Similar Matters Pending Before The Facilitation Council Under The MSME Act; Parties Can Be Referred To Arbitration: Jharkhand High Court

The Single Bench of Justice Sujit Narayan Prasad held that in view of the arbitration agreement between the parties, even if similar matters were pending before the Facilitation Council under the MSME Act, the same cannot be a ground for holding the application for appointment of arbitrator as not maintainable.

The petitioner/applicant National Collateral Management Services Limited entered into a Milling Agreement with the respondent Maa Diwri Rice Mill Pvt. Ltd., under which the respondent was required to complete the milling of paddy within a specified period. After the respondent failed to fulfil its obligations under the Agreement, the petitioner invoked the Arbitration Clause. The petitioner filed an application before the Jharkhand High Court under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (A&C Act) for appointment of Arbitrator.

The respondent Maa Diwri Rice Mill submitted before the High Court that since it had approached the Jharkhand Micro and Small Enterprises Facilitation Council in accordance with the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act) in a similar circumstance, therefore, the petitioner must be directed to approach the Council to avoid any conflicting order.

The petitioner National Collateral Management Services averred that in view of the Arbitration Clause contained in the said agreement, the application for appointment of arbitrator was maintainable even if the respondent had approached the Facilitation Council.

The petitioner added that there is no provision in the MSME Act to file counter-claims and hence, the application for appointment of arbitrator cannot be held to be not maintainable.

The Court observed that as per the relevant Clause contained in the said agreement, the dispute between the parties was required to be settled by arbitration through an arbitrator mutually agreed upon by them. The Court added that the petitioner accordingly made a request for appointment of the arbitrator.

The Court refuted the contention of the respondent that since a similar issue was pending adjudication before the Council constituted under the MSME Act, therefore, the application for appointment of arbitrator was not maintainable.

The Court held that merely because one of the parties had approached the Council under the MSME Act for adjudication of a similar dispute, the application for appointment of arbitrator could not be held to be not maintainable in view of the arbitration clause contained in the said agreement.

"This Court, is not in agreement with such submission reason being that even accepting that the similar matters are pending before the Council, the same cannot be construed to be a ground for holding this application not maintainable. The reason for coming to such conclusion is that under Section 11(6) of the Arbitration and Conciliation Act, 1996 is supposed to see the arbitration clause contained in the agreement/contract enriched in between the parties. The matter is otherwise different if there is no arbitration clause in the agreement then what has been submitted by the learned counsel for the respondent can be accepted, but, that is not the fact herein since there is specific arbitration clause as under Clause 19 of the Milling Agreement dated 31.12.2015 as quoted and referred above.", the Court ruled.

Thus, the Court allowed the application of the petitioner and appointed an Arbitrator.

Case Title: M/s National Collateral Management Services Limited versus M/s Maa Diwri Rice Mill Pvt. Ltd.

Dated: 07.07.2022 (Jharkhand High Court)

Counsel for the Petitioner: Mr. D.K. Sinha, Advocate and Mr. Vikas Pandey, Advocate

Counsel for the Respondent: Mr. Rohit, Advocate

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