Arbitral Award Not Invalid Merely Because MSME Party Could Have Approached Facilitation Council: Bombay High Court

Justice Sandeep V. Marne dismissed a petition filed by Bharat Sanchar Nigam Limited (BSNL)  challenging an arbitral award passed in favour of Microtex Energy Pvt. Ltd,an MSME. 

“Therefore, if parties opt for ad hoc arbitration, the award is not rendered invalid merely because one of the parties to the dispute is a supplier capable of seeking reference under Section 18 of the MSMED Act," the court held.

The dispute arose from a tender floated by BSNL on March 8, 2016 for the supply of VRLA batteries. Microtex Energy, a registered small enterprise, emerged as the successful bidder and an Advance Purchase Order was issued on June 10, 2016. Subsequent purchase orders were issued on September 20, 2016 and November 1, 2016 for supply of battery sets.

Later, BSNL claimed that there had been an overpayment of ₹34.57 lakh following price revisions and demanded a refund on June 21, 2018. Microtex disputed the claim and sought payment of outstanding dues. Arbitration proceedings followed, culminating in an award dated May 3, 2024 directing BSNL to pay Rs. 2.76 crore along with interest.

BSNL challenged the award contending that disputes involving an MSME supplier could only be decided through the Facilitation Council.

Rejecting the contention, the high court held that the statutory mechanism is only an enabling option and becomes operative only when a party actually invokes it. Since neither party approached the Council and instead proceeded with arbitration under their contract, the court said, the award could not be invalidated on that ground.

Finding that no interference was warranted with the award, the court dismissed BSNL's petition.

For Petitioner: Advocate Disha Karambar i/b Disha Karambar & Associates

For Respondent: Advocates Shivaraj N. Arali, Pooja Singh