Application Under Section 11 Of The A&C Act Is Maintainable Despite The Pendency Of Reference Before The MSME Council: Jharkhand High Court

The Bench of Justice Sujit Narayan Prasad has held that the High Court while exercising powers under Section 11 of the Act is only required to see if there is an arbitration clause between the parties and an objection regarding the pendency of a reference before the MSME Council on the same matter is not to be looked into at that stage.

Facts

The parties entered into a Milling Agreement dated 30.11.2017. Clause 5 of the agreement provided that the respondent had to complete the milling of paddy within a period of seven working days from the date of lifting of paddy. Clause 19 of the agreement was the arbitration clause.

A dispute arose between the parties on account of delay in the execution of the said work. The petitioner requested the respondent to appoint the arbitrator, however, in the meantime the respondent filed a reference before the MSME Council.

Thereafter, the petitioner filed the application under Section 11 of the A&C Act for the appointment of the arbitrator.

The contention of the parties

The petitioner sought the appointment of the arbitrator on the following grounds:

• There is an arbitration clause between the parties and once the parties have agreed for referring the dispute for its resolution, the parties have to abide by the terms of the contract.
• There is no provision under the MSMED Act, 2006 for filing a counter-claim, therefore, the petitioner has no option but to file the application for appointment of the arbitrator.

The respondent objected to the maintainability of the petition on the following grounds:

• The respondent has already filed a reference before the MSME Council, therefore, the petition under Section 11 of the A&C Act is not maintainable.

Analysis by the Court

The Court held that merely because a reference on the same issue is pending before the MSME Council under Section 18 of the MSMED Act, the same is not a bar to the application under Section 11 of the A&C Act for the appointment of the arbitrator.

The Court held that the High Court while exercising powers under Section 11 of the Act is only required to see if there is an arbitration clause between the parties and an objection regarding the pendency of a reference before the MSME Council on the same matter is not to be looked into at that stage.

The Court further observed that no appointment of the arbitrator was made within 30 days period after the notice of arbitration, therefore, it is a fit case where the power conferred to this Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 is required to be exercised for appointment of Arbitrator, considering Clause 19 of the contract.

Accordingly, the Court allowed the petition.

Case Title: National Collateral Management Services Ltd v. Kunk Bihari Food Processing Pvt Ltd, Arbitration Application No. 31 of 2021

Date: 28.07.2022

Citation: 2022 LiveLaw (Jha) 72 

Counsel for the Petitioner: Vikas Pandey

Counsel for the Respondent: Rohit

Click Here To Read/Download Order