Delhi HC Protects Post-Registration MSME Claims
Judgment dated 13.10.2026 of the High Court of Delhi in WP (Civil) No.12456 of 2024 of MS TpL KIPL Joint Ventures Vs. Micro and Small Enterprise Facilitation Council District Magistrate West, Govt of NCT of Delhi and another
Respondent No. 2 – M/s. KRA Infrastructure Pvt. Ltd. was engaged by the Petitioner as a sub-contractor pursuant to a Letter of Intent dated 27.11.2017, for the Construction of the Sewage System including ancillary works, IPS along with O&M of the entire system for a period of 6 years in Karnal Town and a Work Order dated 19.01.2018 was executed in favour of Respondent No. 2. 3. On 07.09.2021, the Petitioner issued a notice to the Respondent No. 2 invoking the CPBGs amounting to ₹3,34,18,428/- against the mobilization advance. However, the Respondent No. 2 vide email dated 04.10.2021, requested the Petitioner to not invoke the CPBGs and offered to transfer the same amount to the Petitioner. After the said transfer, the CPBGs were returned to the office of the Respondent No. 2. 4. Thereafter, on 27.11.2021 the Respondent No. 2 sought payment of alleged outstanding dues amounting to ₹3.30 Crores from the Petitioner and on 13.05.2022, the Respondent No. 2 approached the learned Facilitation Council under Section 18 of the MSME Act, claiming approximately ₹3.60 crores. 5. The Petitioner filed an application challenging the maintainability of the claim filed by the Respondent No. 2 before the learned Facilitation Council raising concerns regarding the eligibility of the Respondent No. 2 availing benefits under the MSME Act, as according to it the Respondent No. 2 was not registered as an MSME at the time of executing the LoI and Work Order, and such benefits could not have been availed.
the Petitioner has raised a limited argument that the learned Facilitation Council referred the dispute to arbitration without deciding the Petitioner’s preliminary objections regarding its jurisdiction and the eligibility of Respondent No. 2 to invoke the provisions of the MSME Act. She submits that Respondent No. 2 had obtained MSME registration on 07.11.2020, subsequent to the execution of the Letter of Intent and Work Order. She contended that registration under the MSME Act operates prospectively and does not extend its benefits to contracts entered into prior to registration.
t remains undisputed that the registration has already been obtained under the MSME Act in the year 2020; the certification declares the enterprise as “small”; the claims arise from the Work order itself and the final bill has also been raised subsequent to the registration i.e. in 2021. However, the sole contention of the Petitioner is that the claims raised are prior to the period of their registration and the cause of action arises out of the LOI and the Work Order executed much before the registration. 19. Hence, it emerges that the above cited judgment in NBCC (supra) squarely covers the case at hand, as it has been settled that any party to the dispute can seek recourse to the Section 18 of the MSME Act, even if registration has been obtained subsequent to the execution of the Contract as Section 8 grants a discretion to a micro or a small enterprise in filing a memorandum with the authority. Thus, the Respondent No. 2 could have taken a recourse to Section 18 of the Act.
