Arbitration Agreement Between Parties And Chosen Venue Will Not Be Overridden By MSMED Act: Calcutta HC

The Odisha Power Generation Corporation Limited, who is the Petitioner/Award-Debtor, filed the petition seeking a stay of operation and setting aside an arbitral award passed by the West Bengal Micro Small Enterprises Facilitation Council, urging that the arbitration agreement entered between the parties will be superseded by operation of MSMED Act, hence, the appropriate Court would be Calcutta and not Odisha.

The Bench of Justice Moushumi Bhattacharya observed “The arbitration conducted by the Facilitation Council in the interregnum cannot confer jurisdiction on the Calcutta High Court in derogation of the venue/seat chosen by the parties. The office of the MSME Facilitation Council was the venue of the arbitration proceeding. The office of the Facilitation Council was not the seat. Jurisdiction cannot be conferred on this Court in the challenge to the Award passed by the Facilitation Council since that would be against the preferred venue/seat of the arbitration agreement…This Court would therefore be denuded of jurisdiction to hear the present application for setting aside the award passed by the Facilitation Council.”

Advocate Suman Kumar Dutt appeared for the Petitioner and Advocate Anubhav Sinha appeared for the Respondent.

The Respondent/Award-holder’s argument is premised on the fact that the office of MSME Council was only the venue for the arbitration and that the dispute resolution clause provides for conciliation and arbitration to be conducted at Bhubaneswar, Odisha. The Counsel for the Respondent further submitted that the venue of the arbitration i.e. office of the MSME Council cannot be read as the seat for the purpose of the arbitration proceedings.

The Court raised the issue “Does the statutory arbitration under section 18(4) of the MSMED Act read with Rule 9 of the 2016 Rules decide the seat of the statutory arbitration?” It was held that the arbitration provided by the Facilitation Council cannot take away the free choice of the parties in the matter of seat and venue and override the same by the situs of the statutory arbitration.

Secondly, “Does the statutory arbitration under section 18(4) of the MSMED Act read with Rule 9 of the 2016 Rules decide the seat of the statutory arbitration?” The Court did not accept that the arbitration agreement stood obliterated once the Respondent went to approach the Facilitation Council, hence, held that “The MSMED Act simply provides an alternative dispute resolution mechanism to an aggrieved Supplier against an errant Buyer. The Act does not contemplate a lock-in dispute resolution mechanism where a party who approaches the Council must necessarily relinquish its rights or freedom to choose the manner of dispute resolution under an independent arbitration agreement executed by that party.”

Thirdly, held that “The Arbitration Agreement pending adjudication by the Facilitation Council is eclipsed, not obliterated.” It further observed, “There is nothing in the MSMED Act to suggest, least of all section 18, that the arbitration conducted by the Facilitation Council would subsume the arbitration agreement between the parties or alter the seat/venue chosen by them. At best, the arbitration agreement is eclipsed during the adjudication by the Facilitation Council – only to rise again after the Council pronounces its decision.”

Accordingly, the Court dismissed the petition.

Cause Title: Odisha Power Generation Corporation Limited. v. M/s. Techniche Consulting Service and Ors.

Appearances:

Plaintiff: Advocates Suman Kumar Dutt, A. A. Chakraborty and Jit Ray.

Respondent: Advocates Anubhav Sinha, Victor Mukherjee, Subhasis Dey and Shruti Shaw.

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