Second, the Court also held that, since the parties had entered into an independent arbitration agreement, the Commission could not pursue the arbitration itself. What can be learned from this observation is that if a contract has an independent arbitration provision, that provision prevails over the arbitration procedure in Section 18, unless they are inconsistent. In India, most small, small and medium-sized industries are no longer viable, mainly due to delays in payment from the parties. Due to the huge tightening of business, normal commercial disputes take a long time to obtain a final character. Most MSMEs do not understand the importance of arbitration clauses when entering into the contract and, therefore, when disputes arise, they are left only for litigation. The government has made various efforts to support and protect the interests of the micro and small business industry. One such effort is the dispute resolution mechanism provided for by the Micro Small Medium Enterprises Development Act 2006 S19. This Act requires parties who accept services from the industry or purchase goods from an industry under the MSME category, payments within 45 days of the date of receipt of that service or goods. If the supplier has not been able to receive the payment within the prescribed time frame, it can apply to the government-trained MSMED board to seek injunctions to pay. The Act also provides 24% interest on late payments. Upon receipt of such a complaint from an MSME unit, the MSMED Facilitation Council can inform the opposing party and attempt to resolve the matter through mediation. If the other party is unwilling and willing to cooperate with conciliation or, for whatever reason, the conciliation procedure fails, the mediation board in question will act as an arbitration tribunal or refer the matter to an arbitration institution (even if there is no arbitration clause between the parties) to settle disputes by arbitration.
The Conciliation Council is required to resolve the matter within 90 days of the reference date. In a recent case GET -D India Limited Vs Reliable Engineering 2017 SCC Online 6978, which came before Hon`ble Justice Muralidhar of Delhi High Court, the parties had two delivery contracts and one of them had a compromise clause too. Following the complaint of the respondent industry, after hearing from both parties, the MSMED Board adopted an arbitration award and the complainant decided to challenge the award in the Delhi High Court in accordance with the 1996 Arbitration and Conciliation Act. The respondent challenged the award for a variety of reasons, but the author identified three important questions that are relevant to this section. Among the issues raised by the applicants, the following points are therefore relevant. However, it should be noted that most of the cases decided by the various jurisdictions are those in which the supplier/MSME commenced proceedings under Section 18 of the MSMED Act before the purchaser/non-MSME referred to an arbitration procedure under the agreement. The Bombay High Court in Porwal Sales v. Flame Control Industries13 dealt with a situation in which the respondent purchaser/non-MSME appealed arbitration after the agreement between the parties first, i.e., if there is no reference to a dispute in the Commission. The Court considered whether the Tribunal`s power to appoint an arbitral tribunal under Section 11 of the Arbitration Act had also been quashed in a case in which the MSME unit had not invoked the Board`s jurisdiction under Section 18 of the MSME Act.