Case Note & Summary
The dispute arose from a 'Bizom Customer Agreement' dated 21.02.2023 between the petitioner and respondent, containing an arbitration clause (clause 11.10) providing for arbitration under the Arbitration and Conciliation Act, 1996 in Bengaluru. A dispute emerged, leading the petitioner to invoke arbitration via notice dated 12.12.2025 and nominate an arbitrator, which the respondent rejected, denying any disputes or amounts due. The petitioner filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator as per the agreement. The respondent, a Micro and Small Enterprise, objected, arguing that Section 18(4) of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) barred the petition under Section 11, as it grants exclusive jurisdiction to the Micro and Small Enterprises Facilitation Council. The petitioner relied on the Bombay High Court decision in Porwal Sales v. Flame Control Industries, contending that Section 18(4) does not create an absolute bar unless a reference is made to the Facilitation Council under Section 18(1). The court analyzed Sections 17 and 18 of the MSMED Act, noting that Section 18(1) uses 'may', indicating discretion, and Section 18(4) must be read in conjunction with Section 18(1). It found that no reference had been made to the Facilitation Council, so the provisions were not attracted, and the arbitration agreement remained operative. The court rejected the respondent's interpretation as doing violence to the statutory language and rendering the arbitration clause meaningless. Consequently, the court allowed the petition, appointing an arbitrator from the Bengaluru Arbitration Centre as per clause 11.10, holding the petition maintainable under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) Arbitration and Conciliation Act, 1996 - The petitioner sought appointment of an arbitrator under an agreement clause 11.10, which provided for arbitration governed by the Arbitration and Conciliation Act, 1996. The court held that the arbitration clause was valid and enforceable, and appointed an arbitrator from the Bengaluru Arbitration Centre as per the agreement. (Paras 1-3, 5.1) B) Arbitration Law - MSMED Act Jurisdiction - Sections 17, 18 Micro, Small and Medium Enterprises Development Act, 2006 - The respondent contended that as a Micro and Small Enterprise, Section 18(4) of the MSMED Act barred the petition under Section 11 of the Arbitration and Conciliation Act, 1996. The court rejected this, holding that Section 18(4) does not create an absolute bar to Section 11 proceedings unless a reference is made to the Facilitation Council under Section 18(1). Since no such reference was made, the petition was maintainable. (Paras 4-9, 5.2-5.3)
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Issue of Consideration: Whether the petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator is maintainable in light of the respondent being a Micro and Small Enterprise and the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act)
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Final Decision
The court allowed the petition, appointing an arbitrator from the Bengaluru Arbitration Centre as per clause 11.10 of the agreement, holding that the petition is maintainable under Section 11(6) of the Arbitration and Conciliation Act, 1996 as Section 18(4) of the MSMED Act does not create an absolute bar in the absence of a reference to the Facilitation Council.
