MSME Facilitation Council Acted As Conciliator Can Also Administer The Arbitration, Bar Under S.80 Of A&C Act Does Not Apply : Chhattisgarh High Court

The Single Bench of Justice Rajendra Chandra Singh Samant has observed that provisions of S.80 of the A&C Act cannot override the provision of the MSMED Act to prevent the council from acting as arbitrator. It has been held that combined reading of Section 18 and 24 of the Act, 2006, show that there is an overriding effect over provision under Section 80 of the Act 1996.

Facts

The parties entered into an agreement wherein the petitioner agreed to supply and transfer certain goods. Certain disputes arose between the parties. The respondent invoked the jurisdiction of the MSME Facilitation Council in terms of S.18 of the MSMED Act. After the failure of the conciliation proceedings, the parties were referred to arbitration administered by the facilitation council.

Challenging the jurisdiction of the tribunal to adjudicate the dispute, the petitioner filed the writ petition.

Contention Of The Parties

The petitioner justified the invocation of writ jurisdiction of the court to challenge the arbitration proceedings on the following grounds:

• The facilitation council has already acted as the conciliator in the conciliation proceedings between the parties, therefore, in view of S. 80 of the A&C Act, it is now precluded from administering the arbitration proceedings between the parties.
• The tribunal consists of an even number of arbitrators.
• The arbitrators have not filed a disclosure in terms of S. 12 of the A&C Act.
• The council can only adjudicate on disputes which are regarding non-payment of amount, it cannot decide disputes regarding price variation, etc.

The Respondent countered the arguments on behalf of the petitioner on the following grounds:

• That the court itself directed the respondent to file its reference before the MSME Council in terms of S. 18 of the MSMED Act.
• The pleadings in the arbitration case are complete from both the parties. The case has been finally heard and only the award is to be passed, therefore, the petitioner has an alternative remedy to challenge the award under S. 34 of the Act.
• Keeping in mind the limited judicial interference permissible under the A&C Act this is not a fit case for exercise of jurisdiction under A. 226 of the Constitution of India.
• Various High Courts across the country have held that Section 80 of the Act, 1996 cannot override the provisions of the MSMED Act, 2006 and it cannot prevent the facilitation council to act as an arbitrator.

Analysis By The Court

The Court observed that the respondent field the reference before the Council only on the direction given by the Court in an earlier writ petition filed by the petitioner.

The Court has held that the bar under S. 80 of the A&C Act which prevents the conciliator from acting as the arbitrator does not apply to MSME Facilitation Council which can administer both the conciliation as well as arbitration proceedings.

The Court further has observed that provisions of S.80 of the A&C Act cannot override the provision of the MSMED Act to prevent the council from acting as arbitrator. The Court referred to S. 24 of the MSMED Act which gives overriding effect to provisions of the MSMED Act over any other law. It held that combined reading of Section 18 and 24 of the Act, 2006, show that there is an overriding effect over provision under Section 80 of the Act 1996.

Case Title: SEW Infrastructure Ltd. v. Micro & Small Enterprises Facilitation Council and Anr. WPC NO. 4235/2021

Date: 14.01.2022

Citation: 2022 LiveLaw (Chh) 28

Counsel for the petitioner: Mr. Ashish Shrivastava, Sr. Advocate with Mr. Aman Saxena, Advocate.

Counsel for the Respondent(s): Ms. Ginny Jetley Rautray with Mr. Akshay K. Shail & Mr. P.R. Patankar, Advocates.

Counsel for Caveator: Mr. Vaibhav Dhar Diwan, Advocate.

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