While hearing a petition filed by M/s. Refex Energy Limited, the High Court of Madras has upheld the Constitutional validity of Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006. The matter was referred to arbitration by the facilitation council, despite objections from the petitioner. The question of its validity had come up during the pendency of these proceedings. Challenging the provision, the petitioner had contended that a party cannot be forced to participate in arbitration proceedings at the instance of the other party making the reference under section 18 of the MSMED Act. It hence argued that Section 18, which contemplates initiation of unilateral arbitration proceedings, is contrary to the spirit of alternate dispute resolution system, as without the consent of both the parties, the dispute cannot be referred to as arbitration.
Submitted by: Nishit Shah