An arbitration agreement supersedes jurisdiction under the Micro and Small Enterprises Facilitation Council provisions when conflicts are solely related to arbitration agreements.

1. Rule. Rule returnable forthwith. Heard finally by consent of the parties.

2. This is a petition by M/s. Steel Authority of India, questioning the jurisdiction of respondent no.1the Micro, Small Enterprises Facilitation Council (hereinafter referred to as "the Council") in entertaining a reference under S.18 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as "the Act"), in disputes, which have arisen between the petitioners as a buyer of goods from respondent no.2M / s. Vidarbha Ceramics Pvt. Ltd, as seller.

3. Respondent no.2M / s. Vidarbha Ceramics Pvt. Ltd. (hereinafter referred to as "the Supplier") has supplied certain goods to the petitioners (hereinafter referred to as "the Buyers") under a contract for supply of Fire Clay Refractory CokeOven.
According to the petitioners, the materials supplied by the supplier were defective and the supplier was, therefore, asked to replace the material. The supplier, apparently, admitted the defects in the material vide communications dated 01.01.2007, 25.01.2007 and 10.02.2007. The supplier, thereafter, issued a notice to the petitioners and invoked clause 22 of the agreement between them and proposed to appoint Justice C. P. Sen (Retired) as Arbitrator to settle the dispute through arbitration. However, in pursuance to clause 23 of the general conditions of contract, the petitioners exercised, its powers and appointed one Mr. S. K. Gulati as an Arbitrator for resolving the disputes between the parties. The Arbitrator issued notices to the parties on 09.03.2009 asking them to submit their claim within 21 days. However, on 26.03.2009, the supplier instead of filing the claim submission before the Arbitrator, objected to the arbitration by stating that the matter be either referred to Justice C. P. Sen (Retired) or it should go before the Micro, Small Enterprise Facilitation Council (hereinafter referred to as "the Council") established under the Act. The petitioners declined to enter into another mode of settlement of dispute before the Council since it had already appointed an Arbitrator. On 17.04.2009, the supplier went ahead and filed a reference before the respondent no.1Council under S.18 of the Act. The petitioners filed an objection before the Council contending that the matter cannot be entertained by it in view of the Arbitration and Conciliation Act, 1996 .

4. In this background, respondent no.1 Council having decided to proceed with the matter, the petitioners have invoked jurisdiction of this Court for a Writ of Prohibition restraining the Council from entertaining the reference.

5. Mr. K. H. Deshpande, the learned counsel for the petitioners, submitted that the reference under S.18 of the Act is not tenable in the present case before the Council since there is an arbitration agreement between the parties, which has already been invoked by the petitioners and in fact even by respondent supplier, who has mainly disputed the choice of the Arbitrator. According to the learned Senior Advocate, a reference may be entertained by the Council only where an arbitration agreement does not exist between the parties. He further submitted that there is no inconsistency between the existence of an independent arbitration agreement and the arbitration which the Council is bound to undertake under the Act. In the submission of the learned counsel for the petitioners, the arbitration agreement between the parties could have been ignored only if the Arbitration in pursuant thereof was inconsistent with the provisions of the Act, which has an overriding effect over any law and not in a case such as the present one w