Private Arbitration Clauses Cannot Override Statutory Mandates Under MSMED Act : Supreme Court

Reaffirming that the MSMED Act prevails over the Arbitration Act, as held in Gujarat State Civil Supplies v. Mahakali Foods, the Supreme Court set aside the Karnataka High Court's interference with MSMED proceedings in Delhi, despite the contract naming Bengaluru as the arbitration seat. The Court clarified that private contractual clauses cannot override the statutory mandate of the MSMED Act. Since the appellant-supplier was registered in Delhi, the Court noted that the Delhi Arbitration...

Ad-Hoc Arbitrator Can Grant Interest U/S 16 Of MSMED Act, Even If Reference Was Not Made To MSME Council: Delhi High Court

The Delhi High Court bench of Justice Jasmeet Singh held that an ad-hoc arbitrator (appointed under the Arbitration and Conciliation Act, 1996) is empowered to grant interest rate contemplated under Section 16 of the Micro, Small and Medium Enterprises Development Act, 2006, even if the reference was not made to the MSME Facilitation Council for resolving disputes. Brief Facts: Respondent No. 2 (“Owner”) owned a thermal power plant in Haldia, West Bengal. It appointed BF ...

No Interim Relief U/S 9 Of A&C Act Without Exceptional Circumstances After Conciliation Fails & Arbitration Starts Under MSME Act: Calcutta HC

The Calcutta High Court bench of Justice Shampa Sarkar has held that once conciliation fails under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), the Council may either conduct the arbitration itself or refer the matter to an arbitral institution. As per Section 18(3) of the MSME Act, the provisions of the Arbitration and Conciliation Act, 1996 (Arbitration Act) apply to such arbitration proceedings. It further held that unless exceptional circumstances are...

MSME Council Cannot Reject Arbitrable Claims Without Providing Any Reasons When Meditation U/S 18 Of MSME Act Has Failed: Calcutta HC

The Calcutta High Court bench of Justice Shampa Sarkar has held that the Micro, Small and Medium Enterprises (MSME) Facilitation Council cannot reject the arbitrable claims of the supplier without providing an opportunity to present evidence in support of the same, especially when mediation, as required under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act) has failed. As per law, the Council is then mandated to either adjudicate the arbitrable matter...

MSME Council Cannot Pass Award On Account Of Failure Of Conciliation Proceedings, Has To Refer Matter To Arbitration: Karnataka HC

The Karnataka High Court has held that the Micro and Small Enterprises Facilitation Council cannot pass an award on account of conciliation having failed without referring the matter to arbitration. Justice Suraj Govindaraj held thus while allowing the petition filed by M/s Enmas GB Power Systems Projects Ltd. It said, “The matter is remitted to the Karnataka Micro and Small Enterprises Facilitation Council, to formally terminate the conciliation proceedings and thereafter take a...

Court Can Appoint Arbitrator U/S 11(6) Of Arbitration Act If MSME Council Fails To Initiate Mediation U/S 18 Of MSMED Act: Delhi HC

The Delhi High Court bench of Justice Jasmeet Singh has held that When the Facilitation Council under the Micro, Small, and Medium Enterprises Development Act (MSMED Act) fails to initiate the mediation process under Section 18 of the MSMED Act, the court can appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Arbitration Act). Brief Facts: The respondent placed a Letter of Intent for execution of civil and associated work for construction of New...

Withdrawal Of MSMED Council Application Does Not Preclude Arbitration U/S 11, Even Without Council's Response: Delhi High Court

The Delhi High Court bench of Justice Subramonium Prasad held that withdrawal of an application before the MSMED Council does not bar a party from seeking the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, even in the absence of any corresponding response from the MSMED Council. Brief Facts: Respondent No. 2 and 3 approached M/s Smartschool Education Private Limited (“Petitioner”) to lease the software. An agreement was entered into...

MSMED Act Will Prevail Over Arbitration Act In Disputes Pertaining To A Party Which Is An MSME: Delhi High Court

The Delhi High Court Bench of Justice Manoj Kumar Ohri has reiterated that the Arbitration and Conciliation Act, 1996 is a general law governing the field of arbitration whereas the MSMED Act, 2006 governing a very specific nature of disputes concerning MSMEs, is a specific law and being a specific law would prevail over Arbitration and Conciliation Act, 1996. Background Facts The Petitioner had engaged the Respondent for providing certain IT services in a project awarded to the...

Mandate Of Facilitation Council Is Not Terminated Even If It Fails To Render Award Within 90 Days U/S 18(5) Of MSME Act: Bombay High Court

The Bombay High Court bench of Justice Somasekhar Sundaresan has held that the mandate of the MSME Facilitation Council (Council) cannot be terminated merely on the ground that it failed to render an award within 90 days under section 18(5) of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSME Act”) from the date of entering reference as this time period is directory in nature. Brief Facts: In this Petition under Section 34 of the Arbitration and Conciliation Act,...

Violation Of Provisions Of Arbitration Act Or MSMED Act Can Be Adjudicated By Court U/S 34 Of Arbitration Act: Orissa High Court

An Orissa High Court bench of Justice K.R. Mohapatra has dismissed a writ petition upon holding that the petitioner, without availing the efficacious statutory remedy u/s 34 of the Arbitration Act had approached the Court under Articles 226 and 227 of the Constitution for which the Court was not inclined to exercise its discretionary power to entertain it.Additionally, the court held that violation of any provisions of the Arbitration Act and/or the MSMED Act can be effectively adjudicated...

Court's Jurisdiction U/S 34 Of Arbitration Act Against Award Under MSMED Act Is Determined By Agreement Between Parties: Gujarat HC

The Gujarat High Court bench of Mrs. Chief Justice Sunita Agarwal and Mr.Justice Pranav Trivedi of has held that the jurisdiction of the Court to hear the application under Section 34 of the Arbitration Act' 1996 as to challenge the award passed under Section 18(4) of the MSMED Act' 2006, would be governed by the agreement between the parties which has conferred exclusive jurisdiction to a particular Court. Brief Facts The present appeal is directed against the judgment and order...

Writ Jurisdiction Cannot Be Invoked To Challenge Arbitral Award, Only To Circumvent Statutory Requirement Of S.19 Of MSMED Act: Delhi High Court

The Delhi High Court bench of Justice Sanjeev Narula, while hearing a writ petition challenging an arbitral award passed by the Micro and Small Enterprises Facilitation Council (MSFEC), has held that invoking the writ jurisdiction to challenge an arbitral award would circumvent the statutory requirement of pre-deposit u/s 19 of the MSMED Act, and would amount to defeating the legislative intent. Submissions: The senior counsel for the Petitioner made the following submissions: A...