The MSME Samadhaan machinery under the MSMED Act, 2006 is a powerful collection tool — summary in character, armed with compound interest, and increasingly the first resort of small suppliers against large buyers. But its jurisdiction has edges. In the Mookerjee Port case, the Calcutta High Court quashed Facilitation Council proceedings because the claimant had not actually completed the supply it sought payment for: the Act protects dues for goods supplied and services rendered, not claims arising out of incomplete, terminated engagements.
The dispute
The port authority had engaged a contractor for architectural services. According to the authority, the contractor failed to complete the required deliverables under the contract specifications, no final bill was submitted, and the engagement was terminated in March 2025. The contractor nevertheless approached the Haryana Micro and Small Enterprises Facilitation Council with a claim of Rs 18,40,800 under the delayed-payment provisions of the MSMED Act, 2006. The authority moved the Calcutta High Court in its writ jurisdiction, questioning the Council’s competence to entertain the reference.
What the High Court held
Justice Krishna Rao allowed the petition and quashed the proceedings. The reasoning proceeds in three steps. First, the MSMED Act’s delayed-payment scheme — Sections 15 to 18 — presupposes goods that have been supplied or services that have been rendered; the words of the statute attach liability to payment withheld after supply and acceptance. Second, on the record, the contractor had not completed the deliverables and had submitted no final bill before termination, so there was no completed supply to anchor the claim. Third, whether the termination itself was lawful is a question for the ordinary courts; the Facilitation Council cannot sit in judgment over termination decisions. The contractor’s failure to challenge the March 2025 termination before any forum compounded the difficulty.
| Within MSEFC jurisdiction | Outside MSEFC jurisdiction |
|---|---|
| Payment withheld for goods supplied and accepted | Damages for wrongful termination |
| Payment for services actually rendered | Claims for incomplete, unaccepted work |
| Statutory compound interest on delayed payments | Adjudication of the validity of a termination |
Why the boundary matters
The Samadhaan route is attractive precisely because it is summary and interest-laden, which is also why buyers increasingly test its limits. The decision confirms that the Council’s jurisdiction is transactional, not plenary: it polices delayed payment for completed supplies, and it is not a substitute for a suit when the real dispute is about performance, quality or termination. Suppliers who shoehorn a broken-contract dispute into a delayed-payment reference risk losing years to a jurisdictional challenge; buyers facing such references have a clean threshold objection to raise at the first hearing.
Practice pointer: a supplier’s Samadhaan file should establish the supply itself before it establishes the delay — purchase orders, delivery challans or completion certificates, invoices, and the date of acceptance or deemed acceptance under Section 2(b) of the Act. Where any deliverable is contested as incomplete, anticipate the jurisdictional objection and be ready to show acceptance of the work billed.
The larger picture
Writ review of Facilitation Council proceedings is exceptional, but jurisdictional error is its classic occasion. The judgment joins a line of authority holding that the MSMED Act, for all its pro-supplier tilt, does not convert the Council into a general commercial court. The statute accelerates payment for what has been delivered; what was never delivered belongs to the ordinary law of contract.
This article is for general information only and is not legal advice or a solicitation.
Frequently Asked Questions
What was the dispute?
A contractor engaged for architectural services by the port authority raised a claim of Rs 18,40,800 before the Haryana Micro and Small Enterprises Facilitation Council after the engagement was terminated. The port authority challenged the Council’s jurisdiction by writ petition, contending that the contracted deliverables were never completed and no final bill had been submitted before termination.
What did the High Court decide?
The writ petition was allowed and the proceedings before the Council were quashed. The Court held that the MSMED Act applies to disputes over goods actually supplied or services actually rendered; where the work was incomplete and the contract terminated, there was no crystallised supply to which the delayed-payment machinery of Sections 17 and 18 could attach.
Can a Facilitation Council examine whether a termination was wrongful?
No. The Court held that adjudicating the correctness of a contract termination lies with the ordinary courts, not the Facilitation Council. The Council’s mandate is the recovery of delayed payments for completed supplies; it is not a forum for damages or for testing the legality of termination decisions.
What should suppliers take from this ruling?
Before invoking Samadhaan, a supplier should be able to show completed deliverables, acceptance or deemed acceptance under Section 2(b), and invoices raised. Where the engagement collapsed midway, the appropriate remedies are a civil suit or arbitration under the contract — and a termination left unchallenged in any forum will weigh heavily against the claim.