The present case deals with limitation of jurisdiction of court to appoint an Arbitrator under Section 11 of the Arbitration and Conciliation Act 1996 (“1996 Act”) vis-à-vis Micro Small and Medium Enterprises Development Act, 2006 (“MSMED Act”).
In the present case, the Petitioner sought appointment of an Arbitrator when a reference under MSMED was already made. The plea of the Petitioner was that the Arbitrator appointed under MSMED Act cannot entertain claim/counter claim prior to the registration of the supplier i.e., the Respondent under MSMED Act. The Petitioner claimed that various work orders were issued between 2013 and 2022 and that the Respondent was registered under the MSMED Act in the year 2021. The Petitioner argued that since the disputes arose before the Respondent was registered under the MSMED Act, an Arbitrator appointed under the MSMED Act wouldn't have jurisdiction over these claims, and thus, they sought the appointment of an Arbitrator by the court under the 1996 Act. The Respondent, however, denying the allegations stated that they were registered under the MSMED Act, and thus the claims should be resolved through arbitration under that MSMED Act. It was also argued that the debit notes issued by the Petitioner were in response to a demand notice issued by the Respondent and were manufactured only to thwart proceedings under the MSMED Act. Both parties cited the judgment of Silpi Industries & Ors. vs. Kerala State Road Transport Corporation & Anr. (2021) 18 SCC 790, highlighting the key differences between arbitration mechanisms under the MSMED Act and the 1996 Act.
The Hon’ble High Court, while dealing with the issue in detail correctly and accurately emphasized upon the primacy of the MSMED Act in resolving disputes involving micro, small and medium enterprises, having overriding effect over the 1996 Act. The Court dismissed the present petition and observed that since arbitration proceedings were already initiated under the MSMED Act, and the debit notes were issued after the Respondent's registration under the MSMED Act, an Arbitrator need not be appointed under the 1996 Act. In summary, the court fairly ruled in favor of the Respondent, dismissing the Petitioner's request for the appointment of an Arbitrator under the 1996 Act.