Delhi High Court: Court Can Appoint Arbitrator Under Section 11(6) of Arbitration Act if MSME Council Fails to Initiate Mediation U/S 18 of MSMED Act

The Delhi High Court in the case M/S Vallabh Corporation Versus SMS India Pvt Ltd observed and has held that When the Facilitation Council under the Micro, Small, and Medium Enterprises Development Act, MSMED Act fails to initiate the mediation process under Section 18 of the MSMED Act, the court can appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Arbitration Act).

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The bench of Justice Jasmeet Singh was hearing the present matter.

Facts of the Case: The respondent placed a Letter of Intent for execution of civil and associated work for construction of New Flash Butt Weld Engineering Workshop at Sabarmati.

On November 11, 2018, the respondent placed a revised Letter of Intent for execution of the said work.

On August 06, 2023, the petitioner requested the respondent to release outstanding contractual payment of Rs.37,20,31,671/- both under the Purchase Order as well as the Service Order. Thus, the parties tried to resolve their disputes but failed to arrive at consensus.

On February 29, 2024, the petitioner invoked arbitration and proposed 5 names to the respondent for choosing any one of them as a Sole Arbitrator.

Contentions Made Before The Court: The petitioner submitted before the court that the mandatory requirement of mediation as per section 18 of MSME Act has also been complied with by the petitioner.

The petitioner is constrained to approach this Court under section 11(6) of the Arbitration Act. Reliance is placed on Microvision Technologies (P) Ltd. v. Union of India, 2023.