Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Some judgments suggest that even if registration occurs after the contract, claims relating to work or supplies after registration may be considered, but this is context-dependent and not the general rule ["Indian Oil Corporation Ltd. vs Adarsh Nobel Corporation Ltd. - Orissa"], ["Srirasthu Shopping Mall VS Micro And Small Enterprises - Telangana"].
Analysis and Conclusion:
References:- ["GUJARAT INFRASTRUCTURE DEVELOPMENT BOARD vs INFRASTRUCTURE DEVELOPMENT - Karnataka"]- ["Indian Oil Corporation Ltd. vs Adarsh Nobel Corporation Ltd. - Orissa"]- ["Hindustan Petroleum Corporation Limited VS West Bengal State Micro, Small Enterprises Facilitation Council - 2023 0 Supreme(Cal) 1161"]- ["A Bharat Trading Company VS Kanpur Steel and Engineering Works - Chhattisgarh"]- ["Jkg Infratech Private Limited VS Larsen And Toubro Limited - Delhi"]- ["Executive Engineer VS Bholasingh Jaiprakash Construction Ltd. - Delhi"]- ["Municipal Corporation of Delhi VS Triweni Enterprises - Delhi"]- ["Srirasthu Shopping Mall VS Micro And Small Enterprises - Telangana"]
In the world of small business operations, disputes with buyers or clients can arise even after a contract ends. For Micro, Small, and Medium Enterprises (MSMEs) in India, the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, offers a specialized forum: the Micro and Small Enterprises Facilitation Council (Council). But a common question arises: can an MSME enterprise approach the Council when it is registered before the Council after the termination of the contract?
This post explores the legal nuances, drawing from judicial precedents and statutory provisions. Note that this is general information based on case law and should not be considered specific legal advice—consult a qualified lawyer for your situation.
Generally, MSME enterprises retain the right to approach the Council under Section 18 of the MSME Act for dispute resolution even after contract termination, provided they were registered as an MSME at the time the contract was entered intoVaishno Enterprises VS Hamilton Medical AG - 2022 4 Supreme 92. The Council's jurisdiction is not barred by contract termination, arbitration clauses, or mere subsequent registration. The MSME Act overrides conflicting contractual provisions to ensure expeditious resolution. However, this right is typically lost if the enterprise was not an MSME when the contract was executed Vaishno Enterprises VS Hamilton Medical AG - 2022 4 Supreme 92M/S Bisleri International Pvt. Ltd. vs M/S Sunpet Pack Jabalpur - 2026 Supreme(Online)(MP) 1529.
Therefore, when the contract was entered into the appellant was not MSME and therefore the parties would not be governed by the MSME Act Northroof Ventures Private Limited VS XYNC Structural Solutions Pvt. Ltd. - 2024 Supreme(Kar) 54. This underscores the critical timing of registration.
These principles ensure MSMEs can seek fast-track remedies for delayed payments or performance issues post-termination.
The cornerstone is MSME registration before or at contract execution. Courts have consistently held that post-contract registration does not retroactively apply. For instance, It is admitted position that in the present case the appellant is registered as MSME only on 28-8-2020... to seek the benefit of provisions under the MSMED Act, the seller should have registered under the provisions of the Act, as on t... M/S Bisleri International Pvt. Ltd. vs M/S Sunpet Pack Jabalpur - 2026 Supreme(Online)(MP) 1529. Similarly, the first respondent was not registered as a Micro, Small, or Medium Enterprise during the relevant transactions, rendering the proceedings before the arbitral Tribunal a nullity in law from case summary in other sources.
If registered timely, post-termination disputes—like unpaid dues from works contracts—are actionable. The Act's beneficial nature warrants liberal construction Hindustan Petroleum Corporation Limited VS West Bengal State Micro, Small Enterprises Facilitation Council - 2023 0 Supreme(Cal) 1161.
The Council's reach extends to supply, erection, and works contracts. In one case involving pipeline supply and erection, jurisdiction was upheld despite an arbitration clause, prioritizing the MSME Act's expertise for speedy disposal Hindustan Petroleum Corporation Limited VS West Bengal State Micro, Small Enterprises Facilitation Council - 2023 0 Supreme(Cal) 1161.
Termination does not automatically extinguish access to the Council. Disputes often emerge or persist post-termination, such as claims for wrongful termination damages. Analogous arbitration law confirms survival of resolution mechanisms: Whether termination was valid or not and whether damages are recoverable for such wrongful termination does not affect arbitration clause Damodar Valley Corporation VS K. K. Kar - 1973 0 Supreme(SC) 349.
Council proceedings mirror statutory arbitration under a deemed agreement, unaffected by termination Secur Industries LTD. VS Godrej & Boyce Mfg. Co. LTD. - 2004 4 Supreme 107. Even full settlements require scrutiny—mere 'full and final' payments may not abrogate rights unless via novation Damodar Valley Corporation VS K. K. Kar - 1973 0 Supreme(SC) 349.
Other precedents reinforce this: Registration post-execution (e.g., on 19.4.2013 after contract) does not qualify claims Marine Craft Engineers Private Limited VS Garden Reach Shipbuilders and Engineers Limited - 2023 Supreme(Cal) 557. In manpower or construction disputes, prospective registration applies only to subsequent supplies Megha Engineering & Infrastructure Ltd. VS H. P. Micro Small Enterprises Facilitation Council - 2023 Supreme(HP) 26.
A key advantage for MSMEs: the Act trumps private pacts. The MSME Act overrides any provisions of the agreement between the parties or the Arbitration and Conciliation Act Indian Highways Management Company Limited VS Mukesh & Associates - 2021 0 Supreme(Del) 2201. Section 18(5) timelines are directory, not mandatory, preventing lapse. Courts cannot stay proceedings on preliminary issues like notice—the Council rules under Section 16 of the Arbitration Act Secur Industries LTD. VS Godrej & Boyce Mfg. Co. LTD. - 2004 4 Supreme 107Hindustan Petroleum Corporation Limited VS West Bengal State Micro, Small Enterprises Facilitation Council - 2023 0 Supreme(Cal) 1161.
Presence of an arbitration clause does not bar Council reference; Section 18(4) ensures jurisdiction over buyers anywhere in India Dalapathi Constructions, Rep. by its Partner Mr. Dalapathirao Venkata Nagaraju VS State of Andhra Pradesh, rep. by its Special Chief Secretary - 2022 Supreme(AP) 791. However, counterclaims may not fit, as the Act targets supplier dues Leitwind Shriram Manufacturing Private Limited, Rep. by its General Manager, Gomathythamarai Selvi VS GR Green Life Energy Pvt. Ltd. , Pune - 2020 Supreme(Mad) 1779.
While access is broad, exceptions apply:
MSMEs can generally approach the Facilitation Council post-contract termination if registered at contract inception, leveraging the MSME Act's protective framework. This promotes timely dispute resolution, overriding hurdles like arbitration clauses. However, timing of registration is pivotal—post-execution filings fail jurisdiction tests.
Key Takeaways:- Register as MSME before signing contracts.- Act swiftly on disputes, even after termination.- The Act favors MSMEs but demands compliance with prerequisites.
Stay informed on evolving case law, as courts continue interpreting these provisions. For tailored guidance, engage legal experts.
References (select citations):- Hindustan Petroleum Corporation Limited VS West Bengal State Micro, Small Enterprises Facilitation Council - 2023 0 Supreme(Cal) 1161, Vaishno Enterprises VS Hamilton Medical AG - 2022 4 Supreme 92, Secur Industries LTD. VS Godrej & Boyce Mfg. Co. LTD. - 2004 4 Supreme 107, Indian Highways Management Company Limited VS Mukesh & Associates - 2021 0 Supreme(Del) 2201, Damodar Valley Corporation VS K. K. Kar - 1973 0 Supreme(SC) 349, M/S Bisleri International Pvt. Ltd. vs M/S Sunpet Pack Jabalpur - 2026 Supreme(Online)(MP) 1529, Northroof Ventures Private Limited VS XYNC Structural Solutions Pvt. Ltd. - 2024 Supreme(Kar) 54
#MSMEAct, #MSMEDisputes, #ContractLaw
Therefore, the supplier has to be a micro or small enterprise registered as MSME, registered with any of the authority mentioned in sub-section (1) of Section 8 and Section 2(n) of the MSME Act. It is admitted position that in the present case the appellant is registered as MSME only on 28.08.2020. ... Further, respondent No.1 herein has registered with the Ministry of Micro, Small and Medium Enterprises as per Annexure-G on 15.12.2....
Section 18 cannot be rejected on the ground that the said enterprise has not registered itself in Section 8 , much less that on the date of contract, it was not registered under . ... Wardha Municipal Corporation , 2021 SCC OnLine Bom 5531 The dispute concerned an MSME contractor who alleged non-payment for work performed under a works contract and sought to invoke arbitration through the MSME Facilitation Council. ... Accordingly, this Court holds ....
Once registered, the status of the enterprise is that of a registered enterprise under the MSME Act and all the provisions of the MSME Act have to apply with full force. 16. ... Once registered, the status of the enterprise is that of a registered enterprise under the MSME Act and all the provisions of the said Act apply with full force. 60. ... The correct proposition of law, in my humble opinion....
Therefore, the supplier has to be a micro or small enterprise registered as MSME, registered with any of the authority mentioned in sub-section (1) of Section 8 and Section 2(n) of the MSME Act. 21. ... It is admitted position that in the present case the appellant is registered as MSME only on 28-8-2020. ... In our view, to seek the benefit of provisions under the MSMED Act, the seller should have registered under the provisions of the Act, as on t....
As on the date of entering into contract, respondent No.1 was not registered as Small Scale Enterprise, provision of MSME Act will not be applicable to respondent No.1 and he cannot take any benefit of provision mentioned therein. ... As on the date of entering into the contract, respondent No.1 being not registered enterprise under the MSME Act, respondent No.1 cannot be treated to be supplier under the provision of MSME Act and th....
Therefore, when the contract was entered into the appellant was not MSME and therefore the parties would not be governed by the MSME Act and the parties shall be governed by the laws of India applicable and/or prevailing at the time of execution of the contract. ... It is admitted position that in the present case the appellant is registered as MSME only on 28.08.2020. ... It now becomes apposite to refer to the judgments of the Apex Court in the cases of Vaishno Enterprises (supra), w....
In other words, whether the supplier was registered as an MSME on the date of the contract would not disqualify the supplier from making reference to the Micro and Small Enterprises Facilitation Council under section 18 for recovery of outstanding amounts as long as the amounts claimed are relatable ... Counsel submits that the petitioner was registered under the MSMED Act only on 19.4.2013 which would mean that the contract between the parties was entered into prior to the registratio....
Therefore, the supplier has to be a micro or small enterprise registered as MSME, registered with any of the authority mentioned in sub-section (1) of Section 8 and Section 2(n) of the MSME Act. It is admitted position that in the present case the appellant is registered as MSME only on 28.08.2020. ... It is admitted position that the date on which a contract/agreement was executed i.e. on 24.08.2020 the appellant was not registered....
Therefore, the supplier has to be a micro or small enterprise registered as MSME, registered with any of the authority mentioned in sub-section (1) of Section 8 and Section 2(n) of the MSME Act. It is admitted position that in the present case the appellant is registered as MSME only on 28.08.2020. ... It is admitted position that the date on which a contract/agreement was executed i.e. on 24.08.2020 the appellant was not registered....
Therefore, the supplier has to be a micro or small enterprise registered as MSME, registered with any of the authority mentioned in subsection (1) of Section 8 and Section 2(n) of the MSME Act. It is admitted position that in the present case the appellant is registered as MSME only on 28.08.2020. ... It is admitted position that the date on which a contract/agreement was executed i.e. on 24.08.2020 the appellant was not registered ....
1 is admittedly a small enterprise registered under the MSME Act. Act which provides that the registration for a particular activity will render an enterprise liable not to be regarded as a micro, small or medium enterprise for any other activity. The registration certificate is annexed at Exhibit ‘1’ to the affidavit in support of notice of motion (L) no. Once registered, the status of the enterprise is that of a registered enterprise under the MSME Act and all the provisions of the MSME Act has to apply with full force” As regards the other defence is co....
As per section 80 of the Act of 1996, the Council cannot act as an Arbitrator in respect of a dispute, which is subject matter of conciliation proceeding. MSME Council having undertaken the proceeding of conciliation and after having recorded its failure in the order sheet, cannot act as an Arbitrator and proceed ahead in the matter. Under section 18(3), the dispute has to be referred to any other institution or centre providing Alternative Dispute Resolution Service. Thus, it is a mandatory pre-requisite for an enterprise classified as micro/small unit to have an....
Therefore, when there is a mechanism provided under the Act for the reference for mediation and arbitration, there is no specific exclusion in the Act to entertain the counter claim. The respondent already invoked arbitration clause before the MSME council. In such view of the matter, the present petition is not applicable.
(v) To the contention of Mr.Baxi that the GCCI had no jurisdiction to appoint an arbitrator, Mr.Bairagar submitted that the present arbitration is a statutory arbitration reading Section 18 of the MSME Act and it cannot be compared to the normal arbitration proceedings invoked under the Arbitration Act. In the present case, it is evident that the claimant – respondent No.5 was a registered MSME. It was in the facts of that case that it was held, the claimant was not entitled to approach MSME council. Mr.Bairagar further submitted that the judgment relied upon by Mr.Baxi in ....
Conciliation having failed, the Council referred the dispute for Arbitration to the DIAC (Delhi International Arbitration Centre) and a Sole Arbitrator was appointed. In these circumstances, Petitioner being MSME registered Company approached the Delhi MSME Facilitation Council as per the MSMED Act and the Council called for Conciliation. 3. It is averred in the petition that Petitioner had requested for appointment of an Arbitrator and while the Arbitrator was appointed by the Respondent, but no date was fixed in the proceedings and for many months nothing was heard either....
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