The Madhya Pradesh High Court at Gwalior has dismissed an application seeking appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, holding that once proceedings have been initiated before the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), the statutory mechanism under the special law prevails over any private arbitration agreement.
Justice G.S. Ahluwalia was hearing an arbitration case arising out of disputes between two contracting parties concerning alleged supply of defective and non-functional machinery under a purchase agreement dated September 6, 2024
The applicant contended that despite the existence of an arbitration agreement, the respondent had failed to perform its contractual obligations, warranting appointment of an arbitrator by the Court.
The respondent opposed the plea, submitting that both parties were registered under the MSMED Act and that it had already approached the Facilitation Council for redressal of its claims. It was argued that in view of Sections 18 and 24 of the MSMED Act, and settled law laid down by the Supreme Court, the special statutory dispute resolution mechanism under the MSMED Act would override the Arbitration Act.
The Court noted that it was not disputed that proceedings before the Facilitation Council were already pending. Relying on the Supreme Court’s decisions in Silpi Industries v. Kerala SRTC(2021) 18 SCC 790, Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd (2023) 6 SCC 401., and Harcharan Dass Gupta v. Union of India 2025 SCC OnLine SC 1111, the Court reiterated that the MSMED Act, being a special statute with an overriding clause, would prevail over the general law of arbitration. The existence of an arbitration agreement between the parties cannot defeat the statutory rights and remedies available under the MSMED Act once the mechanism under Section 18 is invoked.
The Court further observed that the applicant would not be left remediless, as it is open to raise its counterclaims before the Facilitation Council in accordance with law. In such circumstances, appointment of an arbitrator by the High Court under Section 11(6) of the Arbitration and Conciliation Act was held to be impermissible.
Accordingly, the application was dismissed, with liberty granted to the applicant to take recourse to remedies available under the MSMED Act.
Appearance:
For the Applicant: Mr Siddharth Sijoria
For the Respondent: Mr Ankur Maheshwari
