Supreme Court Bench delivers ruling affirming MSME arbitration rights under MSMED Act.
CASE SUMMARY – In M/s Harcharan Dass Gupta vs. Union of India, the Supreme Court addressed jurisdictional conflict between arbitration agreements and statutory rights under the MSMED Act. Despite a contract stipulating Bengaluru as the arbitration seat, the Delhi-based MSME invoked the Delhi Facilitation Council. The Karnataka High Court ruled in favor of the contractual clause, but the Supreme Court reversed it, citing the MSMED Act’s overriding effect. Upholding Mahakali Foods, the Court held that statutory arbitration via Facilitation Councils cannot be overridden by private agreements. Arbitration will proceed in Delhi, affirming MSMEs’ rights to statutory redressal mechanisms.
| ASPECTS | DETAILS |
| Case Title | M/s Harcharan Dass Gupta vs Union of India (Civil Appeal No. 6807 of 2025) |
| Introduction | The case concerns jurisdictional conflict between the MSMED Act, 2006 and the Arbitration and Conciliation Act, 1996 regarding arbitration of disputes involving MSMEs. |
| Factual Background | ISRO (Bengaluru) issued a tender for construction in Delhi. The appellant, a Delhi-based MSME, won the contract. Disputes arose; arbitration was initiated in Delhi. |
| Legal Issues | Whether the Delhi Arbitration Centre had jurisdiction despite the contract specifying Bengaluru as the seat of arbitration. |
| Applicable Law |
|
| Analysis | MSMED Act, being a special law, overrides the Arbitration Act. Section 18(4) gives jurisdiction to the Facilitation Council where the supplier (MSME) is located. |
| Conclusion | The Supreme Court set aside the Karnataka High Court’s decision and upheld Delhi Arbitration Centre’s jurisdiction. |
| Current Scenario | The case reaffirms the MSMED Act’s supremacy in arbitration involving MSMEs. Arbitration will continue in Delhi as per the Facilitation Council’s referral. |
“Statutory rights under the MSMED Act cannot be overridden by private arbitration agreements.”
SOURCE – SUPREME COURT OF INDIA
READ ALSO – Arbitration and Conciliation Act, 1996
