2014 (2) TMI 1420 - HC - Indian Laws

Validity of all the proceedings before the Uttar Pradesh State Micro and Small Enterprises Facilitation Council - direction to the Council to decide the objection filed under Section 8 of the Arbitration and Conciliation Act, 1996 - HELD THAT - Section 18 empowers the Council, upon receipt of a reference, to conduct a conciliation in terms of the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996. Where the conciliation is not successful and is terminated without a settlement between the parties, the Council is empowered to itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services. Sub-section (4) of Section 18 begins with a non obstante clause which operates notwithstanding anything contained in any other law for the time being in force. Under sub-section (4), the Council or as the case may be, the centre providing alternative dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India - The Act thus provides for a statutory remedy of an arbitration in sub-section (4) to Section 18 notwithstanding anything to the contrary contained in any other law for the time being in force. In the present case, the Council is seized of the reference on a claim petition filed by the second respondent - the relief of certiorari for quashing all the proceedings before the Council is manifestly misconceived. The proceedings had been entertained by the Council in pursuance of the provisions of the Act. Though there may be an arbitration agreement between the parties, the provisions of Section 18(4) specifically contain a non obstante clause empowering the Facilitation Council to act as an Arbitrator. Moreover, Section 24 of the Act states that Sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. There are no reason to interdict the proceedings before the Council at this stage. Once the conciliation is unsuccessful, the Council will necessarily have to act in pursuance of the provisions of Section 18. Hence, no case for interference is made out. The petition is, accordingly, dismissed.

Summary

Issues:
1. Interpretation of arbitration agreement in a contract.
2. Application of Micro, Small and Medium Enterprises Development Act, 2006.
3. Jurisdiction of Micro and Small Enterprises Facilitation Council.
4. Authority of the Council to act as an Arbitrator.
5. Relief sought by the petitioner.

Analysis:

Issue 1 - Interpretation of arbitration agreement in a contract:
The petitioner relied on an arbitration agreement within the contract between the parties, specifying the arbitration process to resolve disputes. The agreement mandated arbitration under the Arbitration and Conciliation Act, 1996, with the Executive Director/GM of BHEL, Bhopal or a nominated arbitrator. The petitioner sought to enforce this agreement.

Issue 2 - Application of Micro, Small and Medium Enterprises Development Act, 2006:
The Act aims to promote and develop micro, small, and medium enterprises, providing for timely payments between buyers and suppliers. It mandates the establishment of Facilitation Councils by State Governments. Section 15 sets payment timelines, and Section 18 allows dispute references to the Council, empowering it to conduct conciliation or arbitration.

Issue 3 - Jurisdiction of Micro and Small Enterprises Facilitation Council:
Section 18 of the Act empowers the Council to conduct conciliation under the Arbitration and Conciliation Act, 1996. If conciliation fails, the Council can proceed with arbitration or refer the dispute to an alternate resolution service. The Council has jurisdiction to act as an Arbitrator or Conciliator in disputes between local suppliers and buyers nationwide.

Issue 4 - Authority of the Council to act as an Arbitrator:
The Act provides a statutory remedy for arbitration under Section 18(4), giving the Facilitation Council the authority to act as an Arbitrator, notwithstanding other laws. The Council's role in arbitration is established by the Act, allowing it to resolve disputes effectively.

Issue 5 - Relief sought by the petitioner:
The petitioner sought intervention from the Court to quash proceedings before the Council and direct arbitration based on the contract's terms. However, the Court dismissed the petition, stating that the Council had the authority to proceed with arbitration under the Act. The Court found no grounds for interference and rejected the petitioner's request.

In conclusion, the Court upheld the Council's jurisdiction to conduct arbitration under the Micro, Small and Medium Enterprises Development Act, 2006, emphasizing the statutory provisions allowing the Council to act as an Arbitrator. The judgment highlights the importance of adhering to the Act's procedures in resolving disputes between micro and small enterprises, even in the presence of private arbitration agreements.