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...

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...

MSME Act | Procurement Order 2012 Has Force Of Law, Authorities Subject To Judicial Review : Supreme Court

The Supreme Court recently (on February 25) held that the Procurement Order 2012 issued as per the Micro, Small and Medium Enterprises Development Act, 2006, has the force of law and is enforceable.The Court further held that while the MSME Act and the Procurement Order 2012 do not create an 'enforceable right' for an individual MSE, the statutory authorities and administrative bodies created thereunder are impressed with enforceable duties. They are accountable and subject to judicial...

MSMED Act | Is Writ Maintainable Against MSEFC Award? Can MSEFC Members Act As Arbitrators ? Supreme Court Refers To Larger Bench

The Supreme Court today (Jan. 22) opined that the party aggrieved by an order/award of the Micro and Small Enterprises Facilitation Council (MSEFC) passed under Section 18 of the Micro, Small, and Medium Enterprises Development Act, 2006 (“MSME Act”) can file a writ petition under Article 226 of the Constitution before the High Court. However, upon noting that a contrary view was expressed in the previous ruling delivered by a coordinate bench in M/s India Glycols Limited and Another v. Micro...

Can Unregistered MSMEs Avail Dispute Settlement Under S.18 MSMED Act? Supreme Court Refers To Larger Bench

The Supreme Court today (Jan. 10) observed that for invoking the payment dispute resolution mechanism under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), it is not mandatory for the MSMEs to have prior registration under Section 8 of MSMED Act i.e., filing of an Entrepreneur's Memorandum.Rejecting the argument that only registered enterprises at the time of contract formation are eligible to invoke payment dispute resolution mechanism, the Court...

Writ Petition Against An Award Passed By A Facilitation Council Under MSMED Act Not Maintainable: Supreme Court

The Supreme Court recently held that a writ petition against an award passed by a Facilitation Council under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 would not be maintainable. The bench comprising CJI DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra held that the correct remedy against an award under the Act was provided under Section 34 of the Arbitration and Conciliation Act 1996 and approaching a High Court instead of pursuing the said remedy...

MSMED Act 'Dues' Will Not Prevail Over SARFAESI Proceedings : Supreme Court

The Supreme Court observed that the dues under Micro, Small and Medium Enterprises Development Act, 2006 would not prevail over the SARFAESI Act.In this case, the Madhya Pradehs High Court held that MSMED Act will prevail over Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. According to the High Court, in view of Section 24 of the MSMED Act which provides that the provisions of Sections 15 to 23 of the MSMED Act would have overriding effect...

Party Who Was Not 'Supplier' On The Date Of Entering Into Contract Cannot Seek Any Benefit As Supplier Under MSMED Act : Supreme Court

The Supreme Court observed that a party who was not 'supplier' on the date of entering into contract cannot seek any benefit as the 'supplier' under the MSMED Act, 2006If any registration is obtained subsequently the same would have an effect prospectively and would apply to the supply of goods and rendering services subsequent to the registration, the bench of CJI UU Lalit and Justice Bela M. Trivedi observed.The bench was considering a batch of appeals which raised issues regarding interplay...

[Breaking] Compound Interest During Moratorium Period Can Be Waived For MSME & Personal Loans Up to Rs. 2 Crore: Centre Tells SC [Read Affidavit]

The Central Government on Friday informed the Supreme Court of its decision to waive compound interest during the six-month moratorium period, for MSME loans and personal loans up to Rs. 2 crore. The Union of India submitted that is has decided to continue the "tradition of handholding the small borrowers" and therefore, it has waived interest for the said period for the most "vulnerable category of borrowers" viz.: MSME loans up to Rs. 2 croreEducation loans up to Rs. 2 croreHousing...