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SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, JOYMALYA BAGCHI, JJ.
M/s Sonali Power Equipments Pvt. Ltd. - Appellant
Versus
Chairman, Maharashtra State Electricity Board, Mumbai and Others - Respondents
Civil Appeal Nos. 9524-9532 of 2025 [Arising Out of SLP (C) Nos. 6912-6920 of 2024]
Decided On : 17-07-2025
| Table of Content |
|---|
| 1. applicability of limitation act to conciliation and arbitration. (Para 1) |
| 2. factual background of the case and parties involved (Para 2 , 3) |
| 3. high court's interpretation and relevant orders (Para 4 , 5) |
| 4. arguments from appellants and respondents regarding limitation laws (Para 6 , 7) |
| 5. judicial interpretation of recovery rights under the msmed act. (Para 8) |
| 6. court's analysis of conciliation and its relation to limitation (Para 24 , 32) |
| 7. court's ruling on arbitration claims and its implications (Para 34 , 35 , 50) |
| 8. final ruling on limitations and recovery mechanisms. (Para 51) |
| 9. final conclusions and orders by the court (Para 52 , 53 , 54) |
JUDGMENT :
PAMIDIGHANTAM SRI NARASIMHA, J.
| Table of Contents | |
| (I) | Introduction |
| (II) | Brief Facts |
| (III) | High Court order dated 24.08.2018 |
| (IV) | Impugned order |
| (V) | Submissions |
| (VI) | Issues |
| (VII) | Relevant statutory provisions |
| (VIII) | Whether time-barred claims can be referred to conciliation under Section 18(2) of the MSMED Act |
| (IX) | Whether time-barred claims can be referred to arbitration under Section 18(3) of the MSMED Act |
| (X) | Conclusion |
1. Leave granted.
(I) Introduction:
2. The issue arising in the present appeals are whether the provisions of the LIMITATION ACT , 19631 [Hereinafter “ LIMITATION ACT ”] are applicable to conciliation and arbitration proceedings initiated under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006.2 [Hereinafter “MSMED Act”] Further, even if the LIMITATION ACT is not applicable, whether a supplier can recover a time-barred debt by taking recourse to the remedies provisioned under Section 18 of the MSMED Act. In the order impugned before us in the present appeals, a full bench of the High Court has held that the Facilitation Council cannot entertain time-barred claims for conciliation, and that the provisions of the LIMITATION ACT are applicable to arbitration proceedings under the MSMED. On considering the statutory scheme and provisions of the MSMED Act, the Arbitration and Conciliation Act, 19963 [Hereinafter “ACA”] and the LIMITATION ACT , along with the precedents of this Court as well the submissions of the parties, we have partly allowed the present appeals as follows. We have upheld the decision of the High Court to the extent of the LIMITATION ACT being applicable to arbitration proceedings under the MSMED Act and have provided our reasons for the same. With respect to conciliation proceedings on the other hand, we are of the opinion that they do not attract the applicability of the LIMITATION ACT . Further, there is no legal bar in the LIMITATION ACT , the MSMED Act, the ACA, or the legal precedents laid down by this Court that proscribes conciliation with respect to time-barred debts.
(II) Brief Facts:
3. The appellants are small-scale industries registered with the District Industries Centre, Nagpur. The appellants supplied transformers to respondent no. 1 under various purchase orders between 1993 to 2004. Due to delay in payments, the appellants filed references in 2005-06 before the Industry Facilitation Council established under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.4 [Hereinafter “1993 Act”] The 1993 Act came to be repealed by the MSMED Act, 20065 [ Section 3 2 of the MSMED Act, which reads: “32. Repeal of Act 32 of 1993: (1) The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 is hereby repealed. (2) Notwithstanding such repeal, anything done or any action taken under the Act so repealed under sub-section (1) shall be deemed to have been done or taken under the corresponding provisions of this Act.”] and the proceedings initiated by the appellants were taken up by the Micro and Small Enterprises Facilitation Council6 [Hereinafter “Facilitation Council”] under the MSMED Act.
3.1 By its award dated
The Limitation Act, 1963 is not applicable to conciliation proceedings under the MSMED Act but applies to arbitration under its provisions; time-barred claims can be settled through conciliation.
The Limitation Act, 1963 is not applicable to conciliation proceedings under the MSMED Act; however, it applies to arbitration proceedings, preventing stale claims from being raised under the Act.
The court ruled that a party to a dispute cannot waive the mandatory conciliation requirement under Section 18(2) of the MSMED Act, validating subsequent arbitration proceedings.
The conciliation proceedings contemplated under Section 18(2) of MSMED Act is mandatory in nature, and failure to comply with the mandatory procedure vitiates the impugned order.
Writ petition not maintainable against MSMED Council orders; must challenge via Section 34 A&C Act with 75% pre-deposit.
The main legal point established is that arbitration proceedings under the MSMED Act must adhere to the procedural requirements of the Act and the Arbitration and Conciliation Act, 1996.
The MSMED Act prevails over A&C Act provisions regarding interest, granting small enterprises specific rights on delayed payments independent of dispute resolution processes.
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