The Calcutta High Court held that the Statutory Arbitration Conducted By The Facilitation Council Under the MSMED Act Cannot Supersede The Arbitration Agreement.
The Single-judge bench of Justice Moushumi Bhattacharya noted that the statutory arbitration conducted under the MSMED Act, 2006 does not supersede the arbitration agreement's designation of seat/venue. The chosen seat/venue in the arbitration agreement remains valid post-Facilitation Council's decision.
The petitioner, seeking stay and setting aside of an arbitral award dated 18.10.2022 by the West Bengal Micro Small Enterprises Facilitation Council, faced a jurisdictional challenge from the respondent no. 1. The respondent argued that the Calcutta High Court lacked territorial jurisdiction based on the arbitration agreement designating Bhubaneswar and Odisha courts as the exclusive venues for dispute resolution.
The petitioner contended that the respondent bypassed the arbitration agreement by resorting to the Micro, Small and Medium Enterprises Development Act, 2006 (MSMSD Act). They invoked section 18(4) of the Act, claiming that statutory arbitration under the Act determines the seat of arbitration.
The High Court examined the dispute resolution clause of the agreement, emphasizing the parties' intention to approach Odisha courts for disputes and designating Bhubaneswar as the arbitration venue.
The judgment delved into the interplay between the MSMED Act and the arbitration agreement, determining that the statutory arbitration facilitated by the Facilitation Council does not override the arbitration agreement's seat/venue designation.
The Single-judge bench 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. Thus, the arbitration agreement between the parties takes precedence after publication of the award by the Facilitation Council."
Relying on legal precedents, the Court concluded that the arbitration agreement remains valid post-Facilitation Council's decision. As such, the Calcutta High Court lacked jurisdiction to hear the application, and the respondent's objection to the application's maintainability prevailed.
Consequently, the application for setting aside the award was dismissed, and the Court ordered no costs.