Reconciling Disputes: The MSMED Act And Arbitration Act At A Conjunction – Investigating A Forward-Looking Approach
- IJLLR Journal
- Mar 14
- 1 min read
Khushi Khandelwal, Christ (Deemed To Be University) Pune, Lavasa Campus
The Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006 seeks to enhance and safeguard micro, small, and medium enterprises (MSMEs) within India. Section 18 of the MSMED Act establishes mechanisms for dispute resolution via Micro and Small Enterprises Facilitation Councils (MSEFCs), thereby instituting a distinctive framework that has frequently been disputed concerning the Arbitration and Conciliation Act of 1996.
Introduction
The MSMED Act was instituted to confront the unique challenges that MSMEs encounter, including issues related to delayed payments. Section 18 empowers MSEFCs to function as arbitral tribunals under specified conditions. Concurrently, the Arbitration and Conciliation Act of 1996 offers an independent framework for arbitration. The intersection of these legislations has resulted in considerable litigation, raising questions regarding their concurrent applicability.
This article addresses the discord between the Micro, Small and Medium Enterprises Development Act of 2006 (MSMED Act) and the Arbitration and Conciliation Act of 1996 (A&C Act) in India, concentrating on contemporary legal developments and proposing a novel path forward.
The principal conflict emerged from the Supreme Court's ruling in Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd., which determined that the MSMED Act supersedes the A&C Act owing to its classification as beneficial legislation. Consequently, when Section 18 of the MSMED Act is invoked, arbitration proceedings are mandated to be conducted by the facilitation council (Council), irrespective of any pre-existing arbitration agreements between the parties.
