2019 (2) TMI 2082 - HC - Indian Laws

Referring a dispute for arbitration under the aegis of Delhi International Arbitration Centre - in the agreement entered into between the appellant and respondent No.2 (M/s Slipco Constructions Private Limited), there was an independent arbitration clause - HELD THAT - It is clear that once a reference was made to the Felicitation Council and the Council conducted conciliation proceedings as contemplated under sub-Section (2) of Section 18 and the appellant submitted to the conciliation, statutory in nature under Section 18(2), the necessary statutory consequence would be that on failure of the conciliation, the matter has to be referred for arbitration under sub-Section (3) of Section 18 and the impugned order only refers to the action taken by the Felicitation Council for reference to the arbitration on failure of the conciliation. The learned writ Court has rightly rejected the contention of the appellant to the effect that once there was an arbitration agreement, therefore, the arbitration should have been as per the arbitration agreement. The MSMED Act is applicable in the dispute in question, in view of a decision rendered in the case of Bharat Heavy Electricals Limited vs. The Micro and Small Enterprises Facilitations Centre Anrs. 2017 (9) TMI 2004 - DELHI HIGH COURT and the appellant themselves having chosen to take recourse to the remedy under the MSMED Act are bound by the entire statutory provision contained in Section 18. The appellant had two options, either to take recourse to the arbitration agreement and insist on invoking the arbitration clause but having chosen to take recourse to the statutory remedy under the MSMED Act, the entire process, statutory in nature contemplated under the said Act, i.e., Section 18 has to be complied with and in refusing to interfere into the matter on such consideration, in our considered view, no error has been committed by the learned writ Court. Appeal dismissed.

Summary

Issues:
1. Interpretation of arbitration clauses in agreements.
2. Jurisdiction of Micro and Small Enterprises Facilitation Council under the MSMED Act.
3. Compliance with statutory procedures under Section 18 of the MSMED Act.

Analysis:
1. The appeal was filed challenging an order referring a dispute to arbitration under the MSMED Act. The appellant argued that since there was an independent arbitration clause in the agreement, the reference for statutory arbitration was unsustainable. However, the respondent contended that once the appellant participated in the conciliation process under the MSMED Act, they were bound by the statutory provisions. The court noted that the Felicitation Council conducted conciliation as per Section 18(2) of the Act, and upon the failure of conciliation, the matter had to be referred for arbitration as per Section 18(3).

2. The court examined Section 18 of the MSMED Act, which outlines the procedure for reference to the Micro and Small Enterprises Facilitation Council. The Council has the authority to conduct conciliation and, if unsuccessful, refer the matter for arbitration. The court emphasized that the statutory consequences of submitting to conciliation under Section 18(2) required the matter to proceed to arbitration if conciliation failed. The jurisdiction of the Council to act as an arbitrator or conciliator in disputes between suppliers and buyers was also highlighted.

3. It was established that the appellant, by choosing to pursue the statutory remedy under the MSMED Act, was bound by the entire statutory provision contained in Section 18. The court referenced a previous decision to support the applicability of the MSMED Act in the dispute. The appellant's decision to opt for the statutory remedy necessitated compliance with the procedures outlined in Section 18. As a result, the court found no error in the learned writ Court's decision to dismiss the appeal, as the appellant had the option to invoke the arbitration clause but chose the statutory route, obligating them to comply with Section 18.

In conclusion, the High Court dismissed the appeal and upheld the order referring the dispute to arbitration under the MSMED Act. The court emphasized the importance of complying with statutory procedures and highlighted the binding nature of choosing the statutory remedy over invoking independent arbitration clauses in agreements.