Arbitration & MSME Act – services given after registration as micro enterprise

By the order dated 2.5.2022, the MSME Facilitation Council had accepted the reference of dispute under Section 18 of MSME Act and referred for arbitration to the Respondent no.1 Delhi International Arbitration.

This order was challenged in the writ petition in the following factual matrix –

In 2006, there was contract between the parties.  The first RA bill was submitted in 2018 and the last RA bill was given in 2022.   However, the respondent was registered on 14.11.2018 under MSME Act, 2006.  One of the RA bills given after the registration as a micro enterprise.

What was the service rendered after the contract between the parties or whether the contract was works contract or only a contract for providing services are all mixed questions of laws and facts which can be decided by the Arbitral Tribunal.

Purpose of Sections 17 and 18 of the MSME Act, 2006, is to provide cost-effective dispute resolution mechanism for recovery of unpaid dues of MSME supplier and gives right to have its disputes adjudicated by the  Facilitation Council.   This cannot be obliterated on account of any other contract to the contrary.

The important question is whether the MSME Act would apply to the goods and services supplied subsequent to the registration in a case where the goods / services were supplied also before the registration.

Judgment dated 30.1.2024 in W.P.(Civil) No.14515/2023 & CM APPL.57558/2023 of Mahanagar Telephone Nigam Ltd Vs. Delhi International Arbitration Centre and others