Court Upholds MSMED Act Over Arbitration Agreement in IT Services Dispute

ENA MSME 2025-03-11 14:36:36 New Delhi, Mar 11 (KNN) The Delhi High Court has dismissed the petition filed by Idemia Syscom India Private Limited seeking the appointment of an arbitrator in its dispute with M/s Conjoinix Total Solutions Private Limited. The Court ruled that the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, being a specific legislation, would override the provisions of the Arbitration and Conciliation Act, 1996. The Court observed that the MSMED Act, having a non-obstante clause, prevails over the Arbitration and Conciliation Act. The dispute arose from an IT services contract between the parties for a project awarded by the State Transport Department, Orissa. A Service Framework Agreement was executed on February 9, 2022. Idemia Syscom alleged breach and non-performance by Conjoinix, leading to legal conflicts. On July 1, 2024, Conjoinix invoked the arbitration clause, proposing Shilpa Dogra as the sole arbitrator. However, Idemia Syscom raised objections, leading to the present petition. During the proceedings, it was revealed that Conjoinix had also initiated proceedings under Section 18 of the MSMED Act before the MSME Facilitation Council, Chandigarh, which were still pending. The judgment relied on the Supreme Court rulings in Silpi Industries v. Kerala SRTC and Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods (P) Ltd. to emphasise that MSMEs have a statutory right to seek dispute resolution under the MSMED Act. The Court dismissed the petition, holding that the disputes nature and contract classification should be determined by the MSME arbitral tribunal under Section 18 of the MSMED Act. (KNN Bureau) 41357 https://knnindia.co.in/news/newsdetails/msme/court-upholds-msmed-act-over-arbitration-agreement-in-it-services-dispute 2025-03-11 14:36:36 knnindia.co.in Court Upholds MSMED Act Over Arbitration Agreement in IT Services Dispute