Date:
10/06/2022
Coram:
Justice Lisa Gill
Parties:
Petitioner- SGM Packaging Industries
Respondent- Goyal Plywood LLP
ARB No. 86 of 2020 (O&M)
SUBJECT
The appellant’s contention that the Haryana Micro and Small Enterprises Facilitation Court’s (HMSEFC) decision of assigning a sole arbitrator without any proper/prior process of conciliation by the HMSEFC, was nullified by the court on the grounds that the appellant had not objected to the Council’s in the beginning and that the MSMED Act, being a special act did not require a prior agreement between parties to resort to Arbitration.
OVERVIEW
- The petitioner’s (SGM Packaging Industry) trade involves logistics and safe transport of goods, this demands a steady supply of plywood in order to craft boxes for various articles. The demand is met by the respondents (Goyal Plywood) who deal in supplies of plywood and other wood material.
- The respondent side communicated a claim for an outstanding sum in exchange for the goods supplied in 2016. This claim was filed before the HMSEFC for an amount no less than Rs. 14,01,505/-.
- The issue was thus conferred to a sole arbitrator, Mr. Satish Ahlawat by the HMSEFC due to no progress being made through the process of conciliation (convened by HMSEF itself) under the ambit of Macro, Small and Medium Enterprises Development Act, 2006.
- The petitioner filed a petition challenging this decision under article 14 of the A&C Act and Section 151 of the Code of Civil Procedure, demanding the sole arbitrator for his valid disclosure under Section 12 of the Arbitration act and contending that there was no scope for arbitration as there wasn’t a prior agreement of arbitration.
POINTS ARGUED BY APPELLANT
- Petitioner stresses the importance of the declaration of independence and impartiality issued by the arbitrator before the start of a session as stated under Section 12 (1) of the Arbitration and Conciliation Act.
- It is further stated that the respondent’s claim for invoice of a 2016 deal was time-barred and no longer held any validity.
- The invalidity of the HMSEFC’s decision of assigning a sole arbitrator was argued under Section 18 (3) of the MSMED Act which also offers choices of referring the issue to a centre, institution, or arbitration.
- Petitioner further argued that the sole arbitrator exhibited signs of partiality towards the defendant side and was rushing through the arbitration sessions.
POINTS ARGUED BY RESPONDENT
- Due to being registered under the MSMED Act, the respondent validates its action of submitting the issue to the HMSEFC for redressal.
- And the claims that the claim of the amount by the respondent was invalid does not hold any ground as seen in the order dated 25/09/2019 which ordered the petitioner to pay the owed amount to the respondent.
- It was also observed that the appointment of Satish Ahlawat as the sole arbitrator by the HMSEFC did not attract any dissent from the petitioner, so having failed to challenge the order then, the petitioner had lost all ground to object to the procedure of sole arbitration.
RELEVANT PROVISIONS
- Section 18 of the MSMED Act, dictating course of suits filed before MSEFCs, whose scope was decided upon in the following judgment.
- Arbitration and Conciliation Act, 1996, discussed with section 18 of the MSMED Act.
JUDGMENT
- The lack of challenge from the petitioner’s side to the order passed by HMSEFC was taken into consideration by the court.
- It stated that the respondent, registered under the MSMED Act was entitled to their approach to the HMSEFC for redressal.
- As held in the judgment of M/s Silpi industries Vs. Kerala State Road Transport Corporation (2021), the Articles 15 to 23 of the MSMED Act are given an overriding effect notwithstanding any inconstancies caused by any other law prevalent at that time. Itis a beneficial legislation intended for fostering the holistic growth of micro, small and medium enterprises under the ambit of the above-mentioned Act. Thus, the A&C Act is also overridden.
- It is further specified by the court that even with the existence of a specific agreement between the parties on how to proceed in cases of dispute requiring arbitration, it would be overruled by the MSMED Act if the seller was registered under it.
- The court finally held that despite an absence of arbitration agreement between the parties, the council has powers to make them refer to various arbitration processes under Section 18 of the MSMED Act.
- Even though the court accepted that no efforts towards conciliation were made by the HMSEFC, it held that the plaintiff had not raised an objection during the appointment of a sole arbitrator, leaving him with the only choice of challenging the outcome of the arbitration after it is made.
CONCLUSION
This judgment strings important legislation with relevant case law to clear a critically imperative junction of contention that is arbitration in micro, small and medium industries. It promotes the use of the arbitration instrument among small businesses to settle disputes among themselves without unnecessarily burdening the courts and fast-tracking the whole process at the same time.
Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE
Click here to download the original copy of the judgement
