Whether An Unregistered MSME Can Make A Reference To The Facilitation Council For Dispute Resolution U/S 18 MSME Act: SC Refers Issue To Larger Bench
The Supreme Court has referred the issue of whether an MSME can make a reference to the Facilitation Council for dispute resolution under Section 18 of the MSME Act if it is not registered under Section 8 to a three-Judge Bench.
The Court rejected the submission that the Facilitation Council cannot entertain a reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (the Act) if the enterprise is not registered under Section 8.
The Bench of Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal observed that “in view of the discretion specifically vested with the micro and small enterprises for filing a memorandum under Section 8 of the Act, the submission that the Facilitation Council cannot entertain a reference under Section 18 if the enterprise is not registered under Section 8 must be rejected.”
Senior Advocate Gopal Sankaranarayanan represented the Appellant, while AOR Madhumita Bhattacharjee appeared for the Respondents.
The Court observed that the MSMED Act, enacted in 2006, aims to promote and develop micro, small, and medium enterprises (MSMEs) and provides mechanisms for dispute resolution. Section 18 of the Act allows "any party to a dispute" regarding payments under Section 17 to make a reference to the Facilitation Council. The Appellant contended that only registered suppliers could seek remedies under this provision, relying on past decisions in Silpi Industries v. Kerala State Road Transport Corporation (2021) and Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (2023).
Addressing this, the Court emphasised that the phrase "any party to a dispute" is deliberately broad and unrestrictive, designed to facilitate access to justice. The Court reasoned that the legislative intent behind the MSMED Act was to provide inclusive remedies to MSMEs, many of which operate informally and are not registered. Filing a memorandum under Section 8 of the Act is discretionary for micro and small enterprises and does not bar them from seeking statutory remedies.
In Silpi Industries (Supra), the Apex Court held that an Enterprise cannot invoke Section 18 if it has not filed a memorandum under Section 8 of the Act before entering into a contract. While in Mahakali Foods (Supra), the Court stated that there was neither an issue, discussion, nor analysis on the applicability of Section 18 for enterprises that have not filed a memorandum.
Consequently, the Court held, “On the interpretation of the provisions of the Act we have arrived at a clear opinion and have expressed the same. Though it is possible for us to follow the precedents referred to in para 27 to arrive at the conclusion that the judgments in the case of Silpi Industries (supra) and Mahakali Foods (supra) coupled with the subsequent orders in Vaishno Enterprises (supra) and M/s Nitesh Estates (supra) cannot be considered to be binding precedents on the issue that has arisen for our consideration, taking into account the compelling need to ensure clarity and certainty about the applicable precedents on the subject, we deem it appropriate to refer this appeal to a three Judge Bench.”
Cause Title: NBCC (India) Ltd. v. The State Of West Bengal & Ors. (Neutral Citation: 2025 INSC 54)
Appearance:
Appellant: Senior Advocate Gopal Sankaranarayanan; Advocates Sanidhya Kumar and Shivani Vij; AOR Nagarkatti Kartik Uday
Respondents: AOR Madhumita Bhattacharjee and Roshan Santhalia; Advocates Debarati Sadhu, Srija Choudhury, Anant, Sudarshan Rajan, Satyam Dwivedi, Puja Jakhar and Harshit Prakash
