The MSMED Act operates as a special beneficial legislation, overriding the Arbitration Act in cases involving registered MSMEs, emphasizing exclusive jurisdiction of MSEFC for dispute resolution.

ORDER :

APARESH KUMAR SINGH, C.J.

Heard Mr. Rajeev Rambhatla, learned counsel representing Ms. Sirnapelly Pooja, learned counsel for the applicant and Mr. K.Keertivardhan Reddy, learned counsel for the respondent.

2. The main issue in the present application is not on the existence of the agreement between the parties or the existence of the dispute between the parties, but the forum before which the dispute can be adjudicated. Applicant is the first party under a Sub-Contractor Agreement dated 04.06.2022, which contains an arbitration clause 49, which is also not disputed by the respondent. The issue, as observed hereinabove, is whether the Micro & Small Enterprises Facilitation Council, Jammu (hereinafter referred to as ‘MSEFC’) would be the proper forum or an independent arbitrator appointed by this Court would be the forum where the dispute between the parties is to be adjudicated. Respondent admittedly is a Micro, Small and Medium Enterprise (hereinafter referred to as “MSME”) registered with the MSEFC, Jammu, on 27.04.2020 under the erstwhile “MSME UDYOG AADHAAR” system, whose registration was further renewed with effect from 15.07.2022 under the new “MSME UDYAM” process. The Sub-Contractor Agreement was entered between the parties on 04.06.2022. In respect of the disputes between the parties, the respondent approached the learned Court of Munsiff, Samba, for perpetual injunction in which the applicant appeared and filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act of 1996”). By order dated 18.09.2024, the learned Court of Munsiff, Samba, accepted the objection of the applicant and disposed of the matter, as the agreement between the parties provided for arbitration clause. Thereafter, the respondent initiated proceedings under the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as ‘the MSMED Act’) before the MSEFC on 01.02.2025. On 15.02.2025, the respondent submitted hard copies of documents relating to the claims in response to the MSEFC’s requisition. The present applicant issued notice invoking arbitration clause through Registered Post on 17.02.2025, which returned due to “insufficient address”. Thereafter, on 25.02.2025, the applicant sent an e-mail notice to the respondent invoking arbitration clause. On 04.03.2025, the MSEFC issued notice to the applicant. The present arbitration application was filed on 13.03.2025 by the applicant wherein there was no mention of the proceedings before the MSEFC. Applicant also replied to the notice dated 04.03.2025 from the MSEFC on 17.03.2025 after filing of the arbitration application.

3. In the present arbitration application, counter affidavit was filed by the respondent on 12.06.2025. Rejoinder thereto has been filed on 20.06.2025.

4. On the part of the applicant, the following plea has been taken. That parties entered into a Sub-Contractor Agreement on 04.06.2022 for shifting of electrical utilities (including distribution and transmission) and water pipeline utilities in relation to the project titled “Construction of four/six lane access-controlled expressway from Gurha Baildaran to Junction with Jammu Ring Road (NH 244A) near Jakh village (468+100 km to 503+250) of Delhi Amritsar Katra Expressway”. The agreement was executed on an item rate contract basis, with the rates being based on the cost data of the Utility-owning department prevailing at the time of the agreement’s execution. Despite multiple extensions by the applicant in good faith, respondent failed to complete the work within stipulated timeframe of six months from the date of agreement i.e.