GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD. versus MAHAKALI FOODS PVT. LTD. (UNIT 2) & ANR on 31 October 2022

[2022] 19 S.C.R.

AGUJARAT STATE CIVIL SUPPLIES CORPORATION LTD.

v.

MAHAKALI FOODS PVT. LTD. (UNIT 2) & ANR.

(Civil Appeal No. 8008 of 2022)

B

OCTOBER 31, 2022

[UDAY UMESH LALIT, CJI AND BELA M. TRIVEDI, J.]

Arbitration and Conciliation Act, 1996 – s.37 – Micro, Smalland Medium Enterprises Development Act, 2006 (MSMED Act) –Whether the provisions of Chapter-V of the MSMED Act, 2006 wouldChave an effect overriding the provisions of the Arbitration Act, 1996?– Held :One of principles of statutory interpretation relevant forour purpose is contained in the Latin maxim “leges posteriors priorescontrarias abrogant” (the later laws shall abrogate earlier contrarylaws) – Another relevant rule of construction is contained in theDmaxim “generalia specialibus non derogant” (General laws do notprevail over Special laws) – When there is apparent conflict betweentwo statutes, the provisions of a general statute must yield to thoseof a special one – MSMED Act, 2006 being a special law andArbitration Act, 1996 being a general law, the provisions of MSMEDAct would have precedence over the Arbitration Act – It is settledElegal position that no agreement entered into between the partiescould be given primacy over the statutory provisions – When theSpecial Act i.e., MSMED Act, 2006 has been created for ensuringtimely and smooth payment to the suppliers who are the micro andsmall enterprises, and to provide a legal framework for resolvingFthe dispute with regard to the recovery of dues between the partiesunder the Act, also providing an overriding effect to the said lawover any other law for the time being in force, any interpretation inderogation thereof would frustrate the very object of the Act.

Arbitration and Conciliation Act, 1996 – s.37 – Micro, SmallGand Medium Enterprises Development Act, 2006 (MSMED Act) –Whether any party to a dispute with regard to any amount due underSection 17 of the MSMED Act, 2006 would be precluded frommaking a reference to the Micro and Small Enterprises FacilitationCouncil under sub-section (1) of Section 18 of the said Act, if anindependent arbitration agreement existed between the parties asH

contemplated in Section 7 of the Arbitration Act, 1996? Held : Thatno party to a dispute covered under Section 17 of the MSMED Act,2006 would be precluded from making a reference to the FacilitationCouncil under Section 18(1) thereof, merely because there is anarbitration agreement existing between the parties – S 18(1) of theMSMED Act, 2006 is an enabling provision which gives the partyto a dispute covered under Section 17 thereof, a choice to approachthe Facilitation Council, despite an arbitration agreement existingbetween the parties.

Arbitration and Conciliation Act, 1996 – s.37 – Micro, Smalland Medium Enterprises Development Act, 2006 (MSMED Act) –Whether the Micro and Small Enterprises Facilitation Council, itselfcould take up the dispute for arbitration and act as an arbitrator,when the council itself had conducted the conciliation proceedingsunder sub-section (2) of the Section 18 of the MSMED Act, 2006 inview of the bar contained in Section 80 of the Arbitration Act,1996?Held : In affirmative – Section 38 of the Arbitration Act, 1996contains a bar that the Conciliator shall not act as an Arbitrator inany arbitral proceedings in respect of a dispute that is subject ofconciliation proceedings, the said bar stands superseded by theprovisions contained in Section 18 read with Section 24 of theMSMED Act, 2006 – The provisions of Arbitration Act, 1996 wouldapply to the proceedings conducted by the Facilitation Council onlyafter the process of conciliation initiated by the council under Section18(2) fails and the council either itself takes up the dispute forarbitration or refers to it to any institute or centre for such arbitrationas contemplated under Section 18(3) of the MSMED Act, 2006.

Disposing the appeals, the Court

Conclusion

Disposing the appeals, the Court

HELD : 1.1 The first and foremost issue involved in theseappeals is whether the provisions contained in Chapter V of theMSMED Act, 2006 with regard to the Delayed Payments to Microand Small Enterprises would have the precedence over theprovisions contained in the Arbitration Act, 1996, moreparticularly when the parties by execution of an independentagreement as contemplated in Section 7 of the Arbitration Acthad agreed to submit to arbitration the disputes arising betweenthem? In other words, whether the provisions contained inChapter V of the MSMED Act, 2006 would have an effect AB

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Aoverriding the provisions contained in the Arbitration Act, 1996?[Para 16][1120-G; 1121-A-B]

1.2 One of principles of statutory interpretation relevantfor our purpose is contained in the Latin maxim “leges posteriorspriores contrarias abrogant” (the later laws shall abrogate earlierBcontrary laws). Another relevant rule of construction is containedin the maxim “generalia specialibus non derogant” (General lawsdo not prevail over Special laws). When there is apparent conflictbetween two statutes, the provisions of a general statute mustyield to those of a special one. [Para 18][1121-E]

C1.3 Having regard to the purpose, intention and objects asalso the scheme of the MSMED Act, 2006 and having regard tothe unambiguous expressions used in Chapter-V thereof,following salient features emerge:

i.Chapter-V is “party-specific”, in as much as the partyDi.e. the ‘Buyer’ and the ‘Supplier’ as defined inSections 2(d) and 2(n) respectively are covered underthe said Chapter.

ii.A specific provision is made fastening a liability onthe buyer to make payment of the dues to the supplierEin respect of the goods supplied or services renderedto the buyer, as also a liability to pay compound interestat three times of the bank rate notified by the ReserveBank, if the buyer fails to make payment within theprescribed time limit. The said liability to paycompound interest is irrespective of any agreementFbetween the parties or of any law for the time beingin force.

iii.A dedicated statutory forum i.e., Micro and SmallEnterprises Facilitation Council is provided to enableany party to a dispute with regard to any amount dueGunder Section 17, to make reference to such Council.

iv.A specific procedure has been prescribed to befollowed by the Facilitation Council after the referenceis made to it by any party to the dispute.

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GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD. v.MAHAKALI FOODS PVT. LTD. (UNIT 2)

v.The Facilitation Council or the centres providingalternative dispute resolution services have beenconferred with the jurisdiction to act as an Arbitratoror Conciliator under Section 18(4), notwithstandinganything contained in any law for the time being inforce, in a dispute between the supplier located withinits jurisdiction.

vi.The provisions of Arbitration Act, 1996 has been madeapplicable to the dispute only after the Conciliationinitiated under sub-section (2) does not succeed andstands terminated without any settlement between theparties.

vii.s.18(4)(1) starting with non obstante clauses have aneffect overriding the other laws for the time being inforce.

viii.As per Section 24, the provisions of Sections 15 to23 have an effect notwithstanding anythinginconsistent therewith contained in any other law forthe time being in force. [Para 23][1123-F-H; 1124-A-F]

1.4 Thus, the Arbitration Act, 1996 in general governs thelaw of Arbitration and Conciliation, whereas the MSMED Act,2006 governs specific nature of disputes arising between specificcategories of persons, to be resolved by following a specificprocess through a specific forum. Ergo, the MSMED Act, 2006being a special law and Arbitration Act, 1996 being a general law,the provisions of MSMED Act would have precedence over orprevail over the Arbitration Act, 1996. [Para 25][1125-D]

1.5 There cannot be any disagreement to the propositionof law laid down in various decisions of this Court, relied upon bythe learned counsel for the buyers that the Court has to read theagreement as it is and cannot rewrite or create a new one, andthat the parties to an arbitration agreement have an autonomy todecide not only on the procedural law to be followed but also onthe substantive law, however, it is equally settled legal positionthat no agreement entered into between the parties could begiven primacy over the statutory provisions. When the Special A

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AAct i.e., MSMED Act, 2006 has been created for ensuring timelyand smooth payment to the suppliers who are the micro and smallenterprises, and to provide a legal framework for resolving thedispute with regard to the recovery of dues between the partiesunder the Act, also providing an overriding effect to the said lawover any other law for the time being in force, any interpretationBin derogation thereof would frustrate the very object of the Act.The submission therefore that an independent arbitrationagreement entered into between the parties under the ArbitrationAct, 1996 would prevail over the statutory provisions of MSMED

Act, 2006 cannot countenanced. As such, sub-section (1) of SectionC18 of the MSMED Act, 2006 is an enabling provision which givesthe party to a dispute covered under Section 17 thereof, a choiceto approach the Facilitation Council, despite an arbitrationagreement existing between the parties. Absence of the word‘agreement’ in the said provision could neither be construed ascasus omissus in the statute nor be construed as a preclusionDagainst the party to a dispute covered under Section 17 toapproach the Facilitation Council, on the ground that there is anarbitration agreement existing between the parties. In fact, it isa substantial right created in favour of the party under the saidprovision. It is therefore held that no party to a dispute coveredEunder Section 17 of the MSMED Act, 2006 would be precludedfrom making a reference to the Facilitation Council under Section18(1) thereof, merely because there is an arbitration agreementexisting between the parties. [Para 28][1127-B-G]

1.6 The aforesaid legal position also dispels the arguments Fadvanced on behalf of the counsel for the buyers that theFacilitation Council having acted as a Conciliator under Section18(2) of the MSMED Act, 2006 itself cannot take up the disputefor arbitration and act as an Arbitrator. Though it is true thatSection 38 of the Arbitration Act, 1996 contains a bar that theConciliator shall not act as an Arbitrator in any arbitralGproceedings in respect of a dispute that is subject of conciliationproceedings, the said bar stands superseded by the provisionscontained in Section 18 read with Section 24 of the MSMED Act,2006. As held earlier, the provisions contained in Chapter-V ofthe MSMED Act, 2006 have an effect overriding the provisionsH

of the Arbitration Act, 1996. The provisions of Arbitration Act,1996 would apply to the proceedings conducted by the FacilitationCouncil only after the process of conciliation initiated by thecouncil under Section 18(2) fails and the council either itself takesup the dispute for arbitration or refers to it to any institute orcentre for such arbitration as contemplated under Section 18(3)of the MSMED Act, 2006. [Para 29][1127-H; 1128-A-C]

1.7 When the Facilitation Council or the institution or thecentre acts as an Arbitrator, it shall have all powers to decide thedisputes referred to it as if such arbitration was in pursuance ofthe arbitration agreement referred to in sub- section (1) of Section7 of the Arbitration Act, 1996 and then all the trappings of theArbitration Act, 1996 would apply to such arbitration. It isneedless to say that such Facilitation Council/institution/centreacting as an arbitral tribunal would also be competent to rule onits own jurisdiction like any other arbitral tribunal appointed underthe Arbitration Act, 1996 would have, as contemplated in Section16 thereof. [Para 30][1128-D-E]

1.8 The upshot of the above is that:

i.Chapter-V of the MSMED Act, 2006 would overridethe provisions of the Arbitration Act, 1996.

ii.No party to a dispute with regard to any amount dueunder Section 17 of the MSMED Act, 2006 would beprecluded from making a reference to the Micro andSmall Enterprises Facilitation Council, though anindependent arbitration agreement exists between theparties.

iii.The Facilitation Council, which had initiated theConciliation proceedings under Section 18(2) of theMSMED Act, 2006 would be entitled to act as anarbitrator despite the bar contained in Section 80 ofthe Arbitration Act.

iv.The proceedings before the Facilitation Council/institute/centre acting as an arbitrator/arbitrationtribunal under Section 18(3) of MSMED Act, 2006would be governed by the Arbitration Act, 1996.

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Av.The Facilitation Council/institute/centre acting as anarbitral tribunal by virtue of Section 18(3) of theMSMED Act, 2006 would be competent to rule on itsown jurisdiction as also the other issues in view ofSection 16 of the Arbitration Act, 1996.

vi.A party who was not the ‘supplier’ as per the definitioncontained in Section 2(n) of the MSMED Act, 2006on the date of entering into contract cannot seek anybenefit as the ‘supplier’ under the MSMED Act, 2006.If any registration is obtained subsequently the samewould have an effect prospectively and would applyto the supply of goods and rendering servicessubsequent to the registration. [Para 34][1130-B-G]

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SBP & Company v. Patel Engineering Ltd (2005) 8 SCC618 : [2005] 4 Suppl. SCR 688; Shiv Shakti CooperativeHousing Society, Nagpur vs. Swaraaj Developers andOthers (2003) 6 SCC 659 : [2003] 3 SCR 762; BharatAluminum Company v. Kaiser Aluminum TechnicalServices (2012) 9 SCC 648; Antrix Corporaton Limitedv. Devas Multimedia Private Limited (2014) 11 SCC560 : [2013] 6 SCR 453; Amazon.com NV InvestmentHoldings LLC. v. Future Retail Limited and other (2022)1 SCC 209; Orissa State Financial Corporation v.Narsinghch. Nayak and Others (2003) 10 SCC 261;Shin Satellite Public Co. Ltd. v. Jain Studios Ltd. (2006)2 SCC 628 : [2006] 1 SCR 933; Silpi Industries etc. v.Kerala State Road Transport Corporation and Anr 2021SCC Online SC 439; Secur Industries Ltd. v. Godrej &Boyce Mfg. Co. Ltd. And Anr (2004) 3 SCC 447 : [2004]2 SCR 705; Solidaire India Ltd. v. Fairgrowth FinancialServices Ltd. & Ors (2001) 3 SCC 71 : [2001] 1 SCR932; Maruti Udyog Ltd. v. Ram Lal & Ors (2005) 2SCC 638 : [2005] 1 SCR 790; Union of India v.Prabhakaran Vijaya Kumar and Ors (2008) 9 SCC 517;Regional Provident Fund Commr. v. Hoogly Mills Co.Ltd. (2012) 2 SCC 489 : [2012] 1 SCR 363; D

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GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD. v.MAHAKALI FOODS PVT. LTD. (UNIT 2)

Commissioner of Income Tax, Patiala v. Shahzada Nand& Sons AIR 1966 SC 1342 : [1966] 3 SCR 379;Kaushalya Rani v. Gopal Singh AIR 1964 SC 260 :[1964] 4 SCR 982; K. Prabhakaran v. P. Jayarajan(2005) 1 SCC 754 : [2005] 1 SCR 296 - Referred to.

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Case Law Reference

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8008of 2022.

From the Judgment and Order dated 13.11.2019 of the High Courtof Gujarat at Ahmedabad in R/First Appeal No.3613 of 2019.

With

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Civil Appeal Nos. 127 of 2018, 6167 of 2013, 8009, 8010, 8011,8012 of 2022.

Tushar Mehta, SG, Balbir Singh, ASG, Nakul Dewan, Ranjit Kumar,Vinay Navare, G. Umapathy, Atul Yeshwant Chitale, Maninder Singh,Sr. Advs., Prashant Singh, Ms. Liz Mathew, Kanu Agrawal, PratapVenugopal, Annam Venkatesh, Amrish Kumar, Ms. Aastha Mehta,Bhargav Pandya, Ms. Deepanwita Priyanka, Ms. Anushree PrashitKapadia, Sambit Nanda, Ms. Anushka Shah, Ms. Priyanka Rathi, Ms.Ms. Smriti Kalra, Muddam Thirupathi Reddy, Vijay K. Singh, Ms. VijayaSingh, Abhishek Singh, Pravartak Pathak, Ms. Gwen Karthika, Ms. Abha G

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AR. Sharma, Anup Jain, Udit Gupta, Akshay Goel, M/s. Udit Kishan andAssociates, Ms. Tanvi Kakar, Ms. Prathmesh Kamat, Ms. Suchitra AtulChitale, Sunil Kumar Jain, Ms. Rashika Swarup, Manish Kumar Saran,Satya Prakash Sharan, Aspi Kapadia, Ms. Nidhi Mohan Parashar, VikrantKumar, Sachin Patil, Rahul Chitnis, Aaditya A. Pande, Geo Joseph, Ms.Shwetal Shepal, Amit Meharia, Ms. Tannishtha Singh, Abinash Agarwal,BM/s. Meharia & Company, Satyajit A. Desai, Satya Kam Sharma,Siddharth Gautam, Himanshu Sharma, Ms. Anagha S. Desai, GauravKejriwal, Pankaj Singhal, Pawas Agarwal, Arjun Aggarwal, Ms. AshaGopalan Nair, Ms. Nivedita Nair, Arun Gopalan Nair, Advs. for theappearing parties.

CThe Judgment of the Court was delivered by BELA M. TRIVEDI, J.

1. Leave to appeal is granted in SLP(C) No. 12884/2020, SLP(C)No. 31227/2018, SLP(C) No. 7375/2020, SLP(C) No. 2135/2021 andDSLP(C) No. 6166/2021.

2. All these seven appeals though factually different, involve certaincommon questions of law and therefore were heard together.

3. The broad outline of the impugned orders in each appeal maybe stated as under:

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(I)C.A. No…… of 2022 (@ SLP (C) No. 12884/2020)

The appellant Gujarat State Civil Supplies CorporationLtd. (Original Petitioner), has challenged the Order dated13.11.2019 passed by the Gujarat High Court in the FirstAppeal No. 3613/2019, whereby the High Court hasdismissed the said appeal filed by the appellant under Section37 of the Arbitration and Conciliation Act, 1996 (Hereinafterreferred to as “the Arbitration Act, 1996”). In the said FirstAppeal, the appellant had challenged the Order dated20.08.2018 passed by the Commercial Court, Ahmedabadin Commercial Civil Misc. Application No. 54/2016 filedunder Section 34 of the Arbitration Act read with Section19 of the Micro, Small and Medium EnterprisesDevelopment Act, 2006 (hereinafter referred to as “theMSMED Act, 2006”), whereby the commercial court hadconfirmed the award made by the Madhya Pradesh Micro F

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and Small Enterprises Facilitation Council, Bhopal inReference No. NSEFC 442/2012, holding that the provisionsof MSMED Act, 2006 had an effect overriding the provisionsof the Arbitration Act and that the Facilitation Council atBhopal had the jurisdiction to adjudicate upon the disputesbetween the parties.

(II)C.A. No. 127/2018

The appellant M/s. Ramkrishna Electricals Ltd.(Original Respondent No. 2) has challenged the Order dated27.06.2017 passed by theHigh Court of Judicature atBombay, Nagpur Bench, Nagpur, in W.P. No. 4435/2011,whereby the High Court has allowed the said petition, holdingthat the Micro, Small Enterprises Facilitation Council,Nagpur, did not have the jurisdiction to decide the OriginalApplication No. 24/2010 filed by the appellant herein. Inthe impugned order, the High Court followed its earlierdecision in case Steel Authority Vs. MSE FacilitationCouncil[1], in which it was held that the Facilitation Councilwould not be entitled to proceed under the provisions ofSection 18(3) of MSMED Act, 2006 when there is anindependent arbitration agreement between the parties.

(III) C.A. No. 6167/2013

The appellant M/s. Vidarbha Ceramics Pvt. Ltd.(Original Respondent No. 2) has challenged the Order dated27.08.2010 passed by the High Court of Judicature atBombay, Nagpur Bench, Nagpur, in W.P. No. 2145/2010(AIR 2012 Bom. 178) whereby the High Court has allowedthe said petition holding that the Facilitation Council,Nagpur,was not entitled to proceed under Section 18(3) ofthe MSMED Act, 2006 in view of an arbitration agreementexecuted between the parties.

(IV) C.A. …… of 2022 (@ SLP (C) No. 31227/2018)

The appellant Gujarat State Petronet Ltd. (OriginalPetitioner) has challenged the Order dated 06.08.2018passed by the High Court of Judicature at Bombay, in W.P.

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No. 5459/2015, whereby the High Court disposed of theWrit Petition by holding that despite independent arbitrationagreement between the parties, the respondent FacilitationCouncil, Thane had the jurisdiction to entertain the referencemade by the Respondent No. 1 Krunal Engineering Works(Original RespondentNo. 3) under Section 18 of theMSMED Act, 2006, however the High Court held that therespondent Facilitation Council itself having conducted theconciliation proceedings, could not have taken up thedisputes for arbitration in view of Section 80 of theArbitration Act, 1996. The High Court directed theFacilitation Council to refer the disputes between the partiesto any institution or centre providing alternative disputeresolution services for arbitration.

(V)C.A. …… of 2022 (@ SLP (C) No. 7375/2020)

The appellant Bharat Electronics Ltd. & Anr.(Original Petitioners) have challenged the Order dated20.01.2020 passed by the High Court of Judicature atBombay in W.P. No. 7899/2017, whereby the High Courthas dismissed the said petition along with the W.P. No. 9356/2018, holding that when the Facilitation Council hadconducted the arbitration proceedings and passed an awardunder Section 18(3) of the MSMED Act, 2006 the remedyof the aggrieved party would be to take recourse to Section34 of the Arbitration Act. The High Court relied upon theratio in case of SBP & Company Vs. Patel EngineeringLtd.[2 ]which disapproved the practice of High Courtsentertaining petitions under Article 226/227 of theConstitution of India challenging the orders passed by theArbitration Tribunal.

(VI) C.A. ……of 2022 (@ SLP (C) No. 2135/2021)

The appellant Union of India (Original Appellant) haschallenged the Order dated 23.08.2019 passed by the DelhiHigh Court in LPA 42/2019, whereby the High Court whiledismissing the said LPA held that despite the arbitrationclause in the agreement between the parties, if the MSMED

Act,2006 is applicable to the party, Facilitation Council wouldhave the jurisdiction under Section 18(3) to either take upthe matter for arbitration itself or refer the matter forarbitration to any institution or centre providing alternativedispute resolution services.

(VII) C.A. …… of 2022 (@ SLP (C) No. 6166/2021)

The appellant JITF Water Infrastructure Ltd. (OriginalPetitioner) has challenged the Order dated 24.07.2020passed by the Gujarat High Court in LPA 1667/2019,whereby the High Court while dismissing the said LPA andconfirming the order passed by the Single Bench,held thatRespondent No. 2 M/s. Aquafil Polymers Company Pvt.Ltd. and M/s. Wintech Engineering Pvt. Ltd.being integralpart of the joint venture, any contract signed by the jointventure would be a contract for the benefit and on behalfof its constituents/components; and that if one of thecomponents of the joint venture (in this case M/s AquafilPolymers) had filed its memorandum under Section 8 ofthe MSMED Act, 2006 it cannot be denied the status of thesupplier, even though joint venture had not filed suchmemorandum. The High Court further held that therespondent no. 2 Aquafil Polymers, who was the supplierhad rightly appliedto the Facilitation Council under Section18(1) of the MSMED Act, 2006 and that the FacilitationCouncil having conducted the Conciliation process and thesame havingfailed, the Facilitation Council had no optionleft but to refer it to the institution or centre providingalternative dispute resolution services for carrying out thematter further in accordance with the provisions ofArbitration Act, 1996.

4. In the background of afore-stated spectrum of cases, followingcommon questions of law arise for consideration:

(i) Whether the provisions of Chapter-V of the MSMED Act,2006 would have an effect overriding the provisions of theArbitration Act, 1996?

(ii) Whether any party to a dispute with regard to any amountdue under Section 17 of the MSMED Act,2006 would be A

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precluded from making a reference to the Micro and SmallEnterprises Facilitation Council under sub-section (1) ofSection 18 of the said Act, if an independent arbitrationagreement existed between the parties as contemplated inSection 7 of the Arbitration Act,1996?

B(iii)Whether the Micro and Small Enterprises FacilitationCouncil, itself could take up the dispute for arbitration andact as an arbitrator, when the council itself had conductedthe conciliation proceedings under sub-section (2) of theSection 18 of the MSMED Act, 2006 in view ofthe barcontained in Section 80 of the Arbitration Act,1996?C

5. Before adverting to the afore-stated questions of law, beneficialwould be to glance through the legislative history and the objects andreasons as also the relevant provisions of the MSMED Act, 2006 and ofthe Arbitration Act, 1996. So far as the legislative history of MSMEDAct, 2006 is concerned, it appears thatin order to promote and strengthenDthe small, tiny and medium scale industrial undertakings, the “Interest onDelayed Payments to Small Scale and Ancillary Industrial UndertakingsAct, 1993” (hereinafter referred to as “The Delayed Payments Act”)was enacted by the Parliament. The object of the said enactment was toprovide for and regulate the payment of interest on delayed payments toEthe small scale and ancillary industrial undertakings. Though Sections 4and 5 of the Delayed Payments Act, made the provisions of the recoveryof amount and computation of compound interest and section 10 thereofprovided for the effect overriding the other laws for the time being inforce, it did not provide for any dispute resolution mechanism throughwhich a small enterprise could avail of its remedies. The small enterprises,Ftherefore, had to file a suit or to follow the contractual terms as containedin the arbitration agreement for the recovery of their dues. TheGovernment of India, Ministry of Industry, the Department of Small-Scale Industries and Argo and Rural Industries, realizing the need forreforms in the then existing policies and to design new policies for theGdevelopment of small and medium enterprises constituted “an expertcommittee on small enterprises” vide the Order dated 29.12.1995. Thecommitteerecommended for enacting an Act for the inclusion of stringentprovisions for non-payment of dues to the small-scale industries. Thiswas followed by the Small and Medium Enterprises Development Bill,2005 in August, 2005.The said Bill was referred to the ParliamentaryH

Standing Committee on Industry, which submitted its 176th report on thesaid Bill of 2005.The recommendations of the said committee culminatedinto the MSMED Bill, which sought to achieve following amongst otherobjects: - -to make provisions for ensuring timely and smooth flow ofcredit to small and medium enterprises to minimize theincidence of sickness among and enhancing thecompetitiveness of such enterprises, in accordance with theguidelines or instructions of the Reserve Bank of India; -tomake further improvements in the Interest on DelayedPayments to Small Scale and Ancillary IndustrialUndertakings Act, 1993 and making that enactment a part of the proposed legislation and to repeal that enactment.

6. The MSMED Bill having been passed by both the Houses ofParliament, received the assent of the President on 16[th] June, 2006 andcame into the Statute Book as the MSMED Act, 2006, (27 of 2006).Thelong title of the Act states that the said Act has been enacted to providefor facilitating the promotion and development, and enhancing thecompetitiveness of micro, small and medium enterprises and for mattersconnected therewith or incidental thereto. The Act has been divided intoSix Chapters, and Chapter-V pertains to the ‘Delayed payments to microand small enterprises.’

7. Some of the definitions and provisions contained in the MSMEDAct, 2006 being relevant for the purpose of deciding these appeals arereproduced hereunder: - “2.Definitions. —In this Act, unless the context otherwiserequires, —

(a) ….

(b) “appointed day” means the day following immediately afterthe expiry of the period of fifteen days from the day of acceptanceor the day of deemed acceptance of any goods or any services bya buyer from a supplier.

Explanation. —For the purposes of this clause, —

(i) “the day of acceptance” means, —

(a) the day of the actual delivery of goods or the renderingof services; or A

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(b) where any objection is made in writing by the buyerregarding acceptance of goods or services within fifteen daysfrom the day of the delivery of goods or the rendering ofservices, the day on which such objection is removed by thesupplier;

(ii) “the day of deemed acceptance” means, where no objectionis made in writing by the buyer regarding acceptance of goodsor services within fifteen days from the day of the delivery ofgoods or the rendering of services, the day of the actual deliveryof goods or the rendering of services;

(c) …..

(d) “buyer” means whoever buys any goods or receives anyservices from a supplier for consideration; (e) …..

(f) …..

(g) …..

(h) “micro enterprise” means an enterprise classified as such undersub-clause (i) of clause (a) or sub-clause (i) of clause (b) of sub-section (1) of section 7;

(i) …..

(j) …..

(k) ….

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(m) “small enterprise” means an enterprise classified as such undersub-clause (ii) of clause (a) or sub-clause (ii) of clause (b) of sub-section (1) of section 7; (n) “supplier” means a micro or small enterprise, which has fileda memorandum with the authority referred to in sub-section (1)of section 8, and includes, —

(i) the National Small Industries Corporation, being a company,registered under the Companies Act, 1956 (1 of 1956);

(ii) the Small Industries Development Corporation of a Stateor a Union territory, by whatever name called, being a companyregistered under the Companies Act, 1956 (1 of 1956);

(iii) any company, co-operative society, trust or a body, bywhatever name called, registered or constituted under any lawfor the time being in force and engaged in selling goodsproduced by micro or small enterprises and rendering serviceswhich are provided by such enterprises;”

Section 8(1) pertaining to the filing of Memorandum of micro,small and medium enterprises reads as under: - “(1) Any person who intends to establish, - (a) a micro or small enterprise, may, at his discretion; or (b) a medium enterprise engaged in providing or rendering ofservices may, at his discretion; or

(c) a medium enterprise engaged in the manufacture orproduction of goods pertaining to any industry specified in theFirst Schedule to the Industries (Development and Regulation)Act, 1951 (65 of 1951), shall file the memorandum of micro, small or, as the case maybe, of medium enterprise with such authority as may be specifiedby the State Government under sub-section (4) or the CentralGovernment under sub-section (3):

Provided that any person who, before the commencement ofthis Act, established- (a) a small-scale industry and obtained a registration certificate,may, at his discretion; and (b) an industry engaged in the manufacture or production ofgoods pertaining to any industry specified in the First Scheduleto the Industries (Development and Regulation) Act, 1951 (65of 1951), having investment in plant and machinery of morethan one crore rupees but not exceeding ten crore rupees and,in pursuance of the notification of the Government of India inthe erstwhile Ministry of Industry (Department of IndustrialDevelopment) number S.O. 477(E), dated the 25th July, 1991filed an Industrial Entrepreneur’s Memorandum,shall withinone hundred and eighty days from the commencement of thisAct, file the memorandum, in accordance with the provisionsof this Act.”

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8. Chapter-V of the MSMED Act,2006 pertaining to the“delayedpayments to micro and small enterprises” contains Sections 15to 25, out of which Sections 15 to 20 and 24 being relevant are reproducedherein below:

“15.Liability of buyer to make payment. —Where any suppliersupplies any goods or renders any services to any buyer, the buyershall make payment therefor on or before the date agreed uponbetween him and the supplier in writing or, where there is noagreement in this behalf, before the appointed day: Provided thatin no case the period agreed upon between the supplier and thebuyer in writing shall exceed forty-five days from the day ofacceptance or the day of deemed acceptance.

16. Date from which and rate at which interest is payable.—Where any buyer fails to make payment of the amount to thesupplier, as required under section 15, the buyer shall,notwithstanding anything contained in any agreement betweenthe buyer and the supplier or in any law for the time being inforce, be liable to pay compound interest with monthly rests to thesupplier on that amount from the appointed day or, as the casemay be, from the date immediately following the date agreed upon,at three times of the bank rate notified by the Reserve Bank.

17. Recovery of amount due. —For any goods supplied orservices rendered by the supplier, the buyer shall be liable to paythe amount with interest thereon as provided under section 16.

18. Reference to Micro and Small Enterprises FacilitationCouncil. —

(1) Notwithstanding anything contained in any other law forthe time being in force, any party to a dispute may, with regardto any amount due under section 17, make a reference to theMicro and Small Enterprises Facilitation Council.

(2) On receipt of a reference under sub-section (1), the Councilshall either itself conduct conciliation in the matter or seek theassistance of any institution or centre providing alternate disputeresolution services by making a reference to such an institutionor centre, for conducting conciliation and the provisions ofsections 65 to 81 of the Arbitration and Conciliation Act, 1996

(26 of 1996) shall apply to such a dispute as if the conciliationwas initiated under Part III of that Act.

(3) Where the conciliation initiated under sub-section (2) is notsuccessful and stands terminated without any settlementbetween the parties, the Council shall either itself take up thedispute for arbitration or refer it to any institution or centreproviding alternate dispute resolution services for sucharbitration and the provisions of the Arbitration and ConciliationAct, 1996 (26 of 1996) shall then apply to the dispute as if thearbitration was in pursuance of an arbitration agreementreferred to in sub-section (1) of section 7 of that Act.

(4) Notwithstanding anything contained in any other law forthe time being in force, the Micro and Small EnterprisesFacilitation Council or the centre providing alternate disputeresolution services shall have jurisdiction to act as an Arbitratoror Conciliator under this section in a dispute between the supplierlocated within its jurisdiction and a buyer located anywhere inIndia.

(5) Every reference made under this section shall be decidedwithin a period of ninety days from the date of making such areference.

19. Application for setting aside decree, award or order —No application for setting aside any decree, award or other ordermade either by the Council itself or by any institution or centreproviding alternate dispute resolution services to which a referenceis made by the Council, shall be entertained by any court unlessthe appellant (not being a supplier) has deposited with it seventy-five per cent. of the amount in terms of the decree, award or, asthe case may be, the other order in the manner directed by suchcourt: Provided that pending disposal of the application to set asidethe decree, award or order, the court shall order that suchpercentage of the amount deposited shall be paid to the supplier,as it considers reasonable under the circumstances of the case,subject to such conditions as it deems necessary to impose.

20. Establishment of Micro and Small EnterprisesFacilitation Council. —The State Government shall, bynotification, establish one or more Micro and Small Enterprises A

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AFacilitation Councils, at such places, exercising such jurisdictionand for such areas, as may be specified in the notification.

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24. Overriding effect. —The provisions of sections 15 to 23shall have effect notwithstanding anything inconsistent therewithcontained in any other law for the time being in force.”

C9. So far as the Arbitration Act, 1996 is concerned, its Bill, takinginto account the United Nations Commission on International Trade Law(UNCITRAL) Model Law and Rules,sought to achieve followingamongst other objects: - -to comprehensively cover international and commercialDarbitration and conciliation as also domestic arbitration andconciliation; -to permit an arbitral tribunal to use mediation, conciliationor other procedures during the arbitral proceedings toencourage settlement of disputes; E

-to provide that a settlement agreement reached by the partiesas a result of conciliation proceedings will have the samestatus and effect as an arbitral award on agreed terms onthe substance of the dispute rendered by an arbitral tribunal.

10. The Arbitration and Conciliation Bill having been passed byFboth the Houses of Parliament received the assent of the President on16[th] Aug. 1996, and came on the Statute Book as the Arbitration andConciliation Act, 1996 (26 of 1996). It came into force on 22.08.1996.As per the long title of the Act, the said Act was enacted to consolidate and amend the law relating to domestic arbitration, internationalGcommercial arbitration and enforcement of foreign arbitral awards asalso to define the law relating to conciliation, and for matters connectedtherewith and incidental thereto. The Act has been divided into five parts.Part-I pertains to Arbitration, Part-IA to Arbitration Council of India,Part-II to Enforcement of certain Foreign Awards, Part-III to Conciliationand Part-IV pertains to Supplementary Provisions.H

11. Some of the relevant provisions of the Act are reproducedhereunder for ready reference: - Section 2(1)(b) defines “arbitration agreement” to mean anagreement referred to in Section 7.

Section 2(4) reads as under:

“(4) This Part except sub-section (1) of section 40, sections 41and 43 shall apply to every arbitration under any other enactmentfor the time being in force, as if the arbitration were pursuant toan arbitration agreement and as if that other enactment were anarbitration agreement, except in so far as the provisions of thisPart are inconsistent with that other enactment or with any rulesmade thereunder.”

Section 7 reads as under:

“7. Arbitration agreement. —

(1) In this Part, “arbitration agreement” means an agreementby the parties to submit to arbitration all or certain disputeswhich have arisen or which may arise between them in respectof a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitrationclause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in—

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other meansof telecommunication including communication throughelectronic means which provide a record of the agreement;or

(c) an exchange of statements of claim and defence in whichthe existence of the agreement is alleged by one party andnot denied by the other.

(5) The reference in a contract to a document containing anarbitration clause constitutes an arbitration agreement if thecontract is in writing and the reference is such as to make thatarbitration clause part of the contract.”

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Section 8(1) pertaining to the power of the judicial authority torefer parties to arbitration where there is an arbitration agreement,reads as under:

“8. Power to refer parties to arbitration where there is anarbitration agreement. —

(1) A judicial authority, before which an action is brought in amatter which is the subject of an arbitration agreement shall, ifa party to the arbitration agreement or any person claimingthrough or under him, so applies not later than the date ofsubmitting his first statement on the substance of the dispute,then, notwithstanding any judgment, decree or order of theSupreme Court or any Court, refer the parties to arbitrationunless it finds that prima facie no valid arbitration agreementexists.”

Chapter-IV pertains to the jurisdiction of arbitral tribunals.Sections 16thereof reads as under:

“16. Competence of arbitral tribunal to rule on itsjurisdiction.

(1) The arbitral tribunal may rule on its own jurisdiction, includingruling on any objections with respect to the existence or validityof the arbitration agreement, and for that purpose, —

(a) an arbitration clause which forms part of a contract shallbe treated as an agreement independent of the other terms ofthe contract; and (b) a decision by the arbitral tribunal that the contract is nulland void shall not entail ipso jure the invalidity of the arbitrationclause.

(2) A plea that the arbitral tribunal does not have jurisdiction shallbe raised not later than the submission of the statement of defence;however, a party shall not be precluded from raising such a pleamerely because that he has appointed, or participated in theappointment of, an arbitrator.

(3) A plea that the arbitral tribunal is exceeding the scope of itsauthority shall be raised as soon as the matter alleged to be beyondthe scope of its authority is raised during the arbitral proceedings.

(4) The arbitral tribunal may, in either of the cases referred to insub-section (2) or sub-section (3), admit a later plea if it considersthe delay justified.

(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takesa decision rejecting the plea, continue with the arbitral proceedingsand make an arbitral award.

(6) A party aggrieved by such an arbitral award may make anapplication for setting aside such an arbitral award in accordancewith section 34.”

Section 21 pertaining to the commencement of arbitralproceedings reads as under:

“21. Commencement of arbitral proceedings. —Unlessotherwise agreed by the parties, the arbitral proceedings in respectof a particular dispute commence on the date on which a requestfor that dispute to be referred to arbitration is received by therespondent.”

Section 42 pertaining to the jurisdiction of the courts reads asunder:

“42. Jurisdiction. —Notwithstanding anything containedelsewhere in this Part or in any other law for the time being inforce, where with respect to an arbitration agreement anyapplication under this Part has been made in a Court, that Courtalone shall have jurisdiction over the arbitral proceedings and allsubsequent applications arising out of that agreement and thearbitral proceedings shall be made in that Court and in no otherCourt.”

Section 43 pertaining to the Limitations reads as under:

“43. Limitations. —(1) The Limitation Act, 1963 (36 of 1963),shall apply to arbitrations as it applies to proceedings in Court.

(2) For the purposes of this section and the Limitation Act, 1963(36 of 1963), an arbitration shall be deemed to have commencedon the date referred in section 21.

(3) Where an arbitration agreement to submit future disputes toarbitration provides that any claim to which the agreement applies A

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1116SUPREME COURT REPORTS

Ashall be barred unless some step to commence arbitral proceedingsis taken within a time fixed by the agreement, and a dispute arisesto which the agreement applies, the Court, if it is of opinion that inthe circumstances of the case undue hardship would otherwisebe caused, and notwithstanding that the time so fixed has expired,may on such terms, if any, as the justice of the case may require,Bextend the time for such period as it thinks proper.

(4) Where the Court orders that an arbitral award be set aside,the period between the commencement of the arbitration and thedate of the order of the Court shall be excluded in computing thetime prescribed by the Limitation Act, 1963 (36 of 1963), for theCcommencement of the proceedings (including arbitration) withrespect to the dispute so submitted.”

12. The learned counsels appearing for the parties had made theirsubmissions at length on various issues involved in their respectiveappeals. Since some of the appeals are filed by the Suppliers and someDby the Buyers, for the sake of convenience, the learned counsels shallbe referred to as the counsels for the Suppliers and the counsels for theBuyers instead of the counsels for the Appellants or theRespondents.Their respective submissions may be summarized as under.

13. The learned counsels for the Buyers submitted as under:

E(i)The non obstante portion of Section 18 of the MSMEDAct,2006 does not include ‘agreement’ as expressly donein Section 16 of the said Act and therefore Section 18 cannottake precedence over an arbitration agreement executedbetween the parties.

F(ii)The intention of the legislature not to supersede the contractsbetween the parties is clear, when the term “shall” in Section16 is replaced with the term “may” in Section 18.

(iii) Section 18(1) and 18(4) have anon obstante clause,whereas Section 18(2), 18(3) and 18(5) do not have suchGnon obstante clause. Therefore, Section 18(1) only givesan option to any party to a dispute, and does not compel theparty to make a reference to the Facilitation Council.Similarly, Section 18(4) confers jurisdiction upon theFacilitation Council to act as an arbitrator or the conciliatorin a dispute between the supplier located within itsHjurisdiction and a buyer located anywhere in India.

(iv) As per the well settled principle of law, the Courts cannotsupply casus omissus i.e., omission in a statute cannot besupplied by construction. In this regard, reliance is placed onthe decision in case of Shiv Shakti Cooperative HousingSociety, Nagpur vs. Swaraaj Developers and Others[3].

(v) Section 18 of MSMED Act,2006 does not grant anysubstantive right to the supplier and it is merely a procedure/mechanism available to him under the Act to make referencewith regard to the dispute to the Facilitation Council. Thesaid remedy would be available only when there is no clausein the contract providing for the resolution of dispute byway of arbitration under the Arbitration Act, 1996.

(vi) Sections 15, 16 and 17, though are substantive in nature,Section 18 is procedural, providing for an option to go to theFacilitation Council for the recovery of dues under Section17.

(vii) Commercial contracts must be construed with care, sinceit not only affects the party’s autonomy but also the country’seconomy. The parties to an arbitration agreement have theautonomy to decide not only on the procedural law to befollowed but also the substantive law. In this regard, relianceis placed on various decisions of this Court in case of BharatAluminum Company Vs. Kaiser Aluminum TechnicalServices[4]& Antrix Corporaton Limited Vs. DevasMultimedia Private Limited[5] and Amazon.com NVInvestment Holdings LLC. Vs. Future Retail Limitedand others[6].

(viii) The courts have to read the agreement as it is and cannotrewrite or create a new one. In this regard, reliance is placedin case of Orissa State Financial Corporation vs.Narsingh ch. Nayak and Others[7]and Shin SatellitePublic Co. Ltd. Vs. Jain Studios Ltd.[8]

3 (2003) 6 SCC 659

4 (2012) 9 SCC 648

5 (2014) 11 SCC 560

6 (2022) 1 SCC 209

7 (2003) 10 SCC 261

8 (2006) 2 SCC 628

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A(ix)The doctrine of election is inbuilt in the concept of approbateand reprobate. One cannot take advantage of one part whilerejecting the rest. A party cannot be allowed to have thebenefit of an instrument, while questioning it at the sametime.

B(x)Both the Acts of 1996 and 2006 are special laws and operatein different fields. Therefore, where the agreement betweenthe parties (one of which is micro or small enterprise) issilent about the mode of dispute resolution, then only therecourse to the provisions of Section 18 can be said to bevalid. However, when the contract itself mentions aboutCthe dispute to be resolved through arbitration, then there isno occasion for invoking the provisions of MSMED Act,2006.

(xi) The Facilitation Council cannot act as a conciliator and asan arbitrator over the same dispute, in view of the barDcontained in Section 80 of the Arbitration Act, 1996.

(xii) Section 18 of 2006 Act does not override the contractentered into between the parties providing for referring thedispute to the arbitrator under the Arbitration Act, 1996.The reliance placed by the counsels for the Suppliers onEthe decision of this Court in Silpi Industries etc. vs. KeralaState Road Transport Corporation and Anr.[9] is misplacedas the observations made in the said decision with regardto the issue of effect of MSMED Act over the ArbitrationAct, were per incuriam.

F14. The learned counsels for theSuppliers made the followingsubmissions: -

(i) The avowed object and purpose of Section 18 is to create acost effective and expeditious dispute resolution mechanismfor the recovery of an unpaid dues of a supplier underGSection 17. Section 18 is not subject to a contract or anagreement to the contrary between the parties. It gives theparties a right to have their disputes adjudicated byapproaching the Facilitation Council, even if there is a H9 2021 SCC Online SC 439

contractual provision setting out the manner by which theparties had to resolve their disputes.

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(ii) Section 18 is consistent with Section 2(4) of the ArbitrationAct, 1996 inasmuch as Section 18(3) deems the referenceto statutory arbitration as the arbitration agreement for thepurposes of Section 7(1) of the Arbitration Act, 1996andBtherefore, once availed, the reference under Section 18would override any agreement including arbitrationagreement between the parties. The observations made inM/s. Silpi Industries (supra) clinches the issue that theMSMED Act,2006 being the special legislation to protectCthe MSME’s by setting out the statutory mechanism forthe payment of interest on delayed payments, the said Actwould override the provisions of the Arbitration Act 1996,which is a general legislation.

(iii) In view of the specific mandate under Section 24 of theMSMED Act 2006, the provisions of Sections 15 to 23 wouldhave an effect notwithstanding anything inconsistenttherewith contained in any other law for the time being inforce.

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(iv) Section 18 of the MSMED Act,2006 provides the party astatutory right to approach the council, and such right cannotEbe obliterated on account of an arbitration agreement enteredinto between the parties.(v)Section 18(3) of the MSMED Act,2006 creates a deemingfiction consistent with Section 2(4) of the Arbitration Act,and sets out that if conciliation is not successful and partiesFmove to arbitration, the provisions of the Arbitration Actshall then apply to the dispute as if the arbitration was inpursuance of an arbitration agreement referred to in sub-section (1) of Section 7 of the Act. Hence, once themechanism under Section 18 is triggered, then it wouldGoverride any agreement between the parties to arbitrate.In this regard, reliance is placed on the decision of this Courtin case of Secur Industries Ltd. Vs. Godrej & BoyceMfg. Co. Ltd. And Anr[10].

A(vi)The MSMED Act,2006 being a special statute ought toprevail over the Arbitration Act, 1996 which is a generalstatute. Even if, the Arbitration Act is also treated as aspecial statute, the MSMED Act,2006 would still prevail,since a special statute enacted subsequently in time prevailsin case of any conflict. In this regard, reliance is placed inBcase of Solidaire India Ltd. Vs. Fairgrowth FinancialServices Ltd. & Ors[11]and Maruti Udyog Ltd. Vs. RamLal & Ors[12].

15. The learned counsel appearing for the MSE Facilitation Councilin support of the submissions made by the learned counsels for theCSuppliers, made further following submissions: -

(i) Sections 15 to 19 of the MSMED Act, 2006 are interlinkedand dependent on each other, which prescribe a specialscheme under the Act. A cumulative effect of the saidprovisions would clearly override an arbitration agreementDindependently entered into between the parties.

(ii) Section 18 is a substantive law and not a procedural law, asit provides a right and the remedy on the MSE for resolutionof disputes.

E(iii)Beneficial or welfare statutes should be given a liberal andnot a strict interpretation. If the words used in the beneficialstatute are capable of two constructions, the one which ismore in consonance with the object of the Act, and theinterpretation for the benefit of the persons for whom theAct is made, should be preferred. In this regard, reliance isFplaced on decision of this Court in case of Union of IndiaVs. Prabhakaran Vijaya Kumar and Ors[13] and in caseof Regional Provident Fund Commr. Vs. Hoogly MillsCo. Ltd.[14].

16. Now, the first and foremost issue involved in these appeals isGwhether the provisions contained in Chapter V of the MSMED Act,2006 with regard to the Delayed Payments to Micro and Small Enterprises 11 (2001) 3 SCC 7112 (2005) 2 SCC 63813 (2008) 9 SCC 517H14 (2012) 2 SCC 489

would have the precedence over the provisions contained in the ArbitrationAct, 1996, more particularly when the parties by execution of anindependent agreement as contemplated in Section 7 of the ArbitrationAct had agreed to submit to arbitration the disputes arising betweenthem? In other words, whether the provisions contained in Chapter V ofthe MSMED Act, 2006 would have an effect overriding the provisionscontained in the Arbitration Act, 1996?

17. It is trite to say that the provisions of the special statute wouldoverride the provisions of the general statute. It is also well settled thatwhile determining the effect of a statute overriding the other statute, thepurpose and policy underlying the two statutes and the clear intendmentconveyed by the language of the relevant provisions therein would bethe relevant consideration. This Court in Commissioner of Income Tax,PatialaVs. Shahzada Nand & Sons[15] , while stating the fundamentalrule of construction, had observed that the meaning and intention of astatute must be collected from the plain and unambiguous expressionused therein rather than from any notions which may be entertained bythe court as to what is just and expedient.

18. One of principles of statutory interpretation relevant for ourpurpose is contained in the Latin maxim “leges posteriors priorescontrarias abrogant” (the later laws shall abrogate earlier contrarylaws). Another relevant rule of construction is contained in the maxim“generalia specialibus non derogant” (General laws do not prevailover Special laws). When there is apparent conflict between two statutes,the provisions of a general statute must yield to those of a special one.

19. As observed in Kaushalya Rani Vs. Gopal Singh[16], a “SpecialLaw” means a law enacted for special cases, in special circumstances,in contradiction to the general rules of law laid down, as applicablegenerally to all cases with which the general law deals.

20. Keeping in view the aforestated principles of statutoryinterpretations as also the proposition of law laid down by this Courtwith regard to the general rules of construction, let us proceed to examinewhether the MSMED Act, 2006 is a special enactment having an effectoverriding the Arbitration Act, 1996 which is perceived to be a generalenactment? As stated earlier, the very object of enacting MSMED Act, 15 AIR 1966 SC 1342

16 AIR 1964 SC 260

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A2006 was to facilitate the promotion and development, and enhance thecompetitiveness of micro, small and medium enterprises. The Act alsoaimed to ensure timely and smooth flow of credit to the micro, small andmedium enterprises, and to minimize the incidence of sickness.One ofthe main objects of the Act was to delete the Interest on DelayedPayments to Small Scale and Ancillary Industry Undertakings Act, 1993,Band to include stringent provisions as also to provide dispute resolutionmechanism for resolving the disputes of non-payment of dues to themicro and small enterprises. Thus, the seed of MSMED Act, 2006 hadsprouted from the need for a comprehensive legislation to provide anappropriate legal framework and extend statutory support to the microCand small enterprises to enable them to develop and grow into mediumones.

21. Section 15 to 25 contained in Chapter-V of the MSMED Act,2006 pertain to the ‘delayed payments to micro and small enterprises.’ Abare perusal of the said provisions contained in Chapter-V shows that aDstrict liability is fastened on the buyer to make payment to the supplierwho supplies any goods or renders any services to the buyer, prescribingthe time limit in Section 15. Section 16 further fastens the liability on thebuyer to pay compound interest if any buyer fails to make payment tothe supplier as required under Section 15. Such compound interest isrequired to be paid at three times of the bank rate notified by the ReserveEBank, notwithstanding contained in any agreement between the buyerand supplier or in any law for the time being in force. An obligation tomake payment of the amount with interest thereon as provided underSection 16 has been cast upon the buyer and a right to receive suchpayment is conferred on the supplier in Section 17. Thus, Section 17 isFthe ignition point of any dispute under MSMED Act, 2006. Section 18thereof provides for the mechanism to enable the party to the disputewith regard to any amount due under Section 17, to make a reference tothe Micro and Small Enterprises Facilitation Council.

22. Section 18 starts with a nonobstante clause i.e., ‘notwithstandingGanything contained in any other law for the time being in force’. It meansthat the said provision has been enacted with the aim to supersede otherlaws for the time being in force. Further a dedicated statutory forum i.e.,the Micro and Small Enterprises Facilitation Council (As establishedunder Section 20 of the MSMED Act, 2006), has been provided to whicha reference could be made by any party to the dispute. Sub-section (2)H

of Section 18 empowers the Facilitation Council, on receipt of suchreference made under sub-section (1), to conduct Conciliation in thematter or seek assistance of any institution or centre providing alternatedispute resolution services by making a reference to such an institutionor centre, for conducting Conciliation, as contemplated in Section 65 to81 of the Arbitration Act, 1996. If the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlementbetween the parties, the Council is further empowered under sub-section(3)to either itselftake up the dispute for arbitration or refer to it anyinstitution or centre providing alternate dispute resolution services forsuch arbitration. The provisions of Arbitration Act, 1996 are then madeapplicable to the dispute as if the arbitration was in pursuance of anarbitration agreement referred to in sub-section (1) of Section 7 of theArbitration Act, 1996. Sub-section (4) of Section 18 again starts with anonobstante clause i.e., ‘notwithstanding anything contained in any otherlaw for the time being in force’, and confers jurisdiction upon theFacilitation Council to act as an arbitrator or a conciliator in a disputebetween the supplier located within its jurisdiction and a buyer locatedanywhere in India. Sub-section (5) of Section 18 fixes the time limit ofninety days to decide such reference. Section 19 prescribes the procedureto be followed when any application is made in the court for settingaside any decree, award or other order made either by the Council itselfor by any institution or centre to which reference is made by the Council.Section 24 of the MSMED Act, 2006 states that the provisions of Section15 to 23 shall have an effect notwithstanding anything inconsistenttherewith contained in any other law for the time being in force.

23. Having regard to the purpose, intention and objects as also thescheme of the MSMED Act, 2006 and having regard to the unambiguousexpressions used in Chapter-V thereof, following salient featuresemerge:

(i) Chapter-V is “party-specific”, in as much as the party i.e.the ‘Buyer’ and the ‘Supplier’ as defined in Sections 2(d)and 2(n) respectively are covered under the said Chapter.

(ii) A specific provision is made fasteningaliability on the buyerto make payment of the dues to the supplier in respect ofthe goods supplied or services rendered to the buyer, asalso a liability to pay compound interest at three times ofthe bank rate notified by the Reserve Bank, if the buyerfails to make payment within the prescribed time limit. The A

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said liability to pay compound interest is irrespective of anyagreement between the parties or of any law for the timebeing in force.

(iii) A dedicated statutory forum i.e., Micro and SmallEnterprises Facilitation Council is provided to enable anyBparty to a dispute with regard to any amount due underSection 17, to make reference to such Council.

(iv) A specific procedure has been prescribed to be followedby theFacilitation Council after the reference is made to itby any party to the dispute.

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(v) The Facilitation Council or the centres providing alternativedispute resolution services have been conferred with thejurisdiction to act as an Arbitrator or Conciliator underSection 18(4), notwithstanding anything contained in anylaw for the time being in force, in a dispute between thesupplier located within its jurisdiction.

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(vi) The provisions of Arbitration Act, 1996 has been madeapplicable to the dispute only after the Conciliation initiatedunder sub-section (2) does not succeed and standsterminated without any settlement between the parties.

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(vii) Sub-section(1) and sub-section(4) of Section 18 starting withnon obstante clauses have an effect overriding the otherlaws for the time being in force.

(viii) As per Section 24, the provisions of Sections 15 to 23 havean effect notwithstanding anything inconsistent therewithFcontained in any other law for the time being in force.

24. As against the above position, if the purpose,objects and schemeof the Arbitration Act, 1996 are considered, as stated hereinabove, thesaid Act was enacted to consolidate and amend the law relating to thedomestic arbitration, international commercial arbitration and enforcementGof foreign arbitral awards and also to define the law relating toConciliation. It was enacted taking into account the UNCITRAL ModelLaw on international commercial arbitration. The main objectives amongstothers of the said Act were to make provision for an arbitral procedurewhich was fair, efficient and capable to meet the needs of the specificarbitration and to minimize the supervisory role of courts in the arbitral H

process,as also to permit arbitral tribunal to use mediation, conciliationor other procedures during the arbitral proceedings in the settlement ofdisputes etc[17]. The Arbitration Act, 1996 focuses and covers the lawrelating to the Arbitration and Conciliation, providing for the requirementsof the arbitration agreement, composition of arbitral tribunal, conduct ofarbitration proceedings, finality and enforcement of domestic arbitralawards as well as of certain foreign awards, and covers the law relatingto Conciliation. Having regard to the entire scheme of the ArbitrationAct 1996, it appears that it is a general law relating to the domesticarbitration, international commercial arbitration and for conciliation. Itdoes not specify any specific dispute or specific class or category ofpersons to which the Act shall apply,as has been specified in the MSMEDAct, 2006.

25. Thus, the Arbitration Act, 1996 in general governs the law ofArbitration and Conciliation, whereas the MSMED Act, 2006 governsspecific nature of disputes arising between specific categories of persons,to be resolved by following a specific process through a specific forum.Ergo, the MSMED Act, 2006 being a special law and Arbitration Act,1996 being a general law, the provisions of MSMED Act would haveprecedence over or prevail over the Arbitration Act, 1996. In SilpiInustries case (supra) also, this Court had observed while consideringthe issue with regard to the maintainability and counter claim in arbitrationproceedings initiated as per Section 18(3) of the MSMED Act, 2006 thatthe MSMED Act, 2006 being a special legislation to protect MSME’s bysetting out a statutory mechanism for the payment of interest on delayedpayments, the said Act would override the provisions of the ArbitrationAct, 1996 which is a general legislation. Even if the Arbitration Act,1996 is treated as a special law, then also the MSMED Act, 2006 havingbeen enacted subsequently in point of time i.e., in 2006, it would have anoverriding effect, more particularly in view of Section 24 of the MSMEDAct, 2006 which specifically gives an effect to the provisions of Section15 to 23 of the Act over any other law for the time being in force, whichwould also include Arbitration Act, 1996.

26. The court also cannot lose sight of the specific non obstanteclauses contained in sub-section (1) and sub-section (4) of Section 18which have an effect overriding any other law for the time being inforce. When the MSMED Act, 2006 was being enacted in 2006, the 17 Bharat Sewa Sansthan Vs. U.P. Electronics Corporation; AIR 2007 SC 2961.

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ALegislative was aware of its previously enacted Arbitration Act of 1996,and therefore, it is presumed that the legislature had consciously madeapplicable the provisions of the Arbitration Act, 1996 to the disputesunder the MSMED Act, 2006 at a stage when the Conciliation processinitiated under sub-section (2) of Section 18 of the MSMED Act, 2006fails and when the Facilitation Council itself takes up the disputes forBarbitration or refers it to any institution or centre for such arbitration. Itis also significant to note that a deeming legal fiction is created in theSection 18(3) by using the expression ‘as if’ for the purpose of treatingsuch arbitration as if it was in pursuance of an arbitration agreementreferred to in sub-section (1) of Section 7 of the Arbitration Act, 1996.CAs held in K. Prabhakaran v. P. Jayarajan[18], a legal fictionpresupposes the existence of the State of facts which may not exist andthen works out the consequences which flow from that state of facts.Thus, considering the overall purpose, objects and scheme of the MSMEDAct, 2006 and the unambiguous expressions used therein, this court has no hesitation in holding that the provisions of Chapter-V of the MSMEDDAct, 2006 have an effect overriding the provisions of the ArbitrationAct, 1996.

27. The submissions made on behalf of the counsel for the Buyersthat a conscious omission of the word “agreement”in sub-section (1) ofSection 18, which otherwise finds mention in Section 16 of the MSMEDEAct, 2006 implies that the arbitration agreement independently enteredinto between the parties as contemplated under Section 7 of theArbitration Act, 1996 was not intended to be superseded by the provisionscontained under Section 18 of the MSMED Act, 2006 also cannot beaccepted. A private agreement between the parties cannot obliterateFthe statutory provisions.Once the statutory mechanism under sub-section(1) of Section 18 is triggered by any party, it would override any otheragreement independently entered into between the parties, in view ofthenon obstante clauses contained in sub-section(1) and sub-section(4) of Section 18. The provisions of Sections 15 to 23 have also overridingeffect as contemplated in Section 24 of the MSMED Act, 2006 whenGanything inconsistent is contained in any other law for the time being inforce. It cannot be gainsaid that while interpretating a statute, if twointerpretations are possible, the one which enhances the object of theAct should be preferred than the one which would frustrate the object of the Act. If submissionmade by the learned counsel for the buyers thatthe party to a dispute covered under the MSMED Act, 2006 cannotavail the remedy available under Section 18(1) of the MSMED Act,2006 when an independent arbitration agreement between the partiesexists is accepted, the very purpose of enacting the MSMED Act, 2006would get frustrated.

28. There cannot be any disagreement to the proposition of lawlaid down in various decisions of this Court, relied upon by the learnedcounsel for the buyers that the Court has to read the agreement as it isand cannot rewrite or create a new one, and that the parties to an arbitrationagreement have an autonomy to decide not only on the procedural lawto be followed but also on the substantive law, however, it is equallysettled legal position that no agreement entered into between the partiescould be given primacy over the statutory provisions. When the SpecialAct i.e., MSMED Act, 2006 has been created for ensuring timely andsmooth payment to the suppliers who are the micro and smallenterprises,and to provide a legal framework for resolving the disputewith regard to the recovery of dues between the parties under the Act,also providingan overriding effect to the said law over any other law forthe time being in force, any interpretation in derogation thereof wouldfrustrate the very object of the Act. The submission therefore that anindependent arbitration agreement entered into between the parties underthe Arbitration Act, 1996 would prevail over the statutory provisions ofMSMED Act, 2006 cannot countenanced. As such, sub-section (1) ofSection 18 of the MSMED Act, 2006 is an enabling provision whichgives the party to a dispute covered under Section 17 thereof, a choiceto approach the Facilitation Council, despite an arbitration agreementexisting between the parties. Absence of the word ‘agreement’ in thesaid provision could neither be construed as casus omissus in the statutenor be construed as a preclusion against the party to a dispute coveredunder Section 17 to approach the Facilitation Council, on the ground thatthere is an arbitration agreement existing between the parties. In fact, itis a substantial right created in favour of the party under the saidprovision.It is therefore held that no party to a dispute covered underSection 17 of the MSMED Act, 2006 would be precluded from makinga reference to the Facilitation Council under Section 18(1) thereof, merelybecause there is an arbitration agreement existing between the parties.

29. The aforesaid legal position also dispels the argumentsadvanced on behalf of the counsel for the buyers that the Facilitation A

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ACouncil having acted as a Conciliator under Section 18(2) of the MSMEDAct, 2006 itself cannot take up the dispute for arbitration and act as anArbitrator. Though it is true that Section 80 of the Arbitration Act, 1996contains a bar that the Conciliator shall not act as an Arbitrator in anyarbitral proceedings in respect of a dispute that is subject of conciliationproceedings, the said bar stands superseded by the provisions containedBin Section 18 read with Section 24 of the MSMED Act, 2006. As heldearlier, the provisions contained in Chapter-V of the MSMED Act, 2006have an effect overriding the provisions of the Arbitration Act, 1996.The provisions of Arbitration Act, 1996 would apply to the proceedingsconducted by the Facilitation Council only after the process of conciliationCinitiated by the council under Section 18(2) fails and the council eitheritself takes up the dispute for arbitration or refers to it to any institute orcentre for such arbitration as contemplated under Section 18(3) of theMSMED Act, 2006.

30. When the Facilitation Council or the institution or the centreDacts as an Arbitrator, it shall have all powers to decide the disputesreferred to it as if such arbitration was in pursuance of the arbitrationagreement referred to in sub-section (1) of Section 7 of the ArbitrationAct, 1996 and then all the trappings of the Arbitration Act, 1996 wouldapply to such arbitration. It is needless to say that such Facilitation Council/institution/centre acting as an arbitral tribunal would also be competentEto rule on its own jurisdiction like any other arbitral tribunal appointedunder the Arbitration Act, 1996 would have, as contemplated in Section16 thereof.

31. One of the submissions made by the Ld. Counsels for theBuyers was that if the party Supplier was not the “supplier” within theFmeaning of Section 2(n) of the MSMED Act, 2006 on the date of thecontract entered into between the parties, it could not have madereference of dispute to Micro and Small Enterprises Facilitation Councilunder Section 18(1) of the MSMED Act, 2006 and in such cases, theCouncil would not have the jurisdiction to decide the disputes as anGarbitrator.

32. At this juncture, a very pertinent observations made by thisCourt in Silpi Industries case (supra) on this issue are required to bereproduced: - “26. …… In our view, to seek the benefit of provisions underHMSMED Act, the seller should have registered under the provisions of the Act, as on the date of entering into the contract. In anyevent, for the supplies pursuant to the contract made before theregistration of the unit under provisions of the MSMED Act, nobenefit can be sought by such entity, as contemplated underMSMED Act. While interpreting the provisions of Interest onDelayed Payments to Small Scale and Ancillary IndustrialUndertakings Act, 1993, this Court, in the judgment in the caseof Shanti Conductors Pvt. Ltd. v. Assam State ElectricityBoard has held that date of supply of goods/services can be takenas the relevant date, as opposed to date on which contract forsupply was entered, for applicability of the aforesaid Act. Evenapplying the said ratio also, the appellant is not entitled to seek thebenefit of the Act…..

….by taking recourse to filing memorandum under sub-section(1) of Section 8 of the Act, subsequent to entering into contractand supply of goods and services, one cannot assume the legalstatus of being classified under MSMED Act, 2006, as anenterprise, to claim the benefit retrospectively from the date onwhich appellant entered into contract with the respondent. Theappellant cannot become micro or small enterprise or supplier, toclaim the benefits within the meaning of MSMED Act 2006, bysubmitting a memorandum to obtain registration subsequent toentering into the contract and supply of goods and services. Ifany registration is obtained, same will be prospective and appliesfor supply of goods and services subsequent to registration butcannot operate retrospectively. Any other interpretation of theprovision would lead to absurdity and confer unwarranted benefitin favour of a party not intended by legislation.”

33. Following the above-stated ratio, it is held that a party whowas not the “supplier” as per Section 2 (n) of the MSMED Act, 2006 onthe date of entering into the contract, could not seek any benefit as asupplier under the MSMED Act, 2006. A party cannot become a microor small enterprise or a supplier to claim the benefit under the MSMEDAct, 2006 by submitting a memorandum to obtain registration subsequentto entering into the contract and supply of goods or rendering services.If any registration, is obtained subsequently, the same would have theeffect prospectively and would apply for the supply of goods and renderingservices subsequent to the registration. The same cannot operate AB

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Aretrospectively. However, such issue being jurisdictional issue, if raisedcould also be decided by the Facilitation Council/Institute/Centre actingas an arbitral tribunal under the MSMED Act, 2006.

34. The upshot of the above is that:

(i) Chapter-V of the MSMED Act, 2006 would override theprovisions of the Arbitration Act, 1996.

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(ii) No party to a dispute with regard to any amount due underSection 17 of the MSMED Act, 2006 would be precludedfrom making a reference to the Micro and Small EnterprisesCFacilitation Council, though an independent arbitrationagreement exists between the parties.

(iii) The Facilitation Council, which had initiated the Conciliationproceedings under Section 18(2) of the MSMED Act, 2006would be entitled to act as an arbitrator despite the barDcontained in Section 80 of the Arbitration Act.

(iv) The proceedings before the Facilitation Council/institute/centre acting as an arbitrator/arbitration tribunal underSection 18(3) of MSMED Act, 2006 would be governed bythe Arbitration Act, 1996.

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(v) The Facilitation Council/institute/centre acting as an arbitraltribunal by virtue of Section 18(3) of the MSMED Act, 2006would be competent to rule on its own jurisdiction as alsothe other issues in view of Section 16 of the ArbitrationAct, 1996.

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(vi) A party who was not the ‘supplier’ as per the definitioncontained in Section 2(n) of the MSMED Act, 2006 on thedate of entering into contract cannot seek any benefit asthe ‘supplier’ under the MSMED Act, 2006. If anyregistration is obtained subsequently the same would haveGan effect prospectively and would apply to the supply ofgoods and rendering services subsequent to the registration.

35. Though afore-stated discussions and conclusions cover all theissues involved in the appeals, it would be appropriate to deal with eachof the Appeals individually.H

(I)C.A. No ……of 2022 (@ SLP(Civil) No. 12884 of2020)

(i) In this case, the Gujarat State Civil SuppliesCorporation Ltd. had challenged the award made by theFacilitation Council, Bhopalbefore the Commercial Court,Ahmedabad, under Section 34 of the Arbitration Act,1996and the commercial courtvide Order dated 20.08.2018had confirmed the said award. The appeal being the F.A.No. 3613/2019 filed by the appellant-Gujarat State CivilSupplies Corporation under Section 37 of the Arbitration Act,1996 before the High Court of Gujarat was dismissed by theHigh Court vide the impugned Order dated 13.11.2019.

(ii) In the said First Appeal, the appellant had raised theissue with regard to the jurisdiction of the FacilitationCouncil, Bhopal, M.P. to decide the disputes between theappellant and respondent no. 1- Mahakali Foods Pvt. Ltd.The High Court following its earlier decision in PrincipalChief Engineer Vs. M/s. Manibhai & Brothers (Sleeper)& Anr[19]held that Section 18 of the MSMED Act, 2006would have an overriding effect over any other law for thetime being in force including the Arbitration Act, 1996. TheHigh Court also held that the contention with regard to thejurisdiction having not been raised at the time of filingthestatement of defence or reply, the said contention raisedsubsequently could not be accepted.

(iii) As already held in the earlier part of this judgement,the provisions contained in Chapter-V of the MSMED Act,2006 have an effect overriding any other law for the timebeing in force including the Arbitration Act. We thereforedo not find any infirmity in the impugned order passed bythe High Court.

The appeal stands dismissed accordingly.

(II)Civil Appeal No. 127 of 2018

(i) This appeal filed by the Maharashtra State ElectricityDistribution Company challenging the impugned order dated A

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27.06.2017 passed by the High Court of Judicature atBombay, Nagpur Bench, Nagpur in Writ Petition No. 4435of 2011 also involves the issue as to whether the respondent-Facilitation Council had the jurisdiction to decide the originalapplication filed by the present appellant- M/s. RamkrishnaElectricals Ltd. (the Supplier under the Act) under Section18(1) of the MSMED Act. The High Court placing relianceon its earlier decision in the case of M/s. Steel Authority ofIndia & Anr. vs. MSE Facilitation Council (supra) hasheld that the Facilitation Council would not be entitled toproceed under the provisions of Section 18 of the MSMEDAct, 2006 in view of the independent agreement existingbetween the parties.

(ii) The impugned order of the High Court deserves tobe set aside in view of the foregoing conclusion arrived atby us to the effect that the Facilitation Council shall havethe jurisdiction to proceed with the reference made by theparty in respect of the dispute covered under Section 17 ofthe MSMED Act, 2006 despite the existence of anindependent arbitration agreement between the parties.

The appeal stands allowed accordingly.

(III) Civil Appeal No. 6167 of 2013

(i) The present appeal is arising out of the judgment dated21.08.2010 passed by the Division Bench of Bombay HighCourt, Nagpur Bench. In the said case, the present appellant(original respondent no.2) had supplied certain goods to therespondent M/s Steel Authority of India under a contract.However, some disputes arose between the parties, andtherefore the appellant invoked an arbitration clause-22contained in the agreement and proposed to appoint JusticeC.P. Sen (retired) as the arbitrator to settle the disputesthrough arbitration. However, the respondent Steel Authority,invoking Clause 23 of the General Conditions of Contractappointed one Mr. S. K. Gulati as an arbitrator. The saidarbitrator issued notices to the parties asking them to submittheir respective claims. M/s Vidarbha Ceramics instead offiling a statement of claim before the arbitrator, raised objection to the arbitration by stating that the matter beeither referred to Justice C.P. Sen (retired) or be referredto the Micro and Small Enterprise Facilitation Councilestablished under the MSMED Act, 2006. The respondentSteel Authority did not agree to the said proposition. Thesupplier i.e M/s Vidarbha Ceramics thereafter filed areference before the Facilitation Council under Section 18(1)of the Act. The respondent Steel Authority filed objectionsbefore the Facilitation Council contending that the mattercould not be entertained by it in view of the arbitrationagreement existing between the parties. The respondentSteel Authority thereafter invoked the jurisdiction of theHigh Court by filing the writ petition for restraining theCouncil from entertaining the reference. The High Courtvide impugned Order dated 28.08.2010 allowed the saidwrit petition by holding that the MSMED Facilitation Councilwas not entitled to proceed further under the provisionscontained in Section 18 (3) of the MSMED Act,2006 inview of an independent arbitration agreement havingentered into between the parties.

(ii) In view of the detailed discussion and conclusionsarrived at by us, hereinabove, holding that Chapter-V ofthe MSMED Act, 2006has an overriding effect over theprovisions contained in the Arbitration Act 1996, theFacilitation Council would be entitled to proceed furtherwith the reference made by the party (supplier) under Section18 (1) of the MSMED Act, 2006 despite an independentarbitration agreement existing between the parties. As aconsequence, thereof, the impugned order of the High Courtdeserves to be set aside and the appeal deserves to beallowed.The Appeal stands allowed accordingly.

(IV) C.A. …… of 2022 (@ SLP (C) No. 31227 of 2018

(i) In this appeal, the appellant Gujarat State PetronetLtd. (original petitioner) has challenged the order dated06.08.2018 passed by the High Court of Bombay, wherebythe High Court held that the reference made to theFacilitation Council was maintainable in spite of the A

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independent arbitration agreement. The High Court alsoheld that the Facilitation Council having itself conductedthe conciliation proceedings, it could not have decided toinitiate arbitration proceedings under Section 18 (3) of theMSMED Act, 2006.

(ii) In the instant case, the respondent no.1 i.e., KrunalWorks (original respondent no.3) had invoked Section 18(1) of the MSMED Act, 2006 by approaching the Microand Small Enterprises Facilitation Council. In the saidreference, the appellant GSPL had raised an objection withregard to the jurisdiction of the Facilitation Council toentertain the reference in view of an arbitration agreementexisting between the parties. The Facilitation Council hadinitiated conciliation proceedings between the parties,however the same having failed, the Council vide the Orderdated 29.04.2015, decided to take up the dispute forarbitration. The said order was challenged by the GSPLbefore the Bombay High Court.

(iii) In our view, both the issues have been elaboratelydiscussed and concluded hereinabove by holding that thereference to Facilitation Council by a party to a disputewith regard to any money due under Section 17 would bemaintainable despite an independent arbitration agreementexisting between the parties and that the Facilitation Councilcould also take up the dispute for arbitration and act as anarbitrator as contemplated under Section 18 (3) of theMSMED Act, 2006 despite the bar contained in Section 80of the Arbitration Act 1996.

(iv) The impugned order passed by the High Court,therefore to the extent it records the finding that theFacilitation Council could not have decided to initiatearbitration proceedings by itself under Section 18 (3) of theMSMED Act, 2006 deserves to be set aside and isaccordingly set aside.

(v) The arbitration proceedings before the FacilitationCouncil shall be proceeded further as per the ArbitrationAct, 1996. The Appeal stands disposed of accordingly.

(V)C.A. …… of 2022 (@ SLP (C) No. 7375 of 2020)

(i) The appeal is directed against the judgment and orderdated 20.01.2020 passed by the High Court of Judicatureat Bombay, whereby the High Court dismissed the writpetitions filed by the appellants (original writ petitioners)holding that the party aggrieved by the order passed by theArbitral tribunal has to challenge the same in accordancewith the provisions of the Arbitration Act, 1996.In the saidcase, the present respondent no.1 IBEX Integrated BusinessExpress Private Limited (original respondent no.1– supplier)had approached the Facilitation Council for the recovery ofits dues against the appellants. The appellants appearedbefore the Council and raised a preliminary objection withregard to the maintainability of the reference on the groundthat there was an arbitration clause contained in theagreement executed between the parties.

(ii) The said preliminary objection was rejected by theFacilitation Council vide the Order dated 20.12.2014. TheCouncil thereafter proceeded further with the reference inwhich the appellants filed their reply on merits to the claimmade by the respondent IBEX, and the Facilitation Councileventually passed an award on 31.03.2017, allowing thesaid reference filed by the IBEX. Being aggrieved by thesaid award as well as the earlier order dated 20.12.2014passed by the Facilitation Council, the appellants approachedthe High Court by filing two writ petitions. The High Courtdismissed both the petitions vide the impugned order holdingthat when the Facilitation Council had conducted thearbitration proceedings and passed an award, the remedyof the party aggrieved would be to take recourse to Section34 of the Arbitration Act, 1996.

(iii) As held earlier, the proceedings before the FacilitationCouncil/institute/centre acting as an arbitrator are governedby the Arbitration Act, 1996 and therefore any order passedor award made by such council/institute/centre has to bechallenged as per the Arbitration Act. The Appeal thereforedeserves to be dismissed and is dismissed.

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(VI) C.A. No…… of 2022(@ SLP (C) No. 2135 of 2021)

(i) The appeal filed by the Union of India is directedagainst the judgment and order dated 23.08.2019 passedby the HighCourt of Delhi at New Delhi in L.P.A. No. 42of 2019. So far as the facts of the appeal are concerned –the appellant and the respondent had entered into anagreement for Annual Maintenance Contract for allequipment’s at all UTS, PRS and UTS-cum-PRS locationsand all equipment at the location under the control of ChiefCommercial Manager (CCM)/Passenger Marketing (PM)/Eastern Railways. When the dispute arose between theparties, the respondent instead of invoking an arbitrationclause containing the agreement, approached the Micro andSmall Enterprises Facilitation Council under Section 18 ofthe MSMED Act, 2006. The conciliation process havingfailed, the Facilitation Council in exercise of the powersconferred under Section 18(3) of the MSMED Act, 2006referred the dispute between the parties to the DelhiInternational Arbitration Centre. The appellant challengedthe said order by filing the Writ Petition being Writ PetitionNo. 2273 of 2018 before the Delhi High Court on the groundthat the said order was without any jurisdiction, and evenotherwise the respondent was not registered as the Microand Small Enterprises under the MSMED Act, 2006 at thematerial point of time and, therefore, the respondent beingnot the supplier under the MSMED Act, 2006 the provisionsof the said Act were not applicable. The Single Bench of theDelhi High Court dismissed the said petition holding that byvirtue of the provisions contained in Section 24 of the MSMEDAct, 2006 the provisions of the said Act would have the effectnotwithstanding anything inconsistent in any other law orinstrument and, therefore, the provisions of Section 18(3) ofthe MSMED Act, 2006would be applicable notwithstandingthe arbitration agreement in terms of Section 7 of theArbitration Act, 1996. Being aggrieved by the said order, theappellant had preferred the appeal before the Division Benchof the Delhi High Court, which by the impugned order dated23.08.2019 dismissed the same. The aggrieved appellanthas preferred the appeal before this Court.

(ii) In view of the conclusions arrived at by us in theearlier part of the judgment, it is held that the High Courthas rightly held that despite an arbitration clause in theagreement between the parties, if MSMED Act,2006 isapplicable to them, the Facilitation Council has the power,jurisdiction and authority under Section 18(3) to either takeup the matter for arbitration itself or refer the matter forarbitration to any institution or centre providing alternativedispute resolution services, once the conciliation proceedingsbefore the Facilitation Council fails. As held earlier, theFacilitation Council or the Institution or Centre to whomthe disputes have been referred under Section 18(3) of theMSMED Act, 2006 would be an Arbitral Tribunal fordeciding the disputes as if such arbitration was in pursuanceof the arbitration agreement referred to under Section 7(1)of the Arbitration Act, 1996 and accordingly would havethe jurisdiction to rule on its own jurisdiction. In that viewof the matter, the present appeal deserves to be dismissedand is, accordingly, dismissed.

(VII) C.A. No…… of 2022 (@ SLP(C) No. 6166 of 2021)

(VII) C.A. No…… of 2022 (@ SLP(C) No. 6166 of 2021)

(i) The appeal arises out of the judgment and order dated24.07.2020 passed by the Division Bench of the GujaratHigh Court in L.P.A. No. 1667 of 2019, whereby the DivisionBench while dismissing the L.P.A held that the RespondentNo. 2- M/s. Aquafil Polymers Company Pvt. Ltd. – Supplierhad rightly applied under Section 18(1) of the MSMED Act,2006 to theRespondent No. 1- MSME Commissionerate-Facilitation Council, and on the conciliation process havingfailed, the Facilitation Council had no option left but to referthe disputes between the parties to the Respondent No. 3-Gujarat Chambers of Commerce and Industry.

(ii) Broadly stated the facts of the case are that theappellant- JITF Water Infrastructure Limited was anInfrastructure Company which had entered into theagreement with the joint venture consisting of theRespondentNo. 2 – M/s. Aquafil Polymers Company Private Limitedand one Wintech Engineering Pvt. Ltd. in respect of anorder issued in favour of the appellant under Guwahati AB

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Water Supply Project. The joint venture did not perform itswork as per the agreement and, therefore, the appellantterminated the Contract by Notice dated 08.01.2018. In viewof the Arbitration Clause contained in the agreement, thejoint venture vide letter dated 08.02.2018 proposed the nameof a retired Supreme Court Judge for being appointed asthe Sole Arbitrator to adjudicate upon the disputes betweenthe parties. In response to the said letter, the appellant videthe letter dated 14.02.2018 replied that as per the relevantclause of Arbitration, only the appellant had right to appointthe Arbitrator and such right was not available to the jointventure. Accordingly, the appellant appointed another retiredSupreme Court Judge as the Sole Arbitrator. The saidArbitrator appointed by the appellant directed the parties toappear for preliminary hearing, and at that stage, therespondent no. 2,i.e., the constituent of the joint venturefiled an application before Respondent No. 1- FacilitationCouncil invoking the provisions of the MSMED Act,2006.The Respondent No. 1- Facilitation Council undertook theprocess of conciliation, however, same having failed, theRespondent No. 1 referred the disputes to Respondent No.3- Gujarat Chambers of Commerce and Industry in exerciseof the powers conferred under Section 18(3) of the MSMEDAct, 2006 vide order dated 30.06.2018. The said order cameto be challenged by the appellant by filing a writ petitionbefore the Gujarat High Court. The Single Bench vide itsorder dated 09.09.2019 dismissed the said writ petition. Theaggrieved appellant preferred the L.P.A. which also cameto be dismissed by the Division Bench vide order dated24.07.2020 against which the present appeal has been filed.

(iii) The issues raised and the submissions made by thelearned counsel appearing for the appellant with regard tothe overriding effect of the MSMED Act, 2006 over theArbitration Act, 1996 jurisdiction of Facilitation Council, theparties autonomy to enter into an agreement qua thestatutory provisions, the issue of caususomissus etc. havebeen discussed and decided hereinabove which need notbe reiterated or repeated. Accordingly, it is held that thereference made to the Facilitation Council wouldbe

maintainable in spite of an independent arbitrationAagreement existing between the parties to whom theMSMED Act, 2006 is applicable, and such Council wouldbe entitled to proceed under sub-section (2) of Section 18of the MSMED Act, 2006 as also to act as an Arbitrator orto refer the disputes to the institution or Centre asBcontemplated under Section 18(3) of the MSMED Act,2006. As held earlier, such Facilitation Council/Institute/Centre acting as an Arbitral Tribunal would have thejurisdiction to rule over on its own jurisdiction as per Section16 of the Arbitration Act, 1996. In that view of the matter,the present appeal also deserves to be dismissed and is,Caccordingly, dismissed.

36. In the aforesaid premises,

(I)C.A. No………of 2022 (@ SLP(c) No. 12884 of2020) is dismissed, D

(II)C.A.No. 127 of 2018 is allowed,

(III)C.A. No. 6167 of 2013 is allowed,

(IV)C.A. No……...of 2022 (@ SLP(c) No. 31227 of2018) is disposed of, E

(V)C.A. No……...of 2022 (@ SLP(c)No. 7375 of2020) is dismissed,

(VI)C.A. No……...of 2022 (@ SLP(c)No. 2135 of2021) is dismissed and

(VII)C.A. No……...of 2022 (@ SLP(c)No. 6166 ofF2021) is dismissed.

Ankit Gyan

(Assisted by : Priyanshu Agarwal, LCRA)

Appeals disposed of.

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