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

Under section 18 of the MSMED Act, 2006, a reference was made by a small supplier and conciliation by the Council ended with no settlement after the conciliator declared in writing, after consulting the parties, that further efforts were no longer justified. Which description of the next steps and timing is correct?

The Council must itself arbitrate or refer the dispute to an ADR institution or centre for arbitration. Under section 18(3), the 1996 Act then applies as if there were a section 7(1) arbitration agreement, so no fresh agreement is needed. Section 18(5) requires decision within ninety days.

  1. AThe dispute lapses, and the supplier must file a civil suit
  2. BThe Council must either take up the dispute for arbitration itself or refer it to an ADR institution or centre for arbitration, and the 1996 Act then applies as if there were an arbitration agreement under section 7(1)Correct
  3. CThe parties must first agree afresh in writing to arbitrate, failing which no arbitration can occur
  4. DThe Council must refer the dispute to the High Court, which acts as arbitrator

Explanation

Section 76(b) allows termination by the conciliator's written declaration after consulting the parties. Section 18(3) then requires the Council to take up arbitration itself or refer it to an ADR institution or centre, with the 1996 Act applying as if there were a section 7(1) arbitration agreement. No fresh consent is needed, so the fresh-agreement option is wrong. Under section 18(5), every reference must be decided within ninety days of the reference.

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