Once Arbitration Commences After Failure Of Conciliation Under MSME Act, It Cannot Be Reinitiated By Halting Arbitration: Calcutta High Court

The Calcutta High Court has clarified the dispute resolution process under the Micro, Small and Medium Enterprises (MSME) Development Act, 2006. The court ruled that once conciliation proceedings between an MSME and another party have failed and the matter has been referred to arbitration, the MSME Facilitation Council cannot halt the arbitration to reinitiate conciliation. The court held that the Act provides for a sequential process: first conciliation, and upon its failure, arbitration. Once the arbitration proceedings have commenced, the council becomes 'functus officio' (having discharged its duty) with respect to conciliation. This ruling provides crucial procedural certainty, preventing the dispute resolution process from being stuck in a loop between conciliation and arbitration. It ensures that once arbitration begins, it must proceed to its logical conclusion without being interrupted for a second attempt at conciliation.