2015 (3) TMI 1445 - HC - Indian Laws

Jurisdiction of the Micro and Small Enterprises Facilitation Council under the MSMED Act - order passed in conciliation proceedings or an order passed under Section 18 of MSMED Act 2006 - prevalence of MSMED Act 2006 over the Arbitration Conciliation Act 1996 or not - prevalence of MSMED Act over the contractual arbitration agreement - validity of appointment of a sole arbitrator as per the Arbitration Agreement - maintainbility of Arbitration Petition. HELD THAT - In the present case BSNL has throughout contended that the Council has no mandate to proceed with the arbitration proceedings and has challenged the jurisdiction of the Arbitral Tribunal (Council) on that ground. The Council has after hearing the Parties decided that it has jurisdiction to proceed with the arbitration between the Parties. BSNL is no doubt aggrieved by this decision of the Council. However BSNL cannot approach this Court with a prayer that the mandate of the Council (Arbitrator) stands terminated. The Arbitral Tribunal having rejected the plea of BSNL and having decided that it has jurisdiction to proceed with the arbitration is entitled in law to continue with the arbitral proceedings and make an arbitral award under subclause (5) of Section 16 of the Act and BSNL if aggrieved may challenge the final award as provided in subclause (6) of Section 16 of the Act. The Judgment of the Division Bench of this Court in M/s. Steel Authority of India Ltd. and another vs. Micro Small Enterprises Facilitation Council through Joint Director of Industries Nagpur Region Nagpur 2010 (8) TMI 1100 - BOMBAY HIGH COURT holding that in the facts of that case the Council did not have the jurisdiction to proceed with the arbitration is a decision given in a Writ Petition filed by M/s. Steel Authority of India 2010 (8) TMI 1100 - BOMBAY HIGH COURT challenging the jurisdiction of the Council. A similar relief cannot be sought by BSNL by way of a Petition filed under Sections 14 and 15 of the Act. The earned Single Judge of this Court referred to the decision in Steel Authority of India Ltd. 2013 (4) TMI 412 - BOMBAY HIGH COURT and held that the arbitrator appointed as per the agreement between the parties can proceed with the arbitration proceedings irrespective of Section 18 of the MSMED Act and that the mandate of the arbitrator has not come to an end even on the ground that the arbitration proceedings were delayed because the application under Section 14 of the Act was made by the Petitioner in that matter after all the pleadings between the parties were filed before the learned arbitrator and he had fixed the matter for final hearing. The above Petition is not maintainable under Section 14 and/or 15 of the Arbitration and Conciliation Act 1996 and the same is rejected. It is therefore not necessary for me to consider the other submissions advanced on behalf of BSNL pertaining to the retrospective applicability of the MSMED Act and the claim of PIPL being time barred. In view thereof the above Petition is dismissed with a clarification that the dismissal of the Petition shall not preclude BSNL from pursuing any other remedy available to them in law. It is therefore clear that by the said letter BSNL has merely used the terms which are used under Section 62(3) of the Act of 1996. In fact admittedly BSNL has despite rejecting the invitation for conciliation throughout attended all the hearings before the Council and has also advanced their submissions. The question therefore of the Officers of BSNL or the Advocate for BSNL having committed contempt as alleged by PIPL does not arise and the said Notice of Motion is dismissed with costs. The Learned Advocate appearing for BSNL has prayed that the Council be directed not to proceed with the arbitration proceedings for a period of four weeks from the date of this Order. The said prayer is granted. In view thereof the Council shall not proceed with the arbitration proceedings upto 28th April 2015.

Summary

Issues Involved:
1. Jurisdiction of the Micro and Small Enterprises Facilitation Council under the MSMED Act.
2. Applicability of the Arbitration and Conciliation Act, 1996, vis-`a-vis the MSMED Act.
3. Validity and enforceability of the arbitration agreement between BSNL and PIPL.
4. Allegations of contempt against BSNL by PIPL.

Detailed Analysis:

1. Jurisdiction of the Micro and Small Enterprises Facilitation Council:
The core issue was whether the Micro and Small Enterprises Facilitation Council (the Council) had the jurisdiction to arbitrate disputes between BSNL and PIPL under the MSMED Act, 2006. BSNL contended that the Council lacked jurisdiction, citing that the disputes predated the MSMED Act and that an independent arbitration agreement existed. The court noted that Section 18 of the MSMED Act allows any party to a dispute to make a reference to the Council, which can then conduct conciliation or arbitration. The Council, after failed conciliation, determined it had jurisdiction to arbitrate, a decision BSNL contested. However, the court concluded that the Council was within its rights to proceed, and BSNL's challenge was premature, as it could contest the final award under Section 34 of the Arbitration and Conciliation Act.

2. Applicability of the Arbitration and Conciliation Act, 1996, vis-`a-vis the MSMED Act:
BSNL argued that the arbitration agreement under the Arbitration and Conciliation Act should prevail over the MSMED Act. The court referred to the Division Bench's decision in the Steel Authority of India case, which held that the existence of an arbitration agreement does not negate the Council's jurisdiction under the MSMED Act. The court emphasized that the MSMED Act provides a statutory framework for dispute resolution, which includes arbitration by the Council, and this does not invalidate existing arbitration agreements. The Council's role is to facilitate resolution, and its jurisdiction is not overridden by private arbitration agreements.

3. Validity and Enforceability of the Arbitration Agreement:
BSNL appointed an arbitrator as per the arbitration agreement with PIPL, but PIPL objected, arguing that the Council should arbitrate under the MSMED Act. The court noted that while BSNL had appointed an arbitrator, the Council's decision to arbitrate was valid. The court highlighted that the MSMED Act's provisions, including mandatory conciliation, must be adhered to, and the Council's arbitration proceedings were legitimate. The court dismissed BSNL's petition, stating that the Council's mandate was not terminated and it could continue with arbitration.

4. Allegations of Contempt Against BSNL by PIPL:
PIPL alleged contempt by BSNL for rejecting the Council's conciliation invitation. The court examined Section 62(3) of the Arbitration and Conciliation Act, which allows a party to reject conciliation. BSNL's response aligned with this provision, and the court found no contempt, noting that BSNL participated in Council proceedings despite its rejection. The court dismissed PIPL's contempt motion, emphasizing that BSNL's actions were within legal bounds.

In conclusion, the court upheld the Council's jurisdiction under the MSMED Act, allowed the Council to proceed with arbitration, and dismissed BSNL's petition under Sections 14 and 15 of the Arbitration and Conciliation Act. The court also dismissed PIPL's contempt allegations against BSNL, granting BSNL a temporary stay on arbitration proceedings for four weeks.