MSMED Act overrides private arbitration clauses, allowing statutory reference and arbitration despite a conflicting seat clause.

The MSMED Act provides a special dispute-resolution mechanism that prevails over a private arbitration clause and the general regime under the Arbitration and Conciliation Act, 1996. Once the statutory reference process under Section 18 is invoked, the Facilitation Council or the designated institution can proceed with arbitration notwithstanding a contractual seat clause fixing another location. The non obstante clauses in Sections 18 and 24 give the Act overriding effect, and the deeming fiction in Section 18(3) treats the reference as arbitration pursuant to an arbitration agreement. The supplier's location also supports jurisdiction under Section 18(4), so the contractual objection fails.

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Issues: Whether, in a dispute governed by the Micro, Small and Medium Enterprises Development Act, 2006, the Facilitation Council or the institution to which it refers the dispute for arbitration can proceed notwithstanding an arbitration clause fixing the seat at Bengaluru, and whether the statutory scheme under the MSMED Act overrides the contractual arrangement and the Arbitration and Conciliation Act, 1996.

Analysis: The statutory scheme under the MSMED Act is a special mechanism for resolution of disputes by a designated forum and therefore prevails over the general regime under the Arbitration and Conciliation Act, 1996. The non obstante clauses in Section 18, read with Section 24, give overriding effect to the MSMED Act, and once the statutory reference mechanism is invoked, a private arbitration agreement cannot defeat it. The deeming fiction in Section 18(3) treats the arbitration as if it were pursuant to an arbitration agreement, and the Facilitation Council or the institution/centre acting as arbitrator may proceed accordingly. The location of the supplier also attracts the jurisdictional rule in Section 18(4).

Conclusion: The contractual seat clause did not oust the statutory jurisdiction under the MSMED Act. The reference to arbitration through the Delhi Arbitration Centre was valid, and the objection to its jurisdiction failed.

Ratio Decidendi: Where a dispute falls under the MSMED Act, the statutory dispute-resolution mechanism and the jurisdiction conferred by Section 18 override any inconsistent private arbitration agreement or seat clause, and the Facilitation Council or designated institution may conduct the arbitration notwithstanding the general law of arbitration.

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