MSME Award Still Executable Despite Section 34 Withdrawal; Punjab & Haryana High Court Rejects Article 227 Challenge in Execution Proceedings

Case Name: M/s Pahwa Impex Pvt. Ltd. v. M/s Kanuj Home Textiles Exim

Date of Judgment: 15 May 2026

Bench: Justice Jasgurpreet Singh Puri

Citation: CR-5403-2025

Held: The Punjab and Haryana High Court held that once a party withdraws objections under Section 34 of the Arbitration and Conciliation Act, 1996, it cannot subsequently invoke Article 227 of the Constitution to challenge the arbitral award or execution proceedings on substantially identical grounds. The Court further held that the Executing Court cannot go beyond the arbitral award and that the issue regarding enforceability of MSME Facilitation Council awards, passed through appointed arbitrators, is presently pending consideration before a larger Bench of the Supreme Court.

Summary: The petitioner, M/s Pahwa Impex Pvt. Ltd., filed a civil revision petition under Article 227 challenging the order of the Additional District Judge, Karnal, which had dismissed objections raised in execution proceedings arising out of an arbitral award passed under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The arbitral award had been rendered by a Sole Arbitrator after reference by the Haryana Micro and Small Enterprises Facilitation Council under Section 18(3) of the MSMED Act.

The petitioner argued that the award was inexecutable because the Sole Arbitrator lacked jurisdiction to pass an enforceable award independently and ought to have merely submitted a report to the Facilitation Council for final adjudication. Reliance was placed on the Punjab and Haryana High Court judgment in Indian Oil Corporation Limited v. Haryana Micro and Small Enterprise Facilitation Council, wherein it had been observed that arbitrators appointed under the MSMED framework could not independently render enforceable awards.

The respondent, M/s Kanuj Home Textiles Exim, opposed the petition contending that the petitioner had participated in the arbitral proceedings, filed objections under Section 34 of the Arbitration Act, and later withdrawn them without depositing 75% of the awarded amount as mandated under Section 19 of the MSMED Act. It was argued that after abandoning the statutory remedy, the petitioner could not invoke the supervisory jurisdiction of the High Court under Article 227.

The High Court noted that the petitioner had earlier treated the impugned decision as an “award” while filing objections under Section 34 and could not subsequently change its stand during execution proceedings. The Court further observed that the issue regarding whether MSME Facilitation Councils or appointed arbitrators can validly act as arbitrators after conciliation has already been referred by the Supreme Court to a larger Bench in Tamil Nadu Cements Corporation Ltd. v. MSEFC. Therefore, the Executing Court rightly refused to declare the award inexecutable.

The Court also emphasized that Article 227 jurisdiction cannot be converted into an appellate mechanism after a litigant voluntarily abandons the statutory remedy available under Section 34 of the Arbitration Act. Permitting such a course would amount to forum shopping and abuse of process.

Decision: The Punjab and Haryana High Court dismissed the civil revision petition and upheld the Executing Court’s order rejecting objections to execution. The Court held that the petitioner, having withdrawn objections under Section 34 of the Arbitration and Conciliation Act without complying with the mandatory deposit requirement under Section 19 of the MSMED Act, was estopped from re-agitating the same issues through Article 227 proceedings. The Court further held that the question regarding enforceability of awards passed by arbitrators appointed through MSME Facilitation Councils remains pending before a larger Bench of the Supreme Court and therefore no interference was warranted at the execution stage.