M/s Harcharan Dass Gupta Vs. Union of India
2025 INSC 689
Supreme Court of India
Table of Contents
Introduction
This civil appeal was brought before the Hon’ble Supreme Court by M/s Harcharan Dass Gupta (the appellant), a registered supplier under the MSMED Act, challenging the judgment of the Karnataka High Court. The appellant was aggrieved by the order wherein the High Court allowed the writ petition filed by the Indian Space Research Organisation (ISRO), the respondent, holding that the Delhi Arbitration Centre lacked jurisdiction to conduct the arbitral proceedings, and that the seat of arbitration, as per the terms of the contract, shall be Bengaluru. Aggrieved by the said judgment, the appellant preferred an appeal before the Supreme Court. The matter was heard by Hon’ble Mr. Justice Pamidighantam Sri Narasimha and Hon’ble Mr. Justice Joymalya Bagchi, who were pleased to allow the appeal and restore the arbitral proceedings.
Factual Background
The civil appeal was filed against the order of the Karnataka High Court allowing the writ petition, holding that the Delhi Arbitration Centre lacked jurisdiction as the seat of arbitration, according to the contract, was Bengaluru. The dispute arose after the respondent invited bids for the construction of staff quarters in New Delhi, and the appellant was selected through the tender process. Following disputes between the parties, the appellant invoked the jurisdiction of the Facilitation Council at Delhi under Section 18 of the MSMED Act for conciliation. Due to the non-cooperation of the respondent, the Council referred the matter to arbitration under Section 18(3) of the MSMED Act, to be conducted through the Delhi Arbitration Centre. Despite commencement of arbitration proceedings and a timeline being set, the respondent, instead of filing its defence, approached the Karnataka High Court under Articles 226/227 of the Constitution challenging the jurisdiction. An Ex-Parte stay was granted on the ground that the arbitration proceedings were contrary to the agreement. The appellant thereafter moved the Supreme Court against the stay order.
The Hon’ble Supreme Court allowed the appeal and restored the arbitral proceedings under the aegis of the Delhi Arbitration Centre, relying on its earlier decision in Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd., which affirmed the overriding effect of the Micro, Small and Medium Enterprises Development Act, 2006 over the Arbitration and Conciliation Act, 1996.
Legal Issues
- Whether the provisions of the MSMED Act override the contractual agreement regarding the seat of arbitration?
- Whether the Delhi Arbitration Centre had jurisdiction to conduct the arbitration proceedings despite the contract specifying Bengaluru as the seat of arbitration?
Arguments
- Appellant’s Arguments: The appellant contended that the MSMED Act, 2006, being a special legislation enacted after the Arbitration and Conciliation Act, 1996, overrides not only general laws but also private contractual agreements between the parties. It was argued that the legislature, being aware of the existing general law, deliberately enacted a specific law to address disputes involving micro and small enterprises, thereby indicating legislative intent for the MSMED Act to prevail. The appellant further relied on judicial precedents to assert that the statutory mandate under the MSMED Act takes precedence over any conflicting contractual terms.
- Respondent’s Arguments: The respondent primarily argued that the provisions of the MSMED Act do not override the terms of a private contract, and that the seat of arbitration had already been contractually agreed upon as Bengaluru. It was contended that the Delhi Arbitration Centre lacked jurisdiction to conduct the arbitral proceedings, and therefore, the arbitral process initiated in Delhi was contrary to the agreement between the parties. Accordingly, the respondent submitted that the appeal should be dismissed.
Judgement
After hearing the arguments of both sides and examining the evidence on record, the Hon’ble Court made several observations and delivered its judgment. The Court primarily relied on precedents, noting that the issue was no longer res integra and was covered by the decision in Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (2022) and Silpi Industries v. Kerala SRTC (2021). The Court referred to the relevant facts and principles laid down in these cases, which clearly establish that the MSMED Act, being a special legislation, prevails over the Arbitration and Conciliation Act, 1996, a general law, taking into account the relevant provisions of the MSMED Act and the chronological timeline of both enactments.
The Court also took note of the non obstante clauses contained in sub-sections (1) and (4) of Section 18, and Section 24 of the MSMED Act, which explicitly provide an overriding effect over any other law for the time being in force. Accordingly, the Court held, without hesitation, that the provisions under Chapter V of the MSMED Act, 2006 shall prevail over the provisions of the Arbitration and Conciliation Act, 1996.
Further, the Court held that the statutory mechanism under the MSMED Act will override any prior private arbitration agreement between the parties. The absence of the word “agreement” in Section 18(1) does not restrict the overriding effect of the MSMED Act. This interpretation, as per the Court, is essential to safeguard the rights and interests of Micro and Small Enterprises and to ensure that statutory remedies are not defeated by prior contractual arrangements.
Finally, the Court upheld that the Delhi Arbitration Centre had jurisdiction, as the reference was made by the Delhi-based Facilitation Council, which had jurisdiction since the appellant MSME was located in Delhi. Reiterating the principle that a special law prevails over a general law, the Court allowed the appeal and restored the arbitral proceedings under the aegis of the Delhi Arbitration Centre.
Conclusion
The Hon’ble Supreme Court allowed the appeal filed by M/s Harcharan Dass Gupta, set aside the judgment passed by the Karnataka High Court, and restored the arbitral proceedings under the aegis of the Delhi Arbitration Centre. The appeal was disposed of with no order as to costs.
This case brief has been authored by Ms. Harshita Singh, student at Institute of Law, Nirma University, Ahmedabad.
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