Court Dismisses Writ Petition Challenging Arbitration Reference Under MSMED Act for Works Contract Dispute
In a landmark decision, the Telangana High Court has reaffirmed the applicability of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) to works contracts. The Division Bench, comprising Justices Moushumi Bhattacharya and Gadi Praveen Kumar, dismissed a writ petition filed by SRP Minerals Pvt. Limited, which challenged the arbitration proceedings initiated under the MSMED Act for a works contract dispute.
The petitioner argued that works contracts are excluded from the purview of the MSMED Act and sought to set aside the arbitration reference made by the MSME Facilitation Council to the International Arbitration and Mediation Centre (IAMC). However, the Court, relying on precedents from the Andhra Pradesh High Court and Calcutta High Court, held that the MSMED Act does not distinguish between works contracts and other types of contracts. The Facilitation Council has jurisdiction to settle disputes through conciliation and arbitration, even when they involve works contracts.
The Court observed that the MSMED Act's provisions apply once an enterprise is registered under the Act, and there is no statutory exclusion for works contracts. The judgment emphasized that sections 15 to 23 of the MSMED Act have an overriding effect on all other Acts, reinforcing the Facilitation Council's authority to address disputes involving unpaid amounts for goods sold or services rendered.
Furthermore, the Court noted that SRP Minerals had consented to the constitution of the Arbitral Tribunal and actively participated in the arbitration proceedings. The petitioner was found to have an alternative remedy under the Arbitration and Conciliation Act, 1996, to address any objections, making the writ petition unsustainable.
This decision underscores the comprehensive reach of the MSMED Act in providing a dispute resolution mechanism for small and medium enterprises, regardless of the nature of the contract. The Court's ruling is expected to strengthen the legal framework supporting MSMEs and affirm the role of Facilitation Councils in arbitrating commercial disputes.
Bottom line:-
The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) does not exclude works contracts from its purview. Facilitation Councils under the MSMED Act have jurisdiction to settle disputes through conciliation and arbitration, even in cases involving works contracts.
Statutory provision(s): Micro, Small and Medium Enterprises Development Act, 2006 - Sections 18, 24; Arbitration and Conciliation Act, 1996 - Section 16
SRP Minerals Pvt. Limited v. Union of India, (Telangana)(DB) : Law Finder Doc id # 2897753
