Remedies Under the MSMED Act, 2006 Unrestricted by Prior Registration

Whether an enterprise not registered under Section 8 of the Micro, Small, and Medium Enterprises Development Act, 2006, prior to entering into a contract, is barred from seeking statutory remedies under Section 18 of the Act.

Held:
The Court held that prior registration under Section 8 of the MSMED Act, 2006, is discretionary and not a prerequisite for availing remedies under Section 18 of the Act. The judgment emphasized the intent of the Act to support micro and small enterprises, including unorganized sectors, and clarified that statutory remedies under Section 18 are accessible to any party to a dispute, regardless of registration status at the time of entering into a contract.

Key Observations:

1. Discretionary Nature of Registration (Para 14.5): Filing a memorandum under Section 8 is optional for micro and small enterprises and does not preclude access to remedies under Section 18.
2. Broad Scope of Section 18 (Para 14.1): The provision allows any party to a dispute to approach the Micro and Small Enterprises Facilitation Council without restricting remedies to registered enterprises.
3. Definition of "Supplier" (Para 14.4): The term includes entities providing goods or services on behalf of micro or small enterprises, not limited to those registered.
4. Unrestricted Remedies (Para 14.9): Statutory remedies under the MSMED Act are available irrespective of whether a contract predates registration, affirming the Act's protective objectives.
5. Distinction from Previous Cases (Paras 17, 24): Earlier rulings, such as Silpi Industries and Mahakali Foods, did not mandate prior registration for invoking Section 18 remedies.

Casus Omissus – Judicial interpretation of instances not explicitly addressed by statute.

Acts and Sections Discussed:

• Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006
• Section 8 (Memorandum of MSMEs)
• Section 15 (Liability of Buyer to Make Payment)
• Section 16 (Interest on Delayed Payments)
• Section 17 (Recovery of Amount Due)
• Section 18 (Reference to Facilitation Council)
• Arbitration and Conciliation Act, 1996: Various sections integrated by reference.
• Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (repealed)

Subjects:

• MSMED Act
• Section 18 Arbitration
• Facilitation Council
• Dispute Resolution
• MSME Registration
• Payment Recovery
• Jurisdictional Challenge

Facts

1.      The appellant, NBCC (India) Ltd., challenges whether a micro or small enterprise (not registered under Section 8 at the time of contracting) can refer disputes to the Facilitation Council under Section 18 of the MSMED Act.

2.      The Enterprise sought arbitration for payment disputes with NBCC. NBCC argued the absence of MSME registration precludes such references.

3.      Disputes arose over payments owed under contracts. The Enterprise referred the matter to the West Bengal Facilitation Council for arbitration.

4.      Sections 8 and 18 of the MSMED Act, 2006.

5.      The Single Judge and Division Bench of the Calcutta High Court ruled that jurisdictional issues could be raised before the arbitral tribunal. NBCC’s appeal challenges the interpretation and scope of Section 18.

Issues:

• Can an MSME invoke Section 18 for arbitration if it was not registered under Section 8 when executing the contract?

Submissions/Arguments:

• Appellant (NBCC):
  Argued that the enterprise lacked the necessary Section 8 registration at the time of contracting, citing earlier judgments (Silpi Industries v. Kerala State Road Transport Corporation, Mahakali Foods Pvt. Ltd. v. Gujarat State Civil Supplies Corporation Ltd.).
• Respondent (THE STATE OF WEST BENGAL & ORS):
  Claimed the MSMED Act provides broad dispute resolution rights and that "any party to a dispute" under Section 18 is not limited to registered MSMEs.

Decision:

• The Supreme Court analyzed purpose of Section 18, ruling that:
1. Registration under Section 8 is discretionary and not a precondition for invoking Section 18.
2. Section 18 allows "any party to a dispute" to seek redress, and this encompasses disputes not tied to registration status.

Ratio:

• The court emphasized the Act's remedial purpose and its broad, inclusive language aimed at facilitating MSME operations and dispute resolution. Registration under Section 8 aids administration but does not constrain substantive rights under Section 18.