Writ jurisdiction should not interrupt MSMED arbitration where jurisdictional objections are triable by the arbitral tribunal.

The petitioner, a Government-owned public sector undertaking, entered into an agreement dated 14 July 2015 with respondent no. 2 for telecom infrastructure works in Hoshiarpur, Punjab.

The work was completed and the last invoice was raised on 11 June 2018. Respondent no. 2 obtained MSME registration on 26 March 2021 and subsequently filed a claim before the Micro and Small Enterprises Facilitation Council (MSEFC) on 13 October 2022.

The MSEFC referred the dispute to the Delhi International Arbitration Centre (DIAC) on 24 November 2023.

The petitioner challenged the reference and consequential arbitral proceedings under Articles 226 and 227 of the Constitution, contending that MSME registration obtained after completion of the contract could not be retrospectively applied and that the claim was barred by limitation.

Whether the writ petition was maintainable for challenging the MSEFC’s reference to arbitration on the ground that respondent no. 2 obtained MSME registration after completion of the contract and could not invoke the MSMED Act retrospectively.

Whether the petitioner’s objection that the claim filed before the MSEFC was barred by limitation warranted interference with the arbitral proceedings at the threshold.

Whether the objections concerning MSME status, applicability of the MSMED Act and limitation could appropriately be raised before and decided by the Arbitral Tribunal.

The Court applied the statutory scheme of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), under which disputes referred through the MSEFC process may proceed to arbitration, together with the scheme of the Arbitration and Conciliation Act, 1996, under which jurisdictional and maintainability objections may be raised before the Arbitral Tribunal.

The Court relied on Silpi Industries v. Kerala State Road Transport Corporation, (2021) 18 SCC 790, cited for the petitioner’s contention that an enterprise obtaining MSME registration after completion of a transaction could not retrospectively invoke the MSMED Act.

The later decision in Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (Unit 2) & Anr., (2023) 6 SCC 401, recognised that objections regarding an enterprise’s status and entitlement to invoke the MSMED Act may be raised before the forum seized of the arbitral proceedings.

The Court further applied the principle that writ jurisdiction under Articles 226 and 227 in relation to arbitral proceedings is to be exercised sparingly where an efficacious statutory remedy before the Arbitral Tribunal is available.

The Court held that the petitioner’s objections regarding the timing of respondent no. 2’s MSME registration, the retrospective applicability of the MSMED Act and limitation concerned the maintainability of the claim and the jurisdiction of the arbitral forum, but did not, by themselves, justify immediate writ intervention.

Although the petitioner relied on Silpi Industries, the Court considered that Mahakali Foods required such objections concerning MSME status and entitlement to invoke the Act to be raised before the forum seized of the arbitral proceedings.

Whether registration obtained on 26 March 2021 could support a claim arising from a 2015 agreement and work completed in 2018 was therefore left to the Arbitral Tribunal.

Similarly, the limitation objection required examination of the nature of the claim, contractual terms and accrual of the cause of action, and was appropriately for the Tribunal to determine.

Since the petitioner had an efficacious remedy under the arbitration framework, no exceptional circumstance justified interference at the threshold.

The petitioner was granted liberty to raise before the Arbitral Tribunal all objections, including those concerning the date of respondent no. 2’s MSME registration, applicability of the MSMED Act to the transaction and limitation.

The Court expressly clarified that it had not adjudicated the merits of these objections, which were left open for determination by the Arbitral Tribunal in accordance with law.