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2020 (2) TMI 1639 - HC - Indian LawsAuthority available to the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 to make a reference to arbitration in terms of Section 18 thereof - small enterprise within the meaning of Section 2 (m) of the Act of 2006 - payment to the third respondent herein in connection with an agreement to set up a demineralised water plant at Raghunathpur - Invocation of jurisdiction of the Micro and Small Enterprises Facilitation Council, the first respondent herein, to recover the dues from the appellant. HELD THAT:- In the present case, the original agreement between the appellant and the third respondent contained an arbitration clause. It is asserted on behalf of the appellant that once there is an arbitration agreement between two parties, irrespective of whether the other party is a small or micro enterprise, there is no room for the legal fiction envisaged in Section 18(3) of the Act of 2006 to operate. It is the further submission of the appellant that a legal fiction operates when such a position as is sought to brought about by the legal fiction does not actually exist; when the parties themselves have an arbitration agreement, the legal fiction can have no manner of operation. The essence of the Act of 2006 is captured in Chapter V thereof which is intituled as "Direct payments to Micro and Small Enterprises". Section 15 is the first provision under Chapter V of the Act. Section 15 obliges a buyer who has agreed to obtain goods or services from a supplier as defined in Section 2(n) of the Act to make the payment therefor before the date agreed in writing by the parties to the transaction or, when there is no such agreement, before the appointed day - when an arbitral reference is taken up by the Council or a reference made for arbitration to some other body under Section 18(3) of the Act of 2006, the legal fiction springs to life: that is to say, the parties to the dispute are immediately deemed to have executed an agreement in terms of Section 7(1) of the Act of 1996 to refer such disputes to arbitration in accordance with the reference made by the Council. It is the elementary that when the law requires something to be done in a particular manner, it must be done in such manner and in no other manner. Section 18(3) of the Act of 2006 commands that the arbitral reference may be taken up by the Council or the disputes may be referred to arbitration by any institution or centre involved in alternate dispute resolution - the reference made by the Council under Section 18(3) of the Act of 2006 in this case has to be the mode of adjudication of the disputes between the appellant and the third respondent pertaining to the third respondent's claim for recovery of the amount due in respect of the Raghunathpur contract. The appeal is found to be completely devoid of merit - Appeal dismissed.
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