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MSMED Act Does Not Supersede Arbitration Agreement Calcutta HC admin April 3, 2024

MSMED Act Does Not Supersede Arbitration Agreement Calcutta HC

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MSMED Act Does Not Supersede Arbitration Agreement:
Calcutta HC

In a significant ruling, the Calcutta High Court has declined to consider Odisha Power Generation Corporation Limited's request to annul an arbitration award.

The court emphasized that the arbitration agreement and chosen venue would not be overridden by the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006).

Odisha Power Generation Corporation Limited, as the Petitioner/Award-Debtor, sought to halt and invalidate an arbitration award issued by the West Bengal Micro Small Enterprises Facilitation Council.

They argued that the arbitration agreement would be superseded by the MSMED Act, thus making Calcutta, not Odisha, the appropriate jurisdiction.

Justice Moushumi Bhattacharya's bench noted that the arbitration conducted by the Facilitation Council did not grant jurisdiction to the Calcutta High Court, as it conflicted with the chosen venue/seat agreed upon by the parties. The court clarified that the office of the MSME Facilitation Council was the venue, not the seat, of the arbitration proceedings.

The Court deliberated on whether the statutory arbitration under section 18(4) of the MSMED Act determined the seat of the arbitration. It concluded that the arbitration provided by the Facilitation Council could not override the parties' choice of seat and venue.

The Court also rejected the notion that approaching the Facilitation Council obliterated the arbitration agreement, stating that the MSMED Act merely provided an alternative dispute resolution mechanism without restricting parties' freedom to choose arbitration under an independent agreement.

Additionally, the Court clarified that the arbitration agreement was eclipsed, not obliterated, during adjudication by the Facilitation Council, and would regain significance after the Council's decision. Consequently, the Court dismissed the petition.


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