Delhi High Court Dismisses BSNL Plea, Says Objections on MSME Status for Arbitral Tribunal

Justice Swarana Kanta Sharma of the Delhi High Court has dismissed a petition filed by Bharat Sanchar Nigam Limited (BSNL) that sought to quash an arbitration reference made under the Micro, Small and Medium Enterprises Development (MSMED) Act. The Court held that objections regarding the timing of MSME registration and limitation must first be raised before the Arbitral Tribunal, not in writ proceedings.

The dispute arose from a June 2015 agreement between BSNL and a contractor for telecom infrastructure works in Pathankot, Punjab. The contractor completed the work and raised its final invoice on 1 February 2018, nearly three years before obtaining MSME registration on 26 March 2021. Thereafter, on 25 July 2022, the contractor approached the Micro and Small Enterprises Facilitation Council (MSEFC), which referred the matter to the Delhi International Arbitration Centre (DIAC) on 16 April 2024. BSNL then invoked the writ jurisdiction of the High Court under Articles 226 and 227 of the Constitution, arguing that the contractor could not retrospectively claim MSMED benefits for a pre-registration contract and that the claim was time-barred.

Arguments and Legal Framework

BSNL, represented by a team led by Advocate Sagar Kumar Pradhan, contended that the contractor’s belated MSME registration could not apply to a contract concluded before registration. Reliance was placed on the Supreme Court’s decision in Silpi Industries v. Kerala SRTC , which held that subsequent registration does not retrospectively confer MSME status for completed transactions. BSNL also argued that the claim, filed over four years after the final invoice, was barred by limitation.

The High Court, however, declined to examine these objections at the threshold. It noted that both the Supreme Court’s subsequent ruling in Gujarat State Civil Supplies Corporation Limited v. Mahakali Foods Private Limited and the statutory scheme of the Arbitration and Conciliation Act 1996 empower the Arbitral Tribunal to rule on its own jurisdiction and the maintainability of claims.

Court’s Reasoning

Justice Sharma observed that jurisdictional objections alone do not justify invoking writ powers when an efficacious remedy exists before the Arbitral Tribunal. The judgment emphasized:

“The aforesaid objections essentially relate to the maintainability of the claim and the jurisdiction of the forum constituted under the MSMED Act. However, merely because an objection relates to the jurisdiction of the Arbitral Tribunal, the same would not, by itself, justify exercise of jurisdiction under Articles 226 and 227 of the Constitution, particularly when such objection can be raised before and considered by the learned Arbitral Tribunal under the statutory scheme governing arbitration.”

The Court further noted that the limitation question—whether the claim was filed within time—depended on the nature of the claim, contractual terms, and the date of accrual of cause of action, all of which fall within the arbitral tribunal’s purview.

Key Observations

  • “This Court does not find any circumstance in the present case which would warrant interference with the arbitral proceedings at this stage.”
  • “It is also well settled that the jurisdiction under Articles 226 and 227 of the Constitution in respect of arbitral proceedings is to be exercised sparingly.”

The Court clarified that it had expressed no opinion on the merits of BSNL’s objections, leaving them open for the Arbitral Tribunal to decide in accordance with law.

Decision and Implications

Dismissing the petition as not maintainable, the Court granted BSNL liberty to raise all its objections—including those concerning MSME registration date, the applicability of the MSMED Act to the transaction, and limitation—before the Arbitral Tribunal.

The ruling reinforces the principle that writ courts should not pre-empt arbitration proceedings by entertaining challenges that can be addressed within the statutory arbitration framework. It also underscores that post-contract MSME registration issues and limitation defenses are best resolved by the tribunal seized of the matter.

The judgment was uploaded on 26 August 2026.