Case Note & Summary
The petitioners, Namco Industries Private Limited and its director Namit Soni, filed a writ petition challenging the proceedings initiated by the Micro, Small Enterprise Facilitation Council (respondent no.2) under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The dispute arose between the petitioners and respondent no.3, M/s. Ramelex Private Limited, over a commercial transaction. The petitioners contended that there existed an independent arbitration agreement dated 23.09.2005 between the parties, which precluded the Council from invoking Section 18(3) of the MSMED Act, which provides for arbitration by the Council. The respondents argued that the MSMED Act overrides the Arbitration and Conciliation Act, 1996. The court, relying on a Division Bench decision of the same High Court (Nagpur Bench) in M/s. Steel Authority of India Ltd. v. The Micro, Small Enterprise Facilitation Council & Ors. (Writ Petition No. 2145 of 2010 dated 27 August 2010), held that the Council is not entitled to proceed under Section 18(3) of the Act when there is an independent arbitration agreement. The court directed the parties to participate in conciliation before the Council under Section 18(1) and (2) of the Act, and ordered the Council to complete conciliation within two weeks from the date the parties appear before it. The writ petition was disposed of accordingly.
Headnote
A) Micro, Small and Medium Enterprises Development Act, 2006 - Section 18(3) - Arbitration Agreement - Facilitation Council not entitled to proceed under Section 18(3) in view of independent arbitration agreement dated 23.09.2005 between the parties - The court held that the Council can only conduct conciliation under Section 18(1) and (2) and parties must participate in conciliation - The arbitration agreement ousts the Council's jurisdiction to arbitrate under Section 18(3) (Paras 2-3).
Issue of Consideration
Whether the Micro, Small Enterprise Facilitation Council can proceed under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 when there exists an independent arbitration agreement between the parties.
Final Decision
The court held that the Facilitation Council is not entitled to proceed under Section 18(3) of the MSMED Act in view of the independent arbitration agreement dated 23.09.2005. The parties were directed to participate in conciliation under Section 18(1) and (2) of the Act, and the Council was ordered to complete conciliation within two weeks from the date the parties appear before it. The writ petition was disposed of.
Law Points
- Section 18(3) of Micro
- Small and Medium Enterprises Development Act
- 2006 cannot be invoked when parties have an independent arbitration agreement
- Arbitration and Conciliation Act
- 1996 prevails
- Facilitation Council's role limited to conciliation under Section 18(1) and (2) in such cases
Case Details
Writ Petition No. 1901 of 2015
Anoop V. Mohta, A.S. Gadkari
Mr. Pradeep Mane a/w Ms. Vidhi Kothari i/by M/s. Crawford Bayley & Co. for the Petitioners, Mr. N.C. Walimbe, AGP for Respondent No. 1, Mr. N.M. Kamdar for Respondent No. 3
NAMCO Industries Private Limited and Mr. Namit Soni
State of Maharashtra, Directorate of Industries, Micro, Small Enterprises Facilitation Council, Pune Division, and M/s. Ramelex Private Limited
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Nature of Litigation
Writ petition challenging proceedings under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 by the Facilitation Council.
Remedy Sought
Petitioners sought to restrain the Facilitation Council from proceeding under Section 18(3) of the MSMED Act due to existence of an independent arbitration agreement.
Filing Reason
The Facilitation Council initiated proceedings under Section 18 of the MSMED Act despite an existing arbitration agreement between the parties dated 23.09.2005.
Previous Decisions
A Division Bench of the Bombay High Court (Nagpur Bench) in M/s. Steel Authority of India Ltd. v. The Micro, Small Enterprise Facilitation Council & Ors. (Writ Petition No. 2145 of 2010 dated 27 August 2010) held that the Council cannot proceed under Section 18(3) when there is an independent arbitration agreement.
Issues
Whether the Micro, Small Enterprise Facilitation Council can proceed under Section 18(3) of the MSMED Act when there is an independent arbitration agreement between the parties.
Submissions/Arguments
Petitioners argued that the independent arbitration agreement dated 23.09.2005 precludes the Council from invoking Section 18(3) of the MSMED Act.
Respondents contended that the MSMED Act overrides the Arbitration and Conciliation Act, 1996.
Ratio Decidendi
The existence of an independent arbitration agreement between the parties ousts the jurisdiction of the Micro, Small Enterprise Facilitation Council to proceed under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006. The Council's role is limited to conciliation under Section 18(1) and (2) in such cases.
Judgment Excerpts
In the circumstances, we hold that respondent no.1 Council is not entitled to proceed under the provisions of Section 18 (3) of the 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.1 Council under the provisions of Section 18 (1) and (2) of the Act.
Procedural History
The petitioners filed Writ Petition No. 1901 of 2015 before the Bombay High Court challenging the proceedings initiated by the Micro, Small Enterprise Facilitation Council under Section 18 of the MSMED Act. The court heard the matter and disposed it on 14 December 2016, relying on a prior Division Bench decision in M/s. Steel Authority of India Ltd. v. The Micro, Small Enterprise Facilitation Council & Ors.
Acts & Sections
- Micro, Small and Medium Enterprises Development Act, 2006: 18, 18(1), 18(2), 18(3)
- Arbitration and Conciliation Act, 1996:
