Statutory MSME dispute resolution prevails over private arbitration agreement and Section 8 objection cannot defeat Council proceedings

A special statutory dispute-resolution mechanism under the Micro, Small and Medium Enterprises Development Act, 2006 prevails over a private arbitration clause because Section 18 contains a non obstante clause and authorises the Council to act as arbitrator, while Section 24 gives overriding effect to the statutory scheme. In this framework, filing an objection under Section 8 of the Arbitration and Conciliation Act, 1996 does not justify quashing the Council's proceedings or requiring the Council to decide the objection as prayed. The challenge to the Council proceedings was rejected and the writ petition was dismissed.

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Issues: Whether proceedings before the Micro and Small Enterprises Facilitation Council could be quashed on the ground that the parties had an arbitration agreement and an objection had been filed under Section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The dispute arose under the Micro, Small and Medium Enterprises Development Act, 2006, which provides a special statutory mechanism for recovery of dues, first through conciliation and, if conciliation fails, through arbitration by the Council or a designated institution. Section 18 contains a non obstante clause and expressly authorises the Council to act as arbitrator notwithstanding anything contained in any other law. Section 24 further gives overriding effect to Sections 15 to 23 of the Act. In these circumstances, the existence of a private arbitration clause did not justify interdicting the statutory proceedings or directing the Council to decide the Section 8 objection in the manner prayed for.

Conclusion: The challenge to the Council proceedings was rejected and the writ petition was dismissed.

Ratio Decidendi: Where a special statute creates a mandatory dispute-resolution mechanism with an overriding non obstante clause, that statutory procedure prevails over a private arbitration agreement and cannot be defeated by invoking Section 8 of the Arbitration and Conciliation Act, 1996.

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