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

Patel Fasteners, a micro enterprise supplier in Rajkot, makes a reference to the Micro and Small Enterprises Facilitation Council for unpaid dues from a buyer in Chennai. Which statement correctly reflects section 18 of the MSMED Act, 2006 on this reference?

On receiving the reference, the Council either conducts conciliation itself or refers the matter to an ADR institution or centre, and sections 65 to 81 of the Arbitration and Conciliation Act apply as if conciliation was initiated under Part III. The buyer's location outside the state does not defeat jurisdiction.

  1. AThe Council must first refer the parties to a civil court before any conciliation
  2. BOn receipt of the reference, the Council either conducts conciliation itself or refers it to an ADR institution or centre, and sections 65 to 81 of the 1996 Act apply as if conciliation was initiated under Part IIICorrect
  3. CThe Council has no jurisdiction because the buyer is located outside Gujarat
  4. DThe Council must proceed directly to arbitration, and conciliation provisions do not apply

Explanation

Section 18(2) of the MSMED Act provides that the Council either itself conducts conciliation or seeks the assistance of an ADR institution or centre, with sections 65 to 81 of the Arbitration and Conciliation Act applying as if conciliation was initiated under Part III. Section 18(4) gives jurisdiction where the supplier is within the Council's jurisdiction and the buyer is anywhere in India. Arbitration follows only if conciliation fails.

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