MSME dispute reference: contractual arbitration survives, but mandatory conciliation before the Facilitation Council still applies.

An independent arbitration agreement is not displaced by Section 18 of the MSMED Act, 2006, because Section 24 overrides only inconsistent provisions and statutory arbitration under Section 18(3) operates within the Arbitration and Conciliation Act, 1996. The Facilitation Council therefore cannot bypass a contractual arbitration clause and move directly to arbitration under Section 18(3). Section 18 is also wide enough to permit a buyer to invoke the Council in disputes concerning amounts due under Section 17, including acceptance, deemed acceptance, and billing disputes. Conciliation under Section 18(1) and (2) remains mandatory before any arbitral step, and the parties must first undergo that process before the Council.

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Issues: (i) Whether the Facilitation Council could proceed to arbitration under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 despite an existing independent arbitration agreement between the parties; and (ii) whether a buyer can invoke Section 18 of the Act and whether conciliation under Section 18(1) and (2) remains mandatory.

Issue (i): Whether the Facilitation Council could proceed to arbitration under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 despite an existing independent arbitration agreement between the parties.

Analysis: Section 18 permits a reference by any party to a dispute regarding amounts due under Section 17. The statutory scheme does not negate an existing arbitration agreement. Section 24 overrides only provisions inconsistent with Sections 15 to 23, and there is no inconsistency between an arbitration conducted under Section 18 and an arbitration conducted under an agreed contractual clause, since both operate under the Arbitration and Conciliation Act, 1996. The Council may therefore not disregard the independent arbitration agreement and proceed straight to arbitration under Section 18(3).

Conclusion: The Council could not proceed under Section 18(3) in the face of the existing arbitration agreement.

Issue (ii): Whether a buyer can invoke Section 18 of the Act and whether conciliation under Section 18(1) and (2) remains mandatory.

Analysis: Section 18(1) allows any party to a dispute with regard to an amount due under Section 17 to make a reference to the Council. The provision is wide enough to cover disputes between buyer and supplier, including disputes relating to acceptance of goods, deemed acceptance, and billing. The statutory conciliation mechanism is mandatory and operates before any arbitral step. The existence of a private arbitration agreement does not exclude the statutory conciliation process under Section 18(1) and (2).

Conclusion: The buyer could participate in the reference before the Council, and the parties were required to undergo conciliation under Section 18(1) and (2).

Final Conclusion: The writ petition succeeded to the extent that the Council was restrained from invoking statutory arbitration under Section 18(3), while the parties were directed to proceed with conciliation before the Council.

Ratio Decidendi: An independent arbitration agreement is not displaced by Section 18 of the Act, and the Council's overriding statutory role is limited to the mandatory conciliation stage unless conciliation fails.

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