By the Court.—The petitioner is a partnership firm which is registered under the provisions of the Indian Partnership Act, 1932 and is also registered as a small scale industry. The petitioner is engaged in the business of processing, manufacture and conversion of various kinds of papers and paper products. The petitioner is registered with the National Small Industries Corporation as a supplier of paper products to Government departments in accordance with the rate contracts which are issued from time to time by the second respondents.

2. During 2005, 2008 and 2009, rate contracts were awarded to the petitioner for the supply of paper products which the petitioner claims to have supplied to designated consignees. According to the petitioner, goods were supplied but payments were not made.

3. On 3 June 2011, the petitioner served an Advocate’s notice on the second respondent for the payment of its outstanding dues failing which, it was stated that it would be constrained to initiate proceedings under the Micro, Small and Medium Enterprises Development Act, 2006 (2006 Act). On 3 October 2011, the petitioner filed a claim before the Micro and Small Enterprises Facilitation Council of the State of Uttar Pradesh at Kanpur claiming an award of an amount of Rs. 1.03 crore together with interest and expenses.

4. An objection was filed on behalf of the respondents on 4 May 2012 inter alia contending that the dispute was first required to be decided by an arbitrator and it was only when the liability to make payment was established that the Facilitation Council at Kanpur could exercise the jurisdiction. The respondents stated that in pursuance of the request which was made by the petitioner, an arbitrator had been appointed on 5 October 2011. On 28 December 2012, the respondents filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 on the ground that the sole arbitrator had been appointed by the respondents in pursuance of the request made by the petitioner.

5. Upon receipt of the reference, the Facilitation Council conducted conciliation proceedings. The Facilitation Council recorded a failure of conciliation on 30 December 2013. Thereafter, by an order dated 13 February 2014, the Facilitation Council upheld the contention of the respondents and directed that the petitioner should place its version before the sole arbitrator in terms of the rate contract agreement.

6. The submission which has been urged on behalf of the petitioner is that once the petitioner had invoked the provisions of the 2006 Act, the Facilitation Council was conferred with the exclusive jurisdiction under Section 18 to enter upon the dispute and to initially conduct the conciliation proceedings. Moreover, once the conciliation ended in a failure, the Council was, under Section 18 (3) either required to take up the dispute for arbitration itself or to refer it to any institution or centre providing alternate dispute resolution services. The submission is that though the petitioner had invoked arbitration initially, the provisions of the 2006 Act were invoked on 3 October 2011. Thereafter, the proceedings had to be governed by that Act which contains a non-obstante clause in sub-section (4) of Section 18 and hence, it was not open to the respondents to seek a reference to the sole arbitrator whom the respondents had designated on 5 October 2011 after the petitioner had moved the Facilitation Council.

7. On the other hand, it has been urged on behalf of the respondents by the learned Assistant Solicitor General of India that it was at the behest and the request of the petitioner that the respondents had appointed an arbitrator on 5 October 2011. The respondents having acceded to the request for arbitration in terms of the arbitration agreement between the parties, the Facilitation Council was not in error in referring the parties to arbitration by the sole arbitrator appointed by the respondents on 5 October 2011.

8. The 2006 Act