2016 (11) TMI 1740 - HC - Indian Laws

Appointment of Arbitrator - dispute between the petitioner and respondent no. 2 to the Arbitrator to be appointed by the Delhi International Arbitration Centre and consequent notice issued requiring the petitioner to suggest five names from the DSE panel of Arbitrators for being appointed as an Arbitrator - HELD THAT - As decided in Steel Authority of India Anr. Vs. Micro Small Facilitations Council 2010 (8) TMI 1100 - BOMBAY HIGH COURT procedure for arbitration and conciliation is precisely the procedure under which all arbitration agreements are dealt with. It cannot be said that because Section 18 provides for a forum of arbitration an independent arbitration agreement entered into between the parties will cease to have effect. There is no question of an independent arbitration agreement ceasing to have any effect because the overriding clause only overrides things inconsistent therewith and there is no inconsistency between an arbitration conducted by the Council under Section 18 and arbitration conducted under an individual clause since both are governed by the provision of the Arbitration Act, 1996. Issue notice. Notice is accepted by learned counsel appearing for respondent no. 1. Notice shall issue to respondent no. 2, returnable on 31.03.2017. Till the next date of hearing, the operation of the order dated 16.06.2016 and the notice dated 07.10.2016 shall remain stayed.

Summary

Issues:
Impugning order referring dispute to Arbitrator by Micro & Small Enterprises Facilitations Centre, reliance on Division Bench judgment of Bombay High Court regarding arbitration agreement's effectiveness.

Analysis:
The petitioner challenged the order referring the dispute to an Arbitrator by the Micro & Small Enterprises Facilitations Centre. The petitioner's counsel relied on a Division Bench judgment of the Bombay High Court, which emphasized the effectiveness of an arbitration agreement even when a reference is made to a facilitation council. The Bombay High Court held that Section 18(1) of the Act allows any party to approach the facilitation council for a dispute related to the amount due under Section 17. The judgment clarified that the existence of an arbitration agreement does not render the facilitation council's role ineffective. Section 18(3) of the Act provides that if conciliation before the council fails, the dispute may be taken for arbitration, and the provisions of the Arbitration and Conciliation Act, 1996 will apply. This procedure does not nullify an independent arbitration agreement between the parties, as both the facilitation council's arbitration and individual arbitration are governed by the Arbitration Act, 1996.

The High Court issued notice to the respondents, with notice accepted by the counsel for respondent no. 1. Notice was to be served on respondent no. 2 returnable on a specified date. The operation of the challenged order and notice was stayed until the next hearing. The court directed the order to be given dasti under the Court Master's signature for further action. The judgment highlighted the importance of upholding arbitration agreements despite references to facilitation councils, ensuring consistency and effectiveness in resolving disputes under the relevant legal framework.