Case Note & Summary
The Supreme Court of India heard an appeal by NBCC (India) Ltd. against the State of West Bengal and others, concerning a dispute with M/s Saket Infra Developers Private Limited (the Enterprise), a small enterprise registered under the Micro, Small and Medium Enterprises Development Act, 2006. The Enterprise had been awarded five work orders by NBCC between July 2015 and August 2016, with contracts executed on various dates. The Enterprise filed a memorandum under Section 8 of the Act on 19 November 2016, after the execution of the first four contracts but before the fifth contract. Disputes arose, and the Enterprise made a reference under Section 18 of the Act to the West Bengal State Micro and Small Enterprises Facilitation Council on 28 March 2019. NBCC objected on the ground that the Enterprise was not registered before the execution of the contracts, and thus the Facilitation Council lacked jurisdiction. The Single Judge and Division Bench of the Calcutta High Court dismissed NBCC's writ petition, holding that jurisdictional objections could be raised before the Arbitral Tribunal. NBCC appealed to the Supreme Court. The core legal issue was whether an MSME must be registered under Section 8 before the execution of the contract to make a reference under Section 18. The appellant argued that registration before contract execution is mandatory, relying on Silpi Industries v. Kerala State Road Transport Corporation and Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. The respondents contended that the question could be raised before the Arbitral Tribunal. The Supreme Court examined the text, context, and purpose of the Act, noting that Section 18 is a remedy for dispute resolution and uses the phrase 'any party to a dispute', which is not confined to a registered supplier. The court distinguished the earlier decisions, observing that they dealt with different factual scenarios. However, recognizing the need for legal certainty, the court directed that the appeal be placed before the Chief Justice of India for reference to a three-judge bench for an authoritative pronouncement on whether registration under Section 8 before contract execution is a precondition for invoking Section 18.
Headnote
A) MSMED Act, 2006 - Section 18 - Reference to Facilitation Council - 'Any party to a dispute' - Interpretation - The court held that Section 18 is not restrictive and is a remedy for resolution of disputes, kept open-ended to enable 'any party' to refer the dispute. The submission that 'any party' is confined to a 'supplier' who has filed a memorandum under Section 8 was rejected. (Paras 1.1-1.2, 10) B) MSMED Act, 2006 - Section 8 - Registration - Precondition for reference under Section 18 - The court examined whether registration under Section 8 before execution of contract is necessary for a reference under Section 18. It held that the issue requires authoritative pronouncement by a larger bench due to conflicting interpretations in Silpi Industries and Mahakali Foods. (Paras 1.2, 5, 10-13) C) MSMED Act, 2006 - Silpi Industries v. Kerala State Road Transport Corporation - Distinction - The court distinguished Silpi Industries, noting that the issue there was different from the present case. Silpi Industries dealt with a supplier who was not registered at all, whereas here the supplier registered after contract execution but before reference. (Paras 1.2, 11) D) MSMED Act, 2006 - Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. - Distinction - The court distinguished Mahakali Foods, which involved a different factual matrix. The present case raises a specific question of whether registration before contract execution is mandatory for invoking Section 18. (Paras 1.2, 12) E) MSMED Act, 2006 - Reference to Larger Bench - The court directed that the appeal be placed before the Chief Justice of India for referring the matter to a bench of three Judges for an authoritative pronouncement on the issue of registration as a precondition for reference under Section 18. (Paras 1.2, 13)
Issue of Consideration
Whether an MSME cannot make a reference to the Facilitation Council for dispute resolution under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 if it is not registered under Section 8 of the Act before the execution of the contract with the buyer.
Final Decision
The Supreme Court held that Section 18 of the MSMED Act, 2006 is not restrictive and 'any party to a dispute' includes unregistered suppliers. However, for clarity and legal certainty, the court directed that the appeal be placed before the Chief Justice of India for referring the matter to a bench of three Judges for an authoritative pronouncement on whether registration under Section 8 before contract execution is a precondition for invoking Section 18.
Law Points
- Section 18 of MSMED Act
- 2006 is not restrictive
- 'any party to a dispute' includes unregistered suppliers
- registration under Section 8 is not a precondition for reference
- issue of registration before contract execution requires authoritative determination by larger bench
