MSME: High Court Quashes Ex Parte Award Referred to Individual Arbitrator

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The petitioner challenged an ex parte arbitral award and the underlying reference made by the Himachal Pradesh Micro & Small Enterprises Facilitation Council (MSEFC) under Section 18 of the MSMED Act, 2006, to an individual empanelled arbitrator. The High Court of Himachal Pradesh allowed the writ petition and set aside both the reference and the resulting award. The Court held that under Section 18(3) of the MSMED Act and its governing rules, upon the failure of conciliation, the Facilitation Council is statutorily mandated either to take up the arbitration itself or to refer the dispute to an “institution” or “centre” providing alternative dispute resolution services, and it has no legal authority to refer a dispute to an individual or ad-hoc arbitrator.

  • Statutory Mandate for Institutional Arbitration:
    • Under Section 18(3) of the MSMED Act, 2006, when conciliation fails, the Facilitation Council must either conduct the arbitration itself or refer the matter to an “institution or centre” providing alternative dispute resolution services.
    • The Act and its rules do not contemplate or permit referring a dispute to an individual or ad-hoc arbitrator. Government empanelment of individual arbitrators does not convert them into an arbitration institution or centre, making any reference to an individual arbitrator void ab initio and a complete nullity.
  • Verification of “Supplier” Status:
    • Recourse to Section 18 of the MSMED Act can only be taken if the claimant-supplier qualifies as a micro or small enterprise.
    • A medium enterprise is excluded from the definition of “supplier” under Section 2(n) of the Act, and the Facilitation Council must verify the claimant’s enterprise status before entertaining any reference.

STPL (Web) 2026 HP 540

M/s Tynor Orthotics Pvt. Ltd. Versus Himachal Pradesh Micro & Small Enterprises Facilitation Council, & Ors. (D.O.J. 07.07.2026)

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Arbitration: Nullity of Unilateral Appointments: High Court Sets Aside Arbitral Award

August 8, 2026 No Comments

The petitioner and the respondent-Department cross-challenged an arbitral award dated 24.09.2022 passed in a dispute arising from a public works contract. The sole arbitrator had been unilaterally appointed by a serving Chief Engineer of the HPPWD, who is an employee of one of the contesting parties. The High Court of Himachal Pradesh set aside the arbitral award, holding that under Section 12(5) of the Arbitration and Conciliation Act, 1996, an official who is an employee of a contesting party is statutorily ineligible to act as an arbitrator, and consequently lacks the legal competence to appoint or nominate any other person as a sole arbitrator. The Court ruled that an award rendered by an arbitrator so appointed is void ab initio, non est in the eyes of the law, and in direct conflict with public policy.

  • Ineligibility of Appointing Authorities and Nominees:
    • Under Section 12(5) and the Seventh Schedule of the Arbitration and Conciliation Act, 1996, an employee, consultant, or person having a business relationship with a contesting party is statutorily ineligible to act as an arbitrator.
    • As settled in Perkins Eastman Architects DPC v. HSCC (India) Limited, an authority that is itself disqualified from acting as an arbitrator is equally disqualified from appointing or nominating any other person as a sole arbitrator.
  • Strict Requirement for Waiver under Proviso to Section 12(5):
    • The statutory bar under Section 12(5) can only be waived pursuant to the proviso if there is an express agreement in writing executed after the disputes have arisen.
    • Conduct, oral consent, or mere participation in proceedings (such as a ‘no objection’ recorded in a procedural order) cannot substitute the mandatory requirement of an express written agreement, and is inconsequential.

STPL (Web) 2026 HP 550

Balbir Singh Versus Executive Engineer, B & R Division, HPPWD, Sarkaghat, District Mandi, HP. (D.O.J. 13.07.2026)

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Absence of Holograms: High Court Quashes FIR Under Section 39 and Directs Compounding

August 8, 2026 No Comments

The petitioner, proprietor of a liquor bottling plant, sought the quashing of an FIR registered under Sections 39(1) and 39(2) of the Himachal Pradesh Excise Act after search operations revealed that certain liquor bottles in his possession lacked requisite holograms. The High Court of Himachal Pradesh allowed the petition under Section 482 of the CrPC, holding that the failure to affix holograms does not constitute unlawful production, manufacture, possession, transport, or sale under Section 39 of the Act, but rather constitutes a breach of license conditions punishable under Section 43, which is compoundable. Ruling that continuing criminal proceedings under Section 39 was an abuse of process, the Court quashed the FIR and, to bring finality to the matter, imposed a composite penalty of ₹1.00 lakh in lieu of pending Section 43 proceedings.

  • Distinction Between Section 39 and Section 43 of the Himachal Pradesh Excise Act:
    • The omission or failure on the part of a licensee or manufacturer to affix requisite holograms on liquor bottles does not attract penal consequences under Sections 39(1) and 39(2) of the Himachal Pradesh Excise Act, which target unlawful production, manufacture, possession, import, export, transport, or sale.
    • Such a statutory or license omission falls squarely under Section 43 of the Act, which deals with breaches of license conditions by a licensee and is compoundable under the statute.
  • Quashing of Criminal Proceedings:
    • Prosecuting a licensee under Section 39 for missing holograms is legally unsustainable and constitutes an abuse of the process of the court.
    • Noting that co-accused individuals similarly situated had already obtained relief from the High Court, the criminal proceedings against the petitioner were ordered to be quashed.
  • Settlement and Imposition of Penalty:
    • To put a quietus to the litigation and bypass protracted departmental proceedings, the High Court exercised its authority to impose a penalty of ₹1.00 lakh upon the petitioner under Section 43 of the Act, directing payment to the Excise Department within four weeks to conclude all pending proceedings.

STPL (Web) 2026 HP 549

Manik Kumar Versus State of Himachal Pradesh and Anr. (D.O.J. 14.07.2026)

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Misinterpretation of Disability Rights: High Court Denies Mandamus for Supernumerary Post Creation

August 8, 2026 No Comments

The petitioner, a 100% visually impaired employee serving as a District Inspector/District Audit Officer, sought a writ of mandamus directing the respondents to create a supernumerary post at Rampur under Section 20(4) of the Rights of Persons with Disabilities Act, 2016, and to adjust him at that station. The High Court of Himachal Pradesh dismissed the writ petition, holding that Section 20(4) and its provisos regarding supernumerary posts apply strictly to employees who acquire a disability during their service and do not apply to individuals who were initially appointed directly under the quota reserved for persons with benchmark disabilities. The Court ruled that the statute does not mandate or provide for the creation of supernumerary posts for persons with disabilities appointed as such ab initio.

  • Scope and Applicability of Section 20(4) of the RPwD Act, 2016:
    • Sub-section (4) of Section 20 of the Rights of Persons with Disabilities Act, 2016, and its provisos (including the provision for supernumerary posts) apply strictly to employees who acquire a disability during their service.
    • These provisions are entirely inapplicable to an employee who was initially appointed to service against the quota reserved for persons with benchmark disabilities.
  • Absence of Statutory Mandate for Supernumerary Posts in Initial Appointments:
    • The statutory framework of the RPwD Act, 2016, does not contemplate or provide for the creation of supernumerary posts to accommodate a person with a disability who entered service as such.
    • A mandamus cannot be issued to compel authorities to create a supernumerary post or to post an officer at a station where the sanctioned post does not exist.

STPL (Web) 2026 HP 548

Shishu Pal Mehta Versus State of Himachal Pradesh and Another (D.O.J. 14.07.2026)

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Service Law: High Court Quashes Premature Transfer of Employee Posted via Judicial Order

August 8, 2026 No Comments

The petitioner, who had been posted to PHC Pragpur only a few months earlier pursuant to a judicial order, challenged a subsequent transfer order issued via a triangular arrangement that moved her to PHC Dhaliara. The High Court of Himachal Pradesh allowed the writ petition and quashed the premature transfer order, holding that the displacement was arbitrary and lacked administrative logic since the private respondent could have been adjusted directly at the alternative station located merely 10 kilometers away without disturbing the petitioner’s normal tenure.

  • Protection of Normal Tenure against Arbitrary Displacement:
    • Where an employee is posted to a station pursuant to an earlier judicial order and has completed only a few months of service, a subsequent transfer effected via a triangular arrangement without valid administrative justification is arbitrary and unsustainable in law.
    • The State cannot disrupt an employee’s normal tenure when simpler, direct administrative alternatives are available.
  • Absence of Administrative Logic in Triangular Transfers:
    • When a private respondent can be adjusted directly at a nearby alternative station (such as 10 kilometers away) and a simple two-way transfer between other parties is feasible, roping in a recently-placed employee through a complex triangular arrangement is unjustified.
  • Final Relief and Directions:
    • The impugned transfer order moving the petitioner from Pragpur to Dhaliara was quashed and set aside.
    • The respondent-authorities were directed to allow the petitioner to complete her normal tenure at Pragpur, while leaving the Department at liberty to post the private respondent directly at Dhaliara.

STPL (Web) 2026 HP 547

Smt. Anjana Kumari Versus State of Himachal Pradesh and Others (D.O.J. 14.07.2026)

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