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2022 Supreme(SC) 1106

SUPREME COURT OF INDIA
UDAY UMESH LALIT, CJI., BELA M. TRIVEDI, J.
GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD. – APPELLANT
VERSUS
MAHAKALI FOODS PVT. LTD. (UNIT 2) & ANR. – RESPONDENTS
CIVIL APPEAL NO. 8008 OF 2022 (Arising out of SLP (C) No. 12884/2020)
WITH
M/S. RAMKRISHNA ELECTRICALS LTD. – APPELLANT
VERSUS
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. & ANR. – RESPONDENTS
CIVIL APPEAL NO. 127 OF 2018
WITH
M/S VIDARBHA CERAMICS PVT. LTD. – APPELLANT
VERSUS
M/S STEEL AUTHORITY OF INDIA & ORS – RESPONDENTS
CIVIL APPEAL NO. 6167 OF 2013
WITH
GUJARAT STATE PETRONET LTD. – APPELLANT
VERSUS
KRUNAL ENGINEERING WORKS & ORS. – RESPONDENTS
CIVIL APPEAL NO.OF 2022 (Arising out of SLP (C) NO. 31227 OF 2018)
WITH
BHARAT ELECTRONICS LTD. &ANR. – APPELLANT
VERSUS
IBEX INTEGRATED BUSINESS EXPRESS PRIVATE LTD. & ORS. – RESPONDENTS
CIVIL APPEAL NO.OF 2022 (Arising out of SLP (C) NO. 7375 OF 2020)
WITH
UNION OF INDIA – APPELLANT
VERSUS
M/S SIRUS GLOBAL PVT. LTD. – RESPONDENT
CIVIL APPEAL NO.OF 2022 (Arising out of SLP (C) NO. 2135 OF 2021)
WITH
JITF WATER INFRASTRUCTURE LIMITED – APPELLANT
VERSUS
MSME COMMISSIONERATE & ORS. – RESPONDENTS
CIVIL APPEAL NO.OF 2022 (Arising out of SLP (C) NO. 6166 OF 2021)
Decided On : 31-10-2022

Advocates appeared:
For the Parties : Mr. Manish Kumar Saran, AOR Ms. Aspi Kapadia, Adv. Ms. Nidhi Mohan Parashar, AOR Mr. Vikrant Kumar, Adv. Mr. Satyajit A. Desai, Adv. Mr. Satya Kam Sharma, Adv. Mr. Siddharth Gautam, Adv. Ms. Deb Deepa Majumdar, Adv. Mr. Abhinav Mutyalwar, Adv. Mr. Gajanan Tirthkar, Adv. Ms. Anagha S. Desai, AOR Mr. Amrish Kumar, AOR Mr. Balbir Singh, ASG Ms. Aastha Mehta, Adv. Mr. Bhargav Pandya, Adv. Ms. Deepanwita Priyanka, AOR Mr. Vinay Navare, Sr. Adv. Ms. Gwen Karthika, Adv. Ms. Abha R. Sharma, AOR Mr. Atun Y Chitale, Sr. Adv. Ms. Tanvi Kakar, Adv. Ms. Suchitra Atul Chitale, AOR Mr. Nakul Dewan, Sr. Adv. Mr. Sambit Nanda, Adv. Ms. Anuska Shah, Adv. Ms. Smriti Kalra, Adv. Mr. Muddam Thirupathi Reddy, AOR Mr. Nakul Dewan, Sr. Adv. Ms. Anushree Prashit Kapadia, AOR Mr. Sachin Patil, AOR Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, Adv. Mr. Geo Joseph, Adv. Mr. Risvi Muhammad, Adv. Mr. Durgesh Gupta, Adv. Mr. Gaurav Kejriwal, AOR Mr. Abhishek Singh, AOR Mr. Sunil Kumar Jain, AOR Ms. Asha Gopalan Nair, AOR M/s. Udit Kishan & Associates, AOR M/s. Meharia & Company, AOR Ms. Anushree Prashit Kapadia, AOR

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 34 and 37 - Micro, Small and Medium Enterprises Development Act, 2006 - Sections 15, 18, and 24 - Appeals concerning jurisdiction of Facilitation Councils over arbitration agreements - The Supreme Court held that MSMED Act provisions override Arbitration Act in specific contexts, allowing claims under MSMED Act despite existing arbitration agreements. (Paras 4, 24, 36)

(B) Legal Hierarchy - The provisions of the MSMED Act, 2006 are considered special legislation for resolving disputes of micro and small enterprises, which take precedence over the general provisions of Arbitration Act as established by the court’s interpretation. (Paras 24, 36)

(C) Procedural Flexibility - The Facilitation Council may initiate arbitration after failed conciliation, adhering to Arbitration Act provisions during arbitration. (Paras 27, 34)

Facts of the case:
Several appeals involve questions of law about the overriding impact of the MSMED Act on arbitration agreements, highlighting disputes in supply contracts where arbitration clauses existed.

Findings of Court:
The Court maintained that MSMED Act's mechanisms ensure timely payment to small enterprises, thus providing a statutory choice for parties to refer disputes to the Facilitation Councils.

Issues: Whether MSMED Act infringes arbitration agreements, and the jurisdictional authority of Facilitation Councils concerning arbitration clauses were central to the court's review.

Ratio Decidendi: The Court reasoned that the MSMED Act, being a special statute, was intended to provide a streamlined remedy for micro and small enterprises, ensuring their rights are upheld over conflicting provisions of general laws.

Result: Appeals decided in favor of maintaining the jurisdiction of Facilitation Councils despite existing arbitration agreements.

Table of Content
1. leave to appeal is granted. (Para 1 , 2)
2. overview of common questions in appeals. (Para 3)
3. substantive legal issues identified. (Para 4 , 5 , 6)
4. arguments presented by buyers and suppliers. (Para 12 , 13 , 14)
5. interpretation of overriding provisions. (Para 16 , 17 , 18)
6. msmed act prevails: context of arbitration. (Para 22 , 23)
7. msmed act’s provisions and their application. (Para 26 , 27 , 28 , 29 , 30 , 31)
8. no preclusion from utilizing the msmed act. (Para 34)
9. final conclusions based on appeals. (Para 35 , 36)

JUDGMENT

Bela M. Trivedi, J.

1. Leave to appeal is granted in SLP(C) No. 12884/2020, SLP(C) No. 31227/2018, SLP(C) No. 7375/2020, SLP(C) No. 2135/2021 and SLP(C) No. 6166/2021.

2. All these seven appeals though factually different, involve certain common questions of law and therefore were heard together.

3. The broad outline of the impugned orders in each appeal may be stated as under:

    (I) C.A. No …… of 2022 (@ SLP (C) No. 12884/2020)

    The appellant Gujarat State Civil Supplies Corporation Ltd. (Original Petitioner), has challenged the Order dated 13.11.2019 passed by the Gujarat High Court in the First Appeal No. 3613/2019, whereby the High Court has dismissed the said appeal filed by the appellant under Section 37 of the Arbitration and Conciliation Act, 1996 (Hereinafter referred to as “the Arbitration Act, 1996”). In the said First Appeal, the appellant had challenged the Order dated 20.08.2018 passed by the Commercial Court, Ahmedabad in Commercial Civil Misc. Application No. 54/2016 filed under Section 34 of the Arbitration Act read with Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “the MSMED Act, 2006”), whereby the commercial court had confirmed the award made by the Madhya Pradesh Micro and Small Enterprises Facilitation Council, Bhopal in Reference No. NSEFC 442/2012, holding that the provisions of MSMED Act, 2006 had an effect overriding the provisions of the Arbitration Act and that the Facilitation Council at Bhopal had the jurisdiction to adjudicate upon the disputes between the parties.

    (II) C.A. No. 127/2018

    The appellant M/s. Ramkrishna Electricals Ltd. (Original Respondent No. 2) has challenged the Order dated 27.06.2017 passed by the High Court of Judicature at Bombay, Nagpur Bench, Nagpur, in W.P. No. 4435/2011, whereby the High Court has allowed the said petition, holding that the Micro, Small Enterprises Facilitation Council, Nagpur, did not have the jurisdiction to decide the Original Application No. 24/2010 filed by the appellant herein. In the impugned order, the High Court followed its earlier decision in case Steel Authority v. MSE Facilitation Council AIR 2012 Bom. 178, in which it was held that the Facilitation Council would not be entitled to proceed under the provisions of Section 18 (3) of MSMED Act, 2006 when there is an independent arbitration agreement between the parties.

    (III) C.A. No. 6167/2013

    The appellant M/s. Vidarbha Ceramics Pvt. Ltd. (Original Respondent No. 2) has challenged the Order dated 27.08.2010 passed by the High Court of Judicature at Bombay, Nagpur Bench, Nagpur, in W.P. No. 2145/2010 (AIR 2012 Bom. 178) whereby the High Court has allowed the said petition holding that the Facilitation Council, Nagpur, was not entitled to proceed under Section 18 (3) of the MSMED Act, 2006 in view of an arbitration agreement executed between the parties.

    (IV) C.A. …… of 2022 (@ SLP (C) No. 31227/2018)

    The appellant Gujarat State Petronet Ltd. (Original Petitioner) has challenged the Order dated 06.08.2018 passed by the High Court of Judicature at Bombay, in W.P. No. 5459/2015, whereby the High Court disposed of the Writ Petition by holding that despite independent arbitration agreement between the parties, the respondent Facilitation Council, Thane had the jurisdiction to entertain the reference made by the Respondent No. 1 Krunal Engineering Works (Original Respondent No. 3) under Section 18 of the


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