The MSMED Act overrides prior agreements allowing a micro enterprise to seek arbitration through the Council, invalidating contrary arbitration procedures.

ORDER

This is a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act) challenging the award passed by the sole Arbitrator dated 11.1.2019.

2. Heard both.

3. The case of the petitioner is as follows :

(i) The petitioner entered into a contract with the respondent for the supply of laminated roll and pouches for packing salt after the respondent became the successful bidder in the tender. After supply, the respondent made a claim for a sum of Rs.1,25,70,274.98 Ps from the petitioner. The petitioner also paid a sum of Rs.2,29,65,875/- to the respondent. This was in view of the fact that the respondent was charging 30% interest.

(ii) A dispute arose since the respondent made a claim for the alleged balance amount of Rs.1,20,70,274.98 Ps. But, the request made by the respondent did not yield any result. Hence, a reference was made under Section 16 of the Micro, Small and Medium Enterprises Development At, 2006 (for short, the MSMED Act) to the Haryana Micro and Small Enterprises Facilitation Council (for short, the Council). However, none appeared before it on behalf of the petitioner. Hence, the matter was referred for arbitration before the sole Arbitrator.

(iii) The sole Arbitrator issued notice to both parties. But, since the petitioner did not respond to the notice, the petitioner was set ex parte. On considering the claim made by the respondent and the materials relied upon by the respondent, the sole Arbitrator passed an award directing the petitioner to pay a sum of Rs.39,90,222/- to the respondent along with interest. Aggrieved by that, the above original petition has been filed before this Court.

4. The learned Senior Counsel appearing on behalf of the petitioner made the following submissions :

The award is a non speaking award and therefore, it has to be set aside on the ground of patent illegality under Section 34(2A) of the Act. The agreement between the parties provided for appointment of an Arbitral Tribunal consisting of three members. However, the arbitration proceedings were conducted by a sole Arbitrator and hence, the award is liable to be interfered under Section 34(2)(a)(v) of the Act. The procedure as contemplated under Section 18(2) of the MSMED Act was not followed and in view of the same, the award is vitiated and liable to interfered under Section 34(2)(a)(v) of the Act.

5. Per contra, the learned counsel appearing for the respondent made the following submissions :

The sole Arbitrator was appointed by the Council and the respondent had no say in the constitution of the Arbitral Tribunal. That apart, the parties are governed by the MSMED Act, which overrides the agreement between the parties in so far as the constitution of Arbitral Tribunal is concerned. Though the petitioner was invited for conciliation, none appeared on behalf of the petitioner during the conciliation. Therefore, left with no other alternative, the matter was referred to the sole Arbitrator by the Council. Even in the arbitration proceedings, the petitioner did not appear nor participate and hence, the petitioner was set ex parte. The sole Arbitrator had taken into consideration the various documents and had passed the award, which does not suffer from any perversity or patent illegality warranting the interference of this Court.

6. This Court has carefully considered the submissions of the learned counsel on either side and perused the materials available on record and more particularly the impugned award.

7. The petitioner floated a tender on 20.12.2015 for the supply of 1 Kg poly polyester laminated LD film pouches for packing crystal iodised salt and refined