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TMI Blog2010 (8) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners, the materials supplied by the supplier were defective and the supplier was, therefore, asked to replace the material. The supplier, apparently, admitted the defects in the material vide communications dated 01.01.2007, 25.01.2007 and 10.02.2007. The supplier, thereafter, issued a notice to the petitioners and invoked clause 22 of the agreement between them and proposed to appoint Justice C. P. Sen (Retired) as Arbitrator to settle the dispute through arbitration. However, in pursuance to clause 23 of the general conditions of contract, the petitioners exercised, its powers and appointed one Mr. S. K. Gulati as an Arbitrator for resolving the disputes between the parties. The Arbitrator issued notices to the parties on 09.03.2009 asking them to submit their claim within 21 days. However, on 26.03.2009, the supplier instead of filing the claim submission before the Arbitrator, objected to the arbitration by stating that the matter be either referred to Justice C. P. Sen (Retired) or it should go before the Micro, Small Enterprise Facilitation Council (hereinafter referred to as "the Council") established under the Act. The petitioners declined to enter into another mode ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the scheme under the Act namely Sections 16, 17 and 18 provide only for recovery of a sum allegedly due to the seller, therefore, a party such as a buyer i.e the petitioners are not entitled to invoke that remedy. Hence, according to the learned counsel for the petitioners, the arbitration agreement between the parties, which allows for an adjudication of the claims and counter claims of both the parties, if any, under the provision of the Arbitration and Conciliation Act, 1996 is the only proper remedy. 6. It is, therefore, necessary to look into the provisions of the Act. The Act is enacted to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or identical thereto. The Act has enacted special provisions for preventing delayed payments to such enterprises and a special procedure for recovery of the amount due to a supplier is also laid down. Chapter V of the Act contains the special provisions. Section 15 of the Act provides that a buyer is liable to make payment of goods purchased from a micro or small enterprise on or before the date agreed upon between hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as if the condition was initiated under Part III of that Act. (3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub- section (1) of section 7 of that Act. (4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. (5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference. 19. Application for setting aside decree, award or order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though Section 17 of the Act makes a provision for recovery of the amount due from the buyer alone at the instance of the supplier, Section 18 clearly contemplates that any party to the dispute may; with regard to any amount due under Section 17; make reference to the Council in view of the expressed provisions of Section 18 (1) supra. According to the learned Addl. Government Pleader, the purport of the Act is to provide for a special procedure for micro, small and medium enterprises to recover the amount and the Act has, therefore, a set up a Facilitation Council, which is required to deal with the dispute, which has arisen between a buyer and a micro and small enterprise, initially by conciliation and later if conciliation fails, by arbitration. 10. Mr. Dhole, the learned counsel for respondent no.2, submitted that the arbitration agreement between the parties cannot be given effect to in view of the Forum provided by Section 18, which has been given an overriding effect by Section 24 of the Act. 11. Having considered the matter, we find that Section 18 (1) of the Act, in terms allows any party to a dispute relating to the amount due under Section 17 i.e. an amount due and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncil under Section 18 and arbitration conducted under an individual clause since both are governed by the provision of the Arbitration Act, 1996. 12. At this stage, it is necessary to deal with another contention raised on behalf of the Council by Mrs. Dangre, the learned Addl. Government Pleader. According to the learned Addl. Government Pleader, the procedure of conciliation contemplated by Section 18 (2) of the Act is a procedure, which has been specially enacted for the purposes providing a Forum for conciliation which itself is capable of settling a dispute between the micro, small and medium enterprises and any other party. We find that the arbitration agreement in question, like most arbitration agreements, does not contain a specific provision for conciliation and, therefore, it would be necessary for the parties to submit to the conciliation process under Section 18 (2) of the Act notwithstanding the existence of an arbitration agreement. Undoubtedly, the Council may either itself conduct the conciliation in accordance with the provisions of Section 65 to 81 of the Arbitration and Conciliation Act, 1996 or as provided by Section 18 (2) of the Act refer it to any institu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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