Summary
Seven appeals raised the relationship between the MSMED Act, 2006 and the Arbitration and Conciliation Act, 1996. The Supreme Court held that Chapter V of the MSMED Act, as a special and later law with non obstante clauses in Section 18(1) and (4) and Section 24, overrides the Arbitration Act. A party to a dispute over dues under Section 17 may refer it to the Facilitation Council despite an independent arbitration agreement, because a private agreement cannot override the statute. The Council may arbitrate after failed conciliation despite Section 80 of the Arbitration Act. That arbitration is governed by the Arbitration Act: the Council can rule on its own jurisdiction under Section 16, and its award is challenged under Section 34. A seller registered only after contracting is not a "supplier" for earlier supplies, and its registration operates prospectively.
Issues
- Whether Chapter V of the MSMED Act, 2006 overrides the Arbitration and Conciliation Act, 1996, so that a party may refer a dispute over dues under Section 17 to the Facilitation Council despite an independent arbitration agreement.
- Whether a Facilitation Council that conducted conciliation under Section 18(2) may itself arbitrate despite Section 80 of the Arbitration Act, and how its jurisdiction and awards are to be questioned.
Provisions considered
- Sections 18 and 24, Micro, Small and Medium Enterprises Development Act, 2006The non obstante clauses in Section 18(1) and (4) and the overriding effect of Sections 15 to 23 under Section 24 give the statutory mechanism precedence over arbitration agreements and the Arbitration Act. (¶¶ 22, 23, 25, 26, 27)
- Section 18(3), Micro, Small and Medium Enterprises Development Act, 2006After conciliation fails the Council may itself arbitrate or refer the dispute, and the deeming fiction makes the Arbitration Act apply as if under an arbitration agreement under Section 7(1). (¶¶ 26, 29, 30)
- Section 2(n), Micro, Small and Medium Enterprises Development Act, 2006A party not a registered supplier on the date of the contract cannot claim the Act's benefits; later registration operates only prospectively. (¶¶ 32, 33)
- Sections 16, 34 and 80, Arbitration and Conciliation Act, 1996The Section 80 bar is superseded by Section 18 read with Section 24 of the MSMED Act, but the Council acting as tribunal can rule on its jurisdiction under Section 16 and its awards are open to challenge under Section 34. (¶¶ 29, 30, 34)
Held
- The MSMED Act governs specific disputes between specific persons through a specific forum and is a special law, while the Arbitration Act is general; even if both are special, the later MSMED Act prevails, so Chapter V overrides the Arbitration Act. (¶¶ 24, 25, 26)
- Section 18(1) creates a substantive right; no party to a dispute under Section 17 is precluded from approaching the Council merely because an arbitration agreement exists, and the omission of 'agreement' from Section 18(1) is not a casus omissus. (¶¶ 27, 28)
- The Council that conducted conciliation may act as arbitrator, the Section 80 bar being superseded, and the Arbitration Act applies to the arbitration only after conciliation fails. (¶ 29)
- The Council or institution acting as tribunal has all the trappings of an arbitral tribunal, including the power to rule on its own jurisdiction, such as whether a party was a supplier on the date of contract, and its orders and awards must be challenged under the Arbitration Act, not by writ. (¶¶ 30, 33, 34)
Result
Of the seven appeals, two were allowed, setting aside Bombay High Court orders that had barred Council proceedings because of arbitration agreements; one was disposed of by setting aside the finding that the Council could not itself arbitrate after conciliation; and four were dismissed, upholding the Council's jurisdiction and the Section 34 route.