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Supreme Court clarifies applicability of Limitation Act, 1963 to petitions challenging arbitral awards

On January 10, 2025, the Supreme Court of India (“Supreme Court”) delivered a landmark judgment in My Preferred Transformation & Hospitality Pvt. Ltd. & Anr. vs. M/s Faridabad Implements Pvt. Ltd[1]., addressing the issue of limitation for filing applications to set aside arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The Court examined the interplay between the Limitation Act, 1963 (“Limitation Act”) and Section 34(3) of the Arbitration Act, with a particular focus on whether the additional 30 (thirty) day condonable period provided under Section 34(3) of the Arbitration Act can be extended if it expires during court vacations. This decision has significant implications for arbitration in India, clarifying the scope of judicial discretion in condoning delays under the Arbitration Act.

 

Brief facts

The dispute arose from lease agreements between the appellants (My Preferred Transformation & Hospitality Pvt. Ltd.) and the respondent (M/s Faridabad Implements Pvt. Ltd.). Following such dispute, the respondent invoked arbitration, resulting in an arbitral award dated February 4, 2022, in its favour.

Under Section 34(3) of the Arbitration Act, the appellants were required to challenge the arbitral award before the High Court within 3 (three) months (by May 14, 2022), with a possible condonable extension of 30 (thirty) days. However, pursuant to the Supreme Court’s earlier COVID-19 orders, the limitation period was automatically extended to May 29, 2022. The additional 30 (thirty) day condonable period expired on June 28, 2022, i.e. during the High Court’s summer vacation. The appellants filed their application on July 4, 2022, i.e. the first day after the High Court reopened. The High Court dismissed the challenge to the award being barred by limitation, which the Division Bench affirmed. In view thereof, the appellants then approached the Supreme Court.

 

Issues

The Supreme Court addressed the following issues in the judgment:

1. do the provisions of the Limitation Act apply to proceedings under Section 34 of the Arbitration Act, and to what extent?
2. does Section 4 of the Limitation Act apply to Section 34(3) of the Arbitration Act as per an analysis of the statutory scheme as well as precedents of this Supreme Court on the issue? If Section 4 of the Limitation Act applies, does it apply only to the 3 (three) month limitation period or also the 30 (thirty) day condonable period? and
3. in light of the answer to Issue 2, will Section 10 of the General Clauses Act apply to Section 34(3) of the Arbitration Act, and if so, in what manner?

 

Brief contentions of the parties

The appellants contended that Section 4 of the Limitation Act, which allows filing on the next working day if the limitation period expires on a court holiday, should apply to the aforesaid 30 (thirty) days condonable period. Alternatively, they argued that Section 10 of the General Clauses Act, 1897 (“General Clauses Act”), which similarly addresses the expiration of statutory periods on court holidays, should apply to the proceedings under Section 34(3) of the Arbitration Act. The respondent on the other hand, relied on Union of India vs. Popular Construction Co.[2] and Assam Urban Water Supply and Sewerage Board vs. Subhash Projects[3], to contend that the aforesaid provisions do not apply to the 30 (thirty) days condonable period under Section 34(3) of the Arbitration Act.

 

Findings and analysis

The Supreme Court analysed the provisions of Section 34(3) of the Arbitration Act alongside the Limitation Act and the General Clauses Act, focusing on the applicability of Sections 4 and 10 of the respective statutes, to arrive at the following findings:

1. Applicability of Section 4 of the Limitation Act: By relying on the language of Section 4 of the Limitation Act, which uses the words ‘prescribed period’, as well as upon the decisions of the Supreme Court in Assam Urban Water Supply (supra) and Bhimashankar Sahakari Sakkare Karkhane Niyamita vs. Walchandnagar Industries Limited[4], it was held that Section 4 of the Limitation Act applies only to the ‘prescribed period’ under Section 34(3) of the Arbitration Act i.e. the initial 3 (three) month limitation period. The additional 30 (thirty) day condonable period under the proviso to Section 34(3) of the Arbitration Act is not the ‘prescribed period’ but a discretionary period, and hence, Section 4 of the Limitation Act does not apply to it.
2. Applicability of other provisions of the Limitation Act: The Court also analysed the applicability of other provisions of the Limitation Act to the Arbitration Act, based on past judgments. Section 12 of the Limitation Act, permitting exclusion of time spent obtaining certified copies, was held to be applicable to proceedings under Section 34 of the Arbitration Act[5]. The Supreme Court clarified that such time can be excluded from the 3 (three) month limitation period under Section 34 of the Arbitration Act. It was also held that Section 14 of the Limitation Act, which excludes time spent in pursuing remedies before the wrong forum in good faith, also applies to Section 34 of the Arbitration Act[6]. Section 17 of the Limitation Act, which delays the start of limitation in cases of fraud or mistake, does not apply to Section 34 of the Arbitration Act. The Supreme Court held that the limitation under the Arbitration Act begins strictly on the date of receiving the arbitral award, cannot be extended by alleging fraud or mistake.[7]
3. Express and implied exclusion of provisions: The Court emphasised that the specific timelines for challenging arbitral awards under the Arbitration Act reflects the legislature’s intention to ensure the finality of awards and restrict judicial interference. In this regard, the Supreme Court reaffirmed the decisions in Bhimashankar (supra) and Assam Urban Water Supply (supra) to hold that while the provisions of the Limitation Act generally apply to arbitrations vide Section 43(1) of the Arbitration Act, the stringent language of Section 34(3) ‘but not thereafter’ impliedly excludes application of Section 4 of the Limitation Act to the 30 (thirty) days condonable period under Section 34(3) of the Arbitration Act.
4. Applicability of Section 10 of the General Clauses Act: Section 10 of the General Clauses Act would not apply to the Arbitration Act as the proviso to Section 10 explicitly excludes the application of the same to acts or proceedings governed by the Limitation Act, including Section 34(3) proceedings under the Arbitration Act.

 

Concerns expressed with the current legal framework

The Supreme Court addressed the restrictive interpretation of limitation provisions under Section 34(3) of the Arbitration Act, which significantly curtails the ability of parties to challenge arbitral awards. It reaffirmed that Section 29(2) of the Limitation Act incorporates Sections 4 to 24 unless expressly excluded and noted that Section 34(3) of the Arbitration Act does not explicitly exclude Section 4 of the Limitation Act. However, the judicial precedent set by earlier decisions, such as Popular Construction Co. (supra) and Assam Urban Water Supply (supra), equated the ‘prescribed period’ to only the 3 (three) month limitation, thereby impliedly excluding the additional 30 (thirty)day condonable period from the ambit of Section 4 of the Limitation Act. This interpretation has created a rigid framework, leaving limited scope for equitable relief. The Supreme Court acknowledged the inconsistency between the legislative intent and the current legal position, suggesting that these precedents effectively deny remedies on procedural grounds. It urged legislative reform to address this imbalance and ensure a fairer application of limitation laws, balancing procedural rules with the need to preserve substantive rights.

With the above concerns, the Supreme Court, being bound by its earlier decisions, dismissed the appeal, affirming that the petition filed under Section 34 was filed beyond the permissible limitation period.

 

Conclusion

The Supreme Court rightly expressed anguish at the restrictive interpretation adopted by previous judgments and the implied exclusion of Section 4 of the Limitation Act in the context of Section 34(3) of the Arbitration Act. It emphasised that the Limitation Act and its provisions should not be left to judicial interpretation alone but should be clear and objective enough to be understood and applied by litigants themselves. Legislative intervention is essential to address the ambiguities in the interplay between these statutes, ensuring that procedural rules do not disproportionately hinder substantive justice. Such clarity will foster greater confidence in arbitration as an effective and equitable dispute resolution mechanism.

 

This Prism is prepared by:

Dheeraj Nair Partner

Padmaja Kaul Partner

Yugank Goel Principal Associate

Vansh Bhutani Associate

 

For more details, please contact [email protected]

 

[1] Civil Appeal No. 336 of 2025 (Arising out of SLP (C) No. 9996 of 2024)

[2] (2001) Supp. (3) S.C.R. 619

[3] Civil Appeal No. 2014 Of 2006

[4] (2023) 8 SCC 453

[5] State of Himachal Pradesh vs. Himachal Techno Engineers, (2010) 12 SCC 210

[6] Coal India Limited vs. Ujjal Transport Agency, (2011) 1 SCC 117; Commissioner, Madhya Pradesh Housing

Board vs. Mohanlal and Company, (2016) 14 SCC 199

[7] P. Radha Bai vs. P. Ashok Kumar, (2019) 13 SCC 445

 

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Supreme Court clarifies that compromise decrees asserting pre-existing rights are not subject to registration or payment of stamp duty

In the recent case of Mukesh vs. The State of Madhya Pradesh and Anr.[1], the Hon’ble Supreme Court of India (“Supreme Court”) adjudicated on the issue of whether compromise decrees that assert pre-existing rights necessitate registration under the Registration Act, 1908 (“Registration Act”) and are subject to stamp duty under the Indian Stamp Act of 1899 (“Stamp Act”). The Supreme Court analysed Section 17(2)(vi) of the Registration Act and held that any decree or order of a court (except the decree or order expressed to be made on compromise and comprising immovable property other than that which is the subject-matter of the suit or proceedings) would not require compulsory registration. The Supreme Court further enlisted 3 (three) conditions which are required to be satisfied to fall under the exception of Section 17(2)(vi) of the Registration Act. The Supreme Court further held that stamp duty is not chargeable on an order/decree of the court as the same does not fall within the documents mentioned in Schedule I or I-A read with Section 3 of the Stamp Act.

 

Brief facts

1. The appellant had filed a civil suit[2] (“Suit”) before the First Civil Judge, Class-2, Badnawar, for declaration and permanent injunction against Abhay Kumar (Respondent No. 2), who is the adjacent landowner of the appellant, who attempted to sell the subject land to third parties, thereby dispossessing the appellant from the subject land.
2. Pending the Suit, both parties entered a compromise, based on which, the suit came to be decreed in favour of the appellant and a consent decree was passed on November 30, 2013 (“Compromise Decree”).
3. Pursuant to the Compromise Decree, the appellant applied for mutation of the subject land before the Tehsildar concerned, who in turn referred the case to the Collector of Stamps, District Dhar (M.P). Upon perusal of the records, the Collector of Stamps initiated proceedings under Section 33 of the Stamp Act and consequently directed the appellant to pay a sum of INR 6,67,500 (Indian Rupees six lakh sixty-seven thousand five hundred) towards stamp duty, by order dated August 23, 2016 (“Collector’s Order”).
4. Challenging the Collector’s Order, the appellant preferred a revision, which was dismissed by the Board of Revenue, Gwalior, Madhya Pradesh, vide order dated February 12, 2019 (“Board’s Order”). Aggrieved by the same, the appellant preferred Miscellaneous Petition[3] to quash the Collector’s Order and Board’s Order before the High Court of Madhya Pradesh, Bench at Indore (“ Madhya Pradesh HC”). However, the Madhya Pradesh HC dismissed the said Miscellaneous Petition vide its order dated December 6, 2019 (“High Court Order”). The High Court Order upheld the Collector’s Order determining stamp duty at INR (Indian Rupees six lakh sixty-seven thousand five hundred) payable by the appellant qua the subject land, acquired by him by way of consent decree, as affirmed by the Board’s Order.
5. Therefore, being aggrieved by the High Court Order and the orders of lower authorities, the appellant filed an appeal before the Supreme Court.

 

Issues

1. Whether the Compromise Decree obtained by the appellant required registration under Section 17 of the Registration Act?
2. Whether the Compromise Decree is chargeable with stamp duty under the Stamp Act?

 

Findings and analysis

Re: Registration is not required if the conditions enumerated in section 17(2)(vi) of the Registration Act are satisfied.

1. The Supreme Court held that Section 17(2)(vi) of the Registration Act carves out the distinction between the property which forms subject-matter of the suit and the property that was not the subject-matter of the suit, but for which a compromise has been arrived at. If a compromise decree involves immovable property other than the property for which a decree is prayed for, such a property would not be exempt and would require registration. To avail the exemption from the mandate of compulsory registration of documents conveying immovable property, the compromise decree arrived must be only in respect of the property that is the subject-matter of the suit.
2. The Supreme Court further held that to fall under the exception of Section 17(2)(vi) of the Registration Act, the following conditions must be satisfied:
   • there must be a compromise decree as per the terms of the compromise without any collusion;
   • the compromise decree must pertain to the subject property in the suit; and
   • there must be a pre-existing right over the subject property, and the compromise decree should not create a right afresh.
3. The Supreme Court held that, in the instance case, in terms of the compromise entered into between the parties, the Suit was decreed in favour of the appellant. Hence, through the said Compromise Decree, the appellant did not obtain any new right, but he has asserted his pre-existing right/title/interest over the subject land. Thus, the appellant has satisfied the conditions enumerated in section 17(2)(vi) of the Registration Act. Hence, the subject land acquired by the appellant by way of Compromise Decree requires no registration.

 

Re: Stamp Duty is not chargeable as the Compromise Decree will not operate as conveyance since no right is transferred.

1. In respect of the issue relating to payment of stamp duty for mutation of the subject land, the Supreme Court referred to Section 3 of the Stamp Act and noted that stamp duty is not chargeable on an order/decree of the court as the same does not fall within the documents mentioned in Schedule 22 I or I-A read with Section 3 of the Stamp Act. The Supreme Court (in the facts of the present case) held that the consent decree will not operate as conveyance, as no right is transferred and the same does not require any payment of stamp duty. Since the appellant has only asserted a pre-existing right and no new right was created through the consent decree, the document pertaining to mutation of the subject land is not liable to stamp duty.
2. The Supreme Court held that, in the instant case, the stamp duty imposed on the Compromise Decree was erroneous by both the Madhya Pradesh HC and the subordinate authorities. Consequently, the High Court Order was set aside, and the mutation of the revenue records in favour of the appellant was directed without the requirement of stamp duty.

 

Conclusion

This judgment establishes a critical precedent regarding the applicability of the Registration Act and the Stamp Act to consent decrees that do not establish any new rights in a property. The Supreme Court has conclusively determined that a compromise decree does not require registration if it satisfies the 3 (three) specified conditions. Furthermore, the Supreme Court clarified that when a document asserts a pre-existing right without creating any new rights through the consent decree, such a document is exempt from stamp duty. This judgment addresses potential ambiguities in transactions executed by compromise decrees and reinforces the principles surrounding registration and stamp duty compliance, offering clarity and guidance on such legal issues.

 

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Sidharth Sethi Partner

Shreya Sircar Partner

Deepank Anand Associate

 

For more details, please contact [email protected]

 

[1] 2024 INSC 1026

[2] Civil suit No. 47-A/2013

[3] Miscellaneous Petition No. 3317 of 2019

 

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Supreme Court grants extension of the arbitral tribunal’s mandate post-expiry of such mandate and clarifies the expression ‘sufficient cause’ employed under Section 29(A) of the Arbitration and Conciliation Act, 1996

In the decision of M/s Ajay Protech Pvt Ltd vs. General Manager and Anr.[1] (“Ajay Protech”), the Hon’ble Supreme Court of India (“Supreme Court”) held that after Rohan Builders (India) Pvt. Ltd. vs. Berger Paints India Ltd.,[2] (“Rohan Builders”), it is a settled legal position that an application to extend the mandate of the arbitral tribunal under Section 29A(4) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) can be filed after the expiry of such mandate. Further, the Supreme Court noted that the determination whether there is ‘sufficient cause’ to grant such extension under the provision should be done to facilitate the efficiency of the arbitration process.

The Supreme Court’s decision goes a long way in providing clarity on relevant considerations for assessing whether there is ‘sufficient cause’ for the court to extend the mandate of the arbitral tribunal under Section 29A(4) of the Arbitration Act.

 

Brief facts

The dispute arose between the parties out of a works contract. A notice to initiate arbitration was issued and a sole arbitrator was appointed. The pleadings of the parties in the arbitral proceedings were completed on October 9, 2019, from which date the 12 (twelve) month period stipulated under Section 29A(1) of the Arbitration Act  commences. As per Section 29A(3) of the Arbitration Act, this period, bound to expire on October 8, 2020, is extendable by another 6 (six) months. Consequently, by mutual agreement between the parties, the time period was extended and the 18 (eight) month period expired on April 9, 2021. Before expiry of this period, the COVID-19 pandemic occurred and the Supreme Court declared that the period between March 15, 2020 and February 28,  2022 will be excluded from limitation period under Section 29A of the Arbitration Act.[3] The arbitral proceedings got adjourned due to the pandemic, and resumed in 2022, with hearings concluding on May 5, 2022. An application was filed by the Appellant under Section 29A(4) of the Arbitration Act for appropriate orders for extension of time for making the award on August 1, 2023. However, the High Court rejected the application noting that the 18 (eighteen) month period got over on April 9, 2021 and that there was an unexplained delay of over 2 (two) years in preferring the application as the mandate of the arbitral tribunal stood terminated on April 9, 2021.

 

Issue

The Supreme Court formulated 2 (two) issues:

1. whether an application for extension can be entertained if it is filed after the expiry of the arbitral tribunal’s mandate? and
2. whether there was ‘sufficient cause’ to extend the mandate of the arbitral tribunal under Section 29A(4) of the Arbitration Act?

 

Analysis and findings

Issue 1: The Supreme Court in its decision in Rohan Builders, had placed emphasis on party autonomy and clarified that an application for extension of time can be filed even after the expiry of the period in sub-sections (1) and (3) of Section 29A of the Arbitration Act. Further, the language of Section 29A(4) of the Arbitration Act itself clarifies that the court can extend the time period ‘either prior to or after the expiry of the period’. Thus, this issue is no longer res integra and an application can be filed after the expiry of the tribunal’s mandate.

Issue 2: The Supreme Court held that the facts of the case did warrant an extension. As per Section 29A(5) of the Arbitration Act, such an extension can only be done when ‘sufficient cause’ is shown and is at the discretion of the Supreme Court. To come to this determination, the Supreme Court took the following factors into consideration:

1. the COVID period which was to be excluded (i.e., from March 15, 2020, and February 28, 2022) had started even before the expiry of the initial 12 (twelve) month period. From the start of the 12 (twelve) month period, i.e. October 9, 2019, till March 15, 2020, only 5 (five) months lapsed. Thereafter, from February 28, 2022, the remaining of the 18 (eighteen) month period expired on March 31, 2023. The current application for extension was filed on August 1, 2023. Thus, there was a delay of 4 (four) months, and not over 2 (two) years as held by the High Court;
2. even in 2022, while the arbitral tribunal proceeded with online hearings, adjournments were sought on several occasions by the respondents as the panel from which the arbitrator was appointed had been changed;
3. the dispute involved technical and legal questions and had a bulky case record;
4. the delay was not attributable to the parties or the tribunal;
5. the hearing was completed and only the declaration of the award was pending; and
6. the parties had agreed on May 5, 2023, to seek an extension of time by filling an application before the court.

The Supreme Court emphasised on the efficiency of the arbitration proceedings, which it noted was essential for an effective dispute resolution remedy through arbitration. It further noted that ‘sufficient cause’ under Section 29A of the Arbitration Act should be interpreted in the context of facilitating effective dispute resolution.  In the facts of the case, the Supreme Court held that there is sufficient cause to extend time and set aside the impugned judgment of the High Court.

 

Conclusion

In Rohan Builders, the Supreme Court had settled the position on whether extension of time in arbitration can be sought after the expiry of the arbitral tribunal’s mandate, on which several High Courts had previously provided conflicting answers. It had also emphasised that courts should not mechanically allow such applications, and extension should only be granted if there is sufficient cause to deter parties from abusing the process of law or filing frivolous applications. The judgement of the Supreme Court in Ajay Protech has reinforced this legal position.

The Supreme Court has further clarified the purport and meaning of the expression ‘sufficient cause’ in the context of Section 29(A) of the Arbitration Act. The Supreme Court clarified that though the statute emphasises on party autonomy, however, there is statutory recognition of the power of the court to step in wherever it is necessary to ensure that the process of resolution of the dispute is taken to its logical end. Efficiency in arbitration proceedings as well as the several factors which were considered by the Supreme Court, including whether the delay was attributable to the parties or the tribunal and whether the case involves a bulky record involving technical questions, will provide guidance to courts in determining whether there is sufficient cause to grant extension of time under Section 29A of the Arbitration Act.

 

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Divyam Agarwal Partner

Pallavi Kumar Principal Associate

Kavya Jha Associate

 

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[1] 2024 SCC OnLine SC 3381

[2] 2024 SCC OnLine SC 2494.

[3] In re: Cognizance for Extension of Limitation, (2022) 3 SCC 117

 

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Hon’ble Supreme Court of India observes that it must specify whether a judgment is passed as a decision inter se parties or binding precedent

The Hon’ble Supreme Court of India (“Supreme Court”)[1] in a recent judgement dated January 10, 2025, in NBCC (India) Ltd. vs. State of West Bengal and Ors,[2] referred the issue of whether a Micro, Small and Medium Enterprises (“MSME”) can refer a dispute to the Micro and Small Enterprises Facilitation Council (“Facilitation Council”) under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSME Act”) regarding execution of a contract which was entered when the said MSME was not registered as an MSME under Section of the MSME Act? to a bench consisting of 3 (three) Hon’ble Judges of the Supreme Court.

The Supreme Court observed that the question of law under consideration in the present matter was not formulated, discussed and decided in any other judgment of the Supreme Court, including the 2 (two) substantive judgments under the MSME Act, i.e. Silpi Industries vs. Kerala State Road Transport Corporation., (2021) 18 SCC 790 (“Silpi Industries Judgments”) and Gujarat State Civil Supplies Corporation Limited vs. Mahakali Foods Private Limited, (2023) 6 SCC 401 (“Mahakali Foods Judgment”). The Supreme Court further observed that:

1. the Supreme Court performs twin functions of decision making and precedent-making. Every judgment or order passed by the Supreme Court in disposing of appeals is not intended to be a binding precedent under Article 141 of the Constitution of India (“Constitution”). However, as every judgment or order of the Supreme Court is considered as a binding precedent by the High Courts and the Subordinate Courts, it is necessary for the Supreme Court to state whether a particular decision is to resolve the dispute inter se parties and provide finality or whether the judgment is intended to be a binding precedent under Article 141 of Constitution; and
2. Section 18 of MSME Act is not restrictive and is a remedy for the resolution of disputes, and as such, it is kept open-ended to enable ‘any party’ to refer the dispute to seek redressal.

 

Brief facts

1. Dispute arose between M/s Saket Infra Developers Private Limited (“Saket Infra”/“Enterprise”) and National Buildings Construction Corporation (“NBCC”) in respect payments to be made by NBCC to Saket Infra for 4 (four) contracts entered between for construction projects at different locations in West Bengal. These contracts were entered before November 19, 2016, when Saket Infra filed a memorandum as a small enterprise under Section 8 of the MSME Act.[3]
2. On March 28, 2019, Saket Infra made a reference to West Bengal Facilitation Council for recovery of dues from NBCC. Pursuant to failure of the conciliation proceedings initiated by Facilitation Council under Section 18(2) of the MSME Act, the dispute was referred to arbitration under Section 18(3) of the MSME Act on January 19, 2021. However, NBCC challenged the jurisdiction Facilitation Council under Section 18 of MSME Act on the ground that Saket Infra was not registered under Section 8 of the MSME Act at the time of executing the 4 (four) contracts and, therefore, dispute falls outside the scope of the MSME Act.
3. Consequently:
   • NBCC filed Writ Petition before Hon’ble High Court of Calcutta (“Calcutta HC”) raising the jurisdictional question of the Facilitation Council entertaining reference under Section 18 of the MSME Act;
   • the Ld. Single Judge Calcutta HC dismissed NBCC’s petition holding that “the question of jurisdiction can be raised before the Arbitral Tribunal, which shall decide the same before entering into other questions.”;
   • the Ld. Division Bench affirmed the Ld. Single Judge’s decision holding that all objections, including those relating to maintainability, can be raised and contested before the arbitrator; and
   • NBCC challenged the Division Bench judgment before the Supreme Court.

 

Submissions of the parties

1. NBCC, while relying upon Supreme Court’s earlier judgments in Silpi Industries Judgments and Mahakali Foods Judgment, challenged the jurisdiction of Facilitation Council in entertaining the reference under Section 18 of MSME Act on the ground that Saket Infra registered itself after the contracts were executed. Saket Infra cannot avail the remedies under Section 18 of the MSME Act for supplies made prior to filing of Memorandum, since:
   • Section 18 provides that ‘any party to a dispute’ may make a reference to the Facilitation Council. The said ‘dispute’ must be “with regard to any amount due under Section 17”;
   • Section 17 provides that, “for any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon under Section 16”;
   • Section 16 imposes the liability of the buyer to pay interest to the ‘supplier’ on the amounts payable to it under Section 15 for the supply of goods and rendering of any services; and
   • the expression ‘supplier’ mentioned in Sections 15, 16 and 17 is defined in Section 2(n), as “a micro or small enterprise which has filed a memorandum with the authority referred to in sub-section (1) of Section 8 and includes…”. Thus, a ‘supplier’ can only be an enterprise that has filed a memorandum under Section 8 of the MSME Act;
2. Saket Infra contended that the question of maintainability can be raised before the Arbitral Tribunal as directed by the Single Judge and Division Bench of the Calcutta HC.

 

Issue

The issue that fell for consideration before the Supreme Court was whether an MSME not registered under Section 8 of the MSME Act before the execution of contract can make a reference to the Facilitation Council under Section 18 of MSME Act for dispute resolution?

 

Analysis and observations of Supreme Court

The Supreme Court after analysis of the statutory provisions of MSME Act was pleased to hold that the Facilitation Council can entertain a reference under Section 18 of the MSME Act also if the Enterprise was initially not registered under Section 8 of the MSME Act at the time of entering into the contract. In this regard, Supreme Court inter alia observed that:

1. Section 18 of MSME Act does not use the expression supplier, instead employs the phrase, “any party to a dispute, may”;
2. definition of the expression ‘supplier’ in Section 2(n) is not confined to a micro or a small enterprise which has filed a memorandum under Section 8 (1) but also includes companies or other entities engaged in selling goods or rendering services by an enterprise; and
3. Section 8 of MSME Act grants a discretion to a micro or a small enterprise in filing a memorandum with the authority.

 

Conclusion

This judgment further highlights the importance of reading and applying the decisions of the Supreme Court considering the issues which were decided in the facts of the respective cases. The Supreme Court again clarifies that the Supreme Court while adjudicating rights of the parties and resolving the disputes between them embodies a declaration of law which operates as a binding principle for future cases, where facts are substantially same. However, the Supreme Court might not lay down principle of law in every dispute raised before it and there might be judgments wherein the Supreme Court may simply resolve a dispute between inter se the parties. Therefore, not every judgment of the Supreme Court is to be read as a binding precedent under Article 141 of the Constitution.

 

This Prism has been prepared by:

Anupam Varma Partner

Nikhil Sharma Partner

Girdhar Gopal Khattar Associate

 

For more details, please contact [email protected]

 

[1] HMJ P.S. Narasimha and HMJ Pankaj Mithal

[2] 2025 SCC OnLine SC 73 (C.A. No. 3705 of 2024)

[3] Section 8 – Memorandum of MSME