MSMED Act overrides private arbitration clauses and lets Facilitation Council act as arbitrator after failed conciliation.

The MSMED Act's special dispute-resolution scheme was treated as overriding an inconsistent private arbitration clause, so a supplier could invoke the Facilitation Council despite contractual arbitration terms. The Court also held that, after failed conciliation under Section 18(2), the Council may itself take up the matter for arbitration under Section 18(3), and the general bar in Section 80 of the Arbitration and Conciliation Act does not apply in this statutory context. The challenge to the Council's reference and arbitral jurisdiction was therefore rejected, and the writ petition failed.

---

---

Issues: (i) Whether the Micro, Small and Medium Enterprises Development Act, 2006 overrides an independent arbitration agreement and permits a reference to the Facilitation Council despite the contractual arbitration clause; (ii) Whether the Facilitation Council, after conducting conciliation under Section 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006, can itself take up the dispute for arbitration despite Section 80 of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether the Micro, Small and Medium Enterprises Development Act, 2006 overrides an independent arbitration agreement and permits a reference to the Facilitation Council despite the contractual arbitration clause.

Analysis: The statutory scheme of Chapter V of the Micro, Small and Medium Enterprises Development Act, 2006 contains non obstante clauses and, by virtue of Section 24, gives overriding effect to Sections 15 to 23 notwithstanding any inconsistent law. Section 18(1) enables a party to a dispute to approach the Facilitation Council irrespective of an existing arbitration agreement, and the later special statute prevails over the general arbitration regime. The dispute could therefore be pursued before the Council notwithstanding Clause 25 of the agreement.

Conclusion: The objection based on the existence of the arbitration clause was rejected, and the reference under the Micro, Small and Medium Enterprises Development Act, 2006 was held maintainable.

Issue (ii): Whether the Facilitation Council, after conducting conciliation under Section 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006, can itself take up the dispute for arbitration despite Section 80 of the Arbitration and Conciliation Act, 1996.

Analysis: Section 18(2) authorises the Council to conduct conciliation or seek institutional assistance, and Section 18(3) authorises the Council, upon failure of conciliation, either to arbitrate itself or refer the matter to an institution or centre for arbitration. Read with Section 24, this statutory discretion overrides the general prohibition in Section 80 of the Arbitration and Conciliation Act, 1996. The Council's power to choose the arbitral forum was treated as absolute within the statutory scheme, and the bar on a conciliator acting as arbitrator was held inapplicable in this context.

Conclusion: The Council was held entitled to act as arbitrator itself, and was not bound to refer the dispute to an external arbitral institution.

Final Conclusion: The challenge to the Council's orders failed because the special statutory mechanism under the Micro, Small and Medium Enterprises Development Act, 2006 was upheld as governing both reference and arbitration, and the writ petition was dismissed.

Ratio Decidendi: Where the Micro, Small and Medium Enterprises Development Act, 2006 is triggered, its statutory dispute-resolution mechanism overrides an inconsistent private arbitration agreement, and the Facilitation Council may itself act as arbitrator after failed conciliation notwithstanding Section 80 of the Arbitration and Conciliation Act, 1996.

---