2004 (2) TMI 379 - SC - Companies Law

Whether the High Court had the jurisdiction to pass the impugned order? Held that - Appeal allowed. The High Court erred in staying proceedings before the Council namely, the alleged failure of the appellant to serve notice under section 21 of the 1996 Act. It had no jurisdiction to do so.

Summary

Issues:
1. Jurisdiction of the High Court to pass an interim order staying arbitration proceedings before the Uttar Pradesh Industry Facilitation Council.
2. Applicability of the provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.
3. Interpretation of section 6(2) of the Act and its relation to the Arbitration and Conciliation Act, 1996.
4. Authority of the Arbitral Tribunal under section 16 of the 1996 Act.
5. Requirement of notice under section 21 of the 1996 Act for arbitration proceedings.

Analysis:
1. The appeal questioned the jurisdiction of the High Court to stay arbitration proceedings before the Council. The Supreme Court held that the High Court erred in staying the proceedings as it had no jurisdiction to do so. The Court emphasized that the Council, not the Court, had the authority to decide the validity of the proceedings under section 16 of the 1996 Act. The Court clarified that judicial intervention in arbitrations is limited by the non obstante provisions of the 1996 Act, specifically section 5.

2. The Court analyzed the provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. Section 6(2) of the Act incorporates the provisions of the 1996 Act, creating a legal fiction deeming disputes referred to the Council as pursuant to an arbitration agreement. The Court highlighted the limited scope of judicial intervention in such proceedings under the 1996 Act.

3. The judgment discussed the interpretation of section 6(2) of the Act in relation to the 1996 Act. It emphasized that the proceedings before the Council were governed by the 1996 Act, and the Arbitral Tribunal had the authority to rule on its jurisdiction under section 16. The Court rejected arguments related to the merits of the claim before the Council, stating that such matters were within the Tribunal's purview, not the Court's.

4. The Court elaborated on the authority of the Arbitral Tribunal under section 16 of the 1996 Act, emphasizing that the Tribunal could rule on its jurisdiction, including the question of whether its authority had been wrongly invoked. The Court cited previous judgments to support the Tribunal's wide-ranging authority under the Act.

5. The judgment addressed the requirement of notice under section 21 of the 1996 Act for arbitration proceedings. The Court noted that the alleged failure to serve notice under section 21 was not raised before the High Court by the respondent. It concluded that this debate could not be a ground for the High Court to interfere with the Council's jurisdiction and stay the proceedings.

In conclusion, the Supreme Court set aside the decision of the High Court, confirming the decision of the City Civil Court and allowing the appeal with costs.