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CS Professional · Arbitration, Mediation and Conciliation · Introduction to Conciliation and its Importance for MSMEs

Kapoor Components, a small enterprise supplier in Pune, makes a reference to the Micro and Small Enterprises Facilitation Council for amounts due from Verma Industries, a buyer located in Chennai. The Council's conciliation under section 18(2) of the MSMED Act, 2006 ends without settlement. Which statement is correct?

The Council may itself arbitrate or refer the dispute to an ADR institution or centre. Its jurisdiction covers a supplier within its area and a buyer anywhere in India, and the 1996 Act applies as if there were an arbitration agreement under section 7(1), so no fresh agreement is required.

  1. AThe Council has no jurisdiction because the buyer is outside its state
  2. BThe Council must close the matter and the supplier must file a civil suit
  3. CThe Council may itself take up the dispute for arbitration or refer it to an ADR institution or centre, and the Arbitration and Conciliation Act then applies as if under an arbitration agreement under section 7(1)Correct
  4. DArbitration can follow only if both parties sign a fresh arbitration agreement

Explanation

Section 18(4) gives the Council jurisdiction where the supplier is within its jurisdiction and the buyer is anywhere in India. Under section 18(3), if conciliation fails, the Council either arbitrates itself or refers the dispute to an ADR institution or centre, with the 1996 Act applying as if there were a section 7(1) arbitration agreement, so no fresh agreement is needed.

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