M/s I Hub Express Private Limited vs M/s Instakart Services Private Limited

A. BACKGROUND OF THE CASE

B. JURISDICTION OF THIS COURT

“18. Reference to Micro and Small Enterprises Facilitation Council.-

(1)

Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.

(2)

On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.

(3)

Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the disputes as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act.

(4)

Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.

(5)

Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.”^{33.Emphasis supplied.}

“44.

The submissions made on behalf of the counsel for the buyers that a conscious omission of the word “agreement” in sub-section (1) of Section 18, which otherwise finds mention in Section 16 of the M^SMED Act, 2006 implies that the arbitration agreement independently entered into between the parties as contemplated under Section 7 of the Arbitration Act, 1996 was not intended to be superseded by the provisions contained under Section 18 of the M^SMED Act, 2006 also cannot be accepted. A private agreement between the parties cannot obliterate the statutory provisions. Once the statutory mechanism under sub-section (1) of Section 18 is triggered by any party, it would override any other agreement independently entered into between the parties, in view of the non obstante clauses contained in sub-sections (1) and (4) of Section 18. The provisions of Sections 15 to 23 have also overriding effect as contemplated in Section 24 of the M^SMED Act, 2006 when anything inconsistent is contained in any other law for the time being in force. It cannot be gainsaid that while interpretating a statute, if two interpretations are possible, the one which enhances the object of the Act should be preferred than the one which would frustrate the object of the Act. If submission made by the learned counsel for the buyers that the party to a dispute covered under the M^SMED Act, 2006 cannot avail the remedy available under Section 18(1) of the M^SMED Act, 2006 when an independent arbitration agreement between the parties exists is accepted, the very purpose of enacting the M^SMED Act, 2006 would get frustrated.” xxx xxx xxx

46.

The submission therefore that an independent arbitration agreement entered into between the parties under the Arbitration Act, 1996 would prevail over the statutory provisions of the M^SMED Act, 2006 cannot be countenanced. As such, sub-section (1) of Section 18 of the M^SMED Act, 2006 is an enabling provision which gives the party to a dispute covered under Section 17 thereof, a choice to approach the Facilitation Council, despite an arbitration agreement existing between the parties. Absence of the word “agreement” in the said provision could neither be construed as casus omissus in the statute nor be construed as a preclusion against the party to a dispute covered under Section 17 to approach the Facilitation Council, on the ground that there is an arbitration agreement existing between the parties. In fact, it is a substantial right created in favour of the party under the said provision. It is therefore held that no party to a dispute covered under Section 17 of the M^SMED Act, 2006 would be precluded from making a reference to the Facilitation Council under Section 18(1) thereof, merely because there is an arbitration agreement existing between the parties.

47.

The aforesaid legal position also dispels the arguments advanced on behalf of the counsel for the buyers that the Facilitation Council having acted as a Conciliator under Section 18(2) of the M^SMED Act, 2006 itself cannot take up the dispute for arbitration and act as an arbitrator. Though it is true that Section 80 of the Arbitration Act, 1996 contains a bar that the Conciliator shall not act as an arbitrator in any arbitral proceedings in respect of a dispute that is subject of conciliation proceedings, the said bar stands superseded by the provisions contained in Section 18 read with Section 24 of the M^SMED Act, 2006. As held earlier, the provisions contained in Chapter V of the M^SMEDAct, 2006 have an effect overriding the provisions of the Arbitration Act, 1996. The provisions of the Arbitration Act, 1996 would apply to the proceedings conducted by the Facilitation Council only after the process of conciliation initiated by the Council under Section 18(2) fails and the Council either itself takes up the dispute for arbitration or refers to it to any institute or centre for such arbitration as contemplated under Section 18(3) of the M^SMED Act, 2006.

48.

When the Facilitation Council or the institution or the centre acts as an arbitrator, it shall have all powers to decide the disputes referred to it as if such arbitration was in pursuance of the arbitration agreement referred to in sub-section (1) of Section 7 of the Arbitration Act, 1996 and then all the trappings of the Arbitration Act, 1996 would apply to such arbitration. It is needless to say that such Facilitation Council/institution/centre acting as an Arbitral Tribunal would also be competent to rule on its own jurisdiction like any other Arbitral Tribunal appointed under the Arbitration Act, 1996 would have, as contemplated in Section 16 thereof.”^{44.Emphasis supplied}

“10.

The issue relating to ‘seat of arbitration’ in all cases covered under the MSMED Act is settled in view of the pronouncement of this Court in Mahakali. This position is also true by virtue of the specific provision of the MSMED Act, that is, sub-Section (4) of Section 18, which vests jurisdiction for arbitration in the Facilitation Council where the supplier is located:

“(4)

Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.”

11.

There is no dispute about the fact that the appellant-MSME is located in Delhi and as such the Facilitation Council, (South-West), GNCTD, Old Terminal Tax Building, Kapashera, New Delhi-110037. In exercise of its power, the said Council entrusted the conduct of arbitration through the institutional aegis of the Delhi Arbitration Centre. The conclusions drawn by us are the logical consequence of the statutory regime as also declared by this Court in Mahakali.”^{55.Emphasis supplied.}

C. THE REQUIREMENT OF CONCILIATION PROCEEDINGS

“1.

Learned counsels for the parties jointly submit that parties are willing to explore the possibility of amicable settlement of their dispute. Counsel for the Respondent submits that since the Petitioner is a Micro, Small and Medium Enterprise, it may take recourse to mediation as per procedure prescribed in Section 18 of the MSME Act, 2006.

2.

Without prejudice to the rights and contentions of the parties in this petition, it is left open to them to take recourse to mediation as per prescribed procedure under the MSME Act, 2006 or alternatively, attempt settlement amongst themselves.

3.

List on 02.12.2025.”^{66.Emphasis supplied.}

“18.

The provisions of 1996 Act are not inconsistent with MSME Act as there is no other mechanism for appointment of an Arbitrator except under Section 18 of MSME Act. Relying on section 11(6) of 1996 Act, it says that if any institution fails to appoint any arbitrator, as the case may be, the Supreme Court or High Court will appoint the same.

19.

Accordingly, the petitioner, in the present case, wrote to MSME Council on 16.05.2024 seeking reference to mediation under the MSME Act as per the provisions of Section 18 of 1996 Act. The petitioner moved this Court on 16.07.2024, till that period, there was no response by the MSME Facilitation Council. Even more, till today, there has been no response by the Facilitation Council.

20.

In addition, the parties have undertaken the exercise of mediation vide Order dated 27.01.2025 before the Delhi High Court Mediation and Conciliation Centre and the same has failed.

21.

I am of the view that the MSME Facilitation Council did not initiate the process of mediation under section 18 of MSME Act and hence, the present petition filed under section 11(6) of 1996 Act needs to be allowed.

22.

In Microvision Technologies (P) Ltd. (supra), the Bombay High Court has observed as under:—

“32.

Another factor to be considered is that the Application made by the Petitioner was under Section 11(6)(c) of the Arbitration Act for referring the dispute to arbitration

33.

Thus, an Application under Section 11(6) is made when the institution as in the present case, the Facilitation Council fails to perform any function entrusted to it under the procedure contemplated in Section 18(3) of the (MSMED Act) and pursuant to which appointment is made for referring the disputes to arbitration. This Court in the said Order dated 15th May, 2020 has treated the application as if it was made under Section 11(5) and not under Section 11(6) of the Arbitration Act. Thus, this Court in the said Order has overlooked the relevant provision of law. .………. …………… ………….

35.

The said provision expressly provides for the Facilitation Council in the event conciliation is not successful and stands terminated without any settlement between the parties to refer to any institution or centre providing alternate dispute resolution services for such arbitration and then the provisions of Arbitration Act shall apply to the disputes as if the arbitration was in pursuance of an arbitration agreement referred to in Sub Section 1 of Section 7 of that Act. Upon the failure on the part of the Facilitation Council to refer the dispute to arbitration, an Application may be made under Section 11(6)(c) and accordingly in the present case the application was made for appointment of an Arbitrator. Thus, Section 18 of the MSMED Act has to be read harmoniously with Section 11 of the Arbitration Act. (Emphasis added)”^{77.Emphasis supplied.}

D. CONCLUSION