Registration As MSME After Executing Contract Doesn’t Bar Reference Of Dispute To Arbitration U/S 18 MSMED Act: Delhi High Court

The Court was hearing TPL-KIPL Joint Venture’s petition challenging the Facilitation Council’s orders terminating unsuccessful conciliation proceedings and referring its payment dispute with KRA Infrastructure Developers Private Limited to DIAC under Section 18(3) of the MSMED Act.

A Bench of Justice Amit Mahajan observed: “… 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.”

Advocate Renu Gupta appeared for the petitioner. Advocate Rakesh Gupta appeared for the respondents.

Background

TPL-KIPL engaged KRA Infrastructure as a subcontractor under a November 2017 Letter of Intent and a January 2018 Work Order for construction and operation-related work concerning a sewage system in Karnal.

In November 2021, KRA Infrastructure demanded approximately ₹3.30 crore as outstanding dues. It approached the Facilitation Council under Section 18 of the MSMED Act in May 2022, claiming approximately ₹3.60 crore.

TPL-KIPL questioned the maintainability of the reference. It contended that KRA Infrastructure obtained MSME registration only on November 7, 2020, after the Letter of Intent and Work Order were executed. According to the petitioner, MSME registration operated prospectively and could not confer statutory benefits upon an earlier contract.

After attempts at conciliation in January 2023, May 2023 and July 2024 failed, the Council terminated the proceedings and referred the dispute to DIAC for arbitration. TPL-KIPL argued before the High Court that the Council should have decided its preliminary objections concerning jurisdiction and the enterprise’s eligibility before making the reference.

KRA Infrastructure contended that the petitioner could raise its jurisdictional objections before the arbitral tribunal under Section 16 of the Arbitration and Conciliation Act, 1996. It also maintained that it had operated as an MSME since 2007 and that the 2020 registration followed a change in the registration format.

Court’s Observations

NBCC Governed The Registration Objection

The Court relied on NBCC (India) Ltd. v. State of West Bengal (2025), which considered whether an enterprise could seek a reference under Section 18 if it had not filed a memorandum under Section 8 before executing its contract with the buyer.

The Bench noted that the Supreme Court had examined the MSMED Act as beneficial legislation and interpreted the expression “any party to a dispute” in Section 18 as not being expressly confined to suppliers registered before entering into a contract. It also treated the filing of a Section 8 memorandum as discretionary for micro and small enterprises. The Supreme Court had thereafter referred the question for consideration by a larger Bench.

The High Court further noted that NBCC distinguished Silpi Industries v. Kerala State Road Transport Corporation (2021) and Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Private Limited (2023), observing that the specific question concerning pre-contract registration had not been formulated or decided in those cases.

Quoting the statutory features identified in NBCC, the Court stated: “We have noted three clear features in the statutory regime. To start with, Section 18 of the Act does not use the expression ‘supplier’, instead employs the phrase, ‘any party to a dispute, may’. We have also noted that the definition of the expression ‘supplier’ is not confined to a micro or a small enterprise which has filed a memorandum under Section 8(1) but also includes companies or other entities engaged in selling goods or rendering services by an enterprise. Thirdly, Section 8 grants a discretion to a micro or a small enterprise in filing a memorandum with the authority.”

Final Bill Was Raised After Registration

Applying NBCC, the Court noted that KRA Infrastructure had obtained MSME registration in 2020 and had been certified as a small enterprise. Although the underlying Letter of Intent and Work Order preceded the registration, its final bill was raised subsequently in 2021.

The Court observed: “It 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.”

The Court held that NBCC squarely covered the petitioner’s objection. It consequently concluded that KRA Infrastructure was entitled to invoke Section 18 despite having obtained registration after execution of the contract.

Arbitration Referral Did Not Decide The Claims

The Court further observed that the Facilitation Council had referred the dispute for arbitration only after conciliation failed. The Council had not adjudicated the rival claims or contentions.

The Bench held: “Even otherwise, it is relevant to note that the impugned orders have been passed upon the failure of conciliation proceedings, with the dispute thereafter being referred for arbitration. No adjudication upon the rival claims and contentions of the parties has been made. Thus, the Petitioner fails to establish that it has been prejudiced by the impugned order.”

The Court clarified that its decision was confined to the petitioner’s objection concerning the enterprise’s subsequent registration. It made no observations on the merits of the underlying payment dispute.

The Bench added: “It is noted that only the limited ground raised before this Court regarding the subsequent registration of the Respondent No. 2 has been adjudicated and no observations have been made on the merits of the claims. Needless to say, the parties are at liberty to raise their respective contentions in the Arbitral proceedings in accordance with law.”

Conclusion

The High Court found no ground to interfere with the Facilitation Council’s orders referring the dispute to DIAC. It dismissed the writ petition and pending applications while leaving the parties free to raise their respective contentions in the arbitral proceedings.

Cause Title: M/s TPL-KIPL Joint Ventures v. Micro and Small Enterprise Facilitation Council, District Magistrate West, Government of NCT of Delhi and Another (Neutral Citation: 2026:DHC:9282)

Appearances

Petitioner: Advocates Renu Gupta and Pratiksha Jalan

Respondents: Advocate Rakesh Gupta

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