Indian Oil Corporation Ltd. v. MSME Council: Legality of Dual Role as Conciliator and Arbitrator.


28 February 2024 Arbitration Law >> Business & Commercial Law   |   MSME (Micro, Small & Medium Enterprises) >> Business & Commercial Law  

Indian Oil Corporation Ltd. (Petitioner) filed a petition under Article 226 of the Constitution of India, challenging the jurisdiction and actions of the Micro and Small Enterprises Facilitation Council (Respondent No.1) in arbitration proceedings related to a decontamination job contract. The Petitioner had initially engaged Respondent No.2 for the job, but a dispute arose when the decontamination failed, leading to a claim by Respondent No.2 under the MSME Act.
 
 

The Petitioner argued that the Council, after acting as a conciliator, could not also serve as an arbitrator, citing Section 80 of the Arbitration and Conciliation Act, which prohibits a conciliator from acting as an arbitrator. The Petitioner also sought various directions and reliefs related to the ongoing proceedings.

In response, Respondent No.2 contended that the MSME Act allows the Council to act as both conciliator and arbitrator. The Court examined the relevant provisions of the MSME Act and the Arbitration Act. It concluded that Section 18(3) of the MSME Act permits the Council to take up arbitration after failed conciliation and that its role as both conciliator and arbitrator is valid under the law.

The Court further relied on a Supreme Court judgment in Gujarat State Civil Supplies Corporation Ltd. to uphold the Council's dual role, dismissing the Petition and vacating the interim relief previously granted to the Petitioner. The case emphasizes the overriding effect of the MSME Act over the Arbitration Act in matters concerning the Council's functions.


Arbitration and Conciliation Act, 1996  

Micro, Small and Medium Enterprises Development Act, 2006