New Delhi, May 26 (KNN) The Delhi High Court has dismissed the writ petitions filed by MDD Medical Systems (India) Pvt. Ltd. and LSR Medical Pvt. Ltd., challenging the revival of arbitration proceedings by the Delhi International Arbitration Centre (DIAC).
The Court held that it is within the jurisdiction of the Arbitral Tribunal (AT) to decide the validity of the revival under Section 16 of the Arbitration and Conciliation Act, 1996.
The petitioners had objected to letters dated 30.07.2019 and 03.08.2019, through which DIAC revived the arbitration and directed them to file a Reply/Counter Claim to the Statement of Claim submitted by Respondent No. 3.
The background of the dispute traces back to a commercial transaction between the petitioners and Respondent No. 3, an MSME engaged in privacy and sun protection products. A payment dispute led Respondent No. 3 to approach the Micro and Small Enterprises Facilitation Council (MSEFC).
After failed conciliation efforts, the matter was referred to DIAC under Section 18(3) of the MSMED Act, 2006. DIAC initially closed the proceedings through letters dated 22.10.2018 and 27.10.2018, as Respondent No. 3 had failed to submit its Statement of Claim. Months later, upon receiving the SOC, DIAC reopened the matter and issued fresh directions to the petitioners.
The petitioners argued that this revival was illegal as the MSMED Act mandates that proceedings be completed within 90 days, and there was no provision in either the 2012 or 2018 DIAC Rules permitting such revival without a fresh reference.
They also stated that Section 25 of the Arbitration Act could not apply, as no sufficient cause was shown for the delayed filing.
In response, the respondents argued that the challenge was premature and not maintainable under writ jurisdiction. They emphasised that the arbitral tribunal, once constituted, must determine any objections to jurisdiction, including those relating to the revival of proceedings.
They also contended that the applicable rules were the 2012 Rules, under which the matter had originally been closed.
The Court observed that Section 18(5) of the MSMED Act, which mentions a 90-day period for resolution, pertains only to the proceedings before the Facilitation Council, not to arbitral proceedings under Section 18(3).
Moreover, the Act does not prescribe any consequence for not adhering to this timeline, making it directory rather than mandatory. The Court also noted that once arbitration is invoked, the Arbitration Act applies in full, including the principle that the tribunal itself must decide issues of jurisdiction under Section 16.
Relying on precedents including Vidya Drolia v. Durga Trading Corporation and Cox & Kings Ltd. v. SAP India (P) Ltd., the Court reiterated that jurisdictional objections must be addressed by the arbitral tribunal and not through writ proceedings.
Accordingly, the Court dismissed the petitions.
(KNN Bureau)
