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NBCC (India) Ltd. v. The State of West Bengal

Civil Appeal · 2025 INSC 54Decided 10 Jan 2025
C.A. No.-003705-003705 - 2024
Justice Pamidighantam Sri Narasimha

Background

NBCC (India) Ltd. (a public sector construction company) had awarded several construction work orders in West Bengal to a small enterprise, which registered itself as a "small enterprise" under Section 8 of the MSMED Act only after some of the contracts were already signed. When payment disputes arose, the enterprise referred the dispute to the West Bengal State Micro and Small Enterprises Facilitation Council under Section 18 of the Act. NBCC challenged this, arguing that only a supplier registered under Section 8 before the contract was executed could invoke Section 18, and the High Court left this jurisdictional question open for the Arbitral Tribunal to decide, prompting NBCC's appeal to the Supreme Court.

Decision Breakdown

The Court examined the text, context, and purpose of the MSMED Act and held that Section 18 is not restrictive. It is an open-ended remedy allowing "any party to a dispute" to seek redressal from the Facilitation Council, not just a supplier registered before the contract was signed. The Court found that the issue raised was materially different from what was decided in two of its own earlier rulings (Silpi Industries v. Kerala SRTC and Gujarat State Civil Supplies Corporation v. Mahakali Foods), which had suggested registration must precede the contract. Rather than simply apply or distinguish those precedents on its own authority as a two-judge Bench, the Court decided that for the sake of legal clarity and certainty on this recurring MSME question, the matter should be referred to a three-judge Bench for an authoritative pronouncement.

Lesson Learnt

Small businesses need not have registered under the MSMED Act before signing a contract with a buyer in order to later seek recovery of unpaid dues through the statutory Facilitation Council process, though this point remains formally pending final resolution by a larger Bench of the Supreme Court.

Official source (sci.gov.in)View Judgment (PDF)

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