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2023 (5) TMI 1396 - HC - Indian LawsChallenge to order dated 11.6.2019 passed by U.P. State Micro and Small Enterprises Facilitation Council - Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 - HELD THAT - The legislature has enacted Micro, Small and Medium Enterprises Development Act,2006 for a special purpose, that is to facilitate the promotion, development and to enhance the competitiveness of Micro, Small and Medium Enterprises and matters connected therewith or incidental thereto and that is why, Section 24 of the Act of 2006 provides that Sections 15 to 23 of the Act of 2006 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The aforesaid Act of 2006 contains various provisions to deal with Micro, Small and Medium Enterprises and therefore, the Act of 2006 is a special law dealing with Micro, Small and Medium Enterprises and for that purpose, Section 24 of the Act of 2006 has given overriding effect to Sections 15 to 23 of the Act of 2006. The provisions under 18 of the Act of 2006 have overriding effect in view of the provisions contained in Section 24 of the Act of 2006. The legislature in Section 18(2) of the Act of 2006 has categorically provided that the Council may either itself act as a Conciliator or may refer the matter for conciliation to any institution providing alternate dispute resolution services and the procedure of conciliation proceedings will be carried out as per Sections 65 to 81 of the Act of 1996. Thereafter, the legislature under Section 18(3) of the Act of 2006 has given absolute discretion to the Council that in the event of failure of the conciliation proceedings either Council itself can proceed to arbitrate the dispute between the parties or Council may refer the arbitration to an institution providing alternate dispute resolution services and it has been further provided that during such arbitration the provisions of the Act of 1996 will be applicable. The Act of 2006 is a special law and in view of the provisions made in Section 24 of the said Act, the discretion given to Council under Section 18(3) of the Act of 2006 for selecting the forum of arbitration between the parties has overriding effect and therefore, at the stage of selection of forum for arbitration by the Council the prohibition contained in Section 80 of the Act of 1996 will not be applicable. The legislature has enacted a special law in the form of Act of 2006 containing the special provisions in respect of Micro, Small and Medium Enterprises and further the legislature has given overriding effect to Sections 15 to 23 of the Act of 2006. Thus, the discretion given to Facilitation Council under Section 18(3) of the Act of 2006 in respect of selection of forum of arbitration between the parties is absolute and has overriding effect to any other law. Therefore, in the event of conciliation proceedings being carried out by the Council and on its failure the Council itself can proceed to arbitrate the dispute between the parties and the prohibition contained in Section 80 of the Act of 1996 will have no application in exercise of the said discretion by the Council. The legislature has framed special law in the form of Act of 2006 to deal with various kinds of issues involved in the functioning of Micro, Small and Medium Enterprises and therefore, the legislature under the Act of 2006 has provided for constitution of the Facilitation Council comprising of the experts of the field of Micro, Small and Medium Enterprises and therefore, it is absolutely misconceived on the part of the petitioners to argue that the Facilitation Council is not well equipped to carry out the arbitration of the dispute between the petitioners and Respondent No.2. Thus, the said argument advanced by the learned counsel for the petitioners lacks merit and is rejected. There are no illegality or infirmity in the orders dated 11.6.2019 and 24.7.2019 passed by the Facilitation Council in Claim Petition No.402 of 2019 - the writ petition filed by the petitioners is dismissed.
Issues Involved:
1. Jurisdiction of the U.P. State Micro and Small Enterprises Facilitation Council to arbitrate disputes under the Micro, Small and Medium Enterprises Development Act, 2006. 2. Applicability of Section 80 of the Arbitration and Conciliation Act, 1996, which prohibits a conciliator from acting as an arbitrator. 3. Overriding effect of the MSMED Act, 2006 over the Arbitration and Conciliation Act, 1996. 4. Discretion of the Facilitation Council in choosing the forum for arbitration. 5. Competence of the Facilitation Council versus institutional arbitration centers like the Delhi International Arbitration Centre. Detailed Analysis: 1. Jurisdiction of the Facilitation Council: The petitioners challenged the Facilitation Council's decision to arbitrate the dispute, arguing that the arbitration should be conducted by an institution like the Delhi International Arbitration Centre. The court reiterated that the MSMED Act, 2006 provides the Facilitation Council with the jurisdiction to arbitrate disputes between micro, small, and medium enterprises and buyers, overriding any pre-existing arbitration agreements between the parties. The court emphasized that the MSMED Act is a special law with provisions that override other laws, including the Arbitration and Conciliation Act, 1996. 2. Applicability of Section 80 of the Arbitration Act, 1996: The petitioners argued that since the Facilitation Council acted as a conciliator, it could not also act as an arbitrator due to the prohibition in Section 80 of the Arbitration Act, 1996. However, the court held that the MSMED Act, being a special law, has provisions that override the general provisions of the Arbitration Act. The court affirmed that the Facilitation Council could act as an arbitrator even if it had previously conducted conciliation proceedings. 3. Overriding Effect of the MSMED Act: The court emphasized that the MSMED Act, 2006, particularly Sections 15 to 23, has an overriding effect over any other law due to the non-obstante clause in Section 24. This means that the MSMED Act takes precedence over the Arbitration Act, allowing the Facilitation Council to arbitrate disputes irrespective of any existing arbitration agreements. 4. Discretion of the Facilitation Council: The court noted that the Facilitation Council has absolute discretion under Section 18(3) of the MSMED Act to either arbitrate the dispute itself or refer it to an institution providing alternate dispute resolution services. This discretion is not subject to the provisions of the Arbitration Act, 1996, regarding the selection of the arbitration forum. 5. Competence of the Facilitation Council: The petitioners contended that the Facilitation Council was not well-equipped to handle the arbitration and that an institutional arbitrator would be more suitable. The court rejected this argument, stating that the Facilitation Council is composed of experts in the field of micro, small, and medium enterprises and is fully competent to arbitrate the disputes under the MSMED Act. Conclusion: The court dismissed the writ petition, upholding the orders of the Facilitation Council to arbitrate the dispute. It reaffirmed the overriding effect of the MSMED Act over the Arbitration Act and the Facilitation Council's discretion to arbitrate disputes directly. The court found no merit in the petitioners' arguments against the competence of the Facilitation Council and the applicability of Section 80 of the Arbitration Act.
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