Jurisdiction Over MSMED Act and Contract Disputes Lies with Arbitral Tribunal, Not Writ Court: Delhi High Court

Petition Background: Corrtech International Pvt. Ltd. challenges ongoing arbitration with Knock Proinfratech Pvt. Ltd., initiated by the Micro and Small Enterprise Facilitation Council under the MSMED Act.

Contract Details:

• Corrtech was awarded a contract for HDD works by GAIL and subcontracted work to Harji Engineering Pvt. Ltd. (HEWPL).
• HEWPL issued a purchase order to Respondent No. 3 for installation work.

Payment Arrangement:

• A letter from HEWPL detailed a direct payment arrangement for HDD services from Respondent No. 3.

Legal Action:

• Respondent No. 3 filed a case in May 2022 against Corrtech for non-payment.
• Conciliation failed, leading to a reference for arbitration.

Court Proceedings:

• Petitioner seeks to quash notices from DIAC and declare proceedings terminated.
• Petitioner claims no outstanding dues and lack of buyer-supplier relationship.

Arguments:

• Respondent No. 3’s claim is based on a fraudulent assertion of dues.
• Claim was not maintainable due to no direct agreement between Corrtech and Respondent No. 3.
• Respondent No. 3 registered as a Micro Enterprise only after the contract, affecting jurisdiction.

Judicial Considerations:

• The court notes DIAC’s actions could have followed due process.
• The question of contract maintainability involves factual disputes suitable for arbitration.

Timeline Violations:

• Petitioner argues DIAC acted beyond statutory timelines but the court clarifies these apply to MSEFC references, not arbitration completion.

Final Ruling:

• Court declines to entertain the petition, emphasizing that the Arbitral Tribunal will independently assess merits.
• Petition disposed of without prejudice to the Tribunal’s authority.

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