The requirement of an arbitration agreement and the specific mechanism provided under Section 18 of the MSMED Act for conciliation and arbitration.

JUDGMENT :

1. The Petitioner seeks appointment of any retired District Judge willing to conduct arbitral proceeding at Nashik under Section 11(6) of the Arbitration & Conciliation Act, 1996 (“Act”) and further direction to the Micro and Small Enterprises Facilitation Council to hand over all the records and proceedings in their custody to the arbitrator so appointed.

2. The Petitioner is registered as a small entity under the Micro, Small & Medium Enterprises Development Act, 2006 (“The MSMED Act”). The Ministry of Micro, Small & Medium Enterprises certifying the date of incorporation of the Petitioner as 21st March 2003 has issued the Udyam Registration Certificate. The Petitioner is a supplier and the Respondent No.2 is a buyer, who according to the Petitioner is liable to pay Rs.92,41,072/- to the Petitioner till 28th February 2023 with future interest as per the MSMED Act till realization of the amount. The Respondent No.1 is the Micro & Small Enterprises Facilitation Council ("MSEFC").

3. The Petitioner, a registered MSME, filed the statement of claim alongwith a declaration of termination of conciliation under Section 76(d) of the Act. It is the case of the Petitioner that despite various attempts to resolve issues of discord between the parties, the dispute remained unresolved. According to the Petitioner, the Respondent No.2 had infact acknowledged the debt but failed to pay the amount. Thus, the Petitioner claims that conciliation between the parties failed and in these circumstances, has filed a certificate of termination under Section 76(d) of the Act with the Respondent No.1 along with its statement of claim. The Respondent-Council thereafter failed to act in accordance with Section 18(3) of the MSMED Act and failed to refer the dispute to arbitration. It is this inaction of the Respondent-Council, which led the Petitioner to file the present Arbitration Petition seeking appointment of an arbitrator under Section 11(6) of the Act.

4. Notice was issued to the Respondents, however, none appeared. Mr. Kirpekar, learned counsel appearing for the Petitioner, has taken steps to serve the Respondents by way of substituted service, i.e., paper publication in two newspapers, pursuant to order dated 7th December 2023 of this Court. Yet none appear for the Respondents. The publications are placed on record along with an affidavit of service. The petition was thus taken up for hearing exparte.

5. Mr. Kirpekar contends that failure to settle dues having once acknowledged the same, presumes failed conciliation. Hence, he filed the statement of claim with a termination certificate. Secondly, he contends that since the MSEFC failed to arbitrate the dispute between the parties within the mandatory period of ninety days as per Section 18(5) of the MSMED Act after failure of conciliation proceedings, this Court has jurisdiction to appoint an arbitrator by invoking Section 11(6) of the Act. Mr. Kirpekar placed reliance on the decision in the case of Microvision Technologies Private Limited v. Union of India, Review Petition (L) No.36475 of 2022 decided on 24.8.2023 of this Court to buttress his contention that in a case where the MSEFC fails to arbitrate between the parties, the only recourse to the Petitioner is to approach this Court seeking appointment of an arbitrator under Section 11(6) of the Act. He also relied on decision of the Supreme Court in the matter of Gujarat State Civil Supplies Corporation Limited & Ors. v. Mahakali Foods Private Limited, 2022 SCC Online SC 1492 as well as the decision in the matter of Silpi Industries & Ors. v. Kerala State Road Transport Corporation and Ors., 2021 SCC Online SC 439. He thus, submitted that Section 18(3) of the MSMED Act provides for deemed arbitration agreement and eliminates the need of any arbitration agreement between the parties. According to him, the combined reading of Sections 18(3) and 24 of the MSMED Act, 2006 with Sections 2(4) and 7 of the Act indicates that arbitration