### Rejection of MSME Reference Does Not Extinguish Contractual Rights or Invalidate Predetermined Arbitral Procedures

The Appellant (Company) and Respondent (Corporation) entered into a contract in 2011 for mechanical and piping works at the Mathura Refinery.

Upon completion, disputes arose, and the Appellant invoked arbitration under the General Conditions of Contract (GCC).

Under Clause 9.0.2.0 of the GCC, the General Manager (GM) of the Respondent must first determine whether a claim is a "notified claim" before the arbitrator can proceed.

While this determination process was underway in 2020, it stalled due to the COVID-19 pandemic and alleged communication failures by the Respondent.

Consequently, the Appellant sought a remedy under Section 18(1) of the MSME Act before the Facilitation Council (MSMFC).

On April 4, 2025, the MSMFC dismissed the reference, holding the Appellant was not a "supplier" under Section 2(n) of the Act.

When the Appellant subsequently attempted to resume the GCC arbitration process, the Respondent failed to respond, leading the Appellant to file a Writ Petition.

The Single Judge dismissed the petition as non-maintainable on January 7, 2026.

1. Whether electing to seek a remedy under the MSME Act precludes or extinguishes a party's right to pursue arbitration under the original contract.

2. Whether the failure of the Respondent to complete the mandatory determination under Clause 9.0.2.0 of the GCC renders the Appellant remediless.

3. Whether the time spent pursuing proceedings under the MSME Act should be excluded for the purposes of limitation.

General Conditions of Contract (GCC) (Clauses 9.0.1.0 to 9.0.3.0), which establish a two-tier process requiring a departmental determination of "notified claims" as a precursor to arbitration.

Micro, Small & Medium Enterprises Development Act, 2006 (MSME Act), specifically Sections 2(n) and 18, to determine if it contained any provision for the automatic exclusion of contractual remedies upon the rejection of an MSME reference.

General principles of equity and the law of limitation regarding the "theory of abandonment" and the exclusion of time spent in bona fide litigation in alternate forums.

The Court rejected the Respondent’s "theory of abandonment," which argued that by approaching the MSMFC, the Appellant had waived its right to arbitration.

The Court reasoned that seeking a remedy under the MSME Act—on the mistaken assumption of eligibility—does not non-suit a party from original contractual remedies unless specifically prohibited by statute, which the Respondent failed to demonstrate.

The Court held that the Respondent had a contractual duty to conclude the Clause 9.0.2.0 determination and could not benefit from its own omission or the pandemic-induced hiatus to render the Appellant remediless.

Regarding limitation, the Court found that since the Appellant legitimately exercised its right to approach the MSMFC, the time spent in those proceedings and the subsequent writ petition must be excluded to prevent the claims from being time-barred.

The Court held that the original invocation of arbitration remains valid and that the Respondent's General Manager must complete the determination under Clause 9.0.2.0 within eight weeks.

The Court specifically ordered that the period from the initial invocation until the date of this judgment shall be excluded for the purposes of limitation.

The MSME order, having not touched upon merits, shall have no effect on future proceedings.