High Court Rejects Essar's Challenge to Conciliation Proceedings Initiated by MSME.
In a recent judgment, the High Court has dismissed a writ petition filed by Essar Oil and Gas Exploration and Production Limited (Essar) challenging an order passed by a District Magistrate initiating conciliation proceedings under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
Background of the Dispute:
Essar had contracted Gargi Travels to provide transportation services for a work program in West Bengal. A dispute arose between the two companies, leading Essar to initiate arbitration proceedings under the Arbitration and Conciliation Act, 1996 (A&C Act). Meanwhile, Gargi Travels, classified as a micro or small enterprise under the MSMED Act, initiated conciliation proceedings before the District Magistrate of Shahdara district in New Delhi. Conciliation proceedings aim for an amicable settlement between parties before resorting to arbitration or litigation.
Essar Challenges Jurisdiction:
The District Magistrate terminated the conciliation proceedings and referred the matter to arbitration under the Delhi International Arbitration Centre (DIAC). Essar challenged this order by filing a writ petition before the High Court, arguing that the District Magistrate lacked territorial jurisdiction.
High Court's Decision:
The High Court dismissed Essar's petition. The court held that the cause of action for the writ petition, which is essentially the set of facts that entitle a party to seek relief, arose entirely outside the court's jurisdiction. The court clarified that only the integral part of the cause of action is relevant when determining jurisdiction under the Constitution. In this case, the actions of the District Magistrate and DIAC, even if disputed, were not considered integral to the cause of action.
Other Observations:
The High Court abstained from commenting on the validity of the District Magistrate's jurisdiction or the applicability of the A&C Act versus the MSMED Act in this specific scenario. Additionally, the concept of "seat" of arbitration, which allows parties to choose a neutral venue under the A&C Act, was deemed irrelevant as no such venue selection occurred in this case.
Takeaway:
This judgment highlights the importance of understanding the concept of cause of action when filing writ petitions challenging decisions by authorities. It also underscores the potential interplay between the A&C Act and the MSMED Act in resolving disputes involving micro, small, and medium enterprises.
Arbitration and Conciliation Act, 1996 Micro, Small and Medium Enterprises Development Act, 2006