The Micro, Small and Medium Enterprises Development Act, 2006 gives supplier claims a fast statutory track: reference to the Facilitation Council under Section 18, conciliation, then arbitration under the Arbitration and Conciliation Act, 1996 as if pursuant to an arbitration agreement. That machinery does not pause for an absent buyer. Councils and their delegate institutions proceed ex parte against parties who ignore notices, and the resulting awards — principal plus compound interest at three times the bank rate under Section 16 — are as enforceable as any other. This article explains how the empty chair scenario unfolds and the realistic options at each stage.
How the empty chair scenario unfolds
The buyer’s post-award menu — short and expensive
Section 34 challenge with Section 19 deposit. The only orthodox route. Grounds are the standard ones — with service defects and inability to present the case doing the heavy lifting for genuinely unserved buyers. The deposit precondition applies regardless.
Attack on jurisdictional foundations. Supplier registration coverage of the transactions, the character of the contract, territorial competence of the Council — jurisdictional points survive default better than merits points, but a party who ignored the forum where they should first have been raised argues them uphill.
Execution-stage resistance. Objections in execution are confined to the decree’s executability — nullity for want of jurisdiction or service — not to its merits; execution courts are not appellate forums.
Settlement. The most common real-world outcome: the award’s interest arithmetic and the deposit requirement give the supplier negotiating leverage that a contested proceeding would never have produced.
The compliance lesson for buyers is procedural hygiene, not heroics: maintain current addresses on statutory registries and contracts, route MSEFC and portal notices to a monitored legal inbox, and appear — even to contest jurisdiction — the first time a notice arrives. Every defence a buyer possesses is worth more before the award than after it; most are worth nothing after.
For suppliers: making the ex parte award execution-proof
Because the absent buyer’s best hope is a service or jurisdiction attack, the supplier’s file should close those doors in advance: serve notices at the registered office and the contractual address, place tracking records before the Council, prove supplier status for the relevant period with the registration certificate, and present the interest computation transparently. An ex parte award built on meticulous service and documentation converts, years later, into an unassailable execution; one built on shortcuts invites the only challenge the buyer can still afford.
The takeaway
The MSMED machinery is deliberately unforgiving of absence: it was enacted because buyers could once outwait unpaid suppliers indefinitely. An ignored notice matures into an award with punitive interest, a challenge gated by a 75% deposit, and execution. Buyers should treat every Council communication as litigation already begun; suppliers should build the service record that makes the empty chair the buyer’s problem alone.
This article is for general information only and is not legal advice or a solicitation.
Frequently Asked Questions
Can the Facilitation Council really proceed without the buyer?
Yes. Once the reference is made and notice issued, the Section 18 process — conciliation, then arbitration — follows the Arbitration and Conciliation Act’s framework, which expressly permits the tribunal to continue proceedings and make an award where a respondent fails to appear or file a defence after due notice. Absence is treated as default, not as veto; the claimant still proves the claim, but unopposed.
What must the supplier still establish in an ex parte proceeding?
The essentials of the statutory claim: supplier status covering the transactions, the supply of goods or services and acceptance (or deemed acceptance), the appointed day and the delay, the amounts due, and the interest computation under Sections 15 and 16. Councils and arbitral institutions act on documents — purchase orders, invoices, delivery challans, ledger confirmations — so an organised paper trail produces a robust ex parte award.
Can the buyer apply to set aside an ex parte MSEFC award?
The principal route is Section 34 of the Arbitration and Conciliation Act — subject to Section 19 of the MSMED Act, which requires a pre-deposit of 75% of the awarded amount before the application is entertained. A buyer genuinely never served may contend the notice failure vitiated the proceedings — inability to present one’s case is a Section 34 ground — but a buyer who was served and slept has almost no room: an award is not set aside merely because the respondent chose not to participate.
Is there any relief against the 75% pre-deposit?
The deposit is mandatory in character, though courts have permitted phased or structured compliance in appropriate cases. Practically, the deposit — which may be released in part to the supplier during the challenge — transforms most post-award strategies into settlement negotiations rather than merits battles.