The Single Judge bench of Justice Subhasis Dasgupta of the Calcutta High Court in the case of Security Hitech Graphics Private Limited Vs LMI India Private Limited held that provisions of Section 24 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “M.S.M.E.D. Act”) giving the overriding effect of Section 15 to 23 can never be construed to be an absolute bar to the disclosure of Arbitrator, as regards his independence and impartiality in aid of Schedule 6th of Arbitration and Conciliation Act, 1996
Brief Facts:
The factual matrix of the case is that the revisional application is filed against the order passed by the learned Arbitrator making the 5th, 6th, and 7th schedule of the Arbitration and Conciliation Act inapplicable to referred arbitration proceeding, thereby causing infraction of the provisions of Section 12 (1) and (2) of Arbitration and Conciliation Act, 1996.
Contentions:
The learned counsel appearing on behalf of the petitioner had contended that the arbitrator appointed though may be under the Micro, Small and Medium Enterprises Development Act, 2006, the arbitrator must disclose, his independence, or impartiality, as disclosed in Section 12(1) and (2) of the Arbitration and Conciliation Act, 1996 making sufficient disclosure as per 5th, 6th and 7th schedule of Arbitration and Conciliation Act 1996. It was further submitted that the disclosure of impartiality should have occurred at the outset to ensure the Arbitrator's independence and impartiality in the current arbitration case. Non-compliance with such mandatory provisions, as stated in Section 12 of the Arbitration Act, would deem the appointment of an arbitrator illegal.
The learned counsel appearing on behalf of the petitioner relied upon the judgments titled Uttarakhand Purv Sainik Kalyan Nigam Limited vs. Northern Coal Field Limited and Secur Industries Ltd. vs. Godrej & Boyce Mfg. Co. Ltd. and Anr.
The learned counsel appearing on behalf of the opposite party had contended that the impugned order cannot be challenged under Article 227 of the Indian Constitution, despite the provisions of Section 19 of the M.S.M.E.D. Act, unless the petitioner deposits 75% of the amount sought to be recovered. It was further submitted that M.S.M.E.D. The act was a piece of special legislation, and the same would always have precedence over a general statute.
The learned counsel appearing on behalf of the opposite party relied upon the judgements titled Gujarat State Civil Supplies Corporation Ltd. vs. Mahakali Foods Pvt. Ltd. (Unit 2) & Anr, M/s. Ramkrishna Electricals Ltd. vs. Maharashtra State Electricity Distribution Company Ltd. & Anr, M/s Vidarbha Ceramics Pvt. Ltd. vs. M/s Steel Authority of India & Ors, Gujarat State Petronet Ltd. vs. Krunal Engineering works & Ors, Bharat Electronics Ltd. & Anr. vs. Ibex Integrated Business Express Private Ltd. & Ors, Union of India vs. M/s Sirus Global Pvt. Ltd, JITF Water Infrastructure Limited vs. MSME Commissionerate & Ors and Silpi Industries vs. Kerala State Road Transport Corporation & Anr.
Observations of the Court:
The Hon’ble Court held that the Arbitrator though appointed by the Delhi Arbitration Centre under M.S.M.E.D. Act shall have all powers to decide the disputes referred to it, as if such arbitration was in pursuance of the arbitration agreement referred to Sub-Section (1) of Section 7 of the Arbitration Act, 1996, and as a corollary all the trappings of the Arbitration Act, 1996 would apply to such arbitration.
When the petitioner had doubted the credibility, and suffered from apprehended biases of the Arbitrator, thereby creating doubt as to the independence and impartiality of the Arbitrator, though the grounds taken in the application under Section 16 of the Arbitration Act are not directly relatable to the grounds disclosed in 5th Schedule of Arbitration and Conciliation Act, 1996, to ensure more and more credibility, impartiality, independence and fairness on the part of Arbitrator, there appears to be no wrong in the process of dispensation of justice, if the Arbitrator discloses his impartiality and independence, doing adherence to Section 12(1) (2) read with Schedule 6th of Arbitration Act, 1996. Disclosure of Schedule 6th by Arbitrator has got nothing to do with the subject in dispute, requiring arbitration. If the provisions of Section 12 (1)(2) read with the 6th Schedule of Arbitration and Conciliation Act about disclosure of impartiality of the Arbitrator about the subject of arbitration are given effect by the Arbitrator at any stage of proceedings to establish his more and more credibility, independence and impartiality, that would not frustrate the object of M.S.M.E.D. Act, 2006. With the disclosure of Schedule 6th by the Arbitrator, all the doubts expressed or apprehended touching the impartiality of the Arbitrator may be dispelled automatically without paving any further way for inviting any complication thereafter. Since arbitration proceedings prohibit inviolability against the Arbitrator, with the disclosure of the impartiality of the Arbitrator, it may be viewed for its holiness in the disposition of law.
The decision of the Court:
The Hon’ble High Court held that the appointment of the Arbitrator being subject to the disclosure of Schedule 6th of Arbitration Act, 1996, can never be construed to be coming in the way against the spirit of Section 24 of M.S.M.E.D. Act. The overriding provisions of Sections 15 to 23 of M.S.M.E.D. Act, thus cannot be deemed to be an absolute bar making Section 12 of Arbitration Act, 1996 inapplicable in case of arbitration, conducted under the M.S.M.E.D. Act, with the appointment of an Arbitrator, thereby not strictly prohibiting the Arbitrator from disclosing his independence and impartiality to the arbitration proceedings in aid of Schedule 6th of the Arbitration and Conciliation Act.
Case Title: Security Hitech Graphics Private Limited Vs LMI India Private Limited
Case No: CO. No. 1931 of 2022
Coram: Justice Subhasis Dasgupta
Advocate for the Petitioner: Mr. Kushal Chatterjee, Mr. Saptarshi Kumar MaL.
Advocate for the Respondent: Mr. Bhaskar Chakraborty, Mr. Subrata Mukherjee
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