Gujrat High Court, following a line of earlier precedents, has ruled that the Micro, Small, Medium Enterprises Development Act, 2006 (“MSMED Act”), being a special legislation, will prevail over Arbitration and Conciliation Act, 1996 (“A&C Act”). The Court held that the procedure of appointment of arbitrator under the A&C Act would have to give way to the special mechanism provided under the MSMED Act.
What is the overlap between the arbitration act and MSMED Act?
The MSMED Act was passed with the objective of the development and promotion of micro, small, and medium enterprises. The MSMED Act provides a specialized mechanism for the recovery of delayed payments to suppliers. It provides for the establishment of facilitation councils and the conciliation process to resolve disputes. The A&C Act, on the other hand, provides a comprehensive framework for arbitration and conciliation, including the appointment of arbitrators, the conduct of arbitration proceedings, and the enforcement of arbitral awards.
Would a petition under Section 11 of the A&C Act be maintainable if one of the parties to the dispute is a Micro/Small/Medium Enterprise under the MSMED Act?
The Gujrat High Court referred to its earlier judgement in Samrat Furnaces Pvt. Ltd. v. State of Gujrat SCA 7006 of 2020, wherein it held that a petition under Section 11 of the A&C Act for the appointment of the arbitrator by the Court would not be maintainable if the dispute is covered under the MSMED Act and the provisions of the MSMED Act are invoked, and accordingly, the parties must approach the council under the MSMED Act. Thereafter, the proceedings would take place as per the regime under the MSMED Act, which also includes the applicability of several provisions of the A&C Act.
