Arbitral Award – Important question – Whether non-obstante clause in Section 18(1) & (4) of MSMED ACt, 2006, override arbitration agreement and venue of arbitration chosen by the parties?

The petitioner – award debtor prayed for stay to the operation and setting-aside the arbitral award dated 18.10.2022 of the West Bengal Micro Small Enterprises Facilitation Council.   

The clauses of the agreement show that the parties intended to approach the courts at Odisha for adjudication of disputes arising out of agreement and the parties agreed to Bhubaneswar as the venue of arbitration.

However, the arbitral award was passed by the Facilitation Council situated within the jurisdiction of the Calcutta High Court.

The objection was that the Calcutta High Court has no jurisdiction to entertain the challenge to the arbitral award.

HELD that the parties’ agreement to a designated venue of arbitration is the base document for all the future adjudications in the Courts.   The arbitration cannot be un-seated simply by statutory arbitration under the provisions of MSMED Act.  The statutory arbitration under Section 18 of the MSMED ACt is meant to last till Facilitation Council decides on the reference under Section 18(1) of the said Act.  The arbitration agreement between the parties take precedence after publication of Award by the Facilitation Council.   The office of Council was the venue of arbitration proceedings and not the seat.  Jurisdiction cannot be conferred on the Calcutta High Court in the challenge to the award of Council against the preferred venue / seat of the arbitration agreement.

Order dated 19.3.2024 in IA No.GA 1 and 2 of 2023 in A.P.Com 365 of 2024 of Odisha Power Generation Corporation Limited Vs. M/s. Techniche Consulting Service and others.