TMI Blog2011 (12) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the manner contemplated by the agreement between parties. The agreement provided for a reference to arbitral Tribunal in case of disputes between themselves through the procedure established under the Arbitration and Conciliation Act, 1996 (for short, 'the Act, 1996'). The 3rd respondent-seller did not respond to the notice and instead sought the Council itself to act as an Arbitrator by invoking Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 (for short, 'the Act, 2006'). The Council rejected the plea of the petitioner that the agreement provided for a reference to arbitration under the Act, 1996 and that the dispute shall not be adjudicated before the Council. According to the petitioner Section 18(3) of the Act, 2006 must be read harmoniously with the Arbitration Act, 1996 and it shall give place to the latter Act. The Council rejected the plea of the petitioner and proceeded to hold that the Act, 2006 was a special central enactment that provided for a mechanism realization of amount for goods supplied by a seller to a buyer, both of which were industries to which the provisions of the Act, 2006 had admittedly applied, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs under the Recovery of Debts Due to Banks Financial Institution Act, 1993, which originally did not contain a provision for making a set-off by a debtor. It came after the decision of Hon'ble the Supreme Court in United Bank of India v. Abhjit Tea Co. (P) Ltd.,1 2000(7) S.S.C. 357 that allowed for a plea for counter claim/set-off to be entertained that the law itself was amended explicitly by amending Section 19(6) of the 1993 Act to make explicit what the law even otherwise made possible. I would not, therefore, find that Section 17 does not fetter a buyer to plead that he is not liable to pay the money and that there is some entitlement, which he has against the seller himself. The Act, 2006 would, therefore, make possible a reference to include even a right, which a buyer claims against the seller. 4. Learned counsel would contend that the reading of Section 18 of the Act, 2006 makes it clear that insofar as it makes provision for conciliation, the provisions of Sections 65 to 81 of the Act, 1996 as applicable, it should be so read that even the provision under Section 80 of the Act, 1996 that bars a Conciliator for acting as an Arbitrator must be applied. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act. (emphasis supplied) (4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. (5) Every reference made under this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. If there is an arbitration agreement between the parties, it only means that the power is still available when the Council, without invoking its own powers. It can simply observe that in terms of the agreement between the parties, the parties shall be at liberty to have an arbitration done under the Act, 1996. It does not exclude a construction that whenever there is an arbitration clause, the Council does not have a power to act as an Arbitrator. Such an interpretation would render nugatory the first portion of Section 18(3) that allows it to proceed to arbitrate. I would, therefore, uphold the specific reasoning, which the impugned order makes in stating that: If Section 18 of the Act, 2006 provides for a mode of resolution of a dispute wherein this Council is to adjudicate acting as an arbitrator in terms of the Act, 1996, it would not be open for any party to oust the said jurisdiction of this Council which has been vested in terms of Section 18(3) of the Act, 2006 merely by creating a mutual agreement. The Agreement cannot over ride the provisions of the Act, 2006 in view of the aforesaid fact. 6. The learned counsel states, to a specific query as to why the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt earlier in CWP No. 13111 of 2011, it had been found that if there is a refusal to refer the matter to the arbitration, the petitioner was entitled to have the remedy under the Act, 1996 in terms of Section 11 but the manner in which the Council has provided to treat itself as an Arbitrator amounted to violation of the directions contained in the order. The Council has also dealt with this objection in the order itself and in my view correctly. This clause could have obtained relevance where the arbitral dispute had not been referred to arbitration. As per the procedure under Section 18(3), the reference could have been either by the Council acting itself as an Arbitrator or it could have made a reference to an Arbitrator constituted under the Act, 1996. If he had omitted to do either one of them, it should have been possible for the petitioner to apply under Section 11 of the Act, 1996. Admittedly, till date a resort to Section 11 had not been made. This has also been referred to in the impugned order. In a case, where the Council has constituted itself as an Arbitrator then, it has done an act allowing for appointment of an Arbitrator and setting the arbitral process in motion. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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