Microvision Technologies Pvt. Ltd. Vs Union of India (Bombay High Court)
Summary: The Bombay High Court, in Microvision Technologies Pvt. Ltd. Vs Union of India, allowed a review petition concerning the territorial jurisdiction of courts over a challenge to an arbitral award arising from the statutory dispute-resolution mechanism under the Micro, Small and Medium Enterprises Development Act, 2006. The petitioner sought review of an earlier order dated 15 May 2020 dismissing its application to transfer Commercial Arbitration Petition (L) No. 855 of 2018 from the Bombay High Court to the District Court at Nashik. Justice R.I. Chagla found that the earlier order suffered from errors apparent on the face of the record because it had not considered relevant binding precedent, had failed to properly examine Section 11(6)(c) of the Arbitration and Conciliation Act, 1996, and had overlooked the non-obstante provision contained in Section 18(4) of the MSMED Act. Consequently, the Court reviewed its earlier order, restored the transfer application and directed that the arbitration petition be transferred to the District Court at Nashik.
The dispute arose from contracts awarded to Microvision Technologies Pvt. Ltd. by the Union of India through Central Railways for electrification and implementation of an Integrated Security System–Video Surveillance System at specified locations. The petitioner claimed to be a supplier within the meaning of the MSMED Act. Following contractual disputes, the matter was referred for conciliation under Section 18(2) of the MSMED Act. After conciliation failed, the petitioner requested the Micro and Small Enterprises Facilitation Council to refer the dispute for arbitration under Section 18(3). Pending consideration of that request, the petitioner approached the District Court at Nashik under Section 9 of the Arbitration and Conciliation Act seeking interim protection. It subsequently applied to the Bombay High Court under Section 11(6) for appointment of an arbitrator because the Facilitation Council had not referred the dispute to an independent arbitrator or institution.
By an order dated 16 December 2016, the Bombay High Court appointed an arbitrator. The arbitration was conducted in Mumbai and culminated in an award by the sole arbitrator, followed by a corrected award or order addressing certain ambiguities and omissions. The award was challenged in Commercial Arbitration Petition (L) No. 855 of 2018, accompanied by an application for condonation of delay. The petitioner later sought transfer of those proceedings to the District Court at Nashik through Notice of Motion No. 2043 of 2019, contending that the arbitration originated under the special statutory mechanism contained in Sections 15 to 24 of the MSMED Act and that the relevant statutory provisions prevailed over inconsistent provisions of the Arbitration and Conciliation Act. The transfer application was dismissed on 15 May 2020.
The petitioner pursued appellate remedies and subsequently filed the present review petition under Order XLVII Rule 1 read with Sections 114 and 151 of the Code of Civil Procedure, 1908. It argued that the earlier order wrongly relied on Steel Authority of India Ltd. Vs Micro, Small Enterprises Facilitation Council without considering the Division Bench decision in Gujarat State Petronet Limited Vs Micro and Small Enterprises Facilitation Council. The latter decision had recognised the statutory jurisdiction of the Facilitation Council notwithstanding the existence of an independent arbitration agreement. The petitioner also relied on Gujarat State Civil Supplies Corporation Ltd. Vs Mahakali Foods Pvt. Ltd., in which the Supreme Court had subsequently explained the overriding operation of Chapter V of the MSMED Act over inconsistent contractual arbitration arrangements.
The petitioner further contended that its application for appointment of an arbitrator was specifically made under Section 11(6)(c) because the Facilitation Council had failed to perform its statutory function under Section 18(3) of the MSMED Act. According to the petitioner, the earlier order had erroneously treated the application as one arising from the parties’ independent contractual arbitration agreement under Clauses 63 and 64 of the railway contract. The petitioner maintained that Section 18(4) of the MSMED Act conferred jurisdiction on the Facilitation Council by reference to the supplier’s location, irrespective of the buyer’s location anywhere in India. Since the petitioner was situated in Nashik, the District Court at Nashik was asserted to be the appropriate forum for proceedings challenging the award under Section 34.
The petitioner also invoked Sections 2(1)(e), 9 and 42 of the Arbitration and Conciliation Act. It argued that an earlier Section 9 application before the District Court at Nashik attracted the statutory rule requiring subsequent applications arising from the arbitration agreement to be brought before the same court. Reliance was placed on Fiza Developers & Inter Trade Pvt. Ltd. Vs AMCI (India) Pvt. Ltd. and State of West Bengal Vs Associated Contractors to support the contention that the making of an application before a competent court was sufficient for Section 42 to operate, even where the application had subsequently been withdrawn. The petitioner accordingly contended that the original transfer refusal involved errors in interpreting both the MSMED Act and the Arbitration and Conciliation Act.
The Union of India opposed the review. It submitted that the arbitrator had been appointed pursuant to Section 11 of the Arbitration and Conciliation Act and the contractual arbitration clauses rather than through the statutory process under Section 18(3) of the MSMED Act. The respondent maintained that the petitioner had accepted the Bombay High Court’s jurisdiction and could not subsequently seek transfer to Nashik. It also relied on decisions concerning the restricted scope of review jurisdiction, including Sanjay Ramchandra Shendkar Vs Narayan Antu Zende and Beghar Foundation Vs Justice K.S. Puttaswamy, to argue that a later judicial development or change in the law could not, by itself, justify review of an earlier decision.
After considering the rival arguments, the High Court held that the order dated 15 May 2020 had failed to consider the Division Bench decision in Gujarat State Petronet Limited, although that decision had examined the earlier Steel Authority of India ruling. This omission constituted a patent error of law. The Court further found that the petitioner’s application was made under Section 11(6)(c) because of the Facilitation Council’s failure to refer the dispute for arbitration under Section 18(3). It held that the earlier order incorrectly treated the appointment application as one under Section 11(5). The Court explained that the statutory mechanism under Section 18(3) of the MSMED Act and the appointment mechanism under Section 11(6)(c) of the Arbitration and Conciliation Act had to be interpreted harmoniously.
The Court also examined the non-obstante clause contained in Section 18(4) of the MSMED Act. It reasoned that the Facilitation Council’s jurisdiction to act as arbitrator or conciliator was determined by the location of the supplier, with the buyer permitted to be located anywhere in India. Since the petitioner supplier was located at Nashik, the Court held that the District Court at Nashik possessed jurisdiction over the arbitral proceedings and the petition challenging the award. The earlier order’s reliance on Clause 64 of the General Conditions of Contract, identifying Mumbai as the arbitration venue, had overlooked the statutory provision. The Court expressly declined to determine the separate issue concerning the effect of the withdrawn Section 9 application under Section 42, considering its conclusion under Section 18(4) sufficient to dispose of the review.
Finally, the High Court observed that its earlier reliance on Steel Authority of India had been overtaken by the Supreme Court’s decision in Gujarat State Civil Supplies Corporation Ltd. Vs Mahakali Foods Pvt. Ltd. Nevertheless, the Court clarified that its decision to allow review rested on errors already apparent in the earlier order, without requiring reliance on the subsequent Supreme Court judgment. Accordingly, the Court reviewed the order dated 15 May 2020, restored Notice of Motion (L) No. 2043 of 2019 and transferred Commercial Arbitration Petition (L) No. 855 of 2018 to the District Court at Nashik. The review petition was disposed of without any order as to costs. The order concerned review and territorial jurisdiction; it did not decide the merits of the underlying arbitral claim or the validity of the award.
Cases Discussed
1. M/s. Steel Authority of India Ltd. Vs The Micro, Small Enterprises Facilitation Council (Bombay High Court); 2010 SCC OnLine Bom 2208 — The earlier order relied on this decision regarding the continued validity of a contractual arbitration agreement notwithstanding the statutory powers of the Facilitation Council. The review court found that subsequent and relevant precedent had not been properly considered.
2. Gujarat State Petronet Limited Vs Micro and Small Enterprises Facilitation Council and Ors. (Bombay High Court); AIR 2018 Bombay 265 — The Division Bench decision was central to the review. It recognised that a reference under the MSMED Act could remain maintainable despite an independent arbitration agreement between the parties. Failure to consider this decision was held to constitute a patent error of law.
3. Paper and Board Converters Vs UP State Micro and Small Enterprises Facilitation Council, Kanpur (Allahabad High Court); 2014 (5) AWC 4844 — Discussed regarding the statutory jurisdiction of the Facilitation Council notwithstanding an independent arbitration agreement.
4. Principal Chief Engineer Vs Manibhai and Brothers (Gujarat High Court); MANU/GJ/1164/2016 — Considered concerning the overriding effect of MSMED arbitration provisions and the statutory jurisdiction of the Facilitation Council despite contractual arbitration arrangements.
5. Gujarat State Civil Supplies Corporation Limited Vs Mahakali Foods Private Ltd. (Supreme Court); 2022 SCC OnLine SC 1492; 21/10/2022 — Considered regarding the overriding operation of Chapter V of the MSMED Act over independent arbitration agreements and the Supreme Court’s rejection of the contrary approach adopted in Steel Authority of India.
6. Silpi Industries Etc. Vs Kerala State Road Transport Corporation & Anr. (Supreme Court); 2021 SCC OnLine SC 439 — Relied upon by the petitioner regarding the statutory MSMED dispute-resolution mechanism prevailing over an independent arbitration agreement.
7. Vachaspati Sharma Vs India Cements – Capital and Finance Ltd. (Bombay High Court); MANU/MH/1607/2013 — Discussed concerning whether a Section 9 application that was not pressed restricted the jurisdiction over subsequent arbitration proceedings to the court before which that application had been filed.
8. Fiza Developers & Inter Trade Pvt. Ltd. Vs AMCI (India) Pvt. Ltd. & Anr. (Supreme Court); (2009) 17 SCC 796 — Relied upon by the petitioner in support of its interpretation of the expression concerning an application being made before a court.
9. State of West Bengal Vs Associated Contractors (Supreme Court); (2015) 1 SCC 32 — Cited regarding the operation of Section 42 of the Arbitration and Conciliation Act and the significance of the first application made before a competent court.
10. Sanjay Ramchandra Shendkar and Ors. Vs Narayan Antu Zende (Bombay High Court); Review Petition No. 70 of 2022 in WP No. 10975 of 2018; 12/04/2023 — Relied upon by the respondent concerning the restricted scope of review jurisdiction and the requirement of an error apparent on the face of the record.
11. Beghar Foundation, thru its Secretary Vs Justice K.S. Puttaswamy (Supreme Court); (2021) 3 SCC 1 — Discussed regarding whether a subsequent judicial decision or change in the law constitutes an independent ground for review of an earlier judgment.
12. Microvision Technologies Thru its Proprietor Atul Nemichand Dhadiwal Vs Dhule Municipal Corporation Thru its Commissioner (Bombay High Court); 2022 SCC OnLine Bom 6068 — Cited by the respondent regarding the circumstances in which review jurisdiction may be exercised for an apparent error of law or misconception of fact or law.
FULL TEXT OF THE ORDER OF BOMBAY HIGH COURT
1. By this Review Petition, the Petitioner is seeking review of order dated 15th May 2020 passed in Commercial Notice of Motion (L.) No. 2043 of 2019 in Commercial Arbitration Petition (L.) No. 855 of 2018 and for restoration of Commercial Notice of Motion (L.) No. 2043 of 2019 on the file of of this Court. Further, relief is sought for transfer of Commercial Arbitration Petition (L.) No. 855 of 2018 to District Court at Nashik as prayed in Commercial Notice of Motion (L.) No. 2043 of 2019.
2. The Petitioner has filed this application under the provisions of Order 47 Rule 1 read with sections 114 and 151 of Code of Civil Procedure, 1908. The Petitioner had upon being advised filed Commercial Appeal (L.) No. 9465 of 2020 assailing the Order dated 15th May 2020 passed by this Court. Thereafter, upon realizing that said Commercial Appeal was not maintainable, the Petitioner has preferred the present Review Petition for review of the said order dated 15th May 2020. The Commercial (L.) 9465 of 2020 was accordingly withdrawn with liberty to file the present Review Petition which was allowed by Division Bench of this Court vide order dated 22nd November, 2022. Copy of the order has been annexed at Exhibit B to the Review Petition.
3. A brief background of facts is necessary.
4. The Petitioner is a supplier within the meaning of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”). The Petitioner had contracts awarded by the Respondent (through Central Railways) for Electrification of Integrated Security System-Video Surveillance System proposed to be implemented by the Central Railways at certain places. Dispute arose between the parties in connection with the contract and which was referred to conciliation under Section 18 (2) of the MSMED Act. Upon failure of conciliation, the Petitioner applied to the Facilitation Council to act under Section 18(3) of the MSMED Act by referring the dispute to the Arbitrator or Institution as provided under the MSMED Act.
5. The Petitioner states that pending the consideration of the Application, the Petitioner moved a Petition under Section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) before the District Court at Nashik, seeking interim relief. The Petitioner then moved an application under Section 11(6) of the Arbitration Act before this Court for appointment of an Arbitrator as the Facilitation Council had failed to refer the dispute to an independent Arbitrator or Institution.
6. This Court by an order dated 16th December, 2016 allowed the Application of the Petitioner under Section 11(6) of the Arbitration Act and appointed an Arbitrator to whom the disputes of the parties were referred. Annexed at Exhibit C to the Petition is a copy of the said order dated 16th December, 2016.
7. The Petitioner has thereafter stated that upon the appointment of the Arbitrator, the Petitioner withdrew the Application under Section 9 having regard to Section 9(b) of the Arbitration Act inserted by Act 3 of 2016 with retrospective effect from 25th October, 2015.
8. Thereafter, the arbitration proceedings have been conducted in Mumbai and concluded by Award passed by the Sole Arbitrator. There was certain ambiguity and omission in the Award considering certain points which were referred before the Arbitrator for correction and the corrected Award / Order came to be passed.
9. The Award of the Arbitrator came to be challenged in Commercial Petition (L) No.855 of 2018 along with Notice of Motion filed for condonation of delay.
10. An Application being Notice of Motion No.2043 of 2019 was preferred by the Petitioner in this Court for transfer of Commercial Arbitration Petition to District Court at Nashik on the ground that the initiation of the Arbitration was not in accordance with the Arbitration Agreement but by way of special provisions of Sections 15 to 24 of the MSMED Act. The Petitioner’s contention was that the said provisions of the MSMED Act have overriding effect on any other law including the Arbitration Act. This Court by the said order dated 15th May, 2020 dismissed the Commercial Notice of Motion No.2043 of 2019.
11. The Petitioner had preferred Special Leave Petition in the Supreme Court against the said order passed by this Court. However, the SLP was rejected.
12. The Petitioner has filed the present Review Petition for review of the said Order dated 15th May, 2020.
13. Mr. Kirpekar, learned Counsel appearing for the Petitioner has submitted that there are patent errors of law on the face of the said Order dated 15th May, 2020 for which review has been sought. The said order has followed the decision of Division Bench of this Court in M/s. Steel Authority of India Ltd. Vs. The Micro, Small Enterprises Facilitation Council1 without considering the law laid down by the Division Bench of this Court in Gujarat State Petronet Limited Vs. Micro and Small Enterprises Facilitation Council and Ors.2. He has submitted that this Court in the said Order dated 15th May, 2020 by placing reliance on Steel Authority India Ltd. (Supra) held that an Agreement for Arbitration shall continue to be valid even in the face of the Council’s powers under Section 18 of the MSMED Act. This Court has in the said Order held that, the decision of the Allahabad High Court cited on behalf of the Petitioner viz. Paper and Board Converters Vs. UP State Micro and Small Enterprises Facilitation Council, Kanpur3 which had been followed by the Gujarat High Court in Principal Chief Engineer Vs. Manibhai and Brothers4 and which differed from the view of this Court in Steel Authority India Ltd. (Supra) would not lead to an inference that the decision of this Court in Steel Authority India Ltd. (Supra) has been dissented from or overruled.
14. Mr. Kirpekar has submitted that this Court in the said Order dated 15th May, 2020 had lost sight of the decision of the Division Bench of this Court in Gujarat Petronet (Supra). The decision of the Allahabad High Court in Paper and Board Converters (Supra) which had been followed by the Gujarat High Court in Manibhai and Brothers (Supra) has been considered in the said decision. Further, the decision of this Court (Nagpur Bench) in Steel Authority India Ltd.(Supra) has also been considered. The Division Bench had observed that the decision of Principal Chief Engineer (Supra) had been challenged before the Apex Court and the order of the Apex Court dated 5th July, 2017 shows that the Apex Court approved the view of the Gujarat High Court in Manibhai and Brothers (Supra) and the Allahabad High Court in Paper and Board Converters (Supra). The Division Bench of this Court has accordingly rejected the submission of Counsel for Petitioner that reference made to Respondent No.1 MSEFC by Respondent No.3 therein is not maintainable in view of independent arbitration agreement between the parties.
15. Mr. Kirpekar has submitted that in the present case the Petitioner had never requested this Court to appoint an Arbitrator on the basis of Arbitration Agreement between the parties. It only by virtue of the MSEFC, Nashik failing to refer the matter to the arbitrator upon the conciliation under Section 18(2) of the MSMED Act having failed, was the Petitioner compelled to approach this Court under Section 11(6), more particularly Section 11(6) (c) of the Arbitration Act read with Section 18(3) of the MSMED Act for appointment of an Arbitrator. The Division Bench of this Court in Gujarat Petronet (Supra) has held that the provisions of the MSMED Act have overriding effect on any other law including Arbitration Act. This Court by failing to consider the said decision in the said order dated 15th May, 2020 erred in law by holding that the Arbitration Agreement would continue to be valid even in the face of the Facilitation Council’s powers under Section 18 (3) of the MSMED Act. This particularly when the said provision of the MSMED Act has been invoked by the Petitioner.
16. Mr. Kirpekar has further submitted that this Court in the said Order dated 15th May, 2020 failed to consider Section 18(4) read with Section 24 of the MSMED Act which has overriding effect on the Arbitration Act. Under Section 18(4), there is a non obstante clause which provides that the Facilitation Council shall have jurisdiction to act as an arbitrator or conciliator under this Section in a dispute between the supplier located within its jurisdiction and the buyer located anywhere in India. Thus, this Court ought to have considered that the Petitioner as supplier being located in Nashik was the relevant factor for jurisdiction and by virtue of which the District Court, Nashik had jurisdiction over the dispute between the Petitioner and the Respondent. Accordingly the Arbitration Petition under Section 34 of the Arbitration and Conciliation Act is only maintainable before the District Court, Nashik. This apart from the provisions of Section 2(1) (e) read with Sections 9 and 42 of the Arbitration Act, in view of the Petitioner having invoked the jurisdiction of that Court by filing Application under Section 9 of the Arbitration and Conciliation Act,1996. He has submitted that any other interpretation will lead to an incongruous result and would not lead to a harmonious construction of the MSMED Act with the Arbitration Act so as to give effect to the objects and reasons of both statutes in its true sense.
17. Mr. Kirpekar has submitted that in a subsequent decision of the Supreme Court in Gujarat State Civil Supplies Corporation Limited Vs. Mahakali Foods Private Ltd.5, decision dated 21st October, 2022, the Supreme Court has set aside the decision of the Division Bench of this Court in Steel Authority of India Ltd. (Supra). This by holding that the Chapter V of the MSMED Act has an overriding effect over the provisions contained in the Arbitration Act and the Facilitation Council would be entitled to proceed further with the reference made by the supplier under Section 18(1) of the MSMED Act, despite an independent arbitration agreement existing between the parties. The Supreme Court has held that a private agreement between the parties cannot obliterate the statutory provisions of MSMED Act. Once the statutory mechanism under sub section (1) of Section 18 is triggered by any party, it would override any other agreement independently entered into between the parties, in view of the non obstante clauses contained in sub Section (1) and sub section (4) of Section 18 of the MSMED Act. The Supreme Court has held that while interpreting a statute, if two interpretations are possible, the one which enhances the object of the Act should be preferred than the one which would frustrate the object of the Act. The Supreme Court has held that if the submission of the counsel for the buyers that the party to a dispute covered under the MSMED Act, 2006 cannot avail the remedy available under Section 18(1) of the MSMED Act, when an independent arbitration agreement between the parties exists is accepted, the very purpose of enacting the MSMED Act, would get frustrated.
18. Mr. Kirpekar has also relied upon the decision of the Supreme Court in Silpi Industries Etc. Vs. Kerala State Road Transport Corporation & Anr.6, wherein the Supreme Court has held that if an arbitration agreement between the parties is there, the same is to be ignored in view of the statutory obligations and mechanism provided under the MSMED Act.
19. Mr. Kirpekar has referred to certain decisions on Section 9 read with 42 of the Arbitration Act. This is in view of the fact that the Petitioner had filed the Application under Section 9 of the Arbitration Act before the District Court, Nashik. Although the application was withdrawn by the Applicant, he has submitted that the mere filing of the Application would be a factor to be considered under the mandate of Section 42 of the Arbitration Act. Further, by virtue of Section 2(1) (e) read with the Section 9 and 42 of the Arbitration Act, the District Court, Nashik will have jurisdiction for entertaining the present challenge to the Award. This Court in the said order dated 15th May, 2020 has relied upon its prior decision in Vachaspati Sharma Vs. India Cements – Capital and Finance Ltd.7 which has held that the proceedings filed under Section 9 of the Act, if not pressed, would not restrict the future jurisdiction over the arbitral proceedings or all subsequent applications arising out of that arbitration agreement to the Section 9 Court.
20. Mr. Kirpekar has submitted that the said decision had not considered the decision of the Supreme Court in Fiza Developers & Inter Trade Pvt. Ltd. Vs. AMCI (India) Pvt. Ltd. & Anr.8, interpreting similar language appearing in Section 36 of the Arbitration Act. Further, Vachaspati Sharma (Supra) has been implidely overruled in State of West Bengal Vs. Associated Contractors9 which makes it clear that the language in Section 42 of the Arbitration Act merely requires an application “made in a Court” which is similar language appearing in Section 36 and which would mean the mere filing of an application, albeit in that case under Section 36 of the Arbitration Act.
21. Mr. Kirpekar has accordingly submitted that mere filing of the application would constitute an application having been “made in a Court” for the purpose of Section 42. Thus, under Section 42 of the Arbitration Act, the Court alone having jurisdiction over the arbitral proceedings is the Court where an application under part 1 has been made (including Application under Section 9) and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court. He has submitted that in view of the application being made under Section 9 of the Arbitration and Conciliation Act in the District Court, Nashik, that Court will have jurisdiction over the arbitral proceedings including Petition under Section 34 of the Arbitration Act challenging the Award passed.
22. Mr. Kirpekar has submitted that this Court has overlooked the said provisions of the Arbitration Act in holding that the District Court, Nashik does not have jurisdiction in the matter, not being a ‘Court’ within a meaning of Section 2(1) (e) of the Act. This is in view of the finding that under the Arbitration Agreement, the seat of the arbitration is Mumbai. He has submitted that this Court has further erred in holding that the filing of the Application under Section 9 of the Arbitration and Conciliation Act does not have effect of restricting the future jurisdiction over arbitral proceedings in the matter to that Court and that the present Arbitration Petition and companion Notice of Motion cannot be transferred to that Court.
23. Mr. Pandian, the learned Counsel appearing for the Respondent, has supported the said order of this Court dated 15th May, 2020. He has submitted that the Application was made by the Petitioner under Section 11 of the Arbitration and Conciliation Act and not under Section 18(3) of the MSMED Act. He has submitted that this Court in allowing the Application under Section 11 of the Arbitration Act had noted that there was an Arbitration Agreement between the parties in terms of Clauses 63 and 64 of the contract. The Petitioner having chosen to refer the disputes between the Petitioner and Respondent under the said clauses of the Arbitration Agreement cannot now contend that the Application for appointment of Arbitrator was initiated under the MSMED Act and / or that the provisions of the MSMED Act namely Section 18 will apply to the appointment of the Arbitrator and the Arbitral Proceedings as well as the challenge to the award.
24. Mr Pandian has further submitted that if the Petitioner was aggrieved by the decision of the Facilitation Council under the MSMED Act not to take up the dispute for arbitration or refer the dispute to an institution or centre for arbitration, the remedy available to the Petitioner was to file a Writ Petition directing the Facilitation Council to proceed with arbitration.
25. Mr Pandian has submitted that this Court in the said Order has correctly referred to the decision of the Division Bench of this Court in Steel Authority of India (Supra) in finding that the agreement of arbitration continues to be valid even in the face of Council’s powers under Section 18 of the MSMED Act. This Court has considered the decisions of the Allahabad High Court in Paper and Board Converters (Supra) and the Gujarat High Court in Manibhai and Brothers (Supra) and held that in those decisions the Court was considering whether the Facilitation Council may still have jurisdiction to take up a dispute for arbitration or refer it to an institution or Centre for arbitration notwithstanding anything contained in the arbitration agreement. He has submitted that in the present case, this Court is considering the position that the Petitioner had made an application for referring this dispute for arbitration under Section 11 of the Arbitration and Conciliation Act and not under Section 18(3) of the MSMED Act.
26. Mr. Pandian has further placed reliance upon the order of the learned Single Judge of this Court dated 4th July, 2017 passed in Writ Petition No.1328 of 2016, wherein the Single Judge has considered that the Facilitation Council by order dated 21st October, 2015 rejected the Petitioner’s Petition No.57 of 2015 for conciliation under the MSMED Act. The Facilitation Council had referred to Clauses 63 and 64 of the Contract between the Petitioner and the Respondent to direct the Petitioner to resort to the remedy of arbitration thereunder. This was challenged by the Petitioner before the District Court and which Petition was dismissed on ground of want of jurisdiction to entertain the proceedings. The Petitioner was directed to approach the competent forum after which the Petitioner filed the Petition which was being considered by the learned Single Judge of this Court. The Petitioner had not disputed the finding that the District Court had no jurisdiction to entertain the challenge to the order passed by the Facilitation Council. He has accordingly submitted that the Petitioner has accepted the jurisdiction of this Court in the arbitral proceedings.
27. Mr. Pandian has also referred to the decision of the learned Single Judge of this Court in Sanjay Ramchandra Shendkar and Ors. Vs. Narayan Antu Zende10, wherein the learned Single Judge of this Court has held that a review is by no means an Appeal in disguise, whereby an erroneous decision is corrected, but it lies only for patent error, without any elaborate argument that one could point to the error and therefore before exercising the power of review, error apparent on the face of the record must be established. The error should be so striking that on a mere looking it is spotted and it would not require any long drawn process of reasoning. The learned Single Judge of this Court in the said order had considered the decision of the Supreme Court in Beghar Foundation, thru its Secretary V. Justice K.S. Puttaswamy11, wherein it was held that the Review Petition cannot be entertained on the ground of “change in the law” by the subsequent decision / judgment of larger Bench. He has accordingly submitted that the subsequent decisions relied upon on behalf of the Petitioner including the decision in Gujarat State Civil Supplies Corporation Ltd. (Supra) which has set aside the decision of this Court in Steel Authority of India Ltd. (Supra) cannot be a ground for review.
28. Mr. Pandian has also placed reliance upon the decision of the Single Judge of this Court in Microvision Technologies Thru its Proprietor Atul Nemichand Dhadiwal Vs. Dhule Municipal Corporation Thru its Commissioner12, wherein this Court has also held that the power of review can be exercised provided there is an error of law apparent on the face of the record or the misconception of fact or law by the Court while rendering the judgment under review.
29. Mr. Pandian has accordingly submitted that there is no merit in the Review Petition and that the Review Petition be rejected.
30. Having considered the rival submissions, this Court in the said Order dated 15th May, 2020 has not considered the decision of the Division Bench of this Court in Gujarat State Petronet Limited (Supra). In the said decision, the Division Bench of this Court has considered Steel Authority of India (Supra) on which this Court had placed reliance in the said order in holding that the agreement for arbitration shall continue to be valid even in the face of Facilitation Council’s power under Section 18 of the MSMED Act. The Division Bench has held that a reference made by the Petitioner under the MSMED Act is maintainable inspite of the independent arbitration agreement between the parties. The Division Bench of this Court has referred to the order dated 5th July, 2017 of the Supreme Court which rejected the challenge to the decision of the Division Bench of the Gujarat High Court in Manibhai and Brothers (Supra) which in turn had expressed its inability to agree with the decision of the Single Judge of this Court (Nagpur Bench) in Steel Authority of India Ltd. (Supra). The Division Bench of the Gujarat High Court in the said decision has held that once the Facilitation Council has jurisdiction to act as an arbitrator and conciliator in a dispute between the parties, the Council has only one of the two courses of action open to it, “either conduct arbitration itself or refer to the parties or Centre or institution providing alternate dispute resolution services stipulated in sub section 3 of Section 18 of the MSMED Act”. The Division Bench of the Gujarat High Court in that case did not find any error in the decision of the Facilitation Council in not entertaining the buyers application under Section 8 of the Arbitration Act.
31. Thus, in my view this Court in the said order dated 15th May, 2020 has committed a patent error of law in not considering the decision of the Division Bench of this Court in Gujarat State Petronet Limited (Supra).
32. Another factor to be considered is that the Application made by the Petitioner was under Section 11(6) (c) of the Arbitration Act for referring the dispute to arbitration. This provision specifically provides as under:-
“a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment”.
33. Thus, an Application under Section 11(6) is made when the institution as in the present case, the Facilitation Council fails to perform any function entrusted to it under the procedure contemplated in Section 18(3) of the (MSMED Act) and pursuant to which appointment is made for referring the disputes to arbitration. This Court in the said Order dated 15th May, 2020 has treated the application as if it was made under Section 11(5) and not under Section 11(6) of the Arbitration Act. Thus, this Court in the said Order has overlooked the relevant provision of law.
34. Under Section 18(3) of the MSMED Act, the following is provided:-
“(3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act”.
35. The said provision expressly provides for the Facilitation Council in the event conciliation is not successful and stands terminated without any settlement between the parties to refer to any institution or centre providing alternate dispute resolution services for such arbitration and then the provisions of Arbitration Act shall apply to the disputes as if the arbitration was in pursuance of an arbitration agreement referred to in Sub Section 1 of Section 7 of that Act. Upon the failure on the part of the Facilitation Council to refer the dispute to arbitration, an Application may be made under Section 11(6) (c) and accordingly in the present case the application was made for appointment of an Arbitrator. Thus, Section 18 of the MSMED Act has to be read harmoniously with Section 11 of the Arbitration Act.
36. I find no merit in the submission on behalf of the Respondent that in the event the Facilitation Council failed to refer the dispute to arbitration, the only remedy available to the Applicant was to file a Writ Petition seeking such direction against the Facilitation Council. This submission overlooks the fact that there is an in built provision under the Arbitration Act, viz. Section 11(6) (c), which provides for appointment of an Arbitrator in such cases. Thus, there is a patent error of law on the face of the record in that Section 11(6) (c) of the Arbitration Act has been completely given a go by to in the said order of this Court.
37. Further, Section 18(4) of the MSMED Act has not even been considered in the said Order. Section 18(4) reads as under:-
“(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India”.
38. Thus, under this provision of MSMED Act, the jurisdiction to act as an Arbitrator or Conciliator is determined according to where the supplier is located. In the present case, the Petitioner being the supplier is located at Nashik. Accordingly, the District Court, Nashik will have jurisdiction with respect to the arbitral proceedings and any challenge to the Award by way of Petition under Section 34 of the Arbitration Act is to be filed before that Court. This material provision was required to be considered in the said Order dated 15th May, 2020. By overlooking this provision, there is an error apparent on the face of the said Order.
39. The said order by placing reliance upon Clause 64 of the General Condition of Contract, where the venue for arbitration is Mumbai and not Nashik Court has clearly overlooked Section Section 18(4) of the MSMED Act which is a non-obstante provision.
40. There are submissions made with regard to the issue of the Application made under Section 9 of the Arbitration Act and upon its withdrawal whether the Application would be a factor to be considered under Section 42 of the Arbitration and Conciliation Act read with Section 2(1) (e) of the Arbitration Act. However, this issue is not required to be determined, in view of the non-obstante provision i.e. Section 18(4) of MSMED Act being applicable and provides for jurisdiction to act as inter alia Arbitrator is determined according to where the Petitioner as supplier is located i.e. at Nashik. There is an error apparent on the face of the said order as it relies upon Clauses 63 and 64 of the arbitration agreement, thereby obliterating the non-obstante statutory provision i.e. Section 18 of the MSMED Act.
41. It is necessary to note that the decision of this Court in Steel Authority of India Ltd. (Supra) has been set aside by the Supreme Court in Gujarat State Civil Supplies Corporation Limited (Supra), subsequent to the passing of the said Order. Although, Mr. Pandian has placed reliance upon the decision of the learned Single Judge of this Court in Sanjay Shendkar (Supra). However, the learned Single Judge of this Court has in the said decision considered the divergent opinions of two Judges of the Supreme Court on the issue as to whether a Review Petition can be entertained on the ground of subsequent overruling of a decision of the Court and has made a request to the Chief Justice of India to refer the divergent opinion to a larger Bench.
42. In view of the above finding of patent error apparent on the face of the said Order and its requiring to be reviewed, it is not necessary to place reliance on Gujarat State Civil Supplies Corporation Limited (Supra) for arriving at such a finding.
43. Hence, the following order is passed:-
(i) The said order dated 15th May, 2020 passed in Commercial Notice of Motion (L) No.2043 of 2019 in Commercial Arbitration Petition (L) No.855 of 2018 is reviewed.
(ii) The Commercial Notice of Motion (L) No.2043 of 2019 is forthwith restored to the file of this Court.
(iii) The Commercial Arbitration Petition (L) No.855 of 2018 is transferred to the District Court at Nashik by allowing Commercial Notice of Motion (L) No.2043 of 2019.
(iv) The Review Petition is accordingly disposed of.
(v) There shall be no order as to costs.
Notes:
1 2010 SCC OnLine Bom 2208. ↩
2 AIR 2018 Bombay 265. ↩
3 2014 (5) AWC 4844. ↩
4 MANU/GJ/1164/2016. ↩
5 2022 SCC OnLine SC 1492. ↩
6 2021 SCC OnLine SC 439. ↩
7 MANU/MH/1607/2013. ↩
8 (2009) 17 SCC 796. ↩
9 (2015) 1 SCC 32. ↩
10 Review Petition No.70 of 2022 in WP No.10975 of 2018 dated 12th April, 2023. ↩
11 (2021) 3 SCC 1. ↩
12 2022 SCC OnLine Bom 6068. ↩
