The provisions of the MSMED Act, 2006 override the Arbitration and Conciliation Act, 1996 in disputes involving contractual breaches related to delayed payments, emphasizing jurisdictional precedence.

Headnote:(A) Minimum Wages Act, 1948 - Sections 12; Payment of Wages Act, 1936 - Section 5(1)(a); Contract Labour (Regulation and Abolition) Act, 1970 - Section 21(4); Micro, Small and Medium Enterprises Development Act, 2006 - Sections 18(1), 18(3); Arbitration and Conciliation Act, 1996 - Section 7; Dispute Resolution Mechanism - Petitioner sought quashing of arbitration proceedings initiated by respondent under MSMED Act, claiming lack of jurisdiction. The court emphasized that the provisions of MSMED Act, being a special law, override the Arbitration Act in contractual disputes. (Paras 4, 31, 32, 26).

(B) Jurisdiction - The court held that disputes regarding contractual breaches fall under the jurisdiction of the MSMED Act and not solely under arbitration clauses in the contracts. (Paras 18, 32).

(C) Nature of Relief - The court clarified that the petitioner must pursue remedies in the arbitral forum, and non-entertainment does not deny the right to contest merits within arbitration. (Paras 35, 36).

Table of Content
1. establishment and nature of petitioner institute. (Para 1 , 2 , 3)
2. breach of contract by respondent no. 1. (Para 4 , 5)
3. dispute resolution process initiated. (Para 6 , 7)
4. claim initiated by respondent no. 1 under msmed act. (Para 8 , 9 , 10 , 11)
5. referral to arbitration by facilitation council. (Para 12 , 13)
6. issues of maintainability and jurisdiction in arbitration. (Para 14 , 15 , 18 , 19 , 21)
7. clarification on legal provisions of msmed act. (Para 20 , 22 , 23)
8. overriding claimant's rights under msmed act. (Para 24 , 25)
9. supreme court ruling on msmed and arbitration act. (Para 26 , 27)
10. conclusion and commentary on the legal proceedings. (Para 28 , 29 , 30 , 31 , 32 , 33)
11. final decision on the writ petition. (Para 34 , 35 , 36)

JUDGMENT :

MANISH CHOUDHURY, J.

1. The petitioner, Lokopriya Gopinath Bardoloi Regional Institute of Mental Health [hereinafter referred to as ‘the petitioner Institute’ or ‘the Institute’, in short, for easy reference] is a tertiary mental health care institute, which is fully funded by the Ministry of Health & Family Welfare, Government of India. It is stated that the petitioner Institute, established in Tezpur, Assam, is dedicated to providing specialized mental health care, research and training to advance mental health services in the region.

2. For the purpose of outsourcing manpower services, the petitioner Institute entered into a Government e-Marketplace [GeM] Contract vide Contract no. GEMC-511687733020098 dated 05.11.2021 with the respondent no. 1, M/s Green Alliance Engineering Services Pvt. Ltd. The GeM Contract was awarded to the respondent no. 1 after a tender process wherein the respondent no. 1 submitted Bid no. GEM/2021/B/1503975 dated 08.09.2021. The GeM Contract was effective from 08.11.2021 to 07.11.2022 and the Contract value was Rs. 1,30,87,348.56/-.

3. As per the terms and conditions of the GeM Contract, the respondent no. 1 was mandatorily required to comply with the provisions of the relevant labour laws including the Minimum Wages Act, 1948 [ Section 12 ], the PAYMENT OF WAGES ACT , 1936 [ Section 5 (1)(a)] and the Contract Labour [Regulation and Abolition] Act, 1970 [ Section 21 (4)]. Clauses 4.1, 5 and 8 of the GeM Contract mandated timely wage payments and EPF/ESI deposits. Clause 8 of the GeM Contract prescribed penalties for delays, and Clause 11 allowed termination of the GeM Contract for breaches of its terms and conditions.

4. It is the case of the petitioner Institute that during the GeM Contract period, the respondent no. 1 committed multiple breaches of the terms and conditions of the GeM Contract as it made delayed wage payments during the period from November, 2021 to August, 2022, which were found to be in violation of Clauses 4.1, 5 and 8 of the GeM Contract and Section 5 (1)(a) of the PAYMENT OF WAGES ACT , 1936. The respondent no. 1 also failed to deposit EPF/ESI dues in time during July, 2022 and August, 2022, which were in violation of Clause 4.1 of the GeM Contract. Further, the respondent no. 1 was found to be collecting an amount of Rs. 5,16,000/- in an unauthorized manner from its workers in breach of Clause 4.1 of the GeM Contract. The violations committed by the respondent no. 1 were brought to the notice of the respondent no. 1 by the petitioner Institute vide its notices, dated 13.01.2022, dated 18.01.2022, dated 20.01.2022, etc.

5. It is the further case of the petitioner Institute that it had to withhold payments pending corrected invoices and EPF/ESI deposit proofs, as required by Clauses 9.2 and 9.3 of the GeM Contract. The payments were, however, made subsequently and promptly upon compliance by the respondent no. 1 with imposition of penalties due to delay on the part of the respondent no. 1 in making payments to the labours in compliance with the GeM Contract. It is claimed by the petitioner Institute that as there were persistent breaches on the part of the respondent no. 1, the petitioner Institute was comp