The Supreme Court of India recently held that the Micro, Small and Medium
Enterprises Development Act (MSMED Act) will have overriding powers over the
Arbitration Act. In a landmark decision, the apex court pointed out that when a
specific legislation exists, no agreement between private parties can have
primacy over it. This decision is likely to have far-reaching implications for
dispute resolution in India, and could have a positive impact on the development
of the MSME sector.
Background Information
The Micro, Small and Medium Enterprises Development (MSMED) Act was enacted in
2006 to promote the growth and development of micro, small, and medium-sized
enterprises (MSMEs) in India. The Act makes provisions for access to credit,
technology, raw materials, and markets, as well as for the protection of these
enterprises from unfair trade practices. The Act also provides for the
establishment of a National Board for MSMEs, and a National Mission for MSMEs,
with the aim of promoting their growth and competitiveness.
The Arbitration and Conciliation Act, 1996, regulates domestic and international
arbitration in India. It provides a framework for the resolution of disputes
through arbitration for commercial agreements, and enables parties to refer
their disputes to arbitration without the need for a court intervention.
Supreme Court of India Decision
The Supreme Court of India recently held that the MSMED Act will have overriding
powers over the Arbitration Act. This ruling was passed in a case involving a
dispute between two private companies concerning a contract for the purchase of
goods. The parties had entered into an arbitration agreement to resolve their
dispute, but the MSMED Act had precedence in this case due to its specific
provisions.
The apex court pointed out that when a specific legislation exists, no agreement
between private parties can have primacy over it. This ruling is likely to have
far-reaching implications for dispute resolution in India, as it overrules the
primacy of arbitration agreements between private parties in cases where the
MSMED Act is applicable.
Implications of the Supreme Court Ruling
The ruling of the Supreme Court of India is likely to have a positive impact on
the development of the MSME sector in India. The MSMED Act was enacted to
promote the growth and development of MSMEs, and this ruling will help ensure
that the specific provisions of the Act are followed.
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