9911796707
TMI Blog2025 (5) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... leave granted. 2. The present appeal is directed against the order dated 22.04.2024 passed by the Karnataka High Court whereby the writ petition Writ Petition No. 27269 of 2023 (GM-RES) filed by the respondent has been allowed, and it has been held that the Delhi Arbitration Centre lacks jurisdiction to manage arbitral proceedings as the contract between the appellant and the respondent provides that the seat for arbitration shall be at Bengaluru. For the reasons to follow and in view of the overriding effect of Micro, Small and Medium Enterprises (Development) Act, 2006 Hereinafter referred to as the 'MSMED Act.' over the Arbitration and Conciliation Act, 1996 Hereinafter referred to as the 'Arbitration Act.' as affirmed by this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enced on 08.06.2022 and by an order dated 26.09.2023, the arbitrator took the claim petition on record and directed the respondent to file its statement of defence within four weeks. Instead of filing its defence, the respondent chose to approach the High Court of Karnataka by filing a writ petition under Article 226/227 challenging the assumption of jurisdiction by the Delhi Arbitration Centre and also the conduct of arbitral proceedings in Delhi. While hearing the writ petition, the High Court passed an ex parte dated 07.12.2023 order granting stay on further proceedings. Eventually, by the order impugned before us, the High Court disposed of the writ petition declaring that the Delhi Arbitration Centre, at the instance of the Facilitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific process through a specific forum. Ergo, the MSMED Act, 2006 being a special law and the Arbitration Act, 1996 being a general law, the provisions of the MSMED Act would have precedence over or prevail over the Arbitration Act, 1996. In Silpi Industries case [Silpi Industries v. Kerala SRTC, (2021) 18 SCC 790 : 2021 SCC OnLine SC 439] also, this Court had observed while considering the issue with regard to the maintainability and counter-claim in arbitration proceedings initiated as per Section 18(3) of the MSMED Act, 2006 that the MSMED Act, 2006 being a special legislation to protect MSMEs by setting out a statutory mechanism for the payment of interest on delayed payments, the said Act would override the provisions of the Arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 7 of the Arbitration Act, 1996. As held in K. Prabhakaran v. P. Jayarajan [K. Prabhakaran v. P. Jayarajan, (2005) 1 SCC 754 : 2005 SCC (Cri) 451], a legal fiction presupposes the existence of the state of facts which may not exist and then works out the consequences which flow from that state of facts. Thus, considering the overall purpose, objects and scheme of the MSMED Act, 2006 and the unambiguous expressions used therein, this Court has no hesitation in holding that the provisions of Chapter V of the MSMED Act, 2006 have an effect overriding the provisions of the Arbitration Act, 1996." 9. Further, the Court proceeds to hold that even the agreement between the parties stands overridden by the statutory provisions under the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on agreement between the parties exists is accepted, the very purpose of enacting the MSMED Act, 2006 would get frustrated. 45. ... 46. The submission therefore that an independent arbitration agreement entered into between the parties under the Arbitration Act, 1996 would prevail over the statutory provisions of the MSMED Act, 2006 cannot be countenanced. As such, sub-section (1) of Section 18 of the MSMED Act, 2006 is an enabling provision which gives the party to a dispute covered under Section 17 thereof, a choice to approach the Facilitation Council, despite an arbitration agreement existing between the parties. Absence of the word "agreement" in the said provision could neither be construed as casus omissus in the statute nor be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liation initiated by the Council under Section 18(2) fails and the Council either itself takes up the dispute for arbitration or refers to it to any institute or centre for such arbitration as contemplated under Section 18(3) of the MSMED Act, 2006. 48. When the Facilitation Council or the institution or the centre acts as an arbitrator, it shall have all powers to decide the disputes referred to it as if such arbitration was in pursuance of the arbitration agreement referred to in sub-section (1) of Section 7 of the Arbitration Act, 1996 and then all the trappings of the Arbitration Act, 1996 would apply to such arbitration. It is needless to say that such Facilitation Council/institution/centre acting as an Arbitral Tribunal would also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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