The Delhi High Court allowed a Petition filed under section 11(6) of the Arbitration and Conciliation Act, 1996 seeking the appointment of an Arbitrator after noting that the MSME Facilitation Council did not initiate the process of mediation under section 18 of the Micro, Small and Medium Enterprises Development Act, 2006.

The Petition before the Delhi High Court was filed by the Petitioner Company under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking the appointment of an Arbitrator for adjudication of disputes between the parties arising out of the Service and Purchase Orders.

The Single Bench of Justice Jasmeet Singh said, “I am of the view that the MSME Facilitation Council did not initiate the process of mediation under section 18 of MSME Act and hence, the present petition filed under section 11(6) of 1996 Act needs to be allowed.”

Senior Advocate Ramesh Singh represented the Petitioner while Advocate Sujoy Datta represented the Respondent.

Factual Background

In the year 2018, the respondent placed a Letter of Intent for the execution of civil and associated work for the construction of the New Flash Butt Weld Engineering Workshop at Sabarmati. The respondent also issued a purchase order for the supply of civil and associated materials for foundation finishing and associated works for its construction. The Provisional Completion Certificate was issued by the respondent recording that the contracted work had been completed satisfactorily. The petitioner company requested the respondent to release the outstanding contractual payment of Rs.37,20,31,67. Disputes arose between the parties and the petitioner invoked arbitration.

The Petitioner company claiming to be a Micro, Small and Medium Enterprise registered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), moved an application under Section 18 of MSME Act before the MSME, Gandhinagar, Gujarat. As there was no response, the petitioner approached the High Court.

Reasoning

The Bench, at the outset, explained, “The provisions of 1996 Act are not inconsistent with MSME Act as there is no other mechanism for appointment of an Arbitrator except under Section 18 of MSME Act.Relying on section 11(6) of 1996 Act, it says that if any institution fails to appoint any arbitrator, as the case may be, the Supreme Court or High Court will appoint the same.”

Reference was also made to the judgment of the Bombay High Court in Microvision Technologies (P) Ltd. v. Union of India (2023) wherein it has been observed that 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) for appointment of an Arbitrator. Section 18 of the MSMED Act has to be read harmoniously with Section 11 of the Arbitration Act.

In view of the fact that the MSME Facilitation Council did not initiate the process of mediation, the Bench allowed the Petition and appointed Justice Rekha Palli, Retd. Judge Delhi High Court as a Sole Arbitrator to adjudicate the disputes between the parties.

Cause Title: M/S Vallabh Corporation v. SMS India Pvt Ltd (Neutral Citation: 2025:DHC:1851)

Appearance:

Petitioner: Senior Advocate Ramesh Singh, Advocates Monisha Nanda, Rajul Shrivastav

Respondent: Advocates Sujoy Datta, Surekh Kani Baxy, Aarsheya Sharda

Click here to read/download Order


Delhi High CourtJustice Jasmeet Singh

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.