APPLICATION UNDER SECTION 11 OF THE A&C ACT IS MAINTAINABLE DESPITE THE PENDENCY OF REFERENCE BEFORE THE MSME COUNCIL: JHARKHAND HIGH COURT

The High Court of Jharkhand in the case National Collateral Management Services Ltd v. Kunk Bihari Food Processing Pvt Lt observed and has held that because a reference on the same issue is pending before the MSME Council under Section 18 of the MSMED Act, the same is not a bar to the application filed under Section 11 of the A&C Act for the appointment of the arbitrator.

The bench comprising of Justice Sujit Narayan Prasad observed and has held that the High Court while exercising powers under Section 11 of the Act is only required to see if there is an arbitration clause between the parties and an objection made regarding the pendency of a reference before the MSME Council on the same matter is not to be looked into at that stage.

FACTS OF THE CASE:

On 30.11.2017, the parties entered into a Milling Agreement. Clause 5 of the agreement provided that the respondent had to complete the milling of paddy within a period of seven working days from the date of lifting of paddy. The Clause 19 stated in the agreement was the arbitration clause.

A dispute was arose between the parties on account of delay in the execution of the said work. It was requested by the petitioner to the respondent to appoint the arbitrator, in the meantime the respondent filed a reference before the MSME Council.

However, an application was filled by the petitioner under Section 11 of the A&C Act for the appointment of the arbitrator.

Contentions Made By The Parties:

On the following grounds, the petitioner sought for the appointment of the arbitrator:

It was stated that there is an arbitration clause between the parties and once the parties have agreed for referring the dispute for its resolution and the parties have to abide by the terms of the contract.

Under the MSMED Act, 2006, there is no provision for filing a counter-claim, therefore, the petitioner has no option but to file the application for appointment of the arbitrator.

On the following grounds, the respondent objected to the maintainability of the petition:

A reference before the MSME Council has already been filled by the respondent, however, the petition filed under Section 11 of the A&C Act is not maintainable.

COURT ANALYSIS

The Court stated that merely because a reference on the same issue is pending before the MSME Council under Section 18 of the MSMED Act and the same is not a bar to the application filled under Section 11 of the A&C Act for the appointment of the arbitrator.

Further, the court held that the High Court while exercising powers under Section 11 of the Act is only required to see if there is an arbitration clause between the parties and an objection made regarding the pendency of a reference before the MSME Council on the same matter is not to be looked into at that stage.

It was observed by the court that no appointment of the arbitrator was made within 30 days period after the notice of arbitration, therefore, it is a fit case where the power conferred to this Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 is required to be exercised for appointment of Arbitrator, while considering Clause 19 of the contract.

Accordingly, the petition was allowed by the Court.