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Home › MSMED: Inert Council, S.11 Relief
Delhi High Court · 5 November 2026

When the Facilitation Council Goes Silent: Section 11 to the Rescue of an MSME

A micro enterprise’s Section 18 reference sat with the Delhi Facilitation Council from 2023 with a single hearing and nothing after; the High Court held the MSMED Act overrides the contract’s Bangalore forum clause and referred the disputes to DIAC arbitration.

In M/s I Hub Express Pvt Ltd v. M/s Instakart Services Pvt Ltd (ARB.P. 1182/2025, decided 5 November 2026), Justice Prateek Jalan of the Delhi High Court answered a question that haunts MSME recovery practice: what happens when the Micro and Small Enterprises Facilitation Council receives a reference under Section 18 of the MSMED Act — and then simply stops? The answer: the supplier is not condemned to wait. The High Court can appoint, and in this case did, referring the disputes to DIAC-administered arbitration over objections based on the contract’s Bangalore seat and exclusive forum clause.

The case in one view

CaseM/s I Hub Express Pvt Ltd v. M/s Instakart Services Pvt Ltd, ARB.P. 1182/2025
CourtHigh Court of Delhi, Justice Prateek Jalan
Decided5 November 2026
BackgroundDelhi-registered micro enterprise supplying logistics services; Principal Agreement of 30 August 2019 with addenda; unpaid invoices referred to the Delhi MSE Facilitation Council on 7 September 2023 under Section 18 MSMED Act
OutcomeDisputes referred to DIAC-administered arbitration under Section 11(6); all merits left open

Two years at the Council, one hearing

The supplier’s reference reached the Delhi Facilitation Council in September 2023. A single hearing followed in December 2023. After that: neither the conciliation that Section 18(2) contemplates, nor the arbitration that Section 18(3) mandates if conciliation fails, nor even an appointment. For a micro enterprise carrying unpaid invoices, the statutory fast track had become a siding.

The supplier moved the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996. The buyer raised two objections — jurisdiction and prematurity — and both failed.

Objection one: the Bangalore clauses

The Principal Agreement fixed a Bangalore seat and an exclusive Bangalore forum. On ordinary arbitration principles those clauses would have sent the petition south. But the MSMED Act is not an ordinary overlay. Following Gujarat State Civil Supplies Corporation v. Mahakali Foods and Harcharan Dass Gupta v. Union of India, the Court held that Section 18 — fortified by Section 24’s overriding effect — prevails over the contractual arbitration mechanism, and that Section 18(4) anchors jurisdiction at the supplier’s location. The supplier being registered in Delhi, Delhi had jurisdiction. The statutory policy is deliberate: an MSME’s remedy sits where the MSME is, not where the buyer’s standard-form contract puts it.

Objection two: “conciliation first”

The buyer’s second argument had surface appeal — Section 18’s architecture does place conciliation before arbitration. The Court’s answer, resting on Vallabh Corporation v. SMS India and the Bombay High Court’s Microvision Technologies, was that the sequence binds the Council, not the supplier’s access to justice. Where the Council never conducts conciliation, the supplier cannot be met with the plea that an unperformed stage bars the next one. Court-annexed mediation had, in any event, been attempted and failed with a “Not-Settled” report in February 2026.

What this unlocks for MSME practice

1. Diarise the Council’s timeline. Section 18(5) contemplates disposal of references within ninety days. Once a reference visibly exceeds it with no movement, the record of that inertia becomes the foundation of relief.
2. Write, then move. A letter to the Council seeking conciliation or appointment — unanswered — makes the inertia documentary. The Section 11 petition then presents a clean narrative.
3. Plead the statutory override. Seat, venue and exclusive-forum clauses in the buyer’s contract do not control; Sections 18(4) and 24 MSMED do. Plead supplier location and Udyam registration with precision.
4. File the full contract. The Court’s admonition on the unfiled Principal Agreement is a standing instruction: Section 11 petitions carry a duty of full disclosure, and incomplete records invite worse than deprecation.
The reference went to the Delhi International Arbitration Centre, with all merits left open. Nothing in the order prejudges the invoices; it decides only that the dispute will finally be heard — which, for a micro enterprise financing its receivables, is most of the battle.

Frequently Asked Questions

Can a Section 11 petition be filed while a Section 18 reference is pending?

Where the Facilitation Council sits inert — here, one hearing in December 2023 and nothing thereafter, with neither conciliation conducted nor an arbitrator appointed — the Delhi High Court held a Section 11(6) petition maintainable, following Vallabh Corporation and the Bombay High Court's Microvision Technologies. The statutory mechanism cannot become a trap of indefinite waiting.

Did the Bangalore exclusive jurisdiction clause not apply?

No. Section 18 of the MSMED Act, reinforced by the overriding effect in Section 24, prevails over a contractual arbitration clause — Gujarat State Civil Supplies Corporation v. Mahakali Foods — and under Section 18(4) jurisdiction follows the supplier's location. The supplier being Delhi-registered, Delhi had jurisdiction despite the contract's Bangalore seat and forum clauses.

Must conciliation under Section 18(2) always precede arbitration?

The sequence is the statutory design, but the Court rejected prematurity where the Council itself never conducted conciliation — and court-annexed mediation had in any event failed with a "Not-Settled" report. A party cannot resist arbitration by pointing to a stage the Council never performed.

What was the consequence of not filing the main agreement?

The Court deprecated the petitioner's failure to file the Principal Agreement, invoking the duty of full disclosure in Section 11 petitions. The lapse did not defeat the reference here, but the admonition is a drafting warning: file the complete contractual record.

Note: This article is general information about the law and is not legal advice. It does not create an advocate-client relationship. The position stated is as at 13 November 2026 and may have changed since. Readers should verify any provision or decision referred to against the official text and seek advice on their own circumstances.