Petition Under Section 11 Of Arbitration Act Would Not Lie Due To The Applicability Of MSMED Act: Gujarat High Court

The Gujarat High Court has reiterated that the petition under Section 11 of the Arbitration Act would not lie due to the prevailing of the MSME Act (The Micro, Small and Medium Enterprises Development Act, 2006).

A Single Bench of Justice Biren Vaishnav said, “Admittedly therefore, due to the prevailing of the MSME Act, petition under Section 11 of the Arbitration Act would not lie.”

The Bench relied upon a judgment of the Gujarat High Court in the case of M/s Samrat Furnaces Pvt. Ltd. v. State of Gujarat (Special Civil Application No.7006 of 2020) wherein it considered the applicability of the Arbitration and Conciliation Act and the MSME Act.

Advocate Mihir H. Pathak appeared on behalf of the petitioner while Advocate Pratik Y. Jasani appeared on behalf of the respondent.

In this case, a petition under Section 11 of the Arbitration and Conciliation Act, 1996 was filed seeking the appointment of a Sole Arbitrator to resolve the disputes and differences between the petitioner and the respondent arising out of or in any way touching or concerning a purchase order. The petitioner had issued purchase orders for the purchase of insulation kits and like products and the respondent had accepted all the terms and conditions of the same and issued bills.

It was the case of the petitioner that the total weight received for the purchase orders was short of the actual orders and since the amount of advance was paid, the petitioner was entitled to a refund of Rs. 2,02,772.96/-. Taking a cue from an arbitration clause in the agreement, the petitioner issued a notice requesting that the parties shall resolve the dispute by appointing an arbitrator named in the notice.

The High Court in view of the above facts observed, “Considering the decision of this Court in case of M/S Samrat Furnaces Pvt. Ltd. (supra), this Court had occasion to consider the applicability of the Acts i.e. the Arbitration and Conciliation Act and the MSME Act and after considering several decisions of various Courts, the Court answered the contentions with regard to the application of Sections 7 and 11 of the Act”

The Court clarified that it is open for the parties to raise all the contentions raised in the petition before the MSME Council.

“The order is subsequently confirmed by the Division Bench in Letters Patent Appeal No.381 of 2020. … In view of the above, the petition is dismissed”, said the Court.

Accordingly, the Court dismissed the plea.

Cause Title- M/s TBEA Energy (India) Private Limited v. R.K. Engineering

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