The Delhi High Court declined to enter into a dispute between parties regarding registration under the MSME Act holding that questions of law and facts can be decided by an Arbitral Tribunal.

Mahanagar Telephone Nigam Ltd. (MTNL), the petitioner, had challenged the decision passed by the Micro and Small Enterprises Facilitation Council (Council) for accepting the reference of a dispute under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act).

The Claimant was registered as a small enterprise under the MSME Act. The Claimant approached the Council for reference of a dispute between them and the petitioner to arbitration claiming dues towards non-payment of the RA bills under Section 17 of the MSME Act.

Subsequently, the petitioner approached the Court stating on the day the contract was entered into between the parties, the petitioner was not an MSME and, therefore, the Council could not have entertained the request for referring the dispute for arbitration.

A Single Bench of Justice Subramonium Prasad observed, “It is stated that the purpose of Section 17 and 18 of the MSME Act is to grant a cost-effective dispute resolution mechanism for recovery of unpaid dues of the supplier, which is a micro, small and medium level enterprise. The said Section gives the right to a micro, small and medium enterprise to have its disputes adjudicated by approaching the Facilitation Councils and it cannot be obliterated on account of any other contract to the contrary.

Advocate Chandan Kumar represented the petitioner, while ​​Advocate Avishkar Singhvi appeared for the respondents.

The Court relied on the Supreme Court’s decision in Gujarat State Civil Supplies Corporation Limited v. Mahakali Foods Private Limited (Unit 2) & Anr., 2023 (6) SCC 401 where it was held that “if any registration is obtained subsequently, the same would have effect prospectively and apply to the supply of goods and rendering services subsequent to the registration and this issue could be decided by the Facilitation Council/Institutes/Centre acting as an Arbitral Tribunal under the MSME Act.

The Court held that the contract was entered into before the claimant was registered as an MSME and one of the RA bills was given subsequent to the registration as an MSME.

The Court remarked, “What was the service rendered after the contract was entered into between the parties, whether the contract is a works contract or only a contract for providing services are all mixed questions of law and facts, which can be decided by the Arbitral Tribunal.”

The Court left it open for the petitioner to raise a dispute between the parties before an Arbitrator by filing appropriate applications under the Arbitration & Conciliation Act, 1996.

Accordingly, the High Court disposed of the petition.

Cause Title: Mahanagar Telephone Nigam Ltd. v. Delhi International Arbitration Centre, Through Its Co-Ordinator & Ors. (2024-DHC-758)


Petitioner: Advocates Chandan Kumar and Kirti Atri

Respondents: Advocates Avishkar Singhvi, Naved Ahmed, Vivek Kumar Singh, Deokinandan Sharma, and Dr. Anurag Kumar Agarwal

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