The Delhi High Court has dismissed an appeal by Shri Krishan Grit Co. challenging an arbitral tribunal’s finding that its claims against Continental Engineering Corporation were not maintainable under the MSME Act, holding that benefits under the MSMED Act, 2006 cannot be claimed retrospectively for supplies made before the enterprise’s registration.
Justice Tushar Rao Gedela held that only claims arising after registration of an entity as a Micro or Small Enterprise under the MSMED Act can be maintained under the statutory mechanism. The Court relied on the Supreme Court’s ruling in Silpi Industries v. Kerala SRTC (2021) 18 SCC 790, which held that subsequent registration cannot confer MSME status retrospectively for contracts or supplies completed before registration.
The dispute arose from unpaid dues claimed by Shri Krishan Grit Co. for supplies of TMT bars, sand and aggregates made between 2016 and 2017-18. The appellant’s Delhi MSME registration was dated 26 February 2019. It argued that a separate registration relating to its manufacturing unit in Rajasthan, dated 20 October 2016, should also be considered.
The Court rejected this contention, noting that the Rajasthan registration related to a different enterprise description and manufacturing activity, while the Delhi entity that had executed the MoU and supplied the materials was registered in Delhi for Services. The Court found that the arbitral tribunal had considered the Rajasthan certificate and had reached a factual conclusion that could not be interfered with under Section 37 of the Arbitration and Conciliation Act.
The Court further held that under Section 18 of the MSMED Act, the MSE Facilitation Council having territorial jurisdiction is the Council where the supplier is located and registered. In the present case, the Delhi Council could exercise jurisdiction, but the subsequent 2019 registration could not make the appellant’s earlier 2016–2018 claims maintainable.
The High Court also considered the fact that the appellant had previously invoked arbitration over the same claims, but the proceedings were terminated after it failed to file its Statement of Claim. The appellant did not challenge that termination. The Court held that subsequent MSME registration could not be used to reopen the abandoned claims and endorsed the tribunal’s finding that the appellant could not resort to forum hunting.
Holding the appeal unmerited, the Court dismissed it and upheld the arbitral tribunal’s decision that the claims were not maintainable.
