Arbitration In IndiaThe Provisions of MSMED Act would prevail over A&C Act

The Delhi High Court in the case of Ahluwalia Contracts v Ozone Research and Applications (I) Pvt. Ltd. [2023 SCC OnLine Del 518] held that the provisions of Chapter V of the MSMEDA would override the provisions of the A&C Act.

FACTS

A dispute arose between Ahluwalia Contracts (India) Limited (hereinafter referred to as the “Petitioner”) and Ozone Research and Applications (hereinafter referred to as the “Respondent”) out of a Purchase Order dated 22.05.2010 (hereinafter referred to as the “Purchase Order”). The Clause 8 of the Purchase Order stated that in case of dispute, Courts in Delhi would have  the exclusive jurisdiction. However,  there was no mention of Arbitration Clause in the Purchase Order.

The Respondent No.1 referred the dispute for conciliation and arbitration to the Facilitation Council under Section 18(4)  of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “MSMED Act”).

The Facilitation Council, Nagpur assumed jurisdiction and passed an award (hereinafter referred to as the “Impugned Award”). Being aggrieved by the Impugned Award, the Petitioner has filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”).

ISSUE BEFORE THE HIGH COURT

Whether the court has jurisdiction to entertain the present petition filed under Section 34 of the A&C Act against the Impugned Award passed under MSMED Act ?

CONTENTIONS OF THE PARTIES

The Respondent No.1 objected that as the Arbitration was conducted by the Facilitation Council, Nagpur, the seat of Arbitration is Nagpur and hence, Delhi High Court would not have the jurisdiction.

The Petitioner relied on Indian Oil Corporation Ltd. v FEPL Engineering (P) Ltd. [FAO(OS)(COMM) 92/2019] and contended that the jurisdiction which was mutually agreed by the parties would always prevail. It was also submitted that though the Facilitation Council is outside Delhi, it would not affect jurisdiction of Delhi Courts.

DECISION AND FINDINGS

The Delhi High Court observed that the Purchase Order does not contain any Arbitration Clause at all.

The High Court relied on Gujarat State Civil Supplies Corporation Ltd. v Mahakali Foods (P) Ltd. [SLP(C) No. 12884/2020] and held that provisions of Chapter V of MSMEDA would override the A&C Act and the Contractual Arrangement. Hence, the present petition was not maintainable and was dismissed.

AMLEGALS REMARKS

The Delhi High Court upheld that the provisions of Chapter V of the MSMEDA would override the A&C Act. The Court has clearly observed that there was no Arbitration Agreement between the parties. Thus, MSMEDA being a specific legislation, it would prevail over the generic legislation A&C Act.

– Team AMLEGALS assisted by Mr. Arth Doshi (Intern)

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