2013 (4) TMI 412 - HC - Companies Law

Arbitration petition dismissed due to waiver of objections, MSME Act does not override existing agreements

The court dismissed the arbitration petition, ruling that the petitioner had consented to extending the arbitration proceedings' time and waived the right ... Arbitration and Conciliation - Petitioner filed a petition under section 9 of the Arbitration Act 1996 in this Court seeking injunction against the 2nd respondent from initiating recoveries pursuant to the letters/circulars dated 31.10.2000 and 3.11.2000. This court by an order dated 2.4.2001 dismissed the said petitions - whether any parties have consented for enlargement of time before the arbitrator - dispute raised by the petitioner about the contents of the minutes of meeting recorded by the learned arbitrator held on 4.4.2011 or that same was not received by the petitioner or his Advocate, the learned arbitrator filed his personal affidavit on 19.1.2013 - Held that:- Perusal of the records indicates that the petitioner had raised objection of jurisdiction from beginning by filing application under section 12 and 13 even before expiry of the two years period. Petitioners had also filed application for discovery and inspection. In view of such applications filed by the petitioner raising issue of jurisdiction of the arbitrator, the petitioner cannot be allowed to raise a plea that the arbitrator became functus officio on expiry of two years period or that his mandate stood terminated due to delay on the part of arbitrator. Perusal of the record also indicates that the learne arbitrator had fixed convenient date to accommodate the Advocate representing the petitioner who was also appearing in large number of other matters before the same arbitrator. It is clear that parties did not want to proceed with this arbitration in view of the pendency of various matters on similar issue in this court. The petitioner therefore could not have raised such plea of delay on the part of the learned arbitrator in completing the proceedings within time. As far as reliance placed by learned Counsel on the provisions of Micro, Small, Medium Enterprises Development Act, 2006 that the petitioner having registered under the provisions of the said Act and thus dispute, if any, between the parties is required to be resolved by the Council appointed under the provisions of the said Act is concerned, reference to the judgment of the Division bench of this court in case of M/s Steel Authority of India Ltd., would be useful wherein held that it cannot be said that because Section 18 which provides for a forum of arbitration, an independent arbitration agreement entered into between the parties will cease to have effect. It is held that there is no question of an independent arbitration agreement ceasing to have any effect because the overriding clause only overrides things inconsistent therewith and there is no inconsistency between an arbitration conducted by the Council under Section 18 and arbitration conducted under an individual clause since both are governed by the provision of the Arbitration Act, 1996. It is held that there is no provision in that Act which negates or renders an arbitration agreement entered into between the parties ineffective. Thus there is no substance in the submissions made by Mr. Mehta appearing on behalf of the petitioner that after petitioner having registered itself under the provisions of the said Act of 2006, the present proceedings could not be proceeded with under the arbitration agreement entered into between the parties or that dispute could by Council appointed under the provisions of the said Act of 2006. The proceedings under the existing arbitration agreement between the parties would not be affected by enactment of the said Act and would continued to be governed by the provisions of the existing agreement between the parties and would be governed by the provisions of the Arbitration and Conciliation Act, 1996. There is no merit in the submissions made by Mr. Mehta, learned Counsel appearing for the petitioner. Issues Involved:1. Termination of the mandate of the arbitrator under Section 14 of the Arbitration and Conciliation Act, 1996.2. Jurisdiction of the Micro and Small Scale Enterprises Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006.3. Validity of the continuation of arbitration proceedings beyond the stipulated time period.4. Waiver of the right to object to the continuation of arbitration proceedings.Detailed Analysis:1. Termination of the Mandate of the Arbitrator:The petitioner sought a declaration that the mandate of the arbitrator had terminated under Section 14 of the Arbitration and Conciliation Act, 1996, and that the petitioner could approach the Micro and Small Scale Enterprises Facilitation Council under the MSME Act, 2006. The petitioner argued that the arbitrator failed to make an award within the stipulated time of two years, extendable by one year with mutual consent, as per Clause 22(g) of the contract. The petitioner did not consent to any extension beyond this period.2. Jurisdiction of the MSME Facilitation Council:The petitioner, registered as a Micro Enterprise under the MSME Act, 2006, contended that the disputes should be adjudicated by the MSME Facilitation Council. The petitioner relied on Section 24 of the MSME Act, which provides that the provisions of Sections 15 to 23 of the MSME Act have an overriding effect over any other law. The petitioner argued that the MSME Act, being a special enactment, would override the provisions of the Arbitration Act, 1996.3. Validity of Continuation of Arbitration Proceedings:The respondent argued that the petitioner had participated in the arbitration proceedings without raising any objection about the expiry of the arbitrator's mandate. The respondent also contended that the petitioner had consented to extend the time for arbitration during a meeting held on 4.4.2011, as recorded in the minutes of the meeting. The arbitrator and the respondent's representative confirmed this consent in their affidavits.4. Waiver of the Right to Object:The court considered whether the petitioner had waived the right to object to the continuation of the arbitration proceedings by participating without raising timely objections. The court referred to the judgment in *Jayesh H. Pandya vs. Subhtex India Ltd.*, which held that a party must make its intention known at the earliest opportunity if it intends to assert a rigid adherence to the time prescribed by the arbitration agreement. The court also referred to the judgment in *Mascon Multiservices & Consultants Pvt. Ltd. vs. Bharat Oman Refineries Ltd.*, which held that when parties raise questions as to jurisdiction, it would be legitimate to infer that they have given a go-by to the stipulation as to the time within which the award is to be made.Judgment:The court dismissed the arbitration petition, holding that:- The petitioner had consented to the extension of time for the arbitration proceedings during the meeting held on 4.4.2011.- The petitioner had waived the right to object to the continuation of the arbitration proceedings by participating without raising timely objections.- The provisions of the MSME Act, 2006, do not negate or render an existing arbitration agreement ineffective. The arbitration proceedings under the existing agreement would continue to be governed by the Arbitration and Conciliation Act, 1996.The court concluded that the mandate of the arbitrator had not terminated, and the arbitration proceedings could continue.