Lack of MSME Registration at Transaction Time Alone Does Not Nullify Arbitral Award: J&K and Ladakh HC

Jammu, Oct 9 (KNN) The Jammu & Kashmir and Ladakh High Court has held that alleged non-registration of an enterprise under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, at the time of a transaction does not, by itself, render an arbitral award passed under the Act a nullity.

Justice Sanjay Dhar observed that an objection to an enterprise's registration status alone cannot deprive the Micro and Small Enterprises Facilitation Council of jurisdiction to entertain a dispute under Section 18 of the Act and refer it to arbitration.

The Court dismissed three revision petitions challenging orders of the Principal District Judge, Jammu, who had rejected objections to the execution of three arbitral awards passed in favour of M/s Mother Choice Health Care India over unpaid dues for the supply of goods.

Dispute Over MSME Registration

The disputes arose from three transactions involving supplies made in 2014-15. The respondent approached the Himachal Pradesh Micro and Small Enterprises Facilitation Council in Shimla for recovery of the outstanding amounts. After conciliation failed, the Council referred the disputes to arbitration under Section 18(3) of the MSMED Act, resulting in three separate awards.

The awards were initially taken up for execution before the District Judge, Solan, Himachal Pradesh, and the proceedings were subsequently transferred to Jammu.

The petitioners challenged their execution under Section 47 read with Section 151 of the Code of Civil Procedure, arguing that the awards were nullities because the respondent was allegedly not registered under the MSMED Act when the supplies were made.

Court Relies on Supreme Court Ruling

Rejecting the challenge, the High Court noted that the respondent had produced an Udyog Aadhaar Memorandum certificate showing registration under the MSMED Act with effect from April 1, 2010. It observed that the petitioners appeared to have mistaken the respondent's re-registration in 2020 for its initial registration.

The Court further held that even if the respondent had not been registered at the relevant time, that fact alone would not invalidate the awards.

The petitioners had relied on Supreme Court judgments, including M/s Silpi Industries v. Kerala State Road Transport Corporation, M/s Vaishno Enterprises v. Hamilton Medical AG and Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd., to argue that an unregistered enterprise could not invoke the dispute-resolution mechanism under the Act.

However, the High Court relied on the Supreme Court's subsequent judgment in NBCC (India) Ltd. v. State of West Bengal (2025 INSC 54). It noted that the Supreme Court had rejected the contention that a Facilitation Council necessarily lacks jurisdiction to entertain a reference under Section 18(3) merely because an enterprise is not registered under Section 8 of the MSMED Act.

Justice Dhar observed that the objection to the respondent's registration status did not establish that the Facilitation Council lacked jurisdiction or that the resulting arbitral awards were nullities.

Finding no ground to interfere with the orders of the Principal District Judge, Jammu, the High Court dismissed all three revision petitions.

(KNN Bureau)