Case Title: JKS Infrastructure Private Limited v. MSME Facilitation Council and Others
Date of Decision: 18th September 2023
Case Number: W.P.(C) 16567/2022
Coram: Justice Prathiba M. Singh
Introduction
This case involves a petition filed by JKS Infrastructure Private Limited (the petitioner) seeking an order to set aside a reference made by the MSME Facilitation Council (Respondent No.1) under section 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), and subsequent proceedings initiated based on the said reference. The dispute arose between the petitioner and Lamba Techno Flooring Solutions (Respondent No.3), leading to a reference to arbitration.
Facts
- The petitioner, JKS Infrastructure Pvt. Ltd., filed a petition seeking the setting aside of the reference UDYAM-DL-10-0032365/M/00003 dated 10th September 2022, made by Respondent No.1 (MSME Facilitation Council) under section 18(2) of the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act).
- The dispute arose between the petitioner and Respondent No.3 (Lamba Techno Flooring Solutions), which led to a reference to arbitration by Respondent No.1.
- The petitioner argued that the MSME Act did not apply as the purchase order and invoice between the petitioner and Respondent No.3 were dated before Respondent No.3’s registration as an MSME on 8th February 2021.
Legal Issue
Whether the MSME Act is applicable when the registration as an MSME occurred after the completion of the works or services?
Contentions
The petitioner contends that the MSME Act does not apply because the purchase order and invoice were dated before Respondent No.3’s registration as an MSME. This argument is based on the timing of registration relative to the contract.
Legal Principles
- Registration under the MSME Act must occur before entering into a contract for the benefits of the Act to apply retroactively.
- The registration’s timing determines the Act’s applicability to goods and services supplied, with the Act applying only prospectively to post-registration supplies.
Observation and Analysis
The Court considered recent judgments in Municipal Corporation of Delhi v. Ram Prakash, and M/s. Grand Mumtaz Hotel v. Deputy Commissioner North East Government of NCT of Delhi to resolve the legal issue. These judgments emphasized that registration under the MSME Act must occur before the contract and supply of goods or services for the Act’s benefits to apply. Registration after the fact does not grant retrospective benefits under the MSME Act.
Decision of the Court
In light of the legal precedent established in the aforementioned judgments, the Court ruled that if registration under the MSME Act occurs after the completion of works or the execution of the contract, the Act would not be applicable. Therefore, the impugned references were quashed. Respondents were advised to pursue remedies in accordance with the law.
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Written by – Ananya Chaudhary
