Section 18 Remedy Remains Open to “Any Party”; Registration Not Precondition for MSME Council Reference

A bench of Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal heard an appeal challenging the jurisdiction of the Micro and Small Enterprises Facilitation Council to entertain a reference under Section 18 of the MSMED Act where the enterprise registered after execution of the contracts. The appeal arose from an objection by the buyer that an enterprise which filed a memorandum under Section 8 only after entering into contracts could not invoke the statutory reference mechanism.

The Court held that Section 18 permitted “any party to a dispute” to make a reference to the Facilitation Council and rejected the narrower contention that the phrase must be read as limited to a “supplier” who had filed a memorandum under Section 8 before contract formation. The Court emphasised statutory text, context and purpose and observed that the Section 18 remedy was an open-ended statutory remedy to enhance access to justice for MSMEs. The Court, in its reasoning, observed: “The text of Section 18 is clear and categoric. The words employed herein are ‘any party to a dispute’. The text, ‘any party to a dispute’, cannot be read as a ‘supplier’ by adopting a process of interpretation, by first referring to Section 17, then to Sections 15 and 16 and thereafter, in search of the definition of supplier, to Section 2(n) and finally stopping at Section 8 to hold that ‘any party to a dispute’ will only be an Enterprise which is registered under Section 8 of the Act. This meaning-making process to metamorphosise the clear text ‘any party’ to ‘a supplier’ is not the legal method to understand true meaning of words employed by the legislature.”

The Court further recorded that Section 8 expressly allowed a micro or small enterprise to file a memorandum “at his discretion” and that the statutory definition of “supplier” under Section 2(n) was not confined to only those who had filed a memorandum: it also “includes” specified institutional sellers and entities selling goods or services produced by micro or small enterprises. The bench distinguished earlier references to Silpi Industries and Mahakali Foods, noting that those decisions did not address the precise question whether registration before contract was a necessary precondition to invoke Section 18; the Court therefore declined to treat those decisions as binding on this point and directed that the appeal papers be placed before the Chief Justice of India for constitution of a three‑Judge Bench for an authoritative pronouncement. The registry was directed to place the paperbooks before the CJI.

Background

The dispute arose from multiple work orders and contracts awarded by the buyer to the enterprise for construction works between 2015 and 2017. The enterprise filed a memorandum under Section 8 on 19.11.2016 after executing earlier contracts, continued to raise bills thereafter and on 28.03.2019 made a reference under Section 18 to the West Bengal Facilitation Council; conciliation under Section 18(2) failed and the matter was referred to arbitration on 19.01.2021. The buyer objected that the Facilitation Council lacked jurisdiction because the enterprise had not been registered prior to entering into the contracts and contended that works contracts fell outside the Act’s scope. The enterprise argued that jurisdictional objections could be raised before the arbitral tribunal.

The Calcutta High Court’s Single Judge dismissed the writ petition, observing that jurisdictional issues could be raised before the Arbitral Tribunal; a Division Bench affirmed and allowed the parties to raise maintainability before the tribunal, referring to Kone Elevator for the indivisibility of works contracts and the special statute doctrine. On appeal, the Supreme Court examined the text and purpose of the MSMED Act, the definition of “supplier”, the discretionary nature of filing the Section 8 memorandum, and the legislative intent to preserve effective remedies for MSMEs. The Court noted the relevance of Shanti Conductors on incidence of liability but found that Silpi Industries and Mahakali Foods did not decide the registration‑precondition issue now before it. The Court rejected the buyer’s submission that registration before contract was a jurisdictional bar, but for certainty referred the question to a larger Bench. The registry was directed to place the matter before the Chief Justice for a three‑Judge Bench.

Case Details: Case No.: 2025 INSC 54; Civil Appeal No. 3705 of 2024 Case Title: NBCC (India) Ltd. v. The State of West Bengal & Ors. Appearances: For the Petitioner(s): Mr. Gopal Sankaranarayanan, Senior Counsel For the Respondent(s): Ms. Madhumita Bhattacharjee, Advocate; Mr. Roshan Santhalia, Advocate