In a significant judgment, a Division Bench of the Supreme Court of India comprising Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal addressed whether micro, small, and medium enterprises (MSMEs) unregistered at the time of entering contracts can access dispute resolution mechanisms under Section 18 of the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006. While clarifying several legal aspects, the Bench referred the matter to a larger Bench for an authoritative
Case Background
The appeal, titled NBCC (India) Ltd. vs. State of West Bengal & Ors. (Civil Appeal No. 3705 of 2024), arose from disputes involving NBCC (India) Ltd. and M/s Saket Infra Developers Private Limited, a construction company registered as a small enterprise under the MSMED Act. NBCC objected to the jurisdiction of the West Bengal Micro and Small Enterprises Facilitation Council to arbitrate disputes, arguing that the Enterprise’s registration under Section 8 of the Act occurred after the contracts were executed, thereby barring it from invoking the provisions of Section 18.
Lower courts had allowed objections to be raised before the arbitrator, but NBCC challenged these decisions in the Supreme Court.
Key Legal Issues
1. Interpretation of Section 18: Whether “any party to a dispute” under Section 18 includes only MSMEs registered before entering into contracts.
2. Role of Registration: Is filing a memorandum under Section 8 a mandatory precondition to accessing statutory remedies?
3. Conflict with Previous Judgments: How this issue aligns with prior Supreme Court decisions in Silpi Industries vs. Kerala State Road Transport Corporation and Gujarat State Civil Supplies Corporation Ltd. vs. Mahakali Foods Pvt. Ltd.
Supreme Court’s Ruling
Justice Pamidighantam Sri Narasimha, delivering the judgment, held that Section 18’s language is expansive and does not restrict dispute resolution access solely to registered MSMEs. The judgment emphasized that filing a memorandum under Section 8 is discretionary for micro and small enterprises, as indicated by the term “may” in the statute.
The Court found that:
– The text “any party to a dispute” under Section 18 includes suppliers irrespective of registration status.
– Registration under Section 8 cannot retroactively impact an MSME’s rights to dispute resolution.
– The statute aims to promote the interests of MSMEs and facilitate access to justice without procedural barriers.
While the judgment clarified these points, the Court acknowledged conflicting interpretations in earlier decisions and referred the issue to a larger Bench for a final determination.
Observations of the Court
The Court made critical observations about the intent of the MSMED Act and the constitutional duty to provide access to justice:
– “Statutory remedies must be interpreted to bridge the gap between rights and remedies, ensuring that justice is accessible, affordable, and effective.”
– “Section 18’s use of the phrase ‘any party to a dispute’ reflects legislative intent to create a broad and inclusive dispute resolution framework.”
Legal Representation
The appellant, NBCC (India) Ltd., was represented by Senior Advocate Mr. Gopal Sankaranarayanan, while the respondent, M/s Saket Infra Developers Private Limited, was represented by Advocates Ms. Madhumita Bhattacharjee and Mr. Roshan Santhalia.
