Deputy General Manag... v. Sigma Engineering Pv...

Biswanath Rath, J.:-

1. This is a Writ Petition filed assailing the impugned order vide Annexure-1 whereby considering the request of the Opp. Party therein, i.e. the present Petitioner, for referring the matter for Arbitration under section 8 of the arbitration & conciliation act, 1996, the authority has passed the order deciding to consider the matter under the provisions contained at section 18(4) of the micro, small & Medium Enterprises Development Act. 2006. Mr. Patnaik, Learned Counsel appearing for the Petitioner states that the order is illegal on the following grounds:

(1) The rejection of Petitioner's claim for taking the matter under section 8 of arbitration & conciliation act 1986 is improper.

(2) Since the parties have entered into a contract, they are bound by the terms of the contract. The contract having contained a clause vide Proviso-22 making a provision for amicable settlement as well as arbitration of the matter following the provisions of Arbitration & Conciliation Act, 1996, the parties are bound by the same & a proceeding under section 18 of the micro, small & Medium Enterprises Development Act, 2006 is not maintainable.

(3) Even assuming that a proceeding under Section 18 of the Act referred to hereinabove, following the provisions contained in Sub-section (2) of Section 18, before the matter is taken up for arbitration/conciliation of the matter should have been taken up. Justifying the claims made hereinabove, Mr. Patnaik during course of argument refers to Clause 22 of the agreement between the parties appearing at Annexure-4 of the Writ Petition. He also referred to the provisions contained in section 18 of the micro small & Medium Enterprises Development Act, 2006.

Per contra, Mr. Mishra, Learned Counsel appearing for the Opp. Party No. 1 submits that there is no justification on the part of the Petitioner for making a request for referring the matter under section 8 of the arbitration & conciliation act, 1996 for the reason that section 8 of the arbitration & conciliation act, 1996 has no application to the present case. In making the submission, Mr. Mishra submitted that Section 8 is only applicable in case there is arbitration before the judicial authority & the authority under the Micro, Small & Medium Enterprises Development Act not being a judicial authority, the provisions contained in section 8 of the arbitration & conciliation act, 1996 has no application to the present case. Mr. Mishra next contended that in view of power given to the council under the Micro, Small & Medium Enterprises Development Act, 2006, the Council has the authority to decide the issues involved in the dispute &, as such there is no illegality in the impugned order.

2. Now coming to decide on the 1st question raised by the Learned Counsel for the Petitioner section 8 of the arbitration & conciliation act, 1996 reads as follows:-

8. Power to refer parties to arbitration where there is an arbitration agreement.-(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(3) Notwithstanding that an application has been made under Sub-section (1) & that the issue is pending before the judicial authority, an arbitration may be commenced or continued & an arbitral award made.

The above provision makes it clear that such contingency is made in the event an action is brought before a Judicial Authority. In the present case the authority before whom the action has been brought is not a Judicial Authority, thus above provision is not at all attracted to the case at hand. Further in view of clear provision contained in section 24 of the micro, small & Medium Enterprises Development Act, 2006 the provision contained in section15 to section 23 of the above act will have an overriding effect over the arbitration & conciliation act 1996 as such I find no force in the submission of the Petitioner in the above regard & this Court reject such contention of the Petitioner.

3. Now coming to the next submission of the Petitioner that even assuming that the provision under section 18 of the micro, small & Medium Enterprises Development Act, 2006 is applicable in the present circumstances, the authority while rejecting the application for referring matter under section 8 of the arbitration & conciliation act, 1996 ought to have followed the procedures contained in sub-section 2 of section 18 of the micro, small & Medium Enterprises Development Act, 2006.

The Union of India has introduced the Micro, Small & Medium Enterprises Development Act, 2006 to take care of the matters relating to the liability in case of contract. Section 16 of the said Act authorizes a party to request the authority to fix liability of paying interest by the supplier whereas Section 17 of the said Act provides provision for recovery of amount dues & Section 18 of the Act gives power to the council for considering a reference to the council & deciding the matter in its appropriate spirit.

4. It is not disputed that such matters can be decided under the provisions of the Micro, Small & Medium Enterprises Development Act, 2006. It is here necessary to refer the provisions contained in section 24 of the micro, small & Medium Enterprises Development Act, 2006.

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

By virtue of the above provision in the Micro, Small & Medium Enterprises Development Act, 2006, the act has made provision for considering the matter of this nature irrespective of having any other provision under any other act. Therefore, in my view the impugned proceeding under Section 18of the Act is valid & as such maintainable.

Now coming to the issue whether the impugned order has been passed in terms of the provision under section 18 of the micro, small & Medium Enterprises Development Act, 2006.

5. Looking to the provisions contained in Section 18 of the Act, Section 18(1) makes provision for making a reference of the dispute falling under consideration under Section 17 of the Act & the reference is to be made under Section 18(1) of the Act. Sub-section 2 of Section 18 of the said Act provides that on receipt of a reference under Sub-section 1, the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre for conducting conciliation & the provisions of sections 65 to 81 of the arbitration & conciliation act, 1996 shall apply to such a dispute as if the conciliation was initiated under Part in of that Act. Similarly Sub-section(3) of Section 18 of the said Act provides where the conciliation initiated under Sub-section (2) is not successful & stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration 6 the provisions of the Arbitration & Conciliation Act, 1996 shall then apply to the disputes as if the arbitration was in pursuance of an arbitration agreement referred to in Sub-section (1) of Section 7of the said Act. Sub-section (4) of Section 18 of the said Act comes to provide power to the Council for the Micro, Small & Medium Enterprises Development or the Centre providing alternate dispute resolution services to act as a arbitrator or conciliator under this Section by a dispute in between supplier located within the jurisdiction & buyer located anywhere in India. On a bare reading of the impugned order, it gives a clear indication of rejection of the request of the Petitioner to refer the matter under section 8 of the arbitration & conciliation act, 1996 but having rejected the above prayer of the Petitioner, the council ought to have taken resort to the provisions contained in Section 18 of the Act in its strict term. Under the clear provisions contained in Section 18(2) of the Act it was incumbent upon the council to take recourse to the provisions contained under Section18(2) of the Micro, Small & Medium Enterprises Development Act, 2006 before resorting to the provisions contained in Section 18(4) of the Act.

6. Therefore, while interfering with the impugned order so far it - relates to taking up the matter under section 18(4) of the micro, small & Medium Enterprises Development Act, 2006, this Court directs the Council to take up the matter & decide the same under Sub-section 2 of Section 18 of the Act & proceed accordingly. In view of the submission made by Mr. Mishra, Learned Manoj Kumar Sahu Vrs. State Commission Women Counsel appearing for the Opp. Party that this order was passed on 13.8.2014. This Court makes it clear that even if the matter has proceeded in the meanwhile all such action taken in the meanwhile being improper I direct the Council to restart the proceeding from the stage of section 18(2) of the micro, small & Medium Enterprises Development Act, 2006 & decide the matter accordingly.

The Writ Petition succeeds to the observations made hereinabove.

_____________