Delhi High Court Orders Deutsche Bank To Refund Rs 3.45 Crore To MSME Exporter

The Delhi High Court has ordered Deutsche Bank to refund Rs 3.45 crore to an MSME exporter, M D Overseas Private Limited. The court held that the bank wrongly recovered interest subvention benefits that had already been given upfront under the Interest Equalization Scheme. A single-judge bench of Justice Amit Bansal said the bank's move defeated the purpose of the scheme. The scheme, the court noted, was meant to "enhance the global competitiveness of Indian exports by lowering the cost of...

Pendency Of Conciliation Proceedings Under MSME Act Does Not Bar Interim Relief U/S 9 Of A&C Act To Preserve Subject Matter: Calcutta HC

The Calcutta High Court has held that pendency of conciliation proceedings does not bar the grant of limited interim relief under section 9 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act"), where such relief is essential to preserve the subject matter of the dispute. Justice Gaurang Kanth held while allowing a Section 9 application filed by Rishi Chemical Works Pvt. Ltd. (“Petitioner”), appointing a Special Officer to inspect, measure, and document the existing status...

Writ Petition Filed To Bypass Pre-Deposit Requirement Under MSMED Act Is Not Maintainable: Calcutta High Court

The Calcutta High Court dismissed a petition filed under Article 227 of the Constitution challenging an award passed by the West Bengal Micro & Small Enterprises Facilitation Council (MSEFC), holding that the petition was not maintainable and was filed to evade pre-deposit requirement under section 19 of the MSMED Act, 2006. Justice Hiranmay Bhattacharyya held that the Facilitation Council had jurisdiction to entertain the reference under section 18 and the buyer (Kommoners Club...

Banks Cannot Penalise Borrowers For Switching Lenders, Prepaying Loans: Orissa High Court

The Orissa High Court recently held that banks cannot impose charges that restrict a borrower's freedom to switch lenders, ruling that such practices undermine fair banking standards and violate binding directions of the Reserve Bank of India. A bench of Justice Sanjeeb K Panigrahi said banks must operate within regulatory limits set by the RBI and cannot create barriers that penalize borrowers for exercising their right to repay or refinance loans. The bank cannot "cannot convert a...

Proceedings For Conciliation & Arbitration Under MSME Act Cannot Be Clubbed: Bombay High Court

The Bombay High Court has set set aside two ex-parte orders passed by the Micro and Small Enterprises Facilitation Council (MSEFC), Daman holding that the council acted in breach of mandatory two stage procedures under the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”). The court remitted the matter for fresh arbitration in accordance with law. A bench led by Justice N.J. Jamadar held that “If the appellant had not submitted its reply at the conciliation...

S. 18(5) MSMED Act | Supreme Court To Examine Whether Time Limit For Deciding Reference By Facilitation Council Is Mandatory

The Supreme Court has agreed to examine the issue of whether the 90-day time limit prescribed under Section 18(5) of the MSMED Act for resolving disputes by the Micro and Small Enterprises Facilitation Council (“Council”) is mandatory or merely directory. The bench comprising Justices Sanjay Kumar and SC Sharma issued a notice in a plea filed by one M/s Vast India Pvt. Ltd. challenging Bombay High Court's Division Bench's order which quashed the award passed by the Council in its favour stating...

MSME Framework Not A Shield Against SARFAESI Proceedings Unless Proactively Invoked : Supreme Court Clarifies 'Pro Knits' Judgment

The Supreme Court recently held that secured creditors and banks are not obligated to identify "incipient stress" in the accounts of MSMEs prior to classifying them as Non-Performing Assets (NPAs), unless the MSME borrower has explicitly invoked the 2015 RBI Framework for revival and rehabilitation. The Court clarified that MSMEs cannot belatedly rely on the Framework during the course of SARFAESI proceedings initiated by lenders following a default. Instead, it is incumbent upon the MSME to...

Limitation Act Won't Apply To Conciliation Process Under MSMED Act, But Applies To Arbitration : Supreme Court

The Supreme Court settled an important legal issue regarding the recovery of time-barred payment claims by Micro, Small, and Medium Enterprises (MSMEs) suppliers from large buyers under the MSMED Act. The Court held that while MSME suppliers may pursue time-barred debts through conciliation proceedings under the Act, such claims cannot be enforced through arbitration, as the Limitation Act applies to arbitration proceedings initiated under the MSMED framework. The Court reasoned that the...

Bar Against Even Number Of Arbitrators Is Not Attracted In Case Of Statutory Arbitration U/S 18(3) Of MSMED Act: Calcutta HC

A division bench of Calcutta High Court comprising Justices Uday Kumar and Sabyasachi Bhattacharya in a notable judgment has observed that the bar restricting the number of arbitrators to even numbers, which is applicable when the parties themselves appoint arbitrators under the Arbitration and Conciliation Act (“ACA”), is not attracted to a statutory arbitration under Section 18(3), Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”). Thus, even if the number of...

Benefits To Registered Retail Traders Under MSMED Act Limited To Priority Sector Lending, Not Eligible For QCO Exemption: Kerala High Court

The Kerala High Court held that the benefits to registered retail traders under MSMED Act, 2006 (Micro, Small and Medium Enterprises Development Act, 2006) limited to priority sector lending only, and are not eligible for QCO [Plywood and Wooden flush door shutters (Quality Control) Order, 2024] exemption. Justice Ziyad Rahman A.A. stated that “the entire category of wholesale and retail trades were excluded completely from the purview of MSMED Act and later, they were re-included...

MSME Council's Order Declaring Jurisdiction To Decide Dispute Between Parties Can Be Challenged Only U/S 34 Of A&C Act: Orissa High Court

The Orissa High Court bench of Justice K.R. Mohapatra has held that once the MSME Council initiates arbitration following the termination of conciliation proceedings, any order passed by the Council regarding its jurisdiction to adjudicate the dispute can only be challenged under Section 34 of the Arbitration and Conciliation Act. The aggrieved party cannot invoke Article 227 of the Constitution to seek setting aside of an award passed under the MSMED Act. Brief Facts: M/s Odisha...

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

The Calcutta High Court bench of Justice Sabyasachi Bhattacharyya has held that once arbitral proceedings commenced under Section 18(3) under the MSME Act, the process could not be reversed to reinitiate pre-arbitral conciliation. The Council did not do so either. It was only at the petitioner's request that additional avenues for mutual settlement were explored alongside the arbitration. Upon the failure of these efforts, the Council proceeded to decide the matter on merits. Brief...