MSME dispute resolution under special statute overrides contractual arbitration clauses and permits buyer defences and counter-claims.

Under the Micro, Small and Medium Enterprises Development Act, 2006, a buyer facing a supplier's claim before the Facilitation Council may raise defences and counter-claims arising from the same transaction, because adjudication of amounts due under the supply relationship is not limited to one-sided recovery. The Council's statutory conciliation-and-arbitration mechanism also prevails over a contrary contractual arbitration clause. After failed conciliation, the Council may assume the role of arbitrator under the special regime, and the general Arbitration and Conciliation Act, 1996 applies only to the extent consistent with the special statute.

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Issues: (i) Whether, under the Micro, Small and Medium Enterprises Development Act, 2006, a buyer facing a supplier's claim before the Facilitation Council can resist liability by raising counter-claims or other defences arising out of the same contractual relationship. (ii) Whether the Facilitation Council could, after failed conciliation, itself assume the role of arbitrator under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 notwithstanding an arbitration clause in the contract and the scheme of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether, under the Micro, Small and Medium Enterprises Development Act, 2006, a buyer facing a supplier's claim before the Facilitation Council can resist liability by raising counter-claims or other defences arising out of the same contractual relationship.

Analysis: The liability contemplated by Section 17 is the amount due for goods supplied or services rendered, and the adjudication of that liability necessarily involves examining the mutual claims of the parties. A buyer is not precluded from asserting that no amount is due, or that it has a claim arising from the supplier's breach. The statutory scheme does not confine the Council to a one-sided recovery exercise; it permits a broader determination of the monetary rights and obligations arising out of the transaction.

Conclusion: The buyer's defences and counter-claims were not barred, and the issue was decided against the petitioner.

Issue (ii): Whether the Facilitation Council could, after failed conciliation, itself assume the role of arbitrator under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 notwithstanding an arbitration clause in the contract and the scheme of the Arbitration and Conciliation Act, 1996.

Analysis: Section 18 is a special statutory mechanism containing its own conciliation and arbitration procedure, reinforced by the overriding effect in Section 24. Once conciliation fails, the Council may itself take up the dispute for arbitration or refer it for arbitration, and the application of the Arbitration and Conciliation Act, 1996 is only to the extent the special statute does not provide otherwise. An agreement between parties cannot oust the statutory power vested in the Council under Section 18(3). The court also held that, once the Council itself assumes arbitration, recourse under Section 11 of the 1996 Act does not arise.

Conclusion: The Council lawfully treated itself as arbitrator, and the arbitration clause did not exclude the statutory jurisdiction under the 2006 Act.

Final Conclusion: The special statutory dispute-resolution mechanism under the 2006 Act prevailed over the contractual mode relied upon by the petitioner, and the writ petitions failed.

Ratio Decidendi: Where a special statute creates an overriding conciliation-and-arbitration regime, the statutory forum may exercise the powers conferred by that statute notwithstanding a contrary contractual arbitration clause, and the general arbitration law applies only to the extent not inconsistent with the special enactment.

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