The legal fiction in Section 18(3) of the Act overrides previous arbitration agreements, creating an altered arbitration agreement between the parties.

JUDGMENT :

1. The short question involved in this appeal is as to the extent of the authority available to the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 to make a reference to arbitration in terms of Section 18 thereof.

2. The facts are not much in dispute. The third respondent herein is a small enterprise within the meaning of Section 2 (m) of the Act of 2006. Upon disputes arising as to the payment to the third respondent herein in connection with an agreement to set up a demineralised water plant at Raghunathpur, the third respondent herein invoked the jurisdiction of the Micro and Small Enterprises Facilitation Council, the first respondent herein, to recover the dues from the appellant.

3. Upon receipt of a reference from a supplier as defined in Section 2(n) of the Act of 2006, the machinery envisaged in Section 18 of such Act is set in motion. Section 18 of the Act may be seen in such context:

“18. Reference to Micro and Small Enterprises Facilitation Council

(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.

(2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.

(3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of any arbitration agreement referred to in sub-section (1) of section 7 of that Act.

(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.

(5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.”

4. Thus, on receipt of a reference for recovery of any amount due to a supplier as defined in Section 2(n) of the Act of 2006, the Council is obliged to either conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such institution or centre for conducting conciliation proceedings. In the event the conciliation fails, the Council is then obliged to either take up the disputes for arbitration by itself or refer such disputes for arbitration to any institution or centre providing alternate dispute resolution services. There is a time-bound schedule for the reference to be concluded.

5. Section 19 of the Act of 2006 recognises the challenge mechanism as provided in the Arbitration and Conciliation Act, 1996; but requires a statutory pre-deposit to be made for the arbitration court to entertain a challenge.

6. Section 24 of the Act of 2006 gives overriding effect to the provisions of Sections 15 to 23 of the said Act:

“24. Overriding effect

The provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any