Court emphasizes that jurisdictional objections can be raised before the Arbitral Tribunal, dismissing the plea by BSNL's Telecom District
In a significant ruling, the Delhi High Court, presided over by Dr. Swarana Kanta Sharma, J., dismissed a petition filed by the General Manager Telecom District Bharat Sanchar Nigam Ltd (BSNL) seeking to quash a reference made by the Micro and Small Enterprises Facilitation Council (MSEFC) to the Delhi International Arbitration Centre (DIAC). The petition challenged the arbitral proceedings initiated under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
The dispute arose from an agreement dated June 22, 2015, between BSNL and the respondent, for telecom infrastructure works in Pathankot, Punjab. The works were completed, and the last invoice was issued on February 1, 2018. The respondent later registered as a Micro, Small and Medium Enterprise on March 26, 2021, and subsequently raised a claim before the MSEFC in July 2022, which was referred for arbitration.
The petitioner's counsel contended that the respondent could not invoke the benefits of the MSMED Act retrospectively as the MSME registration was obtained post-completion of the contract. Furthermore, it was argued that the claim was time-barred.
However, the court emphasized that such objections related to MSME registration timing and limitation are to be adjudicated by the Arbitral Tribunal itself. The court referred to the Supreme Court's decisions in Silpi Industries v. Kerala SRTC and Gujarat State Civil Supplies Corporation Limited v. Mahakali Foods Private Limited, highlighting that jurisdictional challenges and the applicability of the MSMED Act are matters for the arbitral forum to decide.
The court reiterated the principle that the writ jurisdiction under Articles 226 and 227 of the Constitution should be exercised sparingly, especially when the Arbitral Tribunal is competent to address the issues raised. It concluded that the petition was premature and dismissed it, allowing the petitioner to raise all relevant objections before the Arbitral Tribunal.
This judgment underscores the judicial restraint exercised in arbitral matters, affirming that disputes under the MSMED Act should first be resolved through arbitration, as intended by the statutory framework.
Bottom Line :
Writ jurisdiction under Articles 226 and 227 of the Constitution cannot be invoked to interfere with arbitral proceedings when objections related to jurisdiction, limitation, or applicability of the MSMED Act can be raised and decided by the Arbitral Tribunal under the statutory scheme.
Statutory provision(s): Micro, Small and Medium Enterprises Development Act, 2006 Section 18, Arbitration and Conciliation Act, 1996, Constitution of India Articles 226 and 227
