(MENAFN- KNN India) Mumbai, Oct 8 (KNN) The Bombay High Court has set aside orders by the Micro and Small Enterprises Facilitation Council (MSEFC), ruling that conciliation and arbitration under the MSMED Act cannot be clubbed.

A bench led by Justice N.J. Jamadar held that if the appellant had not participated in conciliation, the council could have recorded its failure and then initiated arbitration under the Arbitration and Conciliation Act, 1996.

The court found that the council had bypassed conciliation and directly allowed the claim, making the orders unsustainable as arbitration awards.

The case involved Mexim supplying adhesive tapes to Dodal Electro Instruments. Mexim alleged non-payment and approached the council, which directed Dodal to pay the amount with interest.

Dodal challenged this, claiming the council had merged conciliation and arbitration without following proper procedures and that Mexim was not a registered MSME at the time.

Mexim countered that Dodal had been aware of the proceedings since 2018 and that it was a valid MSME.

The court noted that writ relief is exceptional and found no breach of natural justice, as Dodal had participated in proceedings and sought adjournments.

It emphasized that MSME disputes must follow a two-stage process: conciliation first, arbitration if conciliation fails. Following Jharkhand Urja Vikas Nigam Ltd., the court reaffirmed that conciliation and arbitration serve different purposes and cannot be conducted together.

The court concluded that the council's orders did not meet legal requirements for an arbitration award and set them aside.

(KNN Bureau)

MENAFN08102025000155011030ID1110168883