MSMED Act Section 18 and 19 Proceedings in Delhi High Court
MSMED Act Section 18 and 19 Proceedings in Delhi High Court
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, is a vital legislation aimed at promoting and developing micro, small, and medium enterprises in India. Sections 18 and 19 of the MSMED Act are particularly significant in the context of payment delay disputes between suppliers and buyers. Section 18 of the MSMED Act mandates reference to the Micro and Small Enterprises Facilitation Council for disputes over dues, while Section 19 allows setting aside decrees or awards made by the Council. The Delhi High Court has recently clarified the interpretation of these sections in the context of payment delay disputes.
The Delhi High Court's interpretation of Sections 18 and 19 of the MSMED Act is crucial for Indian businesses and litigators to understand. In a recent judgment, the Delhi High Court ruled that Section 19 applies only to proceedings initiated under Section 18. This means that if a proceeding is not initiated under Section 18, the provisions of Section 19, including the requirement for deposit of 75% of the awarded amount, will not apply. This judgment has significant implications for businesses and litigators, as it clarifies the scope of Sections 18 and 19 of the MSMED Act. As noted in When Statute Prevails Over Contract: The Delhi High Court On MSMED Arbitration, the MSMED Act constitutes a special legislation, governing disputes of a defined class through a statutorily prescribed forum and procedure.
The Delhi High Court's judgments on Sections 18 and 19 of the MSMED Act are based on a thorough analysis of the statutory provisions and the legislative intent behind them. In ARB.P. 206/2025 M/S TOTAL APPLICAT, the Court observed that Section 18(4) of the MSMED Act creates a bar on the jurisdiction of the Court to entertain any application under Section 11 of the Act. This means that if a dispute is referred to the Micro and Small Enterprises Facilitation Council under Section 18, the Court will not have jurisdiction to entertain an application under Section 11 of the Arbitration and Conciliation Act, 1996. As noted in Supreme Court of India: MSME Act dispute resolution prevails over Arbitration and Conciliation Act, despite arbitration clause, for payment delay disputes with micro and small suppliers, the Supreme Court of India has also confirmed that the dispute resolution framework under the MSMED Act takes precedence over the Arbitration and Conciliation Act, 1996, in cases of payment delay disputes with micro and small suppliers.
The implications of the Delhi High Court's judgments on Sections 18 and 19 of the MSMED Act are significant for Indian businesses and litigators. Businesses must be aware of the statutory provisions and the procedures prescribed under the MSMED Act for resolving payment delay disputes. As noted in J U D G M E N T, a writ petition under Articles 226/227 of the Constitution is not maintainable if a statutory remedy is available under Section 18 of the MSMED Act. Litigators must also be aware of the jurisdictional limitations of the Court in entertaining applications under Section 11 of the Arbitration and Conciliation Act, 1996, in cases where a dispute is referred to the Micro and Small Enterprises Facilitation Council under Section 18 of the MSMED Act. In 03.11.2025 Judgment pronounced on: 07.02.2026 + ARB., the Court observed that the seat of arbitration in MSME cases is determined by the provisions of the MSMED Act, and not by the agreement between the parties.
In conclusion, the Delhi High Court's judgments on Sections 18 and 19 of the MSMED Act provide clarity on the interpretation of these provisions in the context of payment delay disputes. Businesses and litigators must be aware of the statutory provisions and the procedures prescribed under the MSMED Act for resolving such disputes. The judgments of the Delhi High Court and the Supreme Court of India emphasize the importance of following the statutory framework for dispute resolution under the MSMED Act, and the limitations of the Court's jurisdiction in entertaining applications under the Arbitration and Conciliation Act, 1996, in such cases. As noted in Delhi HC decides upon the applicability of section 19 of MSMED Act to proceedings which have not been initiated as per Section 18 of the MSMED Act, the Delhi High Court's judgment is a significant development in the law relating to payment delay disputes under the MSMED Act.