A) ABSTRACT / HEADNOTE

The appeal raises whether an MSME may invoke the remedy under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 to refer a dispute to the Facilitation Council when the enterprise was not registered under Section 8 of the Act before execution of the underlying contract. The Supreme Court (Pamidighantam S. Narasimha, J.; Pankaj Mithal, J. concurring) examined the text, context and purpose of Chapter V of the Act and the linked definitions to hold that Section 18 employs the words “any party to a dispute” and is an open-ended statutory remedy intended to promote effective access to justice for MSMEs.

The Court rejected the narrow contention that “any party” must be read as meaning only a “supplier” who had filed a memorandum under Section 8(1) before contracting. The judgment analyses the repealed 1993 Act and the three-Judge decision in Shanti Conductors v. Assam State Electricity Board (on incidence of liability being the date of supply), distinguishes earlier single-judge and two-judge precedents under the 2006 Act (notably Silpi Industries and Mahakali Foods), and records the policy and practical reasons for refusing to make pre-contract registration a jurisdictional bar. Because the Court considered the precedential field unclear and of larger importance, it referred the question for authoritative pronouncement by a three-Judge Bench.

Keywords: Micro, Small and Medium Enterprises Development Act, 2006; Section 18; Section 8; Facilitation Council; access to justice; registration; Shanti Conductors; Silpi Industries; Mahakali Foods.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute arises from multiple public works contracts awarded by NBCC to M/s Saket Infra Developers Pvt. Ltd. (the Enterprise). Contracts were executed in 2015–2016 (four contracts) and a further contract in 2017; the Enterprise filed a memorandum under Section 8 on 19.11.2016. Bills continued to be raised before and after registration; on 28.03.2019 the Enterprise referred outstanding payments to the State Facilitation Council under Section 18.

The buyer (NBCC) objected that the Facilitation Council lacked jurisdiction because the enterprise had not been registered under Section 8 prior to execution of the earlier contracts and thus could not claim remedies under Chapter V of the Act. The High Court declined to decide the jurisdictional question and directed that maintainability be raised before the arbitrator; NBCC appealed to the Supreme Court. The core question: Is pre-contract registration a jurisdictional precondition to invoke Section 18? The Court convened a close textual and purposive analysis of Sections 2(n), 8 and 18, and also examined legacy jurisprudence under the repealed 1993 Act and subsequent decisions under the 2006 Act.

D) FACTS OF THE CASE

The appellant NBCC awarded five work orders between July 2015 and September 2017 to the Enterprise; contracts executed on 27.08.2015, 17.11.2015, 28.07.2016, 20.08.2016 and later 11.10.2017 (for the fifth). The Enterprise filed a memorandum under Section 8 on 19.11.2016 (thereafter still raising bills). Bills raised after registration included 10 bills (₹34.71 cr), 8 bills (₹14.18 cr), 10 bills (₹10.49 cr), 8 bills (₹12.46 cr) for the first four contracts and 5 bills (₹15.72 cr) for the fifth contract. The Enterprise referred the dispute on 28.03.2019 to the West Bengal Facilitation Council; conciliation failed and arbitration was invoked under Section 18(3) on 19.01.2021. NBCC received notice on 30.09.2021 and challenged maintainability before the Calcutta High Court. The High Court remitted the maintainability to the arbitrator; NBCC appealed. These chronological facts underpin the jurisdictional controversy about pre-contract registration and retrospective effect.

E) LEGAL ISSUES RAISED

i. Whether pre-contract filing of a memorandum under Section 8 is a jurisdictional precondition for invoking Section 18 of the MSMED Act, 2006?
ii. Whether the phrase “any party to a dispute” in Section 18 must be confined to the defined term “supplier” under Section 2(n)?
iii. Whether earlier decisions (Silpi Industries; Mahakali Foods) bind this determination or are distinguishable?

F) PETITIONER / APPELLANT’S ARGUMENTS

The appellant contended that Sections 15–17 create liability for the “supplier” (defined in Section 2(n) as a micro or small enterprise which has filed a memorandum under Section 8), so remedies under Section 18 must be only for such registered suppliers. Therefore, where registration occurred after contracting or supplies, the Facilitation Council lacks jurisdiction and the remedy is unavailable. Reliance was placed on Silpi Industries and Gujarat State Civil Supplies v. Mahakali Foods and subsequent orders treating registration/supply timing as dispositive.

G) RESPONDENT’S ARGUMENTS

Counsels for the respondents argued that the High Court rightly left jurisdictional objections to be decided by the arbitral tribunal; Section 18 allows “any party to a dispute” to refer amounts due under Section 17, and it would be improper to read into Section 18 a binding requirement of pre-contract registration. They emphasised access to an effective remedy and that registration is discretionary for micro and small enterprises under Section 8.

H) JUDGEMENT 

The Court held that Section 18 is clear in employing the words “any party to a dispute” and that the Golden Rule of statutory interpretation requires reading statutory words in their natural sense. The Court refused to metamorphose “any party” into “supplier” by cherry-picking cross-references to Section 17 and the Section 2(n) definition. The Court stressed purpose: Section 18 creates a statutory remedy, not a contractual one, and such remedies should be interpreted to promote access to justice accessible, affordable, expeditious and cohesive.

The definition of supplier in Section 2(n), the Court observed, itself includes entities other than memorandum-filing micro/small enterprises (e.g., NSIC, SIDC and bodies selling goods produced by micro/small enterprises), so a rigid reading would be unworkable. Further, Section 8(1) expressly makes filing a memorandum discretionary for micro and small enterprises; ergo registration is not a mandatory precondition. The Court further examined the Shanti Conductors doctrine (incidence of liability on date of supply) and distinguished Silpi and Mahakali Foods on facts and issues: neither had framed or decided the specific question whether non-registration prior to contracting bars Section 18.

Given the doctrinal sensitivity and the need for clarity, the two-Judge Bench concluded the issue warrants determination by a three-Judge Bench and accordingly referred the matter for constitution of an appropriate larger Bench. The appeal was referred.

a. RATIO DECIDENDI

The controlling ratio is that Section 18 must be read as an open remedy available to “any party to a dispute”; the statutory scheme (including the discretionary nature of filing a Section 8 memorandum and the wide definition of supplier) demonstrates Parliament did not intend pre-contract registration to be a jurisdictional bar. Constitutional duties to ensure effective judicial remedies for MSMEs inform a purposive interpretation favouring access to the Facilitation Council. Consequently, referral under Section 18 cannot be rejected solely because registration under Section 8 was obtained after contract execution.

b. OBITER DICTA 

The judgment records important observations on precedent-making: the Court explained distinction between decision-making and precedent-making functions, and cautioned lower courts about treating every pronouncement as binding without attention to whether the Court intended the point as an authoritative rule under Article 141. The bench also underscored policy considerations about MSME formalisation and the rationale in the Expert Committee report on informal units.

c. GUIDELINES 

1. Interpret statutory remedies purposively to ensure access to justice — remedies should be accessible, affordable, expeditious and cohesive.

2. Do not read Section 18 narrowly by substituting “any party” with “supplier”; apply plain meaning and context.

3. Where precedent conflict or uncertainty exists, refer the issue to an appropriately constituted larger Bench to ensure clarity and legal certainty.

I) CONCLUSION & COMMENTS

The two-Judge Bench concluded that pre-contract registration under Section 8 is not an absolute jurisdictional prerequisite to invoke the statutory remedy under Section 18; Section 18’s open textual form and the discretionary nature of registration weigh against the appellant’s restrictive reading. The Court’s emphasis on effective remedies for MSMEs is defensible on constitutional and policy grounds: treating remedial provisions narrowly would undermine statutory objectives to protect small enterprises and to ensure expeditious recovery of dues.

At the same time the Court prudently referred the matter to a three-Judge Bench to resolve residual uncertainty about the precedential weight of earlier decisions (notably Silpi and Mahakali Foods), thereby balancing immediate relief to litigants and the need for clear, authoritative doctrine for the wider bench of courts. Practitioners should note: until the larger Bench rules, tribunals and courts will have to navigate the tension between the open text of Section 18, the factual matrix of each case (timing of supplies and registration), and the existing stream of authorities.

J) REFERENCES

a. Important Cases Referred

1. NBCC (India) Ltd. v. The State of West Bengal & Ors., [2025] 1 S.C.R. 610 : 2025 INSC 54.

2. Silpi Industries v. Kerala State Road Transport Corporation, [2021] 3 SCR 1044 : (2021) 18 SCC 790.

3. Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd., [2022] 19 SCR 1094 : (2023) 6 SCC 401.

4. Shanti Conductors Pvt. Ltd. v. Assam State Electricity Board, [2019] 1 SCR 489 : (2019) 19 SCC 529.

5. Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu, [2014] 5 SCR 912 : (2014) 7 SCC 1.

b. Important Statutes Referred

1. Micro, Small and Medium Enterprises Development Act, 2006 (esp. ss. 2, 7, 8, 15–18, 20–21).

2. Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (repealed).

3. Arbitration and Conciliation Act, 1996 (Parts invoked by Section 18(2)–(3)).