Small and Medium Enterprises Development Act

Arbitrations under the MSMED Act: Supreme Court clarifies but falls short

In the recent case of in Silpi Industries vs. Kerala State Road Transport Corporation & Anr, the Supreme Court was faced with determining the scope of intersection between arbitrations conducted under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 and its effect on already existing arbitration agreements between the parties. Although the Court reasoned that an arbitration agreement is to be ignored owing to Section 18 of the MSMED Act, its reasoning fails to hold water on various counts, and leaves many questions unanswered. The decision is also in contrast to a conflicting judgment delivered by the Bombay High Court in Porwal Sales vs. Flame Control Industries, which is well reasoned and better addresses these logical loopholes. Therefore, although the Court was awarded the opportunity to clarify a position that was both grey and overburdened Micro and Small Enterprises Facilitation Councils, it failed to address both these issues in the present case.

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