MSMED Council jurisdiction objections must be pursued in arbitration, not through termination proceedings under the Arbitration Act.

A challenge to an MSMED Facilitation Council acting as arbitrator was held not to justify termination proceedings under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996, because the jurisdictional objection should ordinarily be raised before the arbitral forum under Section 16 and, if necessary, in proceedings against the award. The Council's refusal to proceed through conciliation was treated as a statutory rejection of the invitation to conciliate, not contempt, especially where the record showed continued participation in the dispute process. The petition and contempt allegation therefore failed, and the parties were left to pursue remedies in the appropriate forum.

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Issues: (i) Whether the petition under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 seeking termination of the mandate of the Micro and Small Enterprises Facilitation Council and a direction to proceed before the contractual arbitrator was maintainable; (ii) Whether the respondent's rejection of the invitation for conciliation amounted to contempt.

Issue (i): Whether the petition under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 seeking termination of the mandate of the Micro and Small Enterprises Facilitation Council and a direction to proceed before the contractual arbitrator was maintainable.

Analysis: A reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 first requires conciliation and, if conciliation fails, the Council may itself take up arbitration or refer the dispute for arbitration. Sections 14 and 15 deal with termination and substitution of an arbitrator where the mandate has failed or ceased to operate, while Section 16 confers on the arbitral tribunal the power to rule on its own jurisdiction. Once the Council had determined that it had jurisdiction and had proceeded to arbitration, the proper course was to raise the jurisdictional challenge before the arbitral forum and, if necessary, after an award. The petition was therefore not the correct remedy for the relief sought.

Conclusion: The petition was not maintainable and the reliefs sought for termination of the Council's mandate were refused.

Issue (ii): Whether the respondent's rejection of the invitation for conciliation amounted to contempt.

Analysis: The communication sent by the respondent merely used the statutory language of Section 62(3) of the Arbitration and Conciliation Act, 1996, which permits rejection of an invitation to conciliate and brings conciliation to an end. The record also showed continued participation in the proceedings before the Council. On those facts, no disobedience of any legal mandate or contemptuous conduct was made out.

Conclusion: The contempt allegation was rejected and the notice of motion was dismissed with costs.

Final Conclusion: The challenge to the Council's participation in the dispute resolution process failed, the contempt allegation also failed, and the parties were left to pursue remedies available in law before the appropriate forum.

Ratio Decidendi: A jurisdictional objection to an MSMED Council acting as arbitrator, once raised and rejected in the arbitration itself, does not justify termination proceedings under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996; the objection must ordinarily be pursued within the arbitral process and in proceedings challenging the eventual award.

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