Karnataka High Court
M/S Mobisy Technologies Pvt Ltd vs M/S J G Hosiery Pvt Ltd on 9 February, 2026
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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®
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF FEBRUARY, 2026
BEFORE
THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
CIVIL MISC. PETITION NO. 311 OF 2025
BETWEEN
M/S MOBISY TECHNOLOGIES PVT LTD.,
HAVING ITS REGISTERED OFFICE AT
3RD FLOOR, SRI ARUNACHALESHWARA BUIDLING,
75/1, BELLANDUR MAIN ROAD, BELLANDUR,
BANGALORE 560103
REP BY ITS AUTHORISED SIGNATORY,
MS.DEVIKA SIVARAMAN
.... PETITIONER
(BY SRI. CHRISTIPHER.E., ADVOCATE)
AND
M/S J G HOSIERY PVT LTD.,
HAVING ITS REGISTERED OFFICE AT
NO.5, J G GARDEN ROAD,
SOLIPALAYAM TIRUPUR,
Digitally signed
by SHWETHA TAMIL NADU 641652
RAGHAVENDRA REP BY ITS AUTHORISED SIGNATORY
Location: HIGH
COURT OF
KARNATAKA .... RESPONDENT
(BY SRI. ABHILESH. J., ADVOCATE)
THIS CMP IS FILED UNDER SECTION 11(6) OF THE
ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO APPOINT
AN ARBITRATOR AS HER CLAUSE 11.10 OF THE AGREEMENT FROM
THE PANEL OF ARBITRATORS FROM THE BENGALURU ARBITRATION
CENTRE TO RESOLVE THE DISPUTE AT ANNEXURE B ARISING OUT
OF THE AGREEMENT DATED 21.02.2023 BETWEEN THE PARTIES, IN
THE INTEREST OF JUSTICE AND EQUITY.
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THIS CMP COMING ON FOR ORDERS AND HAVING BEEN
RESERVED FOR ORDERS ON 21.11.2025, THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
CAV ORDER
1. The Petitioner is before the Court seeking for the
following relief:
"To appoint an Arbitrator as per clause 11.10 of
the Agreement from the Panel of Arbitrators
from the Bengaluru Arbitration Centre to resolve
the dispute arising out of the Agreement dated
21.02.2023 at Annexure-B between the parties,
in the interest of justice and equity."
2. The Petitioner and Respondent having entered into a
'Bizom Customer Agreement'. The said Agreement is
governed by clause 11.10, which is reproduced
hereunder for easy reference:
11.10. Dispute resolution: In the event of any
dispute arising out of or in relation to this
Agreement, the Parties shall try and resolve the
dispute amicably in good faith through
negotiations. In case the dispute is not resolved
within a reasonable time, the Parties agree to
submit the same for arbitration. The arbitration
proceedings shall be governed by the provisions
of the Arbitration and Conciliation Act, 1996 and
its amendments thereafter by a sole arbitrator to
be appointed by mutual Agreement between the
Parties. Arbitration proceedings shall be
conducted in English language and the place,
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venue and seat shall be at Bengaluru. The award
of the arbitration proceedings shall be final and
binding on the Parties.
3. There being a dispute between the parties, the
Petitioner invoked the arbitration clause vide notice
dated 12.12.2025 and nominated the arbitrator,
same not having been accepted by the Respondent,
contending that there are no disputes which are
required to be arbitrated and no amounts are
required to be paid by the Respondent, the Petitioner
has filed the above petition.
4. Notice having been issued, the Respondent entered
an appearance and filed its objections.
5. The submission of Sri. Christopher, learned counsel
for the Petitioner, is that,
5.1. The 'Bizon Customer Agreement' is governed by
an arbitration clause; disputes having arisen,
the matter will be required to be referred to
arbitration as per clause 11.10, which is
extracted hereinabove.
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5.2. He relies upon the decision of the Bombay High
Court in Porwal Sales -v- Flame Control
Industries1, more particularly para 22 and 28
thereof, which are reproduced hereunder for
easy reference:
22. Now coming to the next submission as advanced
on behalf of the Respondent on the MSMED Act.
Learned counsel for the Respondent has argued that
in view of the provisions of Section 18 of the MSMED
Act, this Court would not have jurisdiction to
entertain this Petition under Section 11 of the
Arbitration and Conciliation Act. In support of this
submission, learned counsel for the Respondent has
placed reliance on the decision of the Division Bench
of the Allahabad High Court in Paper & Board
Convertors through partner Rajeev Agarwal v. U.P.
State Micro and Small Enterprise2; in Bharat Heavy
Electricals Ltd. v. The Micro and Small Enterprises
Facilitations Centre of the learned Single Judge of
the Delhi High Court3; and in Welspun Corporation
Ltd. v. Micro and Small, Medium Enterprises
Facilitation Council, Punjab of the learned Single
Judge of Punjab and Harayana High Court4. The
contention as urged on behalf of the Respondent
referring to these decisions is that Section 18(4) of
MSMED Act creates a bar on the jurisdiction of this
Court to entertain any application under section 11
of the Act and/or that the arbitration agreement
between the parties stands obliterated, extinguished
and superseded by the provisions of sub-section (4)
of Section 18 of MSMED Act.
1
(2019 SCC Online Bom 1628)
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23. To appreciate this submission as urged on behalf
of the Respondent, Sections 17 and 18 of MSMED
Act is required to be noted, which reads thus:
"Section 17 - Recovery of amount due
17. For any goods supplied or services rendered by
the supplier, the buyer shall be liable to pay the
amount with interest thereon as provided under
section 16.
Section 18 - Reference to Micro and Small
Enterprises Facilitation Council
(1) Notwithstanding anything contained in any other
law for the time being in force, any party to a
dispute may, with regard to any amount due under
section 17, make a reference to the Micro and Small
Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1),
the Council shall either itself conduct conciliation in
the matter or seek the assistance of any institution
or centre providing alternate dispute resolution
services by making a reference to such an institution
or centre, for conducting conciliation and the
provisions of sections 65 to 81 of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall apply to
such a dispute as if the conciliation was initiated
under Part III of that Act.
(3) Where the conciliation initiated under sub-
section (2) is not successful and stands terminated
without any settlement between the parties, the
Council shall either itself take up the dispute for
arbitration or refer to it any institution or centre
providing alternate dispute resolution services for
such arbitration and the provisions of the Arbitration
and Conciliation Act, 1996 (26 of 1996) shall then
apply to the dispute as if the arbitration was in
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pursuance of an arbitration agreement referred to in
sub-section (1) of section 7 of that Act.
(4) Notwithstanding anything contained in any other
law for the time being in force, the Micro and Small
Enterprises Facilitation Council or the centre
providing alternate dispute resolution services shall
have jurisdiction to act as an Arbitrator or Conciliator
under this section in a dispute between the supplier
located within its jurisdiction and a buyer located
anywhere in India.
(5) Every reference made under this section shall be
decided within a period of ninety days from the date
of making such a reference."
24. On a plain reading of sub-section (1) of Section
18, it is quite clear that sub-section (1) would be
applicable when any amount is due under section 17
to a supplier and when there is a liability of the
buyer to make payment to the supplier. Thus the
supplier falling under the provisions of the Act
"notwithstanding anything contained in any other
law for the time being in force" would be entitled to
make a reference to Micro and Small Enterprises
Facilitation Council. Subsection (2) provides for a
conciliation after such reference is received. Sub-
section (3) provides for a situation when the
conciliation is not successful, then the 'Facilitation
Council' shall either itself take up the dispute for
arbitration or refer it to any institution or centre
providing alternate dispute resolution services for
such arbitration and for such reference, the
provisions of the Arbitration and Conciliation Act,
1996 shall apply to the dispute as if the arbitration
was in pursuance of an arbitration agreement
referred to in sub-section (1) of section 7 of the
Arbitration and Conciliation Act, 1996. Sub-section
(4) saves the jurisdiction of the 'Facilitation Council',
notwithstanding anything contained in any other law
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for the time being in force, to act as an Arbitrator or
Conciliator in respect of a dispute between between
the supplier located within its jurisdiction and a
buyer located anywhere in India.
25. Considering the scheme of Sections 17 and 18,
in my opinion sub-section (4) of Section 18 cannot
be read in isolation. It is required to be read in
conjunction with sub-section (1) of Section 18.
Section 18 of the MSMED Act is attracted when the
jurisdiction of the Facilitation Council is invoked by a
party to a dispute with regard to any amount due
under section 17 of the Act.
26. In the present case, it is not in dispute that the
Respondent has so far not raised any claim against
the Petitioner and the jurisdiction of the Felicitation
Council has not been invoked by either the
Respondent or the Petitioner. It thus cannot be
accepted that the provisions of Subsection (4) of
Section 18 of MSMED Act are attracted in any
manner in the absence of any reference being made
to the Facilitation Council. When there are no
proceedings before the Facilitation Council, it is
difficult to accept the submission as urged on behalf
of the respondents that provisions of Section 18 of
the MSMED Act are attracted in the facts of the
present case.
27. In any event, sub-section (4) of Section 18
cannot be read as a provision creating an absolute
bar to institution of any proceedings other than as
provided under section 18(1) of the MSMED Act, to
seek appointment of an arbitral tribunal. If the
argument as advanced on behalf of the Respondent
that Section 18(4) creates a legal bar on a party who
has a contract with a Small Scale Enterprise, to take
recourse to Section 11 under the Arbitration and
Conciliation Act, 1996 for appointment of an
arbitrator, then the legislation would have so
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expressly provided, namely that in case one such
party falls under the present Act, the arbitration
agreement, as entered between the parties would
not be of any effect and the parties would be
deemed to be governed under the MSMED Act in
that regard. However, Subsection (4) of Section 18
of the MSMED Act does not provide for such a
blanket consequence in the absence of any reference
made by a party to the Facilitation Council. Also if
Section 18 is read in the manner the Respondent is
insisting, it would lead to a two-fold consequence -
firstly, it would amount to reading something in the
provision which the provision itself does not provide,
which would be doing a violence to the language of
the provision; secondly such interpretation in a given
situation would render meaningless an arbitration
agreement between the parties and it may create a
situation that the party who is not falling within the
purview of Section 17 and Section 18(1) would be
foisted a remedy, which the law does not actually
prescribe. Further sub-section (1) uses the word
"may" in the context of a dispute which may arise
between the parties under Section 17. In the present
context, the word "may" as used in sub-section (1)
of Section 18 cannot be read to mean "shall" making
it mandatory for a person who is not a supplier (like
the Petitioner) to invoke the jurisdiction of the
Facilitation Council. Thus, the interpretation of sub-
section (4) of Section 18 as urged on behalf of the
Respondent of creating a legal bar against the
Petitioner to file a petition under section 11 of the
Arbitration and Conciliation Act cannot be accepted.
28. In regard to the decisions as relied by the
learned counsel for the respondents, in my opinion,
these decisions are certainly not applicable in the
facts of the present case. In each of these cases,
there was admittedly a reference made to the
Facilitation Council and once a reference was made
to the Facilitation Council, the Court, in the facts of
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each of these cases, has come to the conclusion that
an argument would not be available to urge that the
Facilitation Council has no jurisdiction. There cannot
be any dispute on this proposition these decision(s)
advance. Moreover this Court following the decision
of Division Bench of this Court in Gujarat State
Petronet Ltd. v. Micro and Small Enterprises
Facilitation Council5, has also consistently taken a
view that once a reference is already made to the
Facilitation Council, an application under section 11
of the Act would not be maintainable. In fact in a
dispute which has arisen between the present
Respondent and another entity connected with the
Petitioner, namely, M/s. Adhinath Sales, this Court
has passed an order rejecting Section 11 Application,
permitting the Petitioner therein to approach the
Facilitation Council and make a claim, as the
Respondent had already invoked the jurisdiction of
the Himachal Pradesh Facilitation Council under
Section 18 of the Act. However, such is not the
situation in the present case as noted above.
5.3. By relying on Porwal Sales' case, his
submission is that Subsection (4) of Section 18
does not create an absolute bar to any
proceedings other than those provided under
Section 18 of the MSMED Act. The word used
in the provision 'may', it is left to the discretion
of MSME whether to approach the facilitation
council or to invoke a separate invocation
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clause under the Agreement entered into
between the parties.
5.4. He relies on the decision of the Delhi High Court
in Total Application Software Co.Pvt.Ltd
TASC -v- Ashoka Distillers and Chemicals
Pvt. Ltd2. more particularly para 13, 14 and
15 thereof, which are reproduced hereunder for
easy reference:
13. Reliance of the Respondent on the judgment of
the Supreme Court in Gujarat State Civil Supplies
Corporation Limited (supra) and of this Court in
Bharat Heavy (supra) is misplaced in the facts of this
case. In Gujarat State Civil Supplies Corporation
Limited (supra), the Supreme Court observed that
1996 Act in general governs the law of arbitration
and conciliation, whereas MSME Act governs specific
nature of disputes arising between specific categories
of persons, to be resolved by following a specific
process through a specific forum. Ergo, MSME Act
being a special law and 1996 Act being a general law,
provisions of MSME Act will have precedence over
1996 Act. However, it is of significance to note that in
the same judgment, the Supreme Court held that
once the statutory mechanism under Section 18(1) of
MSME Act is triggered by any party, it would override
any other agreement independently entered into
between the parties, in view of non-obstante clauses
contained in sub-Sections (1) and (4) of Section 18.
This is exactly the point Petitioner makes. Once the
2
(2025 SCC Online Del 4562)
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mechanism under MSME Act is triggered by any
party, the procedure has to be taken to its logical
end. However, once there is no trigger by invoking
the jurisdiction of the Council, party cannot be
precluded from resorting to any other mechanism for
resolution of its disputes.
14. The judgment in Bharat Heavy (supra) is also of
no avail to the Respondent. Reading of the judgment
reflects that the question involved before the Court
was whether the Council could under Section 18(3) of
MSME Act refer the disputes for arbitration under the
aegis of Delhi International Arbitration Centre
('DIAC') considering that disputing parties had also
entered into an Arbitration Agreement. BHEL
contended that Council did not have jurisdiction to
override the Arbitration Agreement and refer the
disputes to DIAC. Respondents refuted this
submission and urged that in terms of Section 18(3),
if the conciliation proceedings were not successful,
Council was enjoined to adjudicate the disputes or to
refer them for arbitration to any institution or centre,
providing alternate disputes resolution services as
Section 18(3) would override the Arbitration
Agreement between the disputing parties. In the
backdrop of this controversy, the Court held as
follows:--
"14. A plain reading of Section 18(2) of the Act
indicates that on receipt of a reference under Section
18(1) of the Act, the Council [MSEFC] would either
conduct conciliation in the matter or seek assistance
of any institution or centre providing alternate
dispute resolution services. It also expressly provides
that Section 65 to 81 of the A&C Act would apply to
such a dispute as it applies to conciliation initiated
under the Part III of the A&C Act.
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15. It is clear from the provisions of Section 18(2) of
the Act that the legislative intention is to incorporate
by reference the provisions of Section 65 to 81 of the
A&C Act to the conciliation proceedings conducted by
MSEFC.
16. Section 18(3) of the Act expressly provides that
in the event the conciliation initiated under Section
18(2) of the Act does not fructify into any settlement,
MSEFC would take up the disputes or refer the same
to any institution or centre providing alternate
dispute resolution services for such arbitration.
17. It is at once clear that the provision of Section
18(3) of the Act do not leave any scope for a non-
institutional arbitration. In terms of Section 18(3) of
the Act, it is necessary that the arbitration be
conducted under aegis of an institution-either by
MSEFC or under the aegis of any "Institution or
Centre providing alternate dispute resolution services
for such arbitration"."
15. It is thus clear that what the Court decided was
that provision of Section 18(3) does not leave any
scope for a non-institutional arbitration and it is
mandatory that arbitration is conducted under the
aegis of an institution, either by the Council or and
institution or centre providing alternate dispute
resolution services. Counsel for the Respondent is
unable to point out in this judgment that the Court
has held that invoking the jurisdiction of a Council
under Section 18(1) is a mandate.
5.5. Relying on the Total Application software
Co.Pvt.Ltd. TASC case, he submits that the
Hon'ble Delhi High Court has referred to the
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decision in Gujarat State Civil Supplies
Corporation Ltd's case and has come to a
categorical conclusion that there is no bar
under Subsection (3) of Section 18 for
arbitration to continue outside the purview of
MSMED Act.
5.6. Lastly his submission is that the Petitioner is
not a micro or small enterprise, but in fact,
medium enterprise and in terms of Subsection
(n) of Section 2, a supplier can only be a micro
or small enterprise, a medium enterprise is not
contemplated under Subsection (n), as such,
would not come under the purview of Chapter-V
which relates to delayed payments to micro and
small enterprises.
5.7. Section 18 relates to supply made by micro and
small enterprises which could be referred to as
the Micro and small enterprises facilitation
council, the word 'medium' being absent from
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the said Council and absent from the definition
of 'supply' under of Section 2, he submits that a
dispute by a medium enterprise cannot be
raised under Section 18 of the MSMED Act.
5.8. On all the above grounds, he submits that the
writ petition should be allowed.
6. The submission of Sri.Abhilesh, learned counsel for
the Respondent, is that,
6.1. The Petitioner being a medium enterprise, it
would be governed by the Micro, Small and
Medium Enterprises Development Act, 2006
['MSMED Act', for short] and in terms of Section
18 thereof, any proceedings for recovery or
otherwise would have to be filed in terms of
Section 18 and the proceedings under
Subsection (6) of Section 11 of the Arbitration
and Conciliation Act, 1996 ['A&C Act', for short]
to appoint an arbitrator is not maintainable.
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6.2. Any and every disputes pertaining to Micro,
medium and small enterprises is required to
undergo the procedure required under the
MSMED Act, more particularly Chapter-V
relating to delayed payments. It is for the
Petitioner to have approached the said
facilitation council for adjudication of any
disputes. In this regard, he relies upon the
decision in Gujarat State Civil Supplies
Corporation Ltd. v. Mahakali Foods (P)
Ltd3. more particularly para 11, 32 and 37
thereof, which are reproduced hereunder for
easy reference:
11. In the background of aforestated spectrum of
cases, the following common questions of law arise
for consideration:
11.1. (i) Whether the provisions of Chapter V of the
Msmed Act, 2006 would have an effect overriding the
provisions of the Arbitration Act, 1996?
11.2. (ii) Whether any party to a dispute with regard
to any amount due under Section 17 of the Msmed
Act, 2006 would be precluded from making a
3
(2023)6 SCC 401)
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reference to the Micro and Small Enterprises
Facilitation Council under sub-section (1) of Section
18 of the said Act, if an independent arbitration
agreement existed between the parties as
contemplated in Section 7 of the Arbitration Act,
1996?
11.3. (iii) Whether the Micro and Small Enterprises
Facilitation Council, itself could take up the dispute
for arbitration and act as an arbitrator, when the
Council itself had conducted the conciliation
proceedings under sub-section (2) of Section 18 of
the Msmed Act, 2006 in view of the bar contained in
Section 80 of the Arbitration Act, 1996?
32. Now, the first and foremost issue involved in
these appeals is whether the provisions contained in
Chapter V of the Msmed Act, 2006 with regard to the
Delayed Payments to Micro and Small Enterprises
would have precedence over the provisions contained
in the Arbitration Act, 1996, more particularly when
the parties by execution of an independent
agreement as contemplated in Section 7 of the
Arbitration Act had agreed to submit to arbitration
the disputes arising between them? In other words,
whether the provisions contained in Chapter V of the
Msmed Act, 2006 would have an effect overriding the
provisions contained in the Arbitration Act, 1996?
37. Sections 15 to 25 contained in Chapter V of the
Msmed Act, 2006 pertain to the "delayed payments
to micro and small enterprises". A bare perusal of the
said provisions contained in Chapter V shows that a
strict liability is fastened on the buyer to make
payment to the supplier who supplies any goods or
renders any services to the buyer, prescribing the
time-limit in Section 15. Section 16 further fastens
the liability on the buyer to pay compound interest if
any buyer fails to make payment to the supplier as
required under Section 15. Such compound interest is
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required to be paid at three times of the bank rate
notified by the Reserve Bank, notwithstanding
contained in any agreement between the buyer and
supplier or in any law for the time being in force. An
obligation to make payment of the amount with
interest thereon as provided under Section 16 has
been cast upon the buyer and a right to receive such
payment is conferred on the supplier in Section 17.
Thus, Section 17 is the ignition point of any dispute
under the Msmed Act, 2006. Section 18 thereof
provides for the mechanism to enable the party to
the dispute with regard to any amount due under
Section 17, to make a reference to the Micro and
Small Enterprises Facilitation Council.
6.3. By relying on Gujarat State Civil Supplies
Corporation Ltd's case, he submits that the
Hon'ble Apex Court has categorically come to a
conclusion that Chapter-V of MSMED Act
relating to delayed payments to Micro and small
enterprises would have an overriding effect of
A&C Act, as such, a separate proceedings for
appointment of arbitrator in terms of
Agreement Section 7 of A&C Act is not
permissible. Any dispute in which MSMED is
involved would have to be referred to
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conciliation and arbitration in terms of MSMED,
2006. In that background, he submits that the
above petition is required to be dismissed.
7. Heard Sri.Christopher, learned counsel for the
Petitioner and Sri.Abhilesh, learned counsel for the
Respondent. Perused papers.
8. The points that would arise for consideration are:
i. Whether micro, small or medium
enterprises would be required to proceed
under Chapter V of the MSME Act,
requiring the micro, small or medium
enterprise to refer all disputes to the
facilitation council in terms of Section 18
of the MSME Act, 2006?
ii. Whether a medium enterprise would also
be covered under Section 18 of the MSME
Act, 2006?
iii. In the present case, is the invocation of
the arbitration clause in the 'Bizon
Customer Agreement' by the Petitioner
required to be accepted, and an arbitrator
to be appointed?
iv. What order?
9. I answer the above points as follows.
10. ANSWER TO POINT NO.1: Whether micro, small
or medium enterprises would be required to
proceed under Chapter V of the MSME Act,
requiring the micro, small or medium enterprise
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to refer all disputes to the facilitation council in
terms of Section 18 of the MSME Act, 2006?
10.1. The learned counsel for the Petitioner submits
that Chapter V of the MSMED Act, 2006 does
not create an absolute and exclusive bar on
recourse to the Arbitration and Conciliation Act,
1996 for all disputes involving micro, small or
medium enterprises. He places reliance on
Porwal Sales -v- Flame Control Industries,
where the Bombay High Court has held that
sub-section (4) of Section 18 of the MSMED Act
cannot be read in isolation, and must be read
together with sub-section (1). According to the
Petitioner, the statutory mechanism under
Section 18 is attracted only when a party
actually invokes the jurisdiction of the Micro
and Small Enterprises Facilitation Council in
respect of an amount due under Section 17.
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10.2. The Petitioner emphasises that in Porwal
Sales -v- Flame Control Industries, the
Bombay High Court has clearly observed that in
the absence of any reference to the Facilitation
Council, there is no bar under Section 18(4) to
the institution of proceedings under Section 11
of the Arbitration and Conciliation Act. The High
Court has cautioned against reading into
Section 18(4) a blanket consequence which the
legislature has not provided, namely, that the
arbitration agreement would automatically
stand superseded even when the statutory
mechanism is not invoked.
10.3. The Petitioner further relies upon Total
Application Software Co.Pvt.Ltd TASC -v-
Ashoka Distillers and Chemicals Pvt. Ltd,
where the Hon'ble Delhi High Court has
analysed the judgment of the Hon'ble Supreme
Court in Gujarat State Civil Supplies
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Corporation Ltd. v. Mahakali Foods (P) Ltd.
The Petitioner submits that in Total
Application Software Co.Pvt.Ltd TASC -v-
Ashoka Distillers and Chemicals Pvt. Ltd,
the Delhi High Court has held that the MSMED
Act, being a special law, would prevail over the
Arbitration and Conciliation Act, 1996 once the
statutory mechanism under Section 18(1) is
triggered. However, where there is no such
trigger by invocation of the jurisdiction of the
Council, the parties are not precluded from
resorting to an independent arbitration
agreement for the resolution of their disputes.
10.4. The Petitioner therefore contends that, on a
correct reading of the MSMED Act and the
above decisions, the scheme of Chapter V is
enabling and supplemental. It provides an
additional forum and mechanism for micro and
small enterprises in respect of delayed payment
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disputes, but does not, in itself, extinguish or
nullify pre-existing arbitration agreements in all
circumstances. The Petitioner submits that the
use of the word "may" in Section 18(1) is
significant and indicates that the legislature
intended to confer an option on the parties, and
not to mandate that every dispute must
necessarily be taken only to the Facilitation
Council.
10.5. The Petitioner argues that the Respondent's
contention, if accepted, would mean that even
where neither party has chosen to invoke the
statutory mechanism, the mere existence of the
MSMED Act would foreclose resort to
arbitration, thereby doing violence to the
contractual bargain and the statutory
recognition of party autonomy under the
Arbitration and Conciliation Act, 1996. Such an
interpretation, according to the Petitioner,
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would go far beyond what Gujarat State Civil
Supplies Corporation Ltd. v. Mahakali
Foods (P) Ltd actually holds, and would be
inconsistent with Porwal Sales -v- Flame
Control Industries and Total Application
Software Co.Pvt.Ltd TASC -v- Ashoka
Distillers and Chemicals Pvt. Ltd.
10.6. The learned counsel for the Respondent, on the
other hand, submits that once the parties fall
under the MSMED Act, any dispute with regard
to amounts due must be governed by the
scheme of Chapter V, and that the jurisdiction
of the Facilitation Council under Section 18 is
intended to override all other forums, including
contractual arbitration. He places reliance on
Gujarat State Civil Supplies Corporation
Ltd. v. Mahakali Foods (P) Ltd to contend
that the provisions of the MSMED Act, being
special, must prevail over the general law of
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arbitration in all disputes involving micro and
small enterprises.
10.7. According to the Respondent, the MSMED Act
has created a self-contained mechanism for
adjudication of disputes arising out of delayed
payments to micro and small enterprises, and
the parties are obliged to follow that
mechanism. It is contended that permitting
arbitration under Section 11 in parallel to or in
place of the statutory mechanism would result
in multiplicity of proceedings and would
undermine the legislative objective of providing
a speedy and efficacious remedy to micro and
small enterprises.
10.8. The question under this Point is a pure question
of law: whether micro, small or medium
enterprises are, in all cases, required to
proceed only under Chapter V of the MSMED
Act and to refer all disputes to the Facilitation
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Council under Section 18, or whether recourse
to the Arbitration and Conciliation Act, 1996
remains available in appropriate cases.
10.9. It is necessary to begin with the text of Section
18(1). The provision uses the phrase "any party
to a dispute may, with regard to any amount
due under section 17, make a reference to the
Micro and Small Enterprises Facilitation Council"
(emphasis supplied). The use of the word
"may" indicates that the legislature has
conferred a discretion on the party to a dispute
to invoke the jurisdiction of the Facilitation
Council. The provision does not state that the
party "shall" or "must" approach the Council;
nor does it contain any express negative
language prohibiting recourse to other lawful
remedies when the statutory mechanism is not
invoked.
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10.10. Porwal Sales -v- Flame Control Industries
has considered this very language and has held
that Section 18(4) of the MSMED Act cannot be
read as a provision creating an absolute bar to
institution of proceedings under Section 11 of
the Arbitration and Conciliation Act in every
case where one of the parties happens to be a
micro or small enterprise. The Bombay High
Court has reasoned that such an interpretation
would entail adding words to the statute which
the legislature has not used, and would result
in obliterating the arbitration agreement
between the parties even when neither party
has chosen to approach the Facilitation Council.
10.11. The Hon'ble Bombay High Court has also
emphasised that Section 18(3) and (4) operate
in a specific context: namely, where a reference
has actually been made to the Facilitation
Council under Section 18(1), conciliation has
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been attempted, and has failed, and the Council
has then either itself taken up the dispute for
arbitration or referred it to an arbitral
institution. In such a situation, once the
statutory process is triggered, the MSMED Act
mechanism prevails and other routes, including
Section 11, would not be parallelly available.
That, however, is different from saying that in
the absence of any reference to the Council,
Section 11 is automatically barred.
10.12. The Hon'ble Delhi High Court in Total
Application Software Co.Pvt.Ltd TASC -v-
Ashoka Distillers and Chemicals Pvt. Ltd
has considered Gujarat State Civil Supplies
Corporation Ltd. v. Mahakali Foods (P) Ltd
and has read it in a manner consistent with this
position. The Hon'ble Delhi High Court has
recognised that the MSMED Act, being a special
law, has precedence over the Arbitration and
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Conciliation Act, but has drawn a clear
distinction between cases where the statutory
mechanism under Section 18(1) has been
actually invoked and those where it has not.
The Hon'ble Delhi High Court has held that once
a party triggers the mechanism under Section
18(1), the special law overrides the arbitration
agreement by virtue of the non-obstante
clauses in Section 18(1) and (4). But where
there is no such trigger, the special mechanism
remains dormant and does not, by itself,
extinguish the parties' rights under their
arbitration agreement.
10.13. Turning to Gujarat State Civil Supplies
Corporation Ltd. v. Mahakali Foods (P) Ltd,
the Hon'ble Supreme Court was dealing with a
batch of matters where the Facilitation Council
had already been approached and had entered
upon reference. The Hon'ble Supreme Court
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has examined whether the statutory
mechanism under Chapter V would have
precedence over the general law of arbitration
in respect of disputes relating to delayed
payments to micro and small enterprises once a
reference is made under Section 18(1). The
Hon'ble Apex Court has answered that question
in the affirmative, holding that the special
procedure under the MSMED Act prevails once
invoked.
10.14. However, Gujarat State Civil Supplies
Corporation Ltd. v. Mahakali Foods (P) Ltd
does not lay down as an abstract proposition
that in every case where one party is a micro or
small enterprise, the very existence of the
MSMED Act renders the arbitration agreement
inoperative, irrespective of whether the
statutory mechanism is invoked or not. The
binding ratio of the Hon'ble Supreme Court's
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decision is that the MSMED Act overrides the
Arbitration and Conciliation Act when the
dispute is brought within the fold of the special
statute through a reference under Section
18(1), and that in such a situation the
Facilitation Council (or the institution to which it
refers the matter) alone would have jurisdiction
to act as arbitrator/conciliator.
10.15. The contention of the Respondent that even in
the absence of any reference to the Facilitation
Council, the mere applicability of the MSMED
Act precludes resort to Section 11 of the
Arbitration and Conciliation Act is, therefore, an
over-extension of the Supreme Court's ratio. It
would effectively render the word "may" in
Section 18(1) otiose and convert the permissive
statutory option into a mandatory and exclusive
route, which the legislature has not chosen to
do.
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10.16. In the present case, it is undisputed that no
reference has been made by either party to the
Micro and Small Enterprises Facilitation Council.
There is no material to show that the statutory
mechanism under Section 18(1) has been
triggered at all. In such a situation, the
question is not one of concurrent jurisdiction
between the Facilitation Council and the arbitral
forum under the agreement; rather, the
question is whether the existence of a possible
statutory remedy under the MSMED Act, which
has not been invoked, can by itself deprive the
parties of their right to seek appointment of an
arbitrator under Section 11 in terms of their
contract.
10.17. Having regard to the language of Section 18(1),
the interpretation placed in Porwal Sales -v-
Flame Control Industries and Total
Application Software Co.Pvt.Ltd TASC -v-
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Ashoka Distillers and Chemicals Pvt. Ltd,
and the correct reading of Gujarat State Civil
Supplies Corporation Ltd. v. Mahakali
Foods (P) Ltd, I'am of the view that micro and
small enterprises are not, in all cases,
compelled to approach the Facilitation Council
as an exclusive remedy to the exclusion of
arbitration under their contracts. The statutory
mechanism is available to them as a special
forum, and once invoked, it overrides the
arbitration agreement. But until such invocation
takes place, the arbitration agreement
continues to be operative, and recourse to
Section 11 of the Arbitration and Conciliation
Act is not barred.
10.18. As regards medium enterprises, the text and
scheme of the Act, which will be discussed in
more detail while answering Point No.II, make
it clear that medium enterprises are not within
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the definition of "supplier" under Section 2(n)
and that Chapter V is expressly confined to
"micro and small enterprises". Therefore, even
the possibility of a statutory bar under Chapter
V does not arise in the case of medium
enterprises.
10.19. Thus, I'am of the considered opinion that:
10.19.1. Micro and small enterprises have a
statutory option to invoke the special
mechanism under Section 18 of the
MSMED Act for delayed payment disputes.
Once they do so, that mechanism prevails
over any contractual arbitration clause.
10.19.2. In the absence of such an invocation,
the arbitration agreement under the
contract remains fully effective, and the
parties are entitled to seek appointment
of an arbitrator under Section 11 of the
Arbitration and Conciliation Act.
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10.19.3. Medium enterprises are outside the
scope of Chapter V and are governed by
their contractual dispute resolution
mechanisms.
10.20. Accordingly, it cannot be said, as an absolute
proposition, that micro, small or medium
enterprises are required in every case to
proceed only under Chapter V of the MSMED
Act and to refer all disputes to the Facilitation
Council under Section 18. The requirement
arises only upon invocation of the statutory
mechanism in the case of micro and small
enterprises, and does not arise at all in the case
of medium enterprises.
10.21. I answer Point No.I is by holding that micro and
small enterprises are not mandatorily required,
in all circumstances, to proceed under Chapter
V of the MSMED Act, and that medium
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enterprises are in any event outside the
purview of Section 18.
11. Answer to Point No. II: Whether a medium
enterprise would also be covered under Section
18 of the MSME Act, 2006?
11.1. The learned counsel for the Petitioner submits
that the Petitioner is a medium enterprise
within the meaning of Section 7 of the MSMED
Act. He argues that Section 2(n), which defines
"supplier", expressly refers only to micro and
small enterprises, and does not include medium
enterprises. He submits that the heading of
Chapter V, namely "Delayed payments to micro
and small enterprises", also indicates that the
provisions contained therein are intended to
apply only to micro and small enterprises and
not to medium enterprises.
11.2. The Petitioner submits that the absence of the
word "medium" in Section 2(n) and in the
nomenclature of the "Micro and Small
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Enterprises Facilitation Council" is a conscious
legislative choice. On this basis, the Petitioner
contends that medium enterprises are not
covered under Section 18 of the MSMED Act
and cannot invoke or be compelled to invoke
the Facilitation Council mechanism.
Consequently, disputes involving medium
enterprises are to be resolved through the
ordinary fora, including arbitration under valid
contractual clauses and civil suits.
11.3. The Petitioner submits that this interpretation
not only accords with the plain language of the
statute but also with the legislative object, as
the special protections of Chapter V are
intended for micro and small enterprises which
are comparatively more vulnerable. Medium
enterprises, being larger entities with greater
resources, are expected to negotiate and
enforce their contractual rights, including
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arbitration agreements, without requiring the
additional statutory protection of Chapter V.
11.4. The learned counsel for the Respondent argues
that the MSMED Act is a composite legislation
enacted for "Micro, Small and Medium
Enterprises Development" and that, therefore,
the dispute resolution mechanisms under the
Act, including those under Chapter V, should be
read as applicable to all three categories of
enterprises. He submits that to exclude medium
enterprises from the ambit of Section 18 would
be to deny them the benefit of the special
mechanism, which would be contrary to the
spirit of the Act.
11.5. The Respondent contends that while the
definition of "supplier" in Section 2(n) refers
only to micro and small enterprises, the Court
should adopt a purposive interpretation and
treat medium enterprises, at least for dispute
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resolution purposes, as falling within the same
protective umbrella, especially when they are
similarly situated in terms of bargaining power
with large buyers.
11.6. The issue under this Point is again a question of
statutory interpretation, namely, whether
medium enterprises can be brought within the
fold of Section 18 despite the language of
Section 2(n) and the heading of Chapter V.
11.7. Section 2(n) defines "supplier" to mean "a
micro or small enterprise" which has filed a
memorandum with the competent authority,
and includes certain public sector entities. The
provision does not mention medium
enterprises. When the legislature wishes to
cover micro, small and medium enterprises
together, it uses language to that effect, as
seen in other provisions of the Act.
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11.8. Chapter V is titled "Delayed payments to micro
and small enterprises". The title of a Chapter,
while not controlling, is certainly a relevant
internal aid to construction, and here it aligns
with the restrictive definition of "supplier" in
Section 2(n). Sections 15, 16, 17 and 18 all
proceed on the basis of obligations owed by a
"buyer" to a "supplier". Since "supplier" is a
defined term, its meaning cannot be expanded
by implication to include medium enterprises,
when the statutory text does not do so.
11.9. It is well settled that where the legislature has
used clear and unambiguous language, courts
cannot add words to a statute under the guise
of purposive interpretation. The maxim "casus
omissus pro omisso habendus est" applies with
full force. The omission of "medium" from
Section 2(n) and from the title and text of
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Chapter V must be treated as an intentional
legislative choice.
11.10. In this context, the argument of the
Respondent that the Court should, in effect,
read "medium" into Section 2(n) so as to
extend the benefit of the Chapter V mechanism
to medium enterprises cannot be accepted.
Such a course would amount to judicial
legislation, which is impermissible.
11.11. The legislative policy appears to be that micro
and small enterprises, being at the lower end of
the scale and more vulnerable to delayed
payments, require special statutory protection
in the form of Chapter V, whereas medium
enterprises, being larger in scale and capability,
do not. This policy choice is within the
competence of the legislature and cannot be
substituted by the Court's own notions of
fairness or uniformity.
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11.12. Accordingly, I have no hesitation in holding that
medium enterprises are not covered under
Section 18 of the MSMED Act, 2006. Chapter V,
including the special mechanism of the Micro
and Small Enterprises Facilitation Council,
applies only to micro and small enterprises
which qualify as "suppliers" under Section 2(n).
11.13. In the present case, the Petitioner asserts that
it is a medium enterprise. If that assertion is
correct, it would follow that the Petitioner is
outside Chapter V and cannot either invoke or
be compelled to invoke Section 18. Its disputes
are to be resolved through ordinary fora
including arbitration, subject, of course, to the
existence and validity of an arbitration
agreement and the presence of arbitrable
disputes.
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11.14. I answer Point No. II by holding that a medium
enterprise is not covered under Section 18 of
the MSMED Act, 2006.
12. Answer to Point No. III: In the present case, is
the invocation of the arbitration clause in the
'Bizon Customer Agreement' by the Petitioner
required to be accepted, and an arbitrator to be
appointed?
12.1. The learned counsel for the Petitioner submits
that the Petitioner and Respondent have
entered into a 'Bizom Customer Agreement'
dated 21.02.2023, which contains an arbitration
clause at clause 11.10. He submits that
disputes have arisen between the parties
relating to amounts allegedly due from the
Respondent to the Petitioner for services
rendered under the agreement.
12.2. The Petitioner states that it issued a notice
dated 12.12.2025 invoking the arbitration
clause and nominating a sole arbitrator. The
Respondent did not concur in the appointment
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and took the stand that there are no arbitrable
disputes and that no amount is due. It is in
these circumstances that the Petitioner has
approached this Court under Section 11(6) of
the Arbitration and Conciliation Act seeking
appointment of an arbitrator.
12.3. The Petitioner submits that clause 11.10 is a
valid arbitration agreement within the meaning
of Section 7 of the Arbitration and Conciliation
Act. The requirements of Section 11 are,
therefore, satisfied, inasmuch as (i) there is a
valid arbitration agreement, (ii) disputes have
arisen between the parties, and (iii) the agreed
procedure for appointment has failed due to the
Respondent's non-cooperation.
12.4. The Petitioner further submits that, the
Petitioner is a medium enterprise not covered
under Section 18 of the MSMED Act, there is no
statutory bar arising from Chapter V of the
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MSMED Act. Even if the Petitioner were to be
regarded as a micro or small enterprise, the
decisions in Porwal Sales -v- Flame Control
Industries and Total Application Software
Co.Pvt.Ltd TASC -v- Ashoka Distillers and
Chemicals Pvt. Ltd make it clear that, in the
absence of any reference to the Facilitation
Council, the arbitration agreement remains
operative and recourse to Section 11 is
maintainable.
12.5. The Petitioner emphasises that at the Section
11 stage, this Court is not required to
undertake a detailed adjudication of the merits
of the disputes. The Court's remit is confined to
a prima facie examination of the existence of a
valid arbitration agreement and the presence of
disputes thereunder. Questions regarding
whether any amounts are ultimately due or
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whether there were breaches of the agreement
are matters for the arbitral tribunal to decide.
12.6. The learned counsel for the Respondent
reiterates that there are no genuine disputes
warranting arbitration, as, according to the
Respondent, the Petitioner has failed to perform
its obligations and no amount is due. He also
contends, as under Point No.I, that the MSMED
Act mechanism alone should be followed in
such cases, and that resort to Section 11 is not
appropriate.
12.7. The Respondent submits that the Petitioner's
invocation of the arbitration clause is premature
and not in consonance with the requirement
under clause 11.10 to first "try and resolve the
dispute amicably in good faith through
negotiations".
12.8. In view of the answers to Point Nos. I and II,
the position emerging in law is as follows:
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12.9. Medium enterprises are outside the ambit of
Section 18 and Chapter V of the MSMED Act.
12.10. Even in respect of micro and small enterprises,
the mechanism under Section 18 is optional in
the sense that it is triggered only upon a
reference being made; until such reference, the
arbitration agreement remains operative, as
recognised in Porwal Sales -v- Flame
Control Industries and Total Application
Software Co.Pvt.Ltd TASC -v- Ashoka
Distillers and Chemicals Pvt. Ltd, and
Gujarat State Civil Supplies Corporation
Ltd. v. Mahakali Foods (P) Ltd does not lay
down any contrary absolute bar.
12.11. On the factual matrix of this case, there is
nothing to show that any reference has been
made by either party to the Facilitation Council.
Therefore, the situation where the special
statutory mechanism is already in play does not
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arise. The parties stand only on the footing of
their contract, which contains a valid and
operative arbitration clause.
12.12. Clause 11.10 of the 'Bizom Customer
Agreement' is a standard arbitration clause
recognising the parties' obligation to first
attempt an amicable settlement through
negotiations and, if that fails within a
reasonable time, to submit the dispute to
arbitration governed by the Arbitration and
Conciliation Act, 1996.
12.13. The material on record indicates that the
Petitioner has raised a claim for amounts
allegedly due for services rendered, and that
the Respondent has disputed the same. At this
stage, a detailed inquiry into whether the
Petitioner actually performed its obligations or
whether the Respondent was justified in
withholding payment would amount to a mini-
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trial, which is beyond the scope of Section 11
proceedings.
12.14. The law as it stands, post the amendments to
the Arbitration and Conciliation Act and as
interpreted by the Hon'ble Supreme Court,
confines the Court's scrutiny at the Section 11
stage primarily to the existence of an
arbitration agreement and the presence of a
live dispute. Unless the case falls into one of
the narrow categories where the arbitration
agreement is ex facie invalid or where the
dispute is clearly non-arbitrable, the Section 11
Court is expected to lean in favour of reference
to arbitration, leaving contentious issues to be
decided by the arbitral tribunal.
12.15. In the present case, there is no contention that
clause 11.10 is invalid or inoperative on any
recognised ground such as fraud, coercion, or
incapacity. Nor is it suggested that the subject-
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matter is non-arbitrable. The only objection is
that the MSMED Act mechanism should be
preferred, coupled with a factual assertion that
no amounts are due. For the reasons already
recorded under Point Nos. I and II, the first
objection does not hold. The second objection
relates to the merits of the dispute and must be
left to the arbitrator.
12.16. As regards the alleged non-compliance with the
pre-arbitral amicable settlement requirement in
clause 11.10, the record shows that the
Petitioner has issued a notice and that there
has been an exchange of correspondence.
Whether the steps taken amount to a sufficient
attempt at amicable settlement is, at best, a
procedural issue which the arbitral tribunal can
examine if raised. It would not, in the facts of
this case, justify a refusal by this Court to
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exercise its jurisdiction under Section 11 when
the core statutory preconditions are satisfied.
12.17. The Respondent has pressed into service
Gujarat State Civil Supplies Corporation
Ltd. v. Mahakali Foods (P) Ltd to argue that
the MSMED Act must, in all cases involving
enterprises covered by that Act, take
precedence over arbitration. As already
discussed, that judgment does not support such
an absolute proposition. It is restricted to
situations where the statutory mechanism has
been invoked and the Facilitation Council is in
seisin of the dispute. In the absence of such
invocation, there is no occasion for a conflict
between the special mechanism and the
contractual arbitration clause.
12.18. On a holistic consideration of the submissions,
the statutory scheme, and the cited case law,
this Court is satisfied that the present case is a
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fit one for the appointment of an arbitrator
under Section 11(6) of the Arbitration and
Conciliation Act. The existence of the arbitration
agreement at clause 11.10 is admitted, the
presence of disputes is evident from the rival
stands, and there is no legal bar arising from
the MSMED Act in the circumstances of this
case.
12.19. I answer point No.III, by holding that the
invocation of the arbitration clause in the
'Bizom Customer Agreement' by the Petitioner
is required to be accepted, and that an
arbitrator is to be appointed.
13. Answer to Point No. IV: What order?
13.1. In view of the findings on Point Nos. I, II and
III,
13.1.1. The MSMED Act does not, in all cases,
compel micro and small enterprises to
resort exclusively to the Facilitation
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Council and does not bar arbitration
under a valid contractual clause when
the statutory mechanism has not been
invoked.
13.1.2. Medium enterprises are not covered
under Section 18 and Chapter V of the
MSMED Act at all.
13.1.3. In the present case, there is a valid
arbitration agreement at clause 11.10 of
the 'Bizom Customer Agreement';
disputes have arisen thereunder; no
reference has been made to the
Facilitation Council; and there is no legal
bar to the appointment of an arbitrator.
13.1.4. Therefore, the petition deserves to be
allowed by appointing an arbitrator in
terms of the arbitration agreement,
leaving all other questions, including
those relating to classification of the
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Petitioner under the MSMED Act, the
existence and quantum of liability, and
compliance with pre-arbitral steps, to be
decided by the arbitral tribunal.
13.2. Hence, I pass the following
ORDER
i. The CMP is Allowed. ii. Shri. Justice (Retd.) Nagmohan Das former Judge
of this Court, is hereby appointed as the sole
arbitrator to adjudicate the disputes between the
Petitioner and the Respondent arising out of the
‘Bizom Customer Agreement’ dated 21.02.2023.
iii. Registry is directed to forward a copy of this order
to the Director, Arbitration & Conciliation Centre
for doing the needful.
iv. Since the order is passed in the presence of both
the counsels, the counsels are directed to appear
before the Director, Arbitration & Conciliation
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Centre without requirement of any notice at 2.30
p.m. on 19.02.2026.
v. All contentions are left open.
vi. Registry is directed to return the original and/or
certified copies, if produced, to the respective
parties who have produced it/them by following
due procedure.
SD/-
(SURAJ GOVINDARAJ)
JUDGE
LN
List No.: 2 Sl No.: 52