The judgment from the High Court of Delhi in the case of Mahanagar Telephone Nigam Ltd. v/s Delhi International Arbitration Centre; W.P.(C) 14515/2023, revolves around a dispute under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), specifically regarding disputes arising prior to registration under the Act.
In this case, the petitioner, Mahanagar Telephone Nigam Ltd., challenged a decision made by the Micro and Small Enterprises Facilitation Council to refer a dispute raised by Respondent No.3 to the Delhi International Arbitration Centre (DIAC) under the MSME Act. The dispute centred around non-payment of dues by the petitioner to the respondent, who claimed a substantial sum towards unpaid bills.
One of the key points of contention was whether the benefits of the MSME Act could be claimed if the entity was not registered as an MSME at the time of entering into the contract.
The Hon’ble Court referred to various precedents, including the case of Silpi Industries v/s Kerala State Road Transport Corporation, to address this issue. The court emphasized that registration obtained subsequently would have a prospective effect and would not apply retrospectively if registration is obtained after commencement of the contract.
The Hon’ble Court also highlighted the purpose of Sections 17 and 18 of the MSME Act, which provides a cost-effective dispute resolution mechanism for unpaid dues of micro, small, and medium enterprises. The court also observed that these sections give the right to such enterprises to have their disputes adjudicated by Facilitation Councils, irrespective of any other contractual provisions to the contrary.
The Hon’ble Court acknowledged that the determination of whether a party is entitled to MSME benefits during the subsistence of a contract involves mixed questions of law and facts to be decided by the Arbitral Tribunal.
Ultimately, the court disposed of the writ petition, leaving the parties open to raise the dispute before the arbitrator through appropriate applications under the Arbitration & Conciliation Act, 1996.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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