Case Note & Summary
The petitioner, Bharat Sanchar Nigam Ltd. (BSNL), a Central Public Sector Enterprise, entered into agreements with respondent No. 2, M/s. People Infocom Pvt. Ltd. (PIPL), for providing value-added services to BSNL's subscribers. The agreements contained arbitration clauses providing for resolution of disputes by a sole arbitrator appointed by BSNL's Chief Managing Director. Disputes arose between the parties regarding payments, and PIPL approached the Maharashtra Micro and Small Scale Enterprises Facilitation Council (the Council) under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The Council initiated conciliation proceedings, which failed, and thereafter referred the matter to arbitration under Section 18(3) of the MSMED Act. BSNL challenged the Council's jurisdiction by filing a petition under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996, arguing that the existence of an arbitration agreement ousted the Council's jurisdiction. The court held that Section 18 of the MSMED Act is a special provision that overrides any arbitration agreement between the parties, and the Council has the jurisdiction to decide the dispute. The court further held that the Council's reference to arbitration under Section 18(3) is valid and not in conflict with the Arbitration and Conciliation Act, 1996. The petition was dismissed, and the Council was directed to proceed with the arbitration.
Headnote
A) Arbitration Law - Jurisdiction of Facilitation Council - Section 18 of Micro, Small and Medium Enterprises Development Act, 2006 - Arbitration Agreement - The court considered whether the existence of an arbitration agreement between the parties bars the Facilitation Council from proceeding under Section 18 of the MSMED Act. Held that Section 18 of the MSMED Act is a special provision that overrides any arbitration agreement, and the Council has jurisdiction to decide the dispute. (Paras 1-10)
B) Arbitration Law - Reference to Arbitration - Section 18(3) of MSMED Act - The court examined the procedure under Section 18(3) which mandates the Council to refer the matter to arbitration if conciliation fails. Held that the Council's decision to refer the dispute to arbitration is valid and not in conflict with the Arbitration and Conciliation Act, 1996. (Paras 11-15)
Issue of Consideration
Whether the Micro, Small and Medium Enterprises Facilitation Council has jurisdiction to decide disputes between a buyer and a supplier under the Micro, Small and Medium Enterprises Development Act, 2006, despite the existence of an arbitration agreement between the parties.
Final Decision
The High Court dismissed the petition, holding that the Facilitation Council has jurisdiction under Section 18 of the MSMED Act, and the reference to arbitration by the Council is valid. The Council was directed to proceed with the arbitration.
Law Points
- Jurisdiction of Facilitation Council under MSMED Act
- Arbitration agreement not ousted by Section 18 of MSMED Act
- Reference to arbitration under Section 18(3) of MSMED Act
- Applicability of Arbitration and Conciliation Act
- 1996 to proceedings under MSMED Act
Case Details
Arbitration Petition No. 990 of 2014 along with Notice of Motion (L) No. 1923 of 2014
Mr. Gautam Ankhad, instructed by M/s. Shukla & Associates, for BSNL; Mr. Suresh Dhole for the Respondent No.2
Bharat Sanchar Nigam Ltd.
The Maharashtra Micro and Small Scale Enterprises Facilitation Council & Additional Commissioner (Revenue) & Ors.
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Nature of Litigation
Petition under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 challenging the jurisdiction of the Micro, Small and Medium Enterprises Facilitation Council to proceed under Section 18 of the MSMED Act despite an arbitration agreement.
Remedy Sought
BSNL sought to set aside the proceedings before the Facilitation Council and to restrain the Council from proceeding with the arbitration reference.
Filing Reason
BSNL contended that the existence of an arbitration agreement between the parties ousted the jurisdiction of the Facilitation Council under the MSMED Act.
Previous Decisions
The Facilitation Council had initiated conciliation proceedings which failed, and thereafter referred the matter to arbitration under Section 18(3) of the MSMED Act.
Issues
Whether the Micro, Small and Medium Enterprises Facilitation Council has jurisdiction to decide disputes between a buyer and a supplier under the MSMED Act despite the existence of an arbitration agreement.
Whether the reference to arbitration by the Council under Section 18(3) of the MSMED Act is valid.
Submissions/Arguments
BSNL argued that the arbitration agreement between the parties provides for resolution of disputes by a sole arbitrator appointed by BSNL's Chief Managing Director, and therefore the Council cannot assume jurisdiction.
PIPL argued that the MSMED Act is a special statute that overrides the arbitration agreement, and the Council has jurisdiction under Section 18.
Ratio Decidendi
Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 is a special provision that overrides any arbitration agreement between the parties. The Facilitation Council has jurisdiction to decide disputes under the MSMED Act, and its reference to arbitration under Section 18(3) is valid and not in conflict with the Arbitration and Conciliation Act, 1996.
Judgment Excerpts
BSNL – Bharat Sanchar Nigam Ltd. (BSNL) is a Company duly incorporated under Section 617 of the Companies Act 1956, and is registered as a Central Public Sector Enterprise providing telecom services in India, except Mumbai and Delhi.
The present Petition is filed by BSNL under Sections 14 and 15 of the Arbitration and Conciliation Act,1996 (“the Act”).
Procedural History
BSNL filed Arbitration Petition No. 990 of 2014 under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996, challenging the jurisdiction of the Maharashtra Micro and Small Scale Enterprises Facilitation Council. The petition was heard and reserved for orders on 18th November 2014, and the order was pronounced on 31st March 2015.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 14, 15
- Micro, Small and Medium Enterprises Development Act, 2006: 18
- Companies Act, 1956: 617
