MSME
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...
Whether A Particular Contract Is A Works Contract Under MSME Can't Be Decided Under Writ Jurisdiction: Telangana High Court
The Telangana High Court bench of Justice K. Lakshman has held that the question of whether a particular contract is a works contract or not is for the MSME Council to decide, and the dispute cannot be decided under writ jurisdiction. Brief Facts: This writ petition challenges the order dated 21.12.2024 in Case No. 1292/MSEFC/2021 passed by Respondent No. 2, seeking a declaration that the order is non-arbitrable and illegal. The petitioner prays for a direction to Respondent No. 2 to...
Interim Measures U/S 9 Of Arbitration Can't Be Sought By MSME During Conciliation Proceedings: Calcutta High Court
The Calcutta High Court bench of Justice Shampa Sarkar has held that interim measures under Section 9 of the Arbitration Act can be sought by the MSME only after mandatory conciliation before the MSME Council fails and the dispute proceeds to arbitration—either conducted by the Council or referred to an arbitral institution. Only then do the provisions of the Arbitration Act apply. Consequently, seeking relief under the Arbitration Act during conciliation is clearly prohibited under...
Mandate Of MSME Council Not Automatically Terminated For Failure To Refer Dispute To Arbitration Within 90 Days: Delhi High Court
The Delhi High Court bench of Justice Manoj Kumar Ohri has held that the mandate of the MSME Facilitation Council to refer a dispute to arbitration under Section 18(3) of the Micro, Small and Medium Enterprises Development (MSMED) Act, following the failure of conciliation under Section 18(2), is not automatically terminated if the referral is not made within 90 days as prescribed under Section 18(5). Unlike Section 29A of the Arbitration and Conciliation Act, 1996 (Arbitration Act)...
Private Arbitration Clauses Cannot Override Statutory Mandates Under MSMED Act : Supreme Court
Reaffirming that the MSMED Act prevails over the Arbitration Act, as held in Gujarat State Civil Supplies v. Mahakali Foods, the Supreme Court set aside the Karnataka High Court's interference with MSMED proceedings in Delhi, despite the contract naming Bengaluru as the arbitration seat. The Court clarified that private contractual clauses cannot override the statutory mandate of the MSMED Act. Since the appellant-supplier was registered in Delhi, the Court noted that the Delhi Arbitration...