MSME dispute-resolution mechanism prevails over arbitration agreement, and the Facilitation Council may arbitrate after failed conciliation.

Chapter V of the Micro, Small and Medium Enterprises Development Act, 2006 creates a special statutory mechanism for delayed payment disputes and prevails over the Arbitration and Conciliation Act, 1996 where its provisions are inconsistent. A party claiming amounts due under Section 17 may invoke Section 18(1) even if an independent arbitration agreement exists, because the statutory remedy cannot be excluded by private contract. The Facilitation Council may conduct conciliation and, if it fails, arbitrate the dispute itself or refer it to an institution under Section 18(3); Section 80 of the 1996 Act does not bar that course. Once arbitration begins under the special statute, the Arbitration and Conciliation Act, 1996 governs the proceedings.

---

---

Issues: (i) Whether Chapter V of the Micro, Small and Medium Enterprises Development Act, 2006 overrides the Arbitration and Conciliation Act, 1996 despite an independent arbitration agreement. (ii) Whether a party claiming dues under Section 17 of the Micro, Small and Medium Enterprises Development Act, 2006 can invoke Section 18(1) notwithstanding an arbitration clause. (iii) Whether the Facilitation Council can conduct conciliation and, after its failure, itself take up the dispute for arbitration or refer it to an institution or centre, despite Section 80 of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether Chapter V of the Micro, Small and Medium Enterprises Development Act, 2006 overrides the Arbitration and Conciliation Act, 1996 despite an independent arbitration agreement.

Analysis: Chapter V creates a special statutory scheme for delayed payments to micro and small enterprises, imposes liability on the buyer, provides a dedicated forum, and contains express non obstante clauses in Sections 18 and 24. The Arbitration and Conciliation Act, 1996 is a general law governing arbitration and conciliation, whereas the Micro, Small and Medium Enterprises Development Act, 2006 is a special later statute dealing with a defined class of disputes and parties. The statutory text shows a clear legislative intent that the special mechanism under the Micro, Small and Medium Enterprises Development Act, 2006 should operate notwithstanding anything inconsistent in other laws.

Conclusion: The Micro, Small and Medium Enterprises Development Act, 2006 overrides the Arbitration and Conciliation Act, 1996 on the issues covered by Chapter V.

Issue (ii): Whether a party claiming dues under Section 17 of the Micro, Small and Medium Enterprises Development Act, 2006 can invoke Section 18(1) notwithstanding an arbitration clause.

Analysis: Section 18(1) enables any party to a dispute with regard to any amount due under Section 17 to make a reference to the Facilitation Council. The existence of an independent arbitration clause does not extinguish that statutory choice, because the right under the special enactment cannot be defeated by private agreement. The remedy is statutory and enabling, and becomes available when the dispute falls within the class covered by Section 17 and the supplier answers the statutory definition under the Act.

Conclusion: A party is not precluded from invoking Section 18(1) merely because an arbitration agreement exists.

Issue (iii): Whether the Facilitation Council can conduct conciliation and, after its failure, itself take up the dispute for arbitration or refer it to an institution or centre, despite Section 80 of the Arbitration and Conciliation Act, 1996.

Analysis: Section 18(2) authorises the Council to conduct conciliation, and Section 18(3) authorises it, upon failure of conciliation, to arbitrate itself or refer the matter to an alternative dispute resolution institution. The deeming language treats the ensuing arbitration as if it were pursuant to an arbitration agreement, and the special statute displaces the inconsistent bar under Section 80 of the Arbitration and Conciliation Act, 1996. Once the matter reaches the arbitration stage under Section 18(3), the proceedings are governed by the Arbitration and Conciliation Act, 1996, including the tribunal's power to rule on jurisdiction.

Conclusion: The Facilitation Council may act as arbitrator after failed conciliation, and Section 80 does not prevent that course under the special statute.

Final Conclusion: The consolidated ruling affirms the primacy of the special MSME dispute-resolution mechanism, while leaving intact the arbitral framework for proceedings that follow failure of conciliation under the Act.

Ratio Decidendi: A special later statute containing express non obstante clauses and a self-contained dispute-resolution mechanism prevails over a general arbitration law, and an arbitration agreement cannot defeat the statutory right to invoke that special mechanism.

---