The Delhi High Court, while hearing a petition under Section 11 of the Arbitration and Conciliation Act, 1996, declined to interfere with the ongoing proceedings between the parties before the MSME Facilitation Council at S.A.S. Nagar (Mohali). Justice Jasmeet Singh held that the Micro, Small and Medium Enterprises Development (MSMED) Act, being a special statute governing disputes of a specific nature through a designated forum and procedure, overrides the general framework of the Arbitration and Conciliation Act, 1996. The Court emphasised that a party legitimately invoking the statutory remedy under the MSMED Act would prevail over any private arbitration agreement between the parties.
The Petitioner, a public company, engaged the Respondent for their services concerning two installation projects. The dispute originated when the Respondent, an MSME based in Mohali, invoked the statutory dispute resolution mechanism under Section 18 of the MSMED Act against the Petitioner, claiming pending payments. The Petitioner subsequently filed an application under Section 16 before the Facilitation Council, challenging its jurisdiction. As the Council did not adjudicate the application, the Petitioner approached the Punjab and Haryana High Court by way of a writ petition. The High Court disposed of the writ petition, directing the Facilitation Council to consider the Section 16 application and conclude the proceedings expeditiously. Thereafter, the Petitioner filed the present Section 11 petition before the Delhi High Court seeking the appointment of a sole arbitrator.
The Court observed that the issues raised in the Section 11 petition must be examined within the framework of the Arbitration Act, whereas the jurisdictional challenge pending before the Facilitation Council falls within the statutory scheme of the MSMED Act. Noting that both proceedings involved identical contentions and that the Punjab and Haryana High Court had already directed the Facilitation Council to adjudicate upon its jurisdiction, the Court held that judicial prudence required non-interference, particularly when the statutory authority is empowered to rule on its own jurisdiction.
Addressing the Petitioner’s argument that the Facilitation Council lacked jurisdiction because the arbitration agreement designated Delhi as the seat of arbitration, the Court rejected the contention. It held that in MSME disputes, the seat of arbitration is statutorily determined by the location of the supplier and cannot be overridden by contractual stipulation. Since the Respondent MSME was situated in Mohali, the invocation of the Section 18 mechanism before the Mohali Facilitation Council was found to be valid.
Accordingly, the Court disposed of the petition, holding that the Respondent had rightly availed the statutory remedy under the MSMED Act and that the jurisdictional challenge that is already pending before the competent authority did not warrant interference by the High Court.
Appearances:
For Petitioner: Mr. Anirudh Bakhru, Ms. Niyati Kohli, Mr. PrathaVir Agarwal & Ms. Shubhi Agarwal, Advs.
For Respondent: Mr. Varun Bedi & Ms. Swati Ahalwat, Advs.
