MSMED Act, 2006 : Delhi HC Answers Important Issue on the Act

 MSMED Act, 2006 : Delhi HC Answers Important Issue on the Act

MSMED Act, 2006 is important.

In this case [Mangalore Refinery and Petrochemicals Ltd v. MSEFC [2019] GCtR 5765 (Delhi)], a Senior Counsel was engaged by a Company and the party lost its case. The Organisation which lost the case was sarkari one and without doubt public money was spent on a meritless litigation due to wrong decision or inefficient decision - making by few employees of this Govt. Company. Sarkari Company raised certain grounds which were not even taken before the Council. Ultimately, a meaningless and expensive litigation arose due to some inefficient employees of a Government Company. This case also shows callous and irresponsible case handling of some employees of this Government company (Probably the Engineer saab at the helm of affairs of the Company focused more on his "Tours and Leaves" than honing "Drafting and Research Skills"). Or, may be actual "knowledge of law" was limited to ACR remarks of "Outstanding" of their employees without making any meaningful empiricial finding of misadventurous litigations undertaken by employees under "legal wisdom" of Engineer saab.

Barbs apart, it was held that reference under Section 18 of the MSMED Act is a statutory reference and is dehors any arbitration agreement between the parties. MSEF Council is not bound by the terms of the arbitration agreement while making such reference. 

Dispute resolution mechanism under Section 18 of the MSMED Act overrides the arbitration clause under the contract. Even though there may be an arbitration agreement between the parties, the provisions of Section 18(4) of the MSMED Act contains a non-obstante clause in empowering the MSEF Council to act as an Arbitrator. It is also noticed that in terms of Section 24 of the MSMED Act, the provisions of the MSMED Act would have an overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

Taking grounds before Council is important. As evident, even proper grounds were not taken before MSEF Council by this Government Company and a writ petition was filed, leading to huge expenditure of public money which certainly could have been avoided.