Case Note & Summary
The Supreme Court disposed of an appeal arising out of a special leave petition raising a significant legal question concerning the interplay between the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and the Arbitration and Conciliation Act, 1996. The appellant, M/s. Patel Infrastructure Limited, a buyer, sought to clarify whether it could independently invoke arbitration proceedings under the Arbitration Act against the respondent, M/s. Aditya Construction, a micro or small enterprise (MSME) supplier, without being compelled to use the dispute resolution mechanism under the MSMED Act. The appellant argued forcefully, placing reliance on conflicting decisions of the Delhi High Court in Uniseven Engineering and Infrastructure Pvt. Ltd. v. MSEF Council and the Calcutta High Court in Essar Oil and Gas Exploration and Production Limited v. Gargi Travels Private Limited. However, during the hearing, the respondent MSME, through its senior counsel, agreed to submit the disputes to arbitration through the aegis of the Delhi International Arbitration Centre (DIAC), proposing New Delhi as a convenient venue. Accepting this fair offer to give quietus to the matter, the Court disposed of the appeal by requesting DIAC to appoint a suitable arbitrator under the Arbitration and Conciliation Act, 1996, with New Delhi as the venue, and directed the appellant to approach DIAC within two weeks. The Court explicitly left open the substantial question of law for consideration in an appropriate future case. The parties were ordered to bear their own costs. The judgment is non-reportable and carries no ratio decidendi on the legal issue.
Headnote
A) Arbitration - MSMED Act - Invocation Rights - Micro, Small and Medium Enterprises Development Act, 2006; Arbitration and Conciliation Act, 1996 - The appeal presented the question whether a buyer could initiate arbitration under the Arbitration Act against an MSME supplier, potentially bypassing the MSMED Act mechanism. The Court did not decide this question as the respondent MSME consented to arbitration through the Delhi International Arbitration Centre with New Delhi as the venue. The Court appointed an arbitrator by consent, disposed of the appeal, and left the question of law open. Held that the legal issue is kept open for future adjudication. (Paras 2-6)
Issue of Consideration
Whether a buyer of goods or services from a micro or small enterprise (MSME), governed by the Micro, Small and Medium Enterprises Development Act, 2006, can seek to initiate arbitration proceedings in respect of its claim against such MSME by independently taking recourse to the Arbitration and Conciliation Act, 1996
Final Decision
Appeal disposed of by consent; Delhi International Arbitration Centre requested to appoint a suitable arbitrator to resolve disputes under the Arbitration and Conciliation Act, 1996; venue fixed at New Delhi; appellant to approach DIAC within two weeks of receiving certified order; legal question left open; parties to bear their own costs.
Law Points
- Whether a buyer can independently initiate arbitration under the Arbitration and Conciliation Act
- 1996 against an MSME supplier
- bypassing the MSMED Act
- 2006
- is an open question of law
