Arbitral Awards Not Invalid Due To Lack Of MSME Registration At Relevant Time: Jammu & Kashmir And Ladakh High Court

The court dismissed three revision petitions challenging the orders of the Principal District Judge, Jammu, which had rejected the objections filed by the petitioners against the execution of the arbitral awards.

The Court was hearing three revision petitions challenging three separate orders passed by the Principal District Judge, Jammu, whereby applications filed by the petitioners under Section 47 read with Section 151 of the Code of Civil Procedure, objecting to the execution of decrees passed in terms of the awards of the learned Arbitrator, were dismissed.

The awards had arisen out of disputes referred to the Himachal Pradesh Micro and Small Enterprises Facilitation Council under Section 18(2) of the MSME Act.

The matter was heard by Justice Sanjay Dhar, who observed,

“Even if, it is assumed that the respondent concern was not registered under MSME Act at the relevant time, still then for this reason only, the awards passed by the learned Arbitrator under the MSME Act would not become a nullity.”

Background

The respondent concern had three different transactions with the petitioners with regard to the supply of goods. For recovery of unpaid amounts in respect of these three transactions, the respondent concern applied for relief before the Himachal Pradesh Micro and Small Enterprises Facilitation Council, Shimla, established under Section 20 of the MSME Act.

The Facilitation Council, in exercise of its power under Section 18(2) of the MSME Act, took up the reference and subsequently referred the matters to arbitration. The Arbitrator passed three separate awards.

The respondent concern filed three separate execution petitions before the Court of the learned District Judge, Solan, Himachal Pradesh, for execution of the three awards. The said execution petitions were transferred to the Court of the District Judge, Jammu, for their disposal.

During the pendency of the execution petitions, the petitioners filed three separate applications under Section 47 read with Section 151 CPC, objecting to the execution of the decrees. The learned District Judge, Jammu, dismissed the said applications, which led to the filing of the present revision petitions.

The only ground urged by the counsel for the petitioners was that the awards sought to be executed were nullity in the eyes of law as the respondent concern was not registered under the MSME Act at the time when the supplies were made to the petitioners.

It was contended that it was not open to the Facilitation Council to take cognizance of the disputes and refer the matters to the Arbitrator. Reliance was placed on M/s Silpi Industries Etc. v. Kerala State Road Transport Corporation and another (2021), M/s Vaishno Enterprises v. Hamilton Medical AG and another (2022), and Gujarat State Civil Supplies Corporation Limited v. Mahakali Foods Private Limited (Unit 2) and another (2023).

Per contra, the learned counsel for the respondent concern submitted that it was duly registered under the MSME Act. It was pointed out that an Udyog Aadhaar Memorandum Certificate showed that the respondent concern stood registered under the MSME Act with effect from 01.04.2010.

Court's Observation

The Court observed that the Government of India had provided for re-registration of all existing enterprises registered under EM Part-II or UAM on or after the first day of July, 2020, vide notification dated 26.06.2020. Pursuant to the said notification, the respondent concern had re-registered itself in the year 2020. The petitioners were claiming that the registration of the respondent concern was with effect from the year 2020, and that in 2014-2015, when the supplies were made, the respondent concern was not a registered unit.

The Court held,

“The petitioners, it seems are under a misconception that the respondent concern was a registered for the first time in the year 2020. The fact of the matter remains that the respondent was registered in the year 2010 and pursuant to the notification dated 26.06.2020, it was re-registered in the year 2020.”

The Court further noted that even if it was assumed that the respondent concern was not registered under the MSME Act at the relevant time, the awards passed by the learned Arbitrator would not become a nullity.

The Court relied upon the judgment of the Supreme Court in NBCC (India) Ltd. v. The State of West Bengal and others, 2025 INSC 54. The Court observed,

“Having regard to the definition of expression 'supplier' and the 'classification' of enterprises into Micro Small and Medium with respect to each of which, there is a separate legal regime to be suggested by the Advisory Committee and notified by the Central and State Governments and in view of the discretion specifically vested with the Micro Small and Medium Enterprises for filing a memorandum under section 8 of the MSME Act, the contention that the Facilitation Council cannot entertain a reference under section 18(3) of the... cannot be accepted.”

The Court further held,

“In the face of aforesaid legal position, even if, it is assumed that the respondent concern was not registered under the MSME Act, still then reference of dispute between the respondent concern and the petitioners to the Facilitation Council and its subsequent reference by the Facilitation Council to the Arbitrator is perfectly in accordance with law.”

The Court concluded that on this ground, the awards passed by the learned Arbitrator would not become a nullity.

Finding no ground to interfere with the orders of the Principal District Judge, Jammu, the Court dismissed the revision petitions.