Supplier's Alleged Non-Registration Under MSMED Act Does Not Nullify Arbitral Award: J&K High Court

The High Court of Jammu, Kashmir and Ladakh on 30 September held that an arbitral award passed under the Micro, Small and Medium Enterprises Development Act, 2006 does not become a nullity merely because the supplier was allegedly not registered under the Act when the underlying transaction took place.

Justice Sanjay Dhar dismissed three revision petitions filed by Kashmir Confectionary Store, Mehak Trading Co. and Naugraein Traders, challenging the execution of arbitral awards obtained by Mother Choice Health Care India. The Bench 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.”

The disputes arose from three separate transactions under which Mother Choice Health Care India supplied goods to the three traders. After the traders allegedly failed to pay the amounts due, Mother Choice approached the Himachal Pradesh Micro and Small Enterprises Facilitation Council, Shimla, constituted under the Micro, Small and Medium Enterprises Development Act.

After conciliation failed, the Facilitation Council referred the disputes to arbitration. The arbitrator subsequently passed three separate awards, two on 19 October 2023 and another on 22 April 2023. Mother Choice initiated execution proceedings before the District Judge, Solan, Himachal Pradesh. The proceedings were later transferred to the District Judge, Jammu.

During the execution proceedings, the three traders filed separate applications under Section 47 read with Section 151 of the Code of Civil Procedure, 1908, contending that the awards were a nullity because Mother Choice was not registered under the MSMED Act when the supplies were made.

The Principal District Judge, Jammu rejected the objections through three orders dated 20 July 2026, prompting the traders to approach the High Court.

The traders argued that an enterprise not registered under Section 8 of the MSMED Act when the supplies were made could not invoke the dispute-resolution mechanism under Section 18 before the Facilitation Council. They therefore contended that the references to arbitration and the resulting awards were legally void.

Mother Choice produced an Udyog Aadhaar Memorandum Certificate showing that it had been registered under the Act with effect from 1 April 2010.

The High Court found that the challenge was based on a mistaken factual premise. It noted that a Central Government notification dated 26 June 2020 required existing enterprises to re-register from 1 July 2020. Mother Choice had accordingly re-registered in 2020, but its original registration dated back to 2010. The supplies in question were made during 2014-15.

It observed that “the petitioners, it seems are under a misconception that the respondent concern was a registered for the first time in the year 2020.” It further held that even assuming the supplier was not registered at the relevant time, that fact alone would not render the awards void.

Relying on the Supreme Court's ruling in NBCC (India) Ltd. v. State of West Bengal and others, the Bench reiterated that an objection that the Facilitation Council could not entertain a reference merely because an enterprise was not registered under Section 8 of the MSMED Act had already been rejected.

It held that the reference of the disputes to the Facilitation Council and their subsequent referral to arbitration were “perfectly in accordance with law”.

Accordingly, the High Court dismissed all three revision petitions, finding no ground to interfere with the Principal District Judge's orders.

Appearances for petitioners (M/s Kashmir Confectionary Store and others, M/s Mehak Trading Co. and M/s Naugraein Traders): Advocate Vishal Goel.

Appearances for respondent (M/s Mother Choice Health Care India): Advocate Shivam Gupta.