Court affirms Facilitation Council's authority under MSME Act, dismisses appeal, directs counter-statement filing.

The court dismissed the appeal, affirming that the reference made by the Facilitation Council under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 is the appropriate mode of adjudication for the disputes between the parties. The court emphasized the overriding effect of the Act's provisions, altering any previous arbitration agreement. The appellant's arguments regarding existing arbitration agreements were deemed unpersuasive, and the court directed the appellant to file a counter-statement before the arbitral tribunal for expeditious resolution, dismissing the appeal without costs.

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Issues Involved:
1. Authority of the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 to refer disputes to arbitration.
2. Validity and effect of pre-existing arbitration agreements between parties when disputes are referred to the Facilitation Council.
3. Interpretation and application of Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006.
4. Overriding effect of the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 over other laws.

Issue-wise Detailed Analysis:

1. Authority of the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 to refer disputes to arbitration:
The court examined the authority granted to the Facilitation Council under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006. It was established that upon receiving a reference from a supplier, the Council must conduct conciliation or seek assistance from an alternate dispute resolution institution. If conciliation fails, the Council must either take up the dispute for arbitration itself or refer it to an institution providing alternate dispute resolution services. The court emphasized that the Council has no third choice and must adhere to this statutory requirement.

2. Validity and effect of pre-existing arbitration agreements between parties when disputes are referred to the Facilitation Council:
The court addressed the appellant's assertion that an existing arbitration agreement between the parties should negate the legal fiction in Section 18(3) of the Act. The appellant relied on a judgment from the Nagpur Bench of the Bombay High Court, which suggested that an independent arbitration agreement would not be rendered ineffective by Section 18. However, the court found this view exceptionable, emphasizing that the legal fiction in Section 18(3) creates a new arbitration agreement between the parties, overriding any previous agreement.

3. Interpretation and application of Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006:
Section 18 begins with a non-obstante clause, allowing a supplier to make a reference to the Council regardless of any existing suit or arbitration. The court highlighted that the legal fiction in Section 18(3) deems the parties to have entered into an arbitration agreement for the purpose of the reference made by the Council. This provision ensures that disputes are resolved in accordance with the Act of 1996, as if the arbitration agreement was executed under Section 7(1) of the Act of 1996.

4. Overriding effect of the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 over other laws:
Section 24 of the Act gives overriding effect to Sections 15 to 23, ensuring that these provisions take precedence over any inconsistent laws. The court noted that this overriding effect supports the primacy of the statutory mechanism for dispute resolution under Section 18, even when a pre-existing arbitration agreement exists between the parties. The court concluded that the legal fiction in Section 18(3) effectively alters any previous arbitration agreement, ensuring that the statutory mechanism is followed.

Conclusion:
The court dismissed the appeal, affirming that the reference made by the Council under Section 18(3) of the Act of 2006 is the appropriate mode of adjudication for the disputes between the appellant and the third respondent. The court extended the time for the appellant to file a counter-statement before the arbitral tribunal and directed the tribunal to dispose of the matter expeditiously. The judgments cited by the appellant were found to be unpersuasive in the context of the statutory provisions and the legal fiction created by Section 18(3). The appeal was dismissed without any order as to costs.

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