JUDGMENT :

Manjive Shukla, J.

1. Heard Mr. Neeraj Grover and Mr. Chandra Bhan Gupta, learned counsel for the petitioners, Mr. Anil Kumar Mehrotra assisted by Mr. Srijan Mehrotra, learned counsel for Respondent No. 2.

2. Petitioners by filing this writ petition have challenged the order dated 11.6.2019 passed by U.P. State Micro and Small Enterprises Facilitation Council (hereinafter referred to as the ‘Council’), whereby the decision has been taken that in view of Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as the ‘Act of 2006’), the Council itself will arbitrate the dispute in between the petitioners and Respondent No.2. Petitioners have also challenged the order dated 24.7.2019 passed by the Council whereby the petitioners’ representation pursuant to order dated 2.7.2019 passed by Delhi High Court in Arbitration Petition No.402/2019, for referring the arbitration between petitioners and Respondent No.2 to any institution or centre providing alternate dispute resolution services, has been rejected.

Brief facts of the Case

3. Brief facts of the case are that Petitioner No.1 is a company incorporated under Indian Companies Act, 1930 and is India’s largest retailer and leading manufacturer of footwear and accessories. Petitioner No.1 in addition to manufacturing its goods in its own factories also appoint various manufacturers during the course of its business for manufacturing certain goods for its retail sales as well as for institutional supply including the supply to various government organizations.

4. Respondent No.2 - AVS International Private Limited is a company incorporated under the Companies Act, 1956 and is also manufacturer of footwear. Petitioner No.1 and Respondent No.2 entered into an agreement on 7.1.2016 for supply of goods by Respondent No.2 to the petitioners. The said agreement was valid for a period of one year and thereafter, a fresh agreement was entered into in between Petitioner No.1 and Respondent No.2 on 10.1.2017 and under the said agreement Respondent No.2 agreed to manufacture and supply the footwear to the petitioners who were having rate contract with the Government of India to supply the footwear to Indian Navy. Respondent No.2 in the aforesaid agreement was under obligation to supply the footwear as per the terms of the rate contract in between Petitioner No.1 and Government of India.

5. Petitioners in the writ petition have pleaded that Respondent No.2 committed several breaches of the terms of the manufacturing agreement and the purchase order regarding timely delivery of goods and further several issues were raised by the Indian Navy regarding inferior quality and defective supply of the footwear manufactured and supplied by Respondent No.2. It has been further pleaded in the writ petition that due to aforesaid reasons Indian Navy rejected the goods thrice and levied late delivery penalty which, as per the agreed terms, was to be borne by Respondent No.2 and as such, the petitioners deducted such charges from the amount payable to Respondent No.2.

6. Respondent No.2 raised demand regarding its pending amounts through various legal notices and thereafter, petitioners and Respondent No.2 attempted to resolve the disputes amicably amongst themselves.

7. Respondent No.2 is a registered Micro, Small and Medium Enterprise and as such, the provisions of the Act of 2006 are applicable to it.

8. Respondent No.2, in the aforesaid circumstances, approached to U.P. State Micro and Small Enterprises Facilitation Council at Kanpur Nagar by filing Claim Petition No.58 of 2019. The Council while entertaining the aforesaid claim petition issued conciliation notice to petitioners in exercise of its powers under Section 18(2) of the Act of 2006 for joining conciliation proceedings on 21.5.2019. Petitioners’ representative and the representative of Respondent No.2 appeared in the conciliation proceedings before the Council on 21.5.2019 and the Council was appri