Buyers facing a claim before the Micro and Small Enterprises Facilitation Council often reach first for the calendar: the supplier registered under the MSMED Act only after the contract, so — the argument runs — the Council had no business entertaining the reference at all. In W.P.(C) 12456/2024, decided on 13 October 2026, the Delhi High Court rejected that attack at the writ stage. Justice Amit Mahajan held that the timing of registration does not bar the reference under Section 18, that filing a memorandum under Section 8 is discretionary for micro and small enterprises, and that the buyer's objections belong before the arbitral tribunal, not a writ court.
The setting
The petitioner, a joint venture, had issued a Letter of Intent and Work Order to the supplier before November 2020; the supplier obtained its registration under the MSMED Act, 2006 only thereafter. When payment disputes arose, the supplier approached the Micro and Small Enterprises Facilitation Council, District West, Government of NCT of Delhi under Section 18. Conciliation failed, and the matter moved toward arbitration under Section 18(3). The buyer filed W.P.(C) 12456/2024 contending that the supplier's late registration deprived the Council of jurisdiction to act on the reference at all.
The Court's reasoning
Section 8 is discretionary
A micro or small enterprise may file a memorandum — the statute grants a discretion, it does not impose registration as a precondition to existence as a supplier.
Section 18 is wide
Any party to a dispute under Section 17 may make a reference to the Facilitation Council — language the Court read as keeping the forum open notwithstanding the registration date.
NBCC applied
Following the Supreme Court in NBCC (India) Ltd. v. State of West Bengal, the registration timing objection does not bar the reference itself.
No prejudice yet
Conciliation failed; no claim has been adjudicated; every contention — including jurisdiction — remains open before the arbitral tribunal.
Justice Amit Mahajan's judgment keeps two questions firmly apart. The first is whether the statutory machinery — conciliation, then institutional arbitration under Section 18(3) — can be set in motion by a supplier whose registration post-dates the contract. That, the Court held, it can. The second is what such a supplier can ultimately recover under the Act's delayed-payment provisions for supplies made before registration. That question the Court pointedly did not answer: the impugned orders involved no adjudication upon the rival claims and contentions of the parties, no observations were made on the merits of the claims, and the parties may raise their contentions before the arbitral tribunal. The petition was dismissed.
Forum now, merits later
| Question | Where it is decided |
|---|---|
| Can the Council receive the reference despite post-contract registration? | Settled by this judgment — yes; the reference is not barred |
| Does the tribunal have jurisdiction over this buyer and this claim? | Before the arbitral tribunal, under Section 16 of the Arbitration and Conciliation Act, 1996 |
| Which supplies attract the MSMED delayed-payment regime, and from when? | Merits — before the arbitral tribunal on evidence |
| Challenge to the eventual award | Section 34, subject to the 75% pre-deposit under Section 19 MSMED Act |
What buyers and suppliers should take away
For suppliers, the decision removes a threshold ambush: a Udyam registration obtained mid-relationship does not shut the Samadhaan route, and a buyer's writ petition against the reference is unlikely to succeed where the Council has merely processed the statutory sequence. Suppliers should still expect the registration-timing point to return before the tribunal as a merits defence, and should structure their claims — invoice dates, supply dates, registration date — with that battle in mind.
For buyers, the message is about sequencing and cost. The writ court will not ordinarily intercept a Section 18 reference before the tribunal has ruled on anything; objections must be marshalled before the tribunal, and an adverse award can be challenged under Section 34 of the Arbitration and Conciliation Act — but only on depositing seventy-five per cent of the awarded amount as Section 19 of the MSMED Act requires. A premature writ risks dismissal, delay and the hardening of the very proceedings it sought to avoid. The cheaper course is usually to contest the reference on its merits from the first hearing.
The Supreme Court's NBCC (India) Ltd. v. State of West Bengal line of authority distinguishes between the maintainability of a Section 18 reference and the reach of the Act's substantive benefits to supplies pre-dating registration. This judgment applies that distinction at the writ stage for a Delhi Facilitation Council reference; it does not enlarge the substantive entitlements of late-registered suppliers.
Frequently Asked Questions
What was the buyer's objection?
The supplier obtained its MSME registration in November 2020, after the Letter of Intent and the Work Order had been issued. The buyer — a joint venture — contended that a supplier not registered at the time of contract could not invoke Section 18 of the MSMED Act, so the Facilitation Council's proceedings referring the dispute onward were without jurisdiction.
Why did the Delhi High Court reject it?
Relying on the Supreme Court's decision in NBCC (India) Ltd. v. State of West Bengal, the Court held that the timing of registration did not bar the reference: Section 8 makes the filing of a memorandum discretionary for micro and small enterprises, and any party to a dispute under Section 17 can seek recourse to Section 18. The effect of late registration on the merits of the claim is a different question, open before the arbitral tribunal.
Does this mean the supplier automatically gets MSMED Act benefits for old supplies?
No. The judgment is about the forum, not the money. Which supplies attract the Act's delayed-payment regime, and from when, remain merits questions. The Court emphasised that conciliation had failed, no adjudication of the claims had occurred, no observations were made on merits, and all contentions remain open before the tribunal.
When will a writ court interfere with Facilitation Council proceedings?
Sparingly. Where the Council has merely set the statutory process in motion — failed conciliation followed by arbitration — and the petitioner can raise every objection, including jurisdictional ones under Section 16 of the Arbitration and Conciliation Act, before the tribunal itself, the writ court will ordinarily decline to short-circuit the statute. Demonstrated prejudice, not apprehension, is the threshold.