Patel Infrastructure Limited Vs Aditya Construction (Supreme Court of India)
Supreme Court Leaves Open Whether a Buyer Can Invoke Arbitration Against an MSME Outside the MSMED Act Framework
The Supreme Court disposed of the appeal by recording the parties’ consent to resolve their disputes through arbitration under the Arbitration and Conciliation Act, 1996, while leaving open the important legal question of whether a buyer of goods or services from an MSME can independently invoke arbitration under the Arbitration Act instead of proceeding under the MSMED Act, 2006.
The appellant sought adjudication of the legal issue regarding the interplay between the MSMED Act, 2006 and the Arbitration and Conciliation Act, 1996, relying upon decisions of the Delhi High Court in Uniseven Engineering and Infrastructure Pvt. Ltd. and the Calcutta High Court in Essar Oil and Gas Exploration and Production Ltd..
During the hearing, however, the respondent-MSME agreed to have the disputes resolved through arbitration under the Arbitration and Conciliation Act, 1996, with the arbitrator to be appointed through the Delhi International Arbitration Centre (DIAC). Considering the consensus between the parties, the Supreme Court accepted the proposal and directed the DIAC to appoint a suitable arbitrator, fixing New Delhi as the venue of arbitration.
The Court expressly clarified that, since the dispute had been resolved by consent, it was not deciding the larger question of law regarding a buyer’s right to independently invoke arbitration against an MSME outside the mechanism contemplated under the MSMED Act. The issue was kept open for determination in an appropriate future case. The appeal was accordingly disposed of without any adjudication on the legal issue.
Cases Discussed
- Uniseven Engineering and Infrastructure Pvt. Ltd. vs. Micro and Small Enterprises Facilitation (MSEF) Council, District (South), and another (Delhi HC), W.P. (C) 11233/2021 and CM Appl. 34581, decided on July 5, 2023
- Essar Oil and Gas Exploration and Production Limited vs. Gargi Travels Private Limited (Calcutta HC), A.P. No. 73 of 2023, decided on April 20, 2023
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Leave granted.
2. An interesting question of law was sought to be raised by way of this appeal, that is, whether a buyer of goods or services from a micro or small enterprise (MSME), governed by the Micro, Small and Medium Enterprises Development Act, 2006, can seek to initiate arbitration proceedings in respect of its claim against such MSME by independently taking recourse to the Arbitration and Conciliation Act, 1996.
3. Effective arguments were advanced by Ms. Tanyiya Bansal, learned counsel for the appellant, and she placed reliance on case law in support of her weighty contentions. The decisions of the Delhi High Court in Uniseven Engineering and Infrastructure Pvt. Ltd. vs. Micro andSmall Enterprises Facilitation (MSEF) Council, District (South), and another1 and of the Calcutta High Court in Essar Oil and Gas Exploration and Production Limited vs. Gargi Travels Private Limited2 were placed before us.
4. While so, on instructions, Mr. Sanjay Bhaseen, learned senior counsel, appearing for the respondent MSME, stated that the respondent MSME is agreeable to the appointment of an arbitrator through the aegis of the Delhi International Arbitration Centre to resolve the inter se disputes between the parties through the process of arbitration governed by the provisions of the Arbitration and Conciliation Act, 1996. He would, however, submit that as the appellant has its registered office at Ahmedabad, Gujarat, and the respondent MSME, being a proprietorship, has its office at Basti in Uttar Pradesh, the venue of the arbitration may be fixed as New Delhi for the convenience of both parties.
5. Accepting the fair offer made by the learned senior counsel so as to give a quietus to the matter without further ado, the appeal is disposed of requesting the Delhi International Arbitration Centre to appoint a suitable arbitrator to undertake the resolution of the disputes between the appellant, M/s Patel Infrastructure Limited, and the respondent, M/s Aditya Construction under the provisions of the Arbitration and Conciliation Act,1996. The venue of the arbitration shall be at New Delhi. The appellant shall approach the Delhi International Arbitration Centre within two weeks from the date of receipt of a certified copy of this order.
6. The question of law raised in this appeal is, however, left open to be considered in an appropriate case in future.
The appeal is disposed of in the aforestated terms.
Parties shall bear their own costs.
Notes:
1 W.P. (C) 11233/2021 and CM Appl. 34581, decided on July 5, 2023.
2 A.P. No. 73 of 2023, decided on April 20, 2023
