Even if there are pending matters before the MSME Council, application under section 11 of Arbitration Act is maintainable: Jharkhand High Court

Even if there are pending matters before the MSME Council, application under section 11 of Arbitration Act is maintainable: Jharkhand High Court

The Jharkhand High Court recently held that merely because a reference on the same issue is pending before the Micro, Small and Medium Enterprises Council (MSME Council) under Section 18 of the The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), the same is not a bar to the application for the appointment of the arbitrator under Section 11 of the A&C Act.

The Single judge bench of Justice Sujit Narayan Prasad opined 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. In such a case an objection regarding the pendency of a reference before the MSME Council on the same matter is not to be looked into at that stage.

In the present case, the parties entered into a Milling Agreement dated 30.11.2017, wherein 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. Clause 19 of the agreement was the arbitration clause.

The dispute arose between the parties due to delay in the execution of the said work. The petitioner requested the respondent to appoint the arbitrator, however, in the meantime the respondent filed a reference before the MSME Council.

Thereafter, the petitioner filed the application under Section 11 of the A&C Act for the appointment of the arbitrator.

The Court held that merely 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 under Section 11 of the A&C Act for the appointment of the arbitrator.

It was further observed 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, considering Clause 19 of the contract.

Accordingly, the Court allowed the petition.