Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(SC) 380

SUPREME COURT OF INDIA
Pamidighantam Sri Narasimha, J
Nbcc (India) Ltd. – Appellant
Versus
State Of West Bengal – Respondent
CIVIL APPEAL NO. 3705 OF 2024

Advocates:
For the Appellants/Petitioners: Gopal Sankaranarayanan
For the Respondents: Madhumita Bhattacharjee, Roshan Santhalia

The reference of a dispute under Section 18 of the Act is not conditioned upon the enterprise having a registration memorandum under Section 8 at the time of contract execution. The remedy is open-ended and available to any party to a dispute arising from statutory payment liabilities.

Headnote:(A) Micro, Small and Medium Enterprises Development Act, 2006 - Sections 2, 8, 15, 16, 17, 18 - Dispute resolution - Whether registration under Section 8 is a mandatory precondition for invoking jurisdiction under Section 18 - Held, the expression 'any party to a dispute' in Section 18 is open-ended and does not restrict the remedy to entities registered under Section 8. (Paras 1.2, 14.1, 14.9)

(B) Interpretation of Statutes - Beneficial legislation - Protection of smaller enterprises - Jurisdictional requirements must be interpreted to bridge the gap between rights and remedies, ensuring effective access to justice. (Paras 10, 10.1)

Facts of the case:
An enterprise sought to refer a dispute regarding payments for supply of goods and services to a statutory facilitation council. The buyer challenged the jurisdiction on the ground that the enterprise was not registered under the Act at the time the contracts were executed. Both the lower courts and the high court directed the parties to agitate the jurisdictional issue before the arbitrator, leading to the present appeal.

Findings of Court:
The Court analyzed the statutory scheme and noted that Section 18 utilizes the phrase 'any party to a dispute,' which is intentionally broader than the term 'supplier.' The Court further clarified that filing a memorandum under Section 8 is discretionary for micro and small enterprises, and the definition of 'supplier' is inclusive of entities regardless of their registration status with respect to specific supply contracts. Previous judicial observations suggesting mandatory registration were found to be rendered without a specific focus on the jurisdictional issues presented here.

Issues: The main issue was whether an enterprise, not registered under the Act at the time of contract execution, is statutorily precluded from referring a dispute to the facilitation council under Section 18.

Ratio Decidendi: The Court held that the legislative intent behind the facilitation council was to provide an open-ended remedy for the resolution of disputes arising from delayed payments. Since Section 8 grants discretion in filing a memorandum, and Section 18 does not explicitly restrict its use to registered suppliers, the lack of registration at the time of contract execution does not bar the filing of a reference.

Result: Appeal referred to a larger bench to resolve the conflict with earlier judicial pronouncements and provide clear legal certainty.

Table of Content
1. introductory overview and the specific jurisdictional question regarding msme registration for section 18 references. (Para 1)
2. summary of factual background and procedural history of the dispute. (Para 2 , 3)
3. contentions of parties and identification of the core legal issue regarding pre-contract registration. (Para 4 , 5 , 12 , 13)
4. application of shanti conductors principle: liability rests on supply date, not contract date. (Para 6 , 7 , 11)
5. constitutional mandate for effective, accessible, and cohesive judicial remedies. (Para 8 , 9 , 10)
6. interpretation of section 18: 'any party' does not restrict access to registered enterprises only. (Para 14 , 15)
7. critical analysis of precedents (silpi industries/mahakali foods) arguing for limited precedential scope. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28)
8. formal order referring the matter to a larger bench for legal certainty. (Para 29 , 30)

Table of Contents

1. Introduction .................................................................................................... 2

2. Facts ............................................................................................................... 4

3. Decisions of the Single Judge and the Division Bench..................................... 6

4. Submissions .................................................................................................... 7

5. Issue for our consideration.............................................................................. 8

6. The repealed Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 and the judgment in Shanti Conductors v. Assam State Electricity Board . ..................................................................... 8

7. The Micro, Small and Medium Industry in our Country................................. 12

8. Interpretation of Statutory Remedies by Constitutional Courts..................... 15

9. Statutory Scheme of the MSMED Act, 2006 ................................................... 17

10. Whether registration is a necessary precondition to referring a dispute under Section 18 of the Act .................................................................................... 20

11. Re: Silpi Industries v. Kerala State Road Transport Corporation .................. 31

12. Re: Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. ..........35

13. Conclusion and reference to larger Bench..................................................... 42

1. Introduction: The old value of ‘Small is beautiful’, (E.F. Schumacher, ‘Small Is Beautiful: A Study of Economics as if People Mattered’ (1973) “We need the freedom of lots and lots of small, autonomous units, and, at the same time, the orderliness of large-scale, possibly global, unity and co-ordination. When it comes to action, we obviously need small units, because action is a highly personal affair, and one cannot be in touch with more than a very limited number of persons at any one time.”) has not lost its relevance. Recognising the contribution of micro, small and medium enterprises towards economic development, the United Nations declared June 27th as MSME day. MSMEs are said to be the backbone of many economies, including India. This resonates with the statement of the father of our nation, Mahatma Gandhi, declaring that the ‘salvation of India lies in cottage and small scale industries’. The Parliament enacted the Micro, Small and Medium Enterprises Development Act, 2006, (Hereinafter referred to as ‘the Act’.) for facilitating the promotion and development of the enterprises by creating certain rights and duties and establishing a Board, Advisory Committee, and Facilitation Council. Importantly, the Act provided a mechanism for dispute resolution.

1.1 The MSME before us has a simple prayer. It seeks to refer the dispute that it has with the buyer regarding payment of its dues to the Facilitation Council for

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2025 Supreme(Online)(SC) 380

SUPREME COURT OF INDIAPamidighantam Sri Narasimha, JNbcc (India) Ltd. – AppellantVersusState Of West Bengal – RespondentCIVIL APPEAL NO. 3705 OF 2024

The reference of a dispute under Section 18 of the Act is not conditioned upon the enterprise having a registration memorandum under Section 8 at the time of contract execution. The remedy is open-ended and available to any party to a dispute arising from statutory payment liabilities.

Cases Referred (3)

SUPREME COURT OF INDIA
Pamidighantam Sri Narasimha, J
Nbcc (India) Ltd. – Appellant
Versus
State Of West Bengal – Respondent
CIVIL APPEAL NO. 3705 OF 2024