Factual Matrix 

In the Matter of Bata India Limited v U.P. State Micro and Small Enterprise Facilitation Council a writ petition was filed in opposition to the U.P. State Micro and Small Enterprises Facilitation Council’s decision to arbitrate the dispute between the petitioner and respondent on its behalf in accordance with Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006. Petitioner Bata entered a deal with AVS International for the supply of shoes to Bata, which was under contract with the Indian government to provide shoes to the Indian Navy. According to Bata, AVS has repeatedly violated the conditions of the production contract and the purchase order regarding the prompt delivery of goods. The Indian Navy has expressed concerns about the low standard and improper delivery of the boots made and provided by AVS. Due to the aforementioned factors, the Indian Navy three times rejected equipment and assessed a late delivery penalty that was the responsibility of AVS; Bata has subtracted these costs from the sum owed to AVS. AVS approached the Council as a result. The Council then issued an order in which it resolved to resolve the disagreement between the parties through arbitration.

Observation of the Court 

The Allahabad High Court division bench of Justice Mahesh Chandra Tripathi and Justice Manjive Shukla has reaffirmed that, in the event that the Council’s conciliation proceedings are unsuccessful, the Council may proceed to arbitrate the parties’ dispute, and the prohibition in Section 80 of the Arbitration and Conciliation Act, 1996, will not apply in the exercise of the said discretion by the Council.

According to the Court, Section 18 of the MSMED Act of 2006 has precedence over Section 24 of the Act of 2006. The Act of 2006’s Section 18(2) expressly states that the Council may refer a dispute for conciliation to any institution offering alternative dispute resolution services or act as the dispute’s Conciliator itself. The Conciliation Proceedings shall be conducted in accordance with Sections 65 to 81 of the A&C Act. Following that, the legislature granted the Council complete discretion under Section 18(3) of the MSMED Act, 2006, allowing it to arbitrate the dispute between the parties on its own or refer it to a body that offers alternative dispute resolution in the event that the conciliation proceedings are unsuccessful. The Court ruled that the MSMED Act, 2006 is a special law and that, in light of Section 24 of the Act, 2006, the discretion granted to the Council for choosing the venue for arbitration between the parties has an overriding effect. As a result, the Court ruled that the prohibition in Section 80 of the A&C Act will not apply at the time the Council chooses the venue for arbitration.

As a result, the Court determined that the Facilitation Council had complete authority in choosing an arbitration venue for parties under Section 18(3) of the MSMED Act, 2006. The ban stated in Section 80 of the A&C Act, 1996 will not apply when using this discretion since it supersedes all other laws. As a result, the Court determined that the directives challenged by the Facilitation Council are neither unlawful nor flawed.