Statutory MSME dispute reference requires Facilitation Council control; buyer-appointed sole arbitrator cannot displace the Act's procedure.

A statutory reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 must be dealt with by the Facilitation Council in the manner prescribed by the Act. After reference, the Council must first conduct conciliation or seek assistance from an alternate dispute resolution institution; if conciliation fails, it must itself take up arbitration or refer the matter to an ADR institution or centre. The scheme operates notwithstanding any arbitration agreement and gives the Council exclusive jurisdiction at the initial stage, so the Council cannot direct the parties to proceed before a sole arbitrator appointed by the buyer. The buyer-appointed arbitrator route is therefore invalid after statutory reference.

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Issues: Whether, after a reference is made to the Micro and Small Enterprises Facilitation Council under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, the Council has exclusive jurisdiction to first conduct conciliation and, on failure, itself take up arbitration or refer the dispute to an alternate dispute resolution institution, so that the Council cannot direct the parties to proceed before a sole arbitrator appointed by the buyer.

Analysis: Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 creates a statutory mechanism for reference of disputes concerning amounts due under Section 17 to the Facilitation Council notwithstanding any other law. On receipt of such reference, the Council must first conduct conciliation or seek assistance of an alternate dispute resolution institution. If conciliation fails, the Council is then required either to take up arbitration itself or refer the matter to an institution or centre providing alternate dispute resolution services. This statutory scheme does not depend upon an arbitration agreement between the parties. The non obstante clauses in Sections 18(1) and 18(4) confer exclusive jurisdiction on the Council in the first instance and exclude a course whereby the Council sends the dispute to a sole arbitrator appointed by the buyer after the statutory reference has been invoked.

Conclusion: The direction of the Facilitation Council referring the dispute to the sole arbitrator appointed by the buyer was invalid. The statutory reference under Section 18 had to be dealt with by the Council in the manner prescribed by the Act, and the petition was allowed with the impugned order set aside.

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