The reference under Section 18 of the MSMED Act is a statutory reference and overrides the arbitration clause under the contract.

VIBHU BAKHRU, J.

1. The petitioner has filed the present petition, inter alia, impugning an order dated 16.06.2016 passed by respondent no. 1 (the Micro and Small Enterprises Facilitation Council – hereafter ‘the Council’), whereby the petitioner and respondent no.2 (Driplex Water Engineering Ltd.) were referred to arbitration under the aegis of the Delhi International Arbitration Centre (DIAC).

2. The principal controversy raised in the present petition is that the impugned order falls foul of the arbitration clause, as contained in the Agreement entered into between the concerned parties. It is the petitioner’s case that the Council has no jurisdiction to refer the disputes contrary to the express terms of the arbitration agreement (arbitration clause).

3. Briefly stated, the relevant controversy arises in the following context:

3.1 On 08.07.2009, the petitioner invited tenders for supply and services comprising of Design, Engineering, Supply, civil work, erection testing etc. of DM water and CPU plant package for Phase III refinery project of the petitioner. Pursuant to the aforementioned invitation, respondent no.2 submitted its bid, which was found to be the lowest. Accordingly, on 01.12.2009, the petitioner issued a Letter of Acceptance (LOA) awarding the contract to respondent no.2, for a total contract price of Rs.51,00,00,000/-. The LOA was duly accepted by respondent no.2.

3.2 The entire work was required to be completed within a period of eighteen months from the date of issue of the LOA, that is, by 31.03.2011. However, the works could not be completed within the stipulated time. Subsequently, the work was completed on 11.03.2013 and a completion certificate was issued by the petitioner. It is the petitioner’s case that the delay in completion of the project is entirely due to reasons attributable to respondent no.2. This is stoutly disputed by respondent no.2.

3.3 After the works were completed, respondent no.2 submitted its final bill. Admittedly, certain amounts were withheld by the petitioner. Although respondent no.2 had raised certain claims, it is contended that respondent no.2 had voluntarily given up these claims by submitting a No Claim Certificate dated 25.09.2013.

3.4 According to the petitioner, no cause of action survived after the issuance of the No Claim Certificate dated 25.09.2013. This is also disputed by respondent no.2. According to respondent no.2, the said No Claim Certificate was conditional and was without prejudice to the claims, which had already been raised. It is also contended that the said Certificate was not issued with free consent.

3.5 On 09.07.2014, respondent no.2 filed an application under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereafter the ‘MSMED Act’), before the Council raising certain claims in respect of the aforementioned LOA. Notices were issued by the Council to explore the possibilities of conciliation between the parties. The impugned order indicates that at a meeting held on 12.02.2016, the Council had directed the claimant to file a reply. Apparently, the same was not filed within the stipulated time. However, it is the petitioner’s case that it had filed a reply on 03.03.2016 (that is, the date on which the hearing was fixed). The impugned order further indicates that both parties were encouraged to explore the possibility of conciliation, in mutual interest. However, the Council found that the parties were not interested in conciliation and, accordingly, by an order dated 16.06.2016, referred the parties to arbitration under the aegis of the DIAC.

4. Mr Sengh, learned senior counsel appearing for the petitioner, has assailed the impugned order on three fronts. First, he contended that there was an arbitration agreement between the parties in terms of which only a “notified claim” could be referred to arbitration. He submits that the disputes raised by respondent no.2 do not relate to notified claims and, therefore, reference to