Facilitation Council cannot reject reference under MSMED Act Section 18(1) on limitation; must attempt conciliation under 18(2) even for time-barred claims, as non-adjudicatory; limitation applies only to arbitration under 18(3).

JUDGMENT :

Ajay Mohan Goel, J.

By way of this petition, the petitioner has assailed order dated 16.12.2024, passed by the Micro and Small Enterprises Facilitation Council, in terms whereof, the Reference made by the petitioner under Section 18(1) of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “the MSMED 2006 Act,”) has been rejected by holding that the same was time barred.

2. Brief facts necessary for the adjudication of this petition are that the petitioner submitted a Reference Petition before the Council under Section 18(1) of the 2006 Act against the present respondent for recovery of an amount of Rs.2,55,96,949/- alongwith interest for delayed payments. According to the petitioner, it had supplied goods to the respondents w.e.f. 13.02.2012 to 06.06.2016 and claimed that the payment in lieu of said supplies was delayed beyond the stipulated period as was prescribed in Section 16 of the 2006 Act by the respondents. After the receipt of the said reference, the proceedings were conducted by the Council in the matter, in which, the reference was contested by the respondents herein, including on the ground that the same was barred by limitation.

3. In terms of the impugned order, the Council has dismissed the reference by returning the findings that the reference claim filed by the claimant before the Council is in the nature of a suit filed before the Civil Court, in which, parties are required to agitate their matter diligently and, therefore, law of limitation which is applicable to the claim before the Civil Court is also applicable to the claims filed before the Council. The Council has further held in the impugned order that the litigation before the Council is like a suit before the Civil Court and, therefore, the question of limitation can be raised as a preliminary issue. The Council relied upon the judgment of the Hon’ble Supreme Court in Silpi Industries versus Kerala State Road Transport Corporation (2021)18 SCC 790, and has observed that as in terms of Article 137 of the Limitation Act, 1963, the applicable limitation period to file a case is three years from the date of cause of action and since the 2006 Act, is silent on the limitation period, therefore, the applicable period of limitation shall be three years. The Council further observed in the impugned order that as the claimant had approached the Council after a delay of almost eight years, the reference was hopelessly barred by limitation. The Council held that public policy underlines that the principles of limitation were salutary and it is well settled that respondents against whom claims are made should be in a position to justify their stand with records and in case the claims were made decades after the transaction took place, then, respondents may not be in a position to defend themselves with records.

4. Feeling aggrieved, the petitioner has approached this Court by way of the present petition.

5. Learned counsel for the petitioner submitted that the impugned order is not sustainable in the eyes of law as the Council has completely misdirected itself by dismissing the reference petition for want of limitation. Learned counsel submitted that the Council has erred in holding that it was akin to a Civil Court without appreciating that there are no traps of a Court as far as a Council is concerned, while it deals with a matter in terms of Section 18(1) or 18(2) of the 2006 Act. He submitted that in terms of the law declared by the Hon’ble Supreme Court of India, there is no power vested in the Council to t