Disputes under Micro, Small and Medium Enterprises Development Act, 2006 have to be adjudicated at Arbitration #indianlaws

Once the Act provides for a statutory remedy of arbitration in terms of Section 18(4), it was held that the relief of certiorari as sought for quashing all the proceedings before the Council was manifestly misconceived.

A claim petition was filed before the Uttar Pradesh State Micro and Small Enterprises Facilitation Council stating that supplier had supplied goods to the buyer against which no payment was made. Upon being served objections under Section 8 of the Arbitration and Conciliation Act, 1996 were filed stating that since there was an arbitration agreement between the parties, the dispute have to be referred to arbitration in terms thereof. Parties were directed to appear before the Member of the Facilitation Council for conciliation and later an order was passed with the observation that the conciliation was unsuccessful. A notice was accordingly issued to the buyer to file its reply failing which action would be taken in terms of the provisions of the Micro, Small and Medium Enterprises Development Act, 2006.

The Buyer moved before the High Court seeking its intervention and issuance of writ of certiorari whereby quashing all the proceedings before the Uttar Pradesh State Micro and Small Enterprises Facilitation Council and a direction to the Council to decide the objection filed under Section 8 of the Arbitration and Conciliation Act, 1996.

The Court clarified that the Micro, Small and Medium Enterprises Development Act, 2006 was enacted for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith. Section 15 of the said Act provides that where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day. The proviso to the said section, however, stipulates that in no case would the period agreed upon between the supplier and the buyer in writing would exceed forty-five days from the date of acceptance or the deemed date of acceptance.

Section 18 of the Act further provides for making a reference of disputes to the Council by any of the parties to the dispute. Section 18 empowers the Council, upon receipt of a reference, to conduct conciliation in terms of the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996. Where the conciliation is not successful and is terminated without there being any settlement between the parties, the Council is empowered to itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services. Section 18(4) begins with a non-obstante clause which operates irrespective of what is contained in any other law for the time being in force. The Council providing alternative dispute resolution services has jurisdiction to act as an Arbitrator or Conciliator in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.

Once the Act provides for a statutory remedy of arbitration in terms of Section 18(4), it was held that the relief of certiorari as sought for quashing all the proceedings before the Council was manifestly misconceived. It was held that though there may be an arbitration agreement between the parties, the provisions of Section 18(4) specifically contains a non obstante clause empowering the Facilitation Council to act as an Arbitrator and further as per Section 24 of the Act, Sections 15 to 23 of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

[M/s Bharat Heavy Electricals Limited vs. State Of U.P. & 2 Others]
(Allahabad HC, 24.02.2014)