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TMI Blog2015 (3) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... bt aggrieved by this decision of the Council. However, BSNL cannot approach this Court with a prayer that the mandate of the Council (Arbitrator) stands terminated. The Arbitral Tribunal having rejected the plea of BSNL and having decided that it has jurisdiction to proceed with the arbitration is entitled in law to continue with the arbitral proceedings and make an arbitral award under subclause (5) of Section 16 of the Act, and BSNL if aggrieved may challenge the final award as provided in subclause (6) of Section 16 of the Act. The Judgment of the Division Bench of this Court in M/s. Steel Authority of India Ltd. and another vs. Micro, Small Enterprises Facilitation Council, through Joint Director of Industries, Nagpur Region, Nagpur [ 2010 (8) TMI 1100 - BOMBAY HIGH COURT] holding that in the facts of that case the Council did not have the jurisdiction to proceed with the arbitration is a decision given in a Writ Petition filed by M/s. Steel Authority of India [ 2010 (8) TMI 1100 - BOMBAY HIGH COURT] challenging the jurisdiction of the Council. A similar relief cannot be sought by BSNL by way of a Petition filed under Sections 14 and 15 of the Act. The earned Single Judge of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Small Scale Enterprises Facilitation Council & Additional Commissioner (Revenue), is a statutory functionary established under the Micro, Small Medium Enterprises Development Act, 2006 ("the Council") . The Respondent No. 2 M/s. People Infocom Pvt. Ltd. ("PIPL") is a Company incorporated under the Companies Act, 1956. BSNL has entered into Agreements with PIPL for providing add on services to the customers of BSNL, details of which are set out hereinafter. 2. The present Petition is filed by BSNL under Sections 14 and 15 of the Arbitration and Conciliation Act,1996 ("the Act") . 3. The facts which have led to the filing of the present Petition are as under: 3.1 On 9th November, 2004, BSNL entered into an Agreement with PIPL where under PIPL agreed to provide SMS based Value Added Service to Cellular Mobile Subscribers of BSNL. This Agreement was nonexclusive and on revenue sharing basis. The said Agreement dated 9th November 2004 was renewed from time to time, i.e. on 2nd December 2005, 4th December 2006, 6th November 2007, 6th November 2008, 13th January 2009 and 23rd April 2010. Clause 11 of the Agreement dated 9th November 2004 provided that the disputes between the Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um Enterprises Development Act, 2006 ("MSMED Act")], to the Council seeking the following relief: "This Facilitation Council /appropriate authority be pleased to allow this application and direct BSNL to pay a sum of Rs. 2,98,07,510 (Two Crores Ninety eight lacs Seven thousand five hundred ten) towards the outstanding invoices along with interest of 225,73,308 (Two crores Twenty Five Lacs Seventy Three Thousand Three Hundred and Eight) calculated @ 18% p.a. till 31st March 2012 in accordance with MSMED Act. We request that further interest be allowed till actual payment and realization of the amount. 3.7 In paragraph 4 (c) and Paragraph 6 of the said Application, PIPL stated as follows: "4 (c): In April 2009 in order to get the things resolved, we issued a notice, through our Advocate to BSNL, to invoke Arbitration ("Notice"). The notice was not replied for a very long time, it is only when the time for renewing the Agreements arrived the BSNL Officials communicated that if we intend to renew the Agreements we will have to withdraw the Notice and the outstanding amounts would be cleared simultaneously. In the interest of long term relationship and with the assurance given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by PIPL from BSNL within a period of one month from the date of the order. 3.11 On 22nd January 2013, the Advocates for BSNL addressed a letter to the Member Secretary of the Council forwarding BSNL's affidavit in reply dated 16th January 2013 to the Council and recording that BSNL is once again rejecting the invitation for conciliation and therefore the conciliation proceedings stand terminated. In the said affidavit BSNL reiterated its stand as recorded in its Advocates letter dated 22nd January 2013 and further recorded that in the Meeting held on 3rd November 2012, BSNL had categorically submitted that they are not submitting to the jurisdiction of the Council and therefore the conciliation proceedings stood terminated. However the Council had not recorded the said submission made on behalf of BSNL in the Minutes of the Meeting held on 3rd November 2012. 3.12 In June 2013, PIPL filed an Application before the Council under Section 18(3) of the MSMED Act, inter alia recording that the conciliation proceedings between the Parties have failed and praying that the dispute now be referred to arbitration. Paragraph 8 of the said Application is reproduced hereunder: "8. The P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the High Court and adjourned the hearing to 18th January 2014. The hearing held on 18th January, 2014, before the Council was attended to by the representatives of BSNL and PIPL. From the Minutes of the Meeting/hearing held on 18th January 2014 (Page 116 of the Petition) it appears that BSNL raised the issue of jurisdiction of the Council and in support of its contention that the Council has no jurisdiction to proceed with the hearing of the disputes, submitted a copy of the judgment passed by this Court in the case of M/s. Faridabad Meta Udyog Pvt. Ltd. vs. Mr. Anurag Deepak, Sole Arbitrator. Thereupon the Council fixed the matter for further hearing on 1st February, 2014. 3.15 On 1st February 2014, both the Parties appeared before the Council and made submissions on the issue of jurisdiction, before it. 3.16 According to BSNL, the Council by its letter/notice dated 14th February 2014, informed BSNL that the next hearing before the Council is fixed on 15th February 2014. In the said letter/notice it was stated that the Minutes of the Meeting held on 1st February 2014, were enclosed therewith. Since no such Minutes were enclosed, the Advocate for BSNL contacted the Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Council in entertaining a reference under Section 18 of the MSMED Act in disputes which had arisen between the parties thereto. Paragraphs 2, 3, 11, 12, 13 and 14 of the said Judgment are reproduced hereunder: "2. This is a petition by M/s. Steel Authority of India, questioning the jurisdiction of Respondent No.1the Micro, Small Enterprises Facilitation Council (hereinafter referred to as "the Council") in entertaining a reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as "the Act"), in disputes, which have arisen between the petitioners as a buyer of goods from Respondent No.2 M/s. Vidarbha Ceramics Pvt. Ltd, as seller. 3. Respondent No.2 M/s. Vidarbha Ceramics Pvt. Ltd. (hereinafter referred to as "the Supplier") has supplied certain goods to the petitioners (hereinafter referred to as "the Buyers") under a contract for supply of Fire Clay Refractory CokeOven. According to the Petitioners, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or renders an arbitration agreement entered into between the parties ineffective. Moreover, Section 24 of the Act, which is enacted to give an overriding effect to the provisions of Section 15 to 23 including section 18, which provides for forum for resolution of the dispute under the Act would not have the effect of negating an arbitration agreement since that section overrides only such things that are inconsistent with Section 15 to 23 including Section 18 notwithstanding anything contained in any other law for the time being in force. Section 18(3) of the Act in terms provides that where conciliation before the Council is not successful, the Council may itself take the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution and that the provisions of the Arbitration and Conciliation Act, 1996 shall thus apply to the disputes as an arbitration in pursuance of arbitration agreement referred to in Section 7(1) of the Arbitration and Conciliation Act, 1996. This procedure for arbitration and conciliation is precisely the procedure under which all arbitration agreements are dealt with. We, thus find that it cannot be said that becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act in view of independent arbitration agreement dated 23.09.2005 between the parties. The petitioners and respondent no.2 shall, however, participate in the conciliation, which shall be conducted by respondent no.1Council under the provisions of Section 18(1) and (2) of the Act. Respondent no.1Council shall complete the process of conciliation within a period of two weeks from the date the parties appear before it. The parties are directed to appear before respondent no.1-Council on 25.10 .2010." 5. The Learned Advocate appearing for BSNL has submitted that though a Special Leave Petition (SLP) is preferred from the above decision of the Division Bench of this Court and the same has been admitted, there is no stay operating against the said order and therefore the ratio laid down in the said decision holds the field. 6. The learned Advocate appearing for BSNL also relied on the following Judgments passed by the learned Single Judge of this Court in: (i) Hindustan Sires Ltd. vs. R. Suresh Order dated 4th April 2013 in Arbitration Petition No. 56 of 2013, (ii) Faridabad Metal Udyog Pvt Ltd. vs. Mr. Anurag Deepak 2013 (7) Bom CR 631 and (iii) Supreme Cylinders Ltd. vs. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocate appearing for PIPL has relied on the following decisions: (i) Eden Exports Co. vs. Union of India Madras High Court Judgment dated 20th Nov. 2012 in W.P. No. 2461 of 2010; (ii) Lanco Infratech Ltd. vs. Micro and Small Enterprises Facilitation Council Bombay High Court Judgment dated 24th October 2013 in Civil W.P. No. 6636 of 2013; (iii) Principal Chief engineer vs. Manibhai and others Gujarat High Court Judgment dated 11th April 2012 in Letters Patent Appeal No. 1997 of 2011; (iv) Union of India vs.Delhi High Court Bar Association and others (2002) 4 SCC 275 (v) Maharashtra State Electricity Board vs. Maharashtra Conductors Association (SSI) Bombay High Court order dated 30th August 2004 in Arbitration Petition (O.S.) No. 328 of 2004; (vi) Maharashtra Conductor Association (SSI) vs. Maharashtra State Electricity Board 2008 (4) AIR Bom. R. 236 (vii) M/s. Sanket Steel Industries vs. The Presiding Officer, Micro and Small Enterprises Facilitation Council and Ors. Bombay High Court (Nagpur) Judgment dated 7th January, 2014 in WP No. 3414 of 2012. (viii) Purbanchal Cables & Conductors Pvt. Ltd. vs.Assam State Elec. Board & Anr. (2012) 7 SCC 462 (ix) Secur In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsection (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 " From the above Section it is clear that upon receipt of a reference by the Council, the Council may either itself attempt to bring about conciliation between the Parties in the matter, or seek the assistance of an institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre for conducting conciliation under the provisions of Sections 65 to 81 of the Act, and where the conciliation initiated under subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same cause of action before a different forum and requested the Arbitrator to keep the matter in abeyance until the application filed before the Council was decided. The Sole Arbitrator appointed by BSNL thereafter did not pursue the matter any further. Instead the representatives of BSNL and PIPL pursuant to the meeting fixed by the Council appeared before the Council on 21st December 2013 and the representative of BSNL submitted before the Council that the arbitration proceedings should be placed before the Arbitrator appointed by them. The meeting was adjourned to 18th January 2014 since the Chairman of the Council wanted to examine and study the case law on the subject. 16. On 18th January 2014, the Council recorded that the representative of BSNL raised the issue of jurisdiction qua the Council and submitted a copy of the Judgment passed by this Court in the case of M/s. Faridabad Meta Udyog Pvt. Ltd. vs. Mr. Anurag Deepak, Sole Arbitrator. This Judgment was obviously cited by BSNL in support of its submission that the Council has no jurisdiction to proceed with the Arbitration and not in support of the argument that the Council had no jurisdiction to hold the conciliation pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstitution of arbitrator. (1) In addition to the circumstances referred to in Section 13 or Section 14, the mandate of an arbitrator shall terminate (a) where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties. (2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. (3) Unless otherwise agreed by the parties, where an arbitrator is replaced under subsection (2),any hearings previously held may be repeated at the discretion of the arbitral tribunal. (4) Unless otherwise agreed by the parties an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal. 16. Competence of arbitral tribunal to rule on its jurisdiction. (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose. (a) an arbitration clause which for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction to proceed with the arbitration between the Parties. BSNL is no doubt aggrieved by this decision of the Council. However, BSNL cannot approach this Court with a prayer that the mandate of the Council (Arbitrator) stands terminated. The Arbitral Tribunal having rejected the plea of BSNL and having decided that it has jurisdiction to proceed with the arbitration is entitled in law to continue with the arbitral proceedings and make an arbitral award under subclause (5) of Section 16 of the Act, and BSNL if aggrieved may challenge the final award as provided in subclause (6) of Section 16 of the Act. The Judgment of the Division Bench of this Court in M/s. Steel Authority of India Ltd. and another vs. Micro, Small Enterprises Facilitation Council, through Joint Director of Industries, Nagpur Region, Nagpur (supra) holding that in the facts of that case the Council did not have the jurisdiction to proceed with the arbitration is a decision given in a Writ Petition filed by M/s. Steel Authority of India challenging the jurisdiction of the Council. A similar relief cannot be sought by BSNL by way of a Petition filed under Sections 14 and 15 of the Act. 20. The argument advanced on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Application by PIPL and asking BSNL to appear before the Council and submit its defence statement. It is submitted on behalf of PIPL that the Officers of the BSNL and its Advocate have disobeyed the mandate of the MSMED Act and by its letter/affidavit dated 14th September 2012, have rejected the invitation for conciliation proceedings by inter alia stating that, "We..... hereby reject the invitation for conciliation proceedings.......". It is submitted that this amounts not only to disobedience but also disregard towards the Council which is a statutory body. In support of this contention, the learned Advocate appearing for PIPL has relied on the decisions in the case of (i) Heema Ravishankar vs. K.R. Ravishankar 2004 Cri. L.J. 1205 and (ii) M.Y. Shareef & Anr. vs. Hon'ble Judges of the Nagpur High Court and others AIR 1955 SC 19. 23. BSNL has in response submitted that there is no contempt whatsoever committed by the Officers of the BSNL or the Advocate for BSNL as alleged. It is submitted that the said letter merely uses the language/terms used under Section 62(3) of the Arbitration and Conciliation Act, 1996. It is submitted that the caselaw relied upon by PIPL in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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