MSE Facilitation Council Has To Decide On Its Jurisdiction To Refer Matter To Arbitrator When Jurisdictional Issue Is Raised At Conciliation Stage: Bombay HC
The Bombay High Court observed that an MSE Facilitation Council has to prima facie give a verdict regarding its jurisdiction to refer a matter to an Arbitrator when an issue regarding jurisdiction is raised at the stage of conciliation.
The Court quashed a notice issued by the Nodal Officer for Goa Micro and Small Enterprises Facilitation Council (Council) invoking its power under Section 18 (3) of the Micro, Small and Medium Enterprises Development Act 2006 (MSMED Act) to refer the matter between parties for arbitration after noting the failure of conciliation.
A Single Bench of Justice Bharat P. Deshpande observed, “The object and propose of such procedure is to consider first whether the matter could be conciliated between the parties and only if it is not possible to give a failure report and then ask the Council to refer it to the panel of arbitrators. Thus, when a jurisdiction is raised even at the stage of conciliation, the Council must at least prima facie give its verdict about the jurisdiction even to refer the matter to Arbitrator, so that the aggrieved party could take proper recourse.”
Sr. Advocate Nitin Sardessai appeared for the petitioners, while Addl. GA Shubham Priolkar represented the respondents.
M/S Bharat Kolkata Container Terminals Pvt. Ltd. (petitioner) challenged the jurisdiction of the Council, arguing that it did not have the jurisdiction to entertain the conciliation proceedings or refer the matter to arbitration.
It was argued that Karunya Overseas & Technical Services Pvt. Ltd. (respondent company) entered into a service contract with the petitioner which was terminated later on. At the time of the contract, the respondent company was not registered under the MSMED Act.
The petitioner argued that between the period of registration and contract termination, no services were rendered by the respondent company to the petitioner. The petitioner contended that the registration under the MSMED Act, which was obtained after entering the contract, could not be applied retrospectively to claim benefits under the MSMED Act.
The Goa Bench clarified that the benefits of the MSMED Act could not be applied retrospectively and that a service provider could not claim the status of a small or medium enterprise based on a memorandum filed after the contract.
“There is no provisions as found in the Act itself that even at the conciliation stage the Conciliator or the Nodal Officer is not empowered to decide about the jurisdiction to take up the matter for conciliation, and then refer to Arbitration,” the Court remarked.
Consequently, the Court held, “the notice of failure submitted by the Nodal Officer needs to be quashed and set aside. The said Officer is therefore directed to consider whether the Council is having jurisdiction to entertain such dispute even at the conciliation stage, and then have power to refer it to Arbitration, as has been done in the matter in hand.”
Accordingly, the High Court remanded the matter to the concerned authority.
Cause Title: M/S Bharat Kolkata Container Terminals Pvt. Ltd. v. Goa Micro and Small Enterprises & Anr. (Neutral Citation: 2024:BHC-GOA:1100)
Appearance:
Petitioners: Sr. Advocate Nitin Sardessai; Advocates Vibhav R. Amonkar, Archana Uppuluri, Siddharth Sardesai and Vaishali Mahato
Respondents: Addl. GA Shubham Priolkar