement. (3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it. (4) The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing, of their appointment.” 24. Hearings and written proceedings. (1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials: 11 Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held. Provided further that the arbitral tribunal shall, as far as possible, hold oral hearings for the presentation of evidence or for oral argument on day-to-day basis, and not grant any adjournments unless sufficient cause is made out, and may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause. (2)The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property. (3)All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.” 15. Under Section 23 (1) of the Act of 1996, it is provided that claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought , and the respondent shall state his defence in respect of these particulars unless the parties have otherwise agreed as to the required elements of those statements. 12 16. In case at hand, respondent had submitted an application under Section 18 (1) of the Act of 2006 based upon which the Council has initiated the proceeding under sub-section (2) of Section 18, but the Council has not recorded in the proceeding that because conciliation proceeding is unsuccessful, the proceeding of conciliation under Section 18 (2) of the Act of 2006 is terminated and the Council itself is taking up the matter for arbitration and adjudicating the dispute. Failure to record such proceeding, in the opinion of this Court, had vitiated the entire process and passing of award dated 20.02.2020 by the Council. 17. If for the sake of arguments only, submission of learned counsel for respondent is to be accepted that notice dated 6.1.2016, is issued mentioning that by closing proceedings arbitration proceeding is started under Section 18 (3) of the Act of 2006, which is not forming part of the paper book but placed before this Court by learned counsel for respondent for perusal, then also, contents of said notice, if read in its entirety, would show that such facts is mentioned, however, in the said notice it is mentioned that the parties to the proceeding shall submit written arguments. From bare perusal of contents of notice, which is relied upon by learned counsel for respondent, dated 6.1.2015 fixing the date of hearing on 30.1.2016 would show that the Council has not adopted the procedure as envisaged under Chapter-V of the Act of 1996 but straightaway directed the 13 parties to submit written arguments. Even in subsequent proceeding from 30.1.2016, as is available in the paper book, nowhere mentioned that the Council has fixed the case for submission of statement of claim, statement of defence etc. Nor any application is submitted by respondent herein that his application under Section 18 (1) of the Act of 2006 be treated as statement of claim. No such proceeding is recorded by the Council nor there is proceeding of the Council directing the appellant herein to submit statement of defence. 18. In case of Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd., reported in (2023) 6 SCC 401, Hon’ble Supreme Court has held thus:- “47.The aforesaid legal position also dispels the arguments advanced on behalf of the counsel for the buyers that the Facilitation Council having acted as a Conciliator under Section 18(2) of the MSMED Act, 2006 itself cannot take up the dispute for arbitration and act as an Arbitrator. Though it is true that Section 80 of the Arbitration Act, 1996 contains a bar that the Conciliator shall not act as an Arbitrator in any arbitral proceedings in respect of a dispute that is subject of conciliation proceedings, the said bar stands superseded by the provisions contained in Section 18 read with Section 24 of the MSMED Act, 2006. As held earlier, the provisions contained in Chapter-V of the MSMED Act, 2006 have an effect overriding the provisions of the Arbitration Act, 1996. The provisions of Arbitration Act, 1996 would apply to the 14 proceedings conducted by the Facilitation Council only after the process of conciliation initiated by the council under Section 18(2) fails and the council either itself takes up the dispute for arbitration or refers to it to any institute or centre for such arbitration as contemplated under Section 18(3) of the MSMED Act, 2006.” 19. In Oil & Natural Gas Corporation vs M/s Wig Brothers Builders and Engineers Pvt. Ltd. reported in (2010) 13 SCC 377 Hon’ble Supreme Court has observed thus:- “…...An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts. But if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award.” 20. In case of Cochin Shipyard Ltd. Vs. Apeejay Shipping Ltd. reported in (2015)15 SCC 522, Hon’ble Supreme Court has observed as under:- “19. …….As far as legal misconduct is concerned, as the authorities would demonstrate, the same must be manifest or palpable from the proceedings before the arbitrator. To elaborate, a person urging the ground of legal misconduct has to satisfy the court from the records of the arbitral proceedings that there has been a legal misconduct on the part of the arbitrator as a consequence of which the award gets vitiated. The question of adducing any kind of oral evidence to substantiate the plea or stand or stance does not arise. It has to be shown from the proceedings carried on 15 before the arbitrator and the evidence adduced before the arbitrator. Evidence cannot be adduced in court to substantiate the challenge on the score of legal misconduct. We are not entering upon any discussion pertaining to moral misconduct as that is not the issue in the case at hand. The decision in Fiza Developers and Inter-Trade Private Limited (supra) has been rendered by this Court while interpreting Section 34 of the 1996 Act. The context being different, we are not inclined to apply the principles enumerated therein to the objection filed Under Sections 30 and 33 of the 1940 Act, for the simon pure reason that the authorities are plenty to make it limpid that the issue of legal misconduct on the part of the arbitrator should be manifestly discernible from the record.” 21. In the case at hand also, as the proceedings conducted by the Council were not in conformity with the mandatory provisions of the Act of 2006, therefore, the award dated 20.02.2020 suffers from an error which is apparent on the face of record. 22. Coming to the finding recorded by the learned Commercial Court while dismissing application under Section 34 of the Act of 1996 filed by appellant herein, that none of the grounds raised by applicant/appellant herein fulfill the conditions enumerated under Section 34 of the Act of 1996 for which impugned award may be interfered with. 23. Section 34 of the Act of 1996 provides for setting aside an award. Section 34 (2) contemplates an arbitral award may be set aside by the Court only in following circumstances:- 16 “(a) the party making the application establishes on the basis of the record of arbitral tribunal that - (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or failing such agreement, was not in accordance with this Part; or…….” 24. Reading of Section 34 (2) of the Act of 1996, as quoted above, makes it clear that an arbitral award can be set aside on the grounds enumerated in sub-section (2) of Section 34 and on no 17 other ground. Clause (iii) of sub-section (2) of Section 34 expressly provides that an arbitral award is liable to be set aside if the party making an application under Section 34 of the Act was not given proper notice of appointment of arbitrator or of the arbitral proceedings or was otherwise unable to present his case. Thus, it can be contemplated that Section 34 (2) (a) (iii) of the Act of 1996 consists of three distinct limbs joined disjunctively by the word “or”, which means, if any of the conditions, as mentioned above, is established, it is sufficient to attract the ground for setting aside arbitral award. 25. From the document of the Council dated 6.1.2016 addressed to appellant herein, which is placed by learned counsel for respondent for perusal of this Court, it can be seen that on the basis of application submitted by respondent herein, conciliation proceeding was drawn by the Council; reply on behalf of appellant was filed and on account of non-settlement of dispute between the parties, the Council took the dispute for arbitration itself under Section 18 (3) of the Act of 2006 and issued notice to appellant herein. Hence, it is clear that intimation of arbitral proceeding under Section 18 (3) of the Act of 2006 was duly given to appellant herein and pursuant thereto appellant appeared before the Council. Thus, first and second limb of Section 34 (2) (a) (iii) of the Act of 1996 are satisfied in present case. 18 26. Now, the question that arise for consideration is whether appellant herein was able to present his case before the Council effectively, which is the third limb of Section 34(2)(a)(iii) of the Act of 1996. 27. Section 18 (3) of the Act of 2006 empowers the Council to itself arbitrate the dispute when the conciliation initiated under Section 18 (2) is not successful, and to pass an award. It further makes it clear that when arbitration proceeding is initiated all the provisions of the Act of 1996 will apply, as if arbitration was in pursuance of an arbitration agreement referred under sub- section (1) of Section 7 of the Act of 1996. Thus, if the Council decides to conduct the arbitration proceedings, the relevant provisions under the Act of 1996 will apply and the procedure contemplated under the Act of 1996 is to be followed. Meaning thereby, once the Council has assumed the role of the Arbitrator, it requires to issue notice to applicant to file a statement of claim in accordance with Section 23 (1) of the Act of 1996 setting out the facts supporting the claim, issues in dispute, relief sought and documents relied upon, and thereafter to respondent calling for statement of defence and counter claim, if any, in support of his case. 28. A perusal of the order sheets recorded by the Council as also the award passed by the Council dated 23.12.2020 reveals that upon making application for conciliation by respondent herein, 19 attempt was made by the Council to conciliate between parties, however, there was no favourable outcome and therefore, the Council itself has taken up the dispute for arbitration under Section 18 (3) of the Act of 2006, directed both the parties to submit their written arguments and fixed the matter on 30.1.2016 directing the parties to appear for hearing along with necessary documents. On 30.1.2016, applicant/respondent herein submitted letter dated 24.11.2015, a copy whereof was supplied to non-applicant/ appellant herein for filing its reply as also written arguments within 21 days. Appellant herein filed reply on 04.05.2016 to letter dated 24.11.2015. Thereafter, the matter was taken up by the Council on various dates and only presence of the parties was recorded. On 20.02.2020 the matter was finally heard by the Council and the award was passed on 23.12.2020. In the entire proceeding of the Council, there is nothing to show filing of a statement of claim by claimant/respondent herein, submission of statement of defence by non-applicant/appellant herein, framing of points for determination, production of evidence etc. as contemplated under the Act of 1996. 29. When the Council had invoked the proceedings under Section 18 (3) of the Act of 2006 and acted as an Arbitrator, it ought to have taken up the dispute as an Arbitrator and should have followed the procedure enumerated under the Act of 1996. The 20 Council proceeded to adjudicate the dispute without directing claimant/respondent herein to file a Statement of Claim in arbitral proceedings and without granting opportunity to appellant herein to file statement of defence, as contemplated under Section 23 of the Act of 1996. The Council did not even conduct any proceeding such as recording evidences, marking of documents, opportunity to cross-examine the witnesses of claimant etc. 30. Application filed under Section 18 (1) of the Act of 2006 for initiating conciliation could not, by itself, be treated as statement of claim in arbitral proceedings. Proceedings for conciliation and arbitration cannot be clubbed as there is a fundamental difference between conciliation and arbitration. During the conciliation proceedings, the Council was under obligation to assists the parties to arrive at an amicable settlement, in an impartial and independent manner. Whereas, in arbitration, the arbitral tribunal / arbitrator adjudicates the disputes between the parties based on the pleadings in statement of claim, statement of defence and evidence in support thereof adduced by respective parties. Transition from conciliation to arbitration necessitated compliance with the mandatory procedure prescribed under the Act of 1996. The claimant must present a clear statement of claim, setting out facts, reliefs, and supporting documents. Respondent must then be afforded a reasonable 21 opportunity to submit a statement of defence. Only through such exchange does the Council obtain a crystallized understanding of disputes. If this statutory stage is bypassed, very identification of issues remains absent. Adjudication without pleadings is akin to deciding in a vacuum, depriving parties of opportunity to contest. By surpassing the mandatory provision of the Act of 1996, the Council deprived the appellant herein of its statutory right to effectively present its case, which also amounts to violation of the principles of natural justice. 31. In case of Associate Builders vs Delhi Development Authority, reported in (2015) 3 SCC 49, Hon’ble Supreme Court has observed thus:- “30...The Audi Alteram Partem principle which undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34 (2) (a) (iii) of the Arbitration and Conciliation Act. These Sections read as follows: "18. Equal treatment of parties.- The parties shall be treated with equality and each party shall be given a full opportunity to present his case. 34. Application for setting aside arbitral award.- (2) An arbitral award may be set aside by the Court only if- (a) the party making the application furnishes proof that- (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; " 32. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Supreme Court has held as under:- 22 "35. …..However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra).” 33. In case of Jharkhand Urja Vikas Nigam Ltd. (supra), Hon’ble Supreme Court has observed thus:- “14. From a reading of Section 18(2) and 18(3) of the MSMED Act it is clear that the Council is obliged to conduct conciliation for which the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 would apply, as if the conciliation was initiated under Part III of the said Act. Under Section 18(3), when conciliation fails and stands terminated, the dispute between the parties can be resolved by arbitration. The Council is empowered either to take up arbitration on its own or to refer the arbitration proceedings to any institution as specified in the said Section. It is open to the Council to arbitrate and pass an award, after following the procedure under the relevant provisions of the Arbitration and Conciliation Act, 1996, particularly Sections 20, 23, 24, 25. ” 34. As discussed above, as the Council did not initiate arbitration proceedings in accordance with mandatory provisions envisaged under the Act of 1996, as a result of which appellant was unable to present his case before the Council effectively, which also amounts to violation of principles of natural justice, and therefore, the award passed by the Council is vitiated under 23 Section 34 (2) (a) (iii) of the Act of 1996. Thus, finding of learned Commercial Court that appellant has not been able to fulfill any of the conditions enumerated under Section 34 of the Act of 1996 is erroneous and not sustainable. 35. Coming to the argument raised by learned counsel for respondent based on the observation made by the learned Commercial Court on Para-1 of the pleadings made in application under Section 34 of the Act of 1996 that when settlement is not arrived in proceeding under Section 18 (2) of the Act of 2006, arbitration proceeding is started under Section 18 (3) is concerned, the Court is conscious of the fact that pleadings being the handwork of lawyer, may be imperfect or suffer from defects or omission. Nevertheless, the proceedings conducted before the authority concerned are the best evidence of what actually transpired and must prevail over any deficiency in the pleadings. The pleadings made by wrong understanding of law, would not estop the party to take other correct stand in subsequent proceedings as held by Hon’ble Supreme Court in case of Group Chimique Tunisien SA (supra). Relevant portion of said decision is reproduced herein below:- “9.It is true that the petitioner had contended before the Jordanian Court that there was no arbitration agreement between the parties. But the said contention was not accepted and the suit filed by the petitioner has been dismissed on the ground of want 24 of jurisdiction. Thereafter, on reconsidering the matter and taking legal advice, with reference to the contentions of the respondent, the petitioner has now proceeded on the basis that an arbitration agreement exists between the parties. If, on account of mistake or wrong understanding of law, a party takes a particular stand (that is, there is no arbitration agreement), he is not barred from changing his stand subsequently or estopped from seeking arbitration. (See U.P. Rajkiya Nirman Nigam Ltd. v. Indore (P) Ltd., [1996] 2 SCC 667, where the contention based on estoppel was negatived while considering a reserve (sic reverse) situation.” 36. In above facts of the case and decision of Hon’ble Supreme Court in Group Chimique Tunisien SA (supra), submission made by learned counsel for respondent and finding recorded by learned Commercial Court in impugned order under Section 34 of the Act of 1996 is not sustainable. 37. In view of aforesaid discussion and taking into consideration above decisions of Hon’ble Supreme Court, it is apparent that appellant was not granted proper opportunity to present his case. Accordingly, the impugned order dated 08.08.2025 passed by the Commercial Court (District Level) Raipur in Arb. MJC No.4/2021 is set aside. Application under Section 34 of the Act of 1996 filed by appellant herein is allowed and the award dated 20.02.2020 passed by the Council is set aside. The matter is remanded back to the Council for reconsideration from the 25 stage contemplated under Section 18 (2) of the Act of 2006 and for proceeding thereafter strictly in accordance with law. 38. Copy of document of the Council dated 06.01.2016, which is placed by learned counsel for appellant, be treated as part and parcel of the paper book. Sd/- Sd/- (Parth Prateem Sahu) (Sachin Singh Rajput) Judge Judge roshan/-