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Informist, Thursday, Jul. 17, 2025

 

NEW DELHI – The Supreme Court on Thursday held that the Limitation Act, 1963, does not apply to conciliation proceedings under Micro, Small and Medium Enterprises Development Act, 2006, with respect to delayed payments to these enterprises. Consequently, the top court allowed appeals by small-scale industries in Maharashtra against rejection of their delayed payments under the 2006 Act.

 

A time-barred claim can be referred to conciliation as the expiry of the limitation period does not extinguish the right to recover the amount, including through a settlement agreement that can be arrived at through the conciliatory process, said the apex court. There was no legal bar in the Limitation Act, the Micro, Small and Medium Enterprises Development Act, the Arbitration and Conciliation Act, 1996, or the legal precedents laid down that proscribe conciliation with respect to time-barred debts, the court added.

 

Further, the court said that the Limitation Act applies to arbitration proceedings under Section 18(3) of the 2006 Act, which outlines the process for dispute resolution between micro, small, and medium enterprises and their buyers when conciliation fails. "The applicability of the provisions of ACA (the Arbitration and Conciliation Act, 1996) to such arbitrations is determined as per Section 18(3) and other provisions of the MSMED Act, as these are special laws, rather than by Section 2(4) of the ACA, which is under a general law," said the court.

 

The apex court was hearing petitions by Sonali Power Equipments Pvt. Ltd. and other small-scale industries. The petitioners had supplied transformers to Maharashtra State Electricity Board under various purchase orders between 1993 to 2004. Due to delay in payments, the petitioners had filed pleas in the Micro and Small Enterprises Facilitation Council under the 2006 Act. 

 

In 2010, the facilitation council allowed the appellants' claims and awarded interest on the delayed payments. However, the award was set aside by a commercial court in 2017 on the ground that the claims were barred by limitation. Thereafter, Bombay High Court ruled against micro, small and medium enterprises and said that the limitation law will apply to them if they seek resolution for delayed payments in conciliation proceedings under the 2006 Act, which the top court rejected on Thursday. However, the apex court upheld the high court's ruling on the applicability of Limitation Act on arbitration proceedings under the 2006 Act.  End

 

Reported by Surya Tripathi

Edited by Vandana Hingorani

 

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