The MSMED Act prevails over the Arbitration and Conciliation Act in disputes involving MSMEs, mandating resolution through the MSME facilitation council.

JUDGMENT :

1. By way of present petition filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter, referred to as the „A&C Act‟), the petitioner seeks appointment of Arbitral Tribunal (hereafter, referred to as „AT‟) comprising of a Sole Arbitrator, to adjudicate the disputes between the parties.

2. Petitioner has invoked Clause 8.2 of Service Framework Agreement dated 09.02.2022 (hereafter, referred to as “contract”), that the parties have executed under which the respondent was engaged by the petitioner for providing certain IT services in a project awarded to the petitioner by the State Transport Department, Orissa, for tracking of commercial vehicles. Petitioner has alleged breach and non- performance of the agreement by the respondent, which has resulted in disputes between them.

3. Petitioner states that arbitration was invoked by the respondent vide email dated 01.07.2024, wherein it had proposed the name of Ms. Shilpa Dogra as the Sole Arbitrator, to which the petitioner had some reservations, and the arbitrator could not be appointed. Petitioner is therefore seeking the court‟s intervention in the appointment of the arbitrator.

4. It has been informed to this Court, that since the filing of the present petition, the respondent has initiated proceedings under Section 18 of the MSMED Act before the MSME facilitation council, Chandigarh, which are currently pending.

5. Per contra, learned counsel for the respondent has vehemently opposed the present petition. He submits that the respondent has been registered as a MSME and the same has been duly brought to the attention of the petitioner vide letters dated 20.09.2023 and 03.10.2023. It is contended that the respondent has already invoked the jurisdiction of the facilitation council under the MSMED Act and the same being a beneficial legislation containing non-obstante clauses, it would prevail over the A&C Act. He places reliance on Silpi Industries and Ors. v. Kerala State Road Transport Corporation and Anr., 2021 SCC OnLine SC 439 and Gujarat State Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd Unit (2) and Anr., (2023) 6 SCC 401 .

6. Learned counsel for the petitioner has sought to counter the submissions by arguing that respondent approaching the facilitation council under the MSMED Act would not affect the maintainability of the present petition. It is submitted that at the time of filing of the present petition, no proceedings were pending under the MSMED Act. It is next contended that the jurisdiction of MSME Council is limited to recovery of amount due for any goods supplied or services rendered by the supplier, whereas the present dispute is much wider in scope and extends to determination of the liability of the respondent for breach of contract. It is submitted that the respondent itself has filed a trademark suit against the petitioner before the Additional District Judge, Chandigarh, which shows that the respondent itself is aware that the proceedings under the MSME Act have a limited scope.

7. Petitioner has further submitted that the contract in question governing the parties, is a works contract, which are outside the ambit of the MSMED Act and hence respondent‟s pending reference under Section 18 is not maintainable. Reliance in this regard is placed on TATA Power Co. Ltd. v. Genesis Engineering Co., 2023 SCC OnLine Del 2366 M/s Shree Gee Enterprises