Back
2021 Supreme(Del) 2201
IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Indian Highways Management Company Limited - Appellant
Versus
Mukesh & Associates - Respondent
Arb.P. No. 209 of 2020; I.A. No. 4011 of 2021
Decided On : 16-03-2021
Shlok Chandra, Advocate, S. Santanam Swaminadhan, Advocate, Nishtha Khurana, Advocate, Lalit Kumar, Advocate
The MSME Act overrides any provisions of the agreement between the parties or the Arbitration and Conciliation Act, and once disputes are referred to arbitration under the MSME Act, the arbitration proceeds in the same manner as it would pursuant to an agreement under the Arbitration and Conciliation Act.
Headnote:
Arbitration - Appointment of Sole Arbitrator - Arbitration and Conciliation Act, 1996 - MSME Act - Section 11(6) - Electronic Tolling and Project Management Consultancy Services - Agreement dated 31.03.2015 - Dispute Resolution Clause - Reference to Arbitration Centre - MSME Act invoked - Disputes referred to Micro and Small Enterprises Facilitation Council - Arbitral Tribunal constituted - Lapse of reference - Interpretation of Section 18 of MSME Act
Fact of the Case:
The petitioner filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator to adjudicate disputes arising from an Agreement for Project Management Consultancy Services. The respondent, a Small-Scale Enterprise under the MSME Act, invoked the MSME Act and referred the disputes to the Micro and Small Enterprises Facilitation Council, which subsequently referred the disputes to the Arbitration Centre. The petitioner contended that the reference had lapsed, while the respondent argued that the provisions of Section 18 of the MSME Act were directory and not mandatory.
Finding of the Court:
The court found that the reference to the Arbitration Centre had not lapsed and that the provisions of Section 18 of the MSME Act were directory and not mandatory. It held that the MSME Act overrides any provisions of the agreement between the parties or the Arbitration and Conciliation Act, and once disputes are referred to arbitration under the MSME Act, the arbitration proceeds in the same manner as it would pursuant to an agreement under the Arbitration and Conciliation Act.
Issues: The principal issue was whether the reference made to the Arbitration Centre had lapsed and the mandate of the Arbitral Tribunal stood terminated, as contended by the petitioner.
Ratio Decidendi: The court interpreted Section 18 of the MSME Act, holding that the provisions of Sub-section (5) of Section 18 were directory and not mandatory. It emphasized that the MSME Act overrides any provisions of the agreement between the parties or the Arbitration and Conciliation Act, and once disputes are referred to arbitration under the MSME Act, the arbitration proceeds in the same manner as it would pursuant to an agreement under the Arbitration and Conciliation Act.
Final Decision: The petition was dismissed.
JUDGMENT
Vibhu Bakhru, J. - The petitioner has filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act') praying that a Sole Arbitrator be appointed to adjudicate the disputes that have arisen between the parties in terms of the Arbitration Clause as included in the Agreement dated 31.03.2015 entered into between the parties.
2. The petitioner is engaged in the business of carrying out Electronic Tolling and other allied works by National Highway Authority of India jointly with its concessionaires and Financial Institutions.
3. The respondent is a sole proprietorship concern and is a SmallScale Enterprise registered under the Micro, Small and Medium Enterprises Development Act, 2006 (hereafter the 'MSME Act').
4. The petitioner and the respondent entered into an Agreement dated 31.03.2015 (hereafter the 'Agreement') for Project Management Consultancy Services for setting up and operations of way-side amenities on National Highways in India. The said Agreement includes a Dispute Resolution Clause. In terms of Sub-clause 15.2.1, any dispute, which is not amicably resolved, is required to be referred to arbitration. The said clause is set out below:
"15.2.1
Any Dispute or difference whatsoever arising between the Parties out of or relating to construction, meaning scope, operation or effect of this Agreement or the validity or the breach thereof which is not resolved amicably as per Clause 15.1.1, shall be settled by reference to arbitration. Such arbitration shall be referred to the sole Arbitrator selected by the Chairman, IHMCL within 30 (Thirty) days from the date of receipt of nonce of arbitration. Such arbitration shall be subject to the provision of the Arbitration & Conciliation Act 1996, as amended from time to time. The venue of such arbitration shall be at New Delhi, and the language of arbitration proceedings shall be in English."
5. Concededly, disputes have arisen between the parties in connection with the Agreement. On 01.05.2018, the respondent sent a notice of dispute to the petitioner in terms of Clause 15.1 of the Agreement and thereafter, on 02.06.2018, the respondent sent a notice invoking arbitration. The respondent, inter alia, claims that the petitioner has neglected and failed to pay a sum of Rs. 2,04,90,000/- in terms of the Agreement and seeks recovery of the said amount along with interest.
6. On 18.07.2018, the respondent sent a notice invoking the provisions of MSME Act as it had not received any response to the earlier notice. The respondent also notified the petitioner that its Chairman did not have the right to appoint an Arbitrator.
7. On the same date (that is, on 18.07.2018), the respondent referred the disputes to the Micro and Small Enterprises Facilitation Council, Coimbatore Region (hereafter the 'Facilitation Council').
8. The petitioner filed its Statement of Defence before the Facilitation Council contesting the claims made by the respondent. It also contended that the claim made by the respondent did not fall within the jurisdiction of the Facilitation Council under the MSME Act. The petitioner contended that the relationship between the parties was contractual and was thus governed by the terms of their Agreement. It also referred to the Dispute Resolution Clause (Clause 15) under the Agreement and contended that the disputes between the parties were required to be resolved by arbitration, which would be subject to the jurisdiction to the Courts at New Delhi.
9. Admittedly, the parties could not resolve the disputes through Conciliation before the Facilitation Council. Consequently, on 27.08.2019, the Facilitation Council referred the disputes between the parties to the Arbitration Centre, Madras High Court, Chennai (hereafter the 'Arbitration Centre').
10. The Arbitration Centre has constituted the Arbitral Tribunal, which is proceeding with the arbitration under the aegis of the Arbitration Centre.
11. Mr Chandra, learned counsel appea
