Tracking Down The Courts In The Interplay Between The Arbitration Act, 1996 And The MSMED Act, 2006: Who Overrides Whom?

Abstract:

In current times, almost all commercial contracts have an arbitration clause, so, do the contracts between micro, small and medium enterprises (the "MSME") i.e. supplier and non-MSME i.e. buyer. The arbitration clauses are governed by Arbitration and Conciliation Act, 1996 (the "Arbitration Act") in India. However, for the protection and benefit of MSMEs, Indian Parliament has enacted a separate piece of legislation called Micro, Small and Medium Enterprises Development Act, 2006 (the "MSMED Act"). The MSMED Act under Section 18 provides arbitration as a dispute resolution mechanism while simultaneously overriding the Arbitration Act. The Supreme Court in Principal Chief Engineer v. M/s Manibhai and Brothers (Sleepers) has held that the provisions of the MSMED Act shall prevail over the arbitration clause. However, there are few circumstances when the arbitration clause would prevail over the MSMED Act when the reference to the arbitration clause is made