The Supreme Court held that the Limitation Act applicable on Arbitration Proceedings initiated under Micro, Small and Medium Enterprises Development Act, 2006 (MSMED).
The respondent, Kerala State Road Transport Corporation (KSRTC), invited tenders for the supply of thread rubber for tire rebuilding. The appellants, M/s. Silpi Industries and M/s. Khyaati Engineering herein who were the claimants before the arbitrator was given purchase orders.
As per the terms of the purchase order, 90% of the total purchase price was payable to the appellants/claimants on supply of materials and the balance 10% was to be paid subject to final performance report. This was so, since it was the condition that the thread rubber supplied by the appellants was to run a minimum number of kilometers.
When the 10% balance amount was not paid as per the purchase order, the appellants/claimants herein have approached the Industrial Facilitation Council presently under the Micro and Small Enterprises Facilitation Council constituted under Micro, Small, and Medium Enterprises Development Act, 2006. The earlier IDPASC Act was replaced by MSMED Act and the earlier Act was repealed. As the conciliation failed, the claims made by the appellants herein were referred to arbitration under provisions of the 1996 Act. The awards were passed in favor of the claimants and such awards were challenged by way of applications for setting aside the same under Section 34 of the 1996 Act. When their applications were dismissed, respondents carried the matter by way of appeals under Section 37 of the 1996 Act before the High Court of Kerala at Ernakulam.
The issue raised was whether the Limitation Act, 1963 applies to arbitration proceedings held under the IDPASC and MSMED Acts.
The division bench of Justice Ashok Bhushan and Justice R. Subhash Reddy held that the Limitation Act, 1963 is applicable to the arbitration proceedings under Section 18(3) of the 2006 Act. Thus, no further elaboration is necessary on this issue and we hold that the provisions of the Limitation Act, 1963 will apply to the arbitrations covered by Section 18(3) of the 2006 Act.
“There is no acceptable material to show that, supply of goods has taken place or any services were rendered, subsequent to registration of appellant as the unit under MSMED Act, 2006. By taking recourse to file memorandum under sub-section (1) of Section 8 of the Act, subsequent to entering into contract and supply of goods and services, one cannot assume the legal status of being classified under MSMED Act, 2006, as an enterprise, to claim the benefit retrospectively from the date on which appellant entered into a contract with the respondent. The appellant cannot become a micro or small enterprise or supplier, to claim the benefits within the meaning of MSMED Act 2006, by submitting a memorandum to obtain registration subsequent to entering into the contract and supply of goods and services. If any registration is obtained, the same will be prospective and applies for the supply of goods and services subsequent to registration but cannot operate retrospectively. Any other interpretation of the provision would lead to absurdity and confer unwarranted benefit in favour of a party not intended by legislation,” the Supreme Court said.
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