Case Note & Summary
The petitioners, M/s. Steel Authority of India Ltd. and its Bhilai Steel Plant, challenged the jurisdiction of the Micro, Small Enterprise Facilitation Council (respondent no.1) in entertaining a reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The dispute arose from a contract for supply of Fire Clay Refractory CokeOven between the petitioners (buyers) and respondent no.2, M/s. Vidarbha Ceramics Pvt. Ltd. (supplier). The buyers alleged that the supplied materials were defective, and the supplier admitted the defects through communications dated 01.01.2007, 25.01.2007, and 10.02.2007. The supplier invoked clause 22 of the agreement proposing arbitration by Justice C.P. Sen (Retired). However, the supplier also made a reference to the Facilitation Council under Section 18 of the MSMED Act. The buyers contended that the Council lacked jurisdiction due to the arbitration clause. The court held that the Facilitation Council has jurisdiction under Section 18 of the MSMED Act, 2006, to entertain references regarding disputes between buyers and suppliers, and such jurisdiction is not ousted by the existence of an arbitration agreement. The court dismissed the writ petition, upholding the Council's jurisdiction.
Headnote
A) Micro, Small and Medium Enterprises - Jurisdiction of Facilitation Council - Section 18 of Micro, Small and Medium Enterprises Development Act, 2006 - Reference under Section 18 is maintainable even if the contract contains an arbitration clause - The Council has jurisdiction to conciliate and arbitrate disputes between a buyer and a supplier under the Act - Held that the provisions of the Act override the arbitration agreement between the parties (Paras 2-4).
Issue of Consideration
Whether the Micro, Small Enterprise Facilitation Council has jurisdiction to entertain a reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, in respect of disputes between a buyer and a supplier, despite the existence of an arbitration clause in the contract.
Final Decision
The court dismissed the writ petition, holding that the Micro, Small Enterprise Facilitation Council has jurisdiction to entertain the reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, and the existence of an arbitration clause does not bar such jurisdiction.
Law Points
- Jurisdiction of Facilitation Council
- Section 18 MSMED Act
- 2006
- Arbitration clause
- Alternative remedy
- Maintainability of reference
Case Details
2010 LawText (BOM) (08) 147
Writ Petition No. 2145/2010
S. A. Bobde, Mridula Bhatkar
Mr. K. H. Deshpande, Senior Advocate with Mr. S. S. Khati for petitioners; Mrs. Bharti Dangre, Addl. Government Pleader for respondent no.1; Mr. Suresh Dhole for respondent no.2
M/s. Steel Authority of India Ltd. and Bhilai Steel Plant
The Micro, Small Enterprise Facilitation Council and M/s. Vidarbha Ceramics Pvt. Ltd.
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Nature of Litigation
Writ petition challenging jurisdiction of Micro, Small Enterprise Facilitation Council to entertain a reference under Section 18 of the MSMED Act, 2006.
Remedy Sought
Petitioners sought to quash the reference made by respondent no.2 to the Facilitation Council, contending lack of jurisdiction due to an arbitration clause.
Filing Reason
Respondent no.2 (supplier) made a reference to the Facilitation Council under Section 18 of the MSMED Act, 2006, regarding a dispute over defective goods supplied to the petitioners.
Issues
Whether the Micro, Small Enterprise Facilitation Council has jurisdiction to entertain a reference under Section 18 of the MSMED Act, 2006, despite the existence of an arbitration clause in the contract between the parties.
Submissions/Arguments
Petitioners argued that the Facilitation Council lacks jurisdiction because the contract contains an arbitration clause, and the dispute should be resolved through arbitration as per the agreement.
Respondent no.2 contended that the MSMED Act, 2006, provides for conciliation and arbitration by the Facilitation Council, and its jurisdiction is not ousted by an arbitration agreement.
Ratio Decidendi
The Micro, Small Enterprise Facilitation Council has jurisdiction under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, to entertain references regarding disputes between buyers and suppliers, and such jurisdiction is not ousted by the existence of an arbitration agreement between the parties.
Judgment Excerpts
This is a petition by M/s. Steel Authority of India, questioning the jurisdiction of respondent no.1 the Micro, Small Enterprises Facilitation Council in entertaining a reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006.
Procedural History
The supplier (respondent no.2) made a reference to the Micro, Small Enterprise Facilitation Council under Section 18 of the MSMED Act, 2006. The buyers (petitioners) filed a writ petition challenging the jurisdiction of the Council. The High Court heard the matter and dismissed the petition, upholding the Council's jurisdiction.
Acts & Sections
- Micro, Small and Medium Enterprises Development Act, 2006: Section 18
