No Interim Relief U/S 9 Of A&C Act Without Exceptional Circumstances After Conciliation Fails & Arbitration Starts Under MSME Act: Calcutta HC

The Calcutta High Court bench of Justice Shampa Sarkar has held that once conciliation fails under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), the Council may either conduct the arbitration itself or refer the matter to an arbitral institution. As per Section 18(3) of the MSME Act, the provisions of the Arbitration and Conciliation Act, 1996 (Arbitration Act) apply to such arbitration proceedings. It further held that unless exceptional circumstances are demonstrated, indicating that the remedy under Section 17 of the Arbitration Act is not efficacious, the court cannot grant interim relief under Section 9(3) of the Arbitration Act. Brief Facts: This application has been filed under Section 9(1) of the Arbitration Act seeking interim measures. Lakhotia Metalizers Private Limited (Petitioner), a registered MSME, initially approached the MSME Facilitation Council to resolve a dispute. However, when conciliation failed and was formally terminated, arbitration proceedings commenced on May 10, 2024. The petitioner filed its statement of claim shortly thereafter, on May 22, 2024. Since Matashree Snacks Pvt. Ltd. (Respondent) has chosen not to participate in the arbitration process, the petitioner fears that the respondent may divert or deplete its assets and funds, leaving little hope for recovery of the claimed amount. Under such circumstances, the petitioner prays for directions for attachment, appointment of receiver and security. Observations: The court at the outset noted that the present application is premature, as the petitioner has not sought interim protection from the arbitral tribunal. As per Section 9(3) of the Arbitration Act, once the arbitral tribunal is constituted, the court should not entertain an application for interim measures unless it finds that remedies under Section 17 of the Arbitration Act are not efficacious. It further observed that section 18(3) of the MSME Act states that when conciliation fails and is terminated without a settlement, the MSME Council may either arbitrate the dispute itself or refer it to an arbitration institution. In such cases, the Arbitration Act applies as if there were an arbitration agreement under Section 7(1) of the Arbitration Act. The court further held that the petitioner approached this Court without first seeking relief under Section 17 of the Arbitration Act as required. Since Section 18(3) of the MSME Act makes Section 17 of the Arbitration applicable, and no exceptional circumstances have been shown, the Court is not inclined to exercise its discretion under Section 9(3) of the Arbitration Act. Interim relief can only be granted if the remedy under Section 17 is shown to be ineffective, which the petitioner has failed to establish. Accordingly, the present petition was dismissed. Case Title: Lakhotia Metalizers Private Limited Vs Matashree Snacks Pvt. Ltd. Case Number:AP-COM/129/2025 Judgment Date: 23/04/2025 Mr. Debraj Sahu, Adv. Mr. H. Singh, Adv. Mr. Antara Biswas, Adv. …for petitioner. Click Here To Read/Download The Order

No Interim Relief U/S 9 Of A&C Act Without Exceptional Circumstances After Conciliation Fails & Arbitration Starts Under MSME Act: Calcutta HC

Mohd Malik Chauhan

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