Delhi High Court: MSME Registration Cannot Operate Retrospectively; Pre-Registration Claims Cannot Be Revived Through MSEFC Arbitration

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 16.09.2026

Delhi High Court: MSME Registration Cannot Operate Retrospectively; Pre-Registration Claims Cannot Be Revived Through MSEFC Arbitration

The Delhi High Court has dismissed an arbitration appeal filed by Shri Krishan Grit Co., holding that the benefits and dispute-resolution mechanism under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) cannot be invoked for claims arising before the enterprise acquired the relevant status as a registered “supplier”.

Justice Tushar Rao Gedela, in Shri Krishan Grit Co. v. Continental Engineering Corporation, ARB.A.(COMM) 30/2024, upheld the Arbitral Tribunal’s decision that it lacked jurisdiction over the appellant’s claims. The appeal had been filed under Section 37(2)(a) of the Arbitration and Conciliation Act, 1996 against the Tribunal’s order under Section 16.

The Court relied substantially on the Supreme Court’s decision in Silpi Industries v. Kerala State Road Transport Corporation, (2021) 18 SCC 790 and reiterated that MSME registration operates prospectively rather than retrospectively.

Dispute Arose From Supply of Aggregates and TMT Steel Bars

• Shri Krishan Grit Co., a sole proprietorship of Sanjeev Gupta, was engaged in supplying aggregates, variants of aggregates and TMT steel bars for construction and infrastructure projects.
• The respondent, Continental Engineering Corporation, was described as a foreign company incorporated in Taiwan with a project office registered in India.
• The appellant claimed that it had supplied aggregates and TMT bars to the respondent under various contractual arrangements, including an MoU dated 9 February 2016, and that disputes subsequently arose over unpaid dues.
• The appellant initially invoked arbitration under the arbitration clauses contained in purchase orders issued under the MoU. A former Chief Justice of the Andhra Pradesh High Court was appointed sole arbitrator, but those proceedings were terminated because the appellant failed to file its Statement of Claim.

Supplier Subsequently Approached MSEF Council

• After termination of the earlier arbitration, Shri Krishan Grit Co. approached the Micro and Small Enterprises Facilitation Council (MSEFC).
• Following unsuccessful conciliation, the Council referred the dispute to the Delhi International Arbitration Centre (DIAC) under Section 18(3) of the MSMED Act. DIAC thereafter appointed a former Delhi High Court judge as sole arbitrator.
• Continental Engineering challenged the Tribunal’s jurisdiction under Section 16 of the Arbitration and Conciliation Act.
• On 13 September 2021, the Arbitral Tribunal allowed that application and held that it had no jurisdiction and that the arbitration proceedings initiated by the appellant were not maintainable.

Core Question: Can MSME Registration Cover Earlier Transactions?

• The principal question before the Delhi High Court was whether claims pertaining to 2016 and 2017-18 could be maintained under the MSMED Act when the appellant’s relevant registration in Delhi was obtained only on 26 February 2019.
• The appellant sought to rely upon another MSME registration relating to its manufacturing unit at Sikar, Rajasthan, for which it claimed registration from 20 October 2016.
• It argued that the location of registration should not matter and that the mere fact of being registered as an enterprise should be sufficient to maintain the claims. It further contended that the effect of the Rajasthan and Delhi registrations required evidence and could not be decided summarily.
• The High Court rejected this argument.

Supreme Court’s Silpi Industries Ruling Governs the Issue

• The Court extensively considered Silpi Industries v. Kerala SRTC.
• In Silpi Industries, the Supreme Court held that an entity cannot obtain MSME registration after entering into contracts and completing supplies and then retrospectively claim the statutory benefits available under the MSMED Act.
• The Delhi High Court noted that registration is prospective and applies to supplies of goods or services subsequent to registration; it cannot retrospectively transform earlier transactions into transactions covered by the MSMED Act.
• The appellant attempted to argue that the relevant observations in Silpi Industries were merely obiter dicta. Justice Gedela expressly rejected that contention, finding that the observations represented a clear principle of law laid down by the Supreme Court.
• The High Court consequently stated that the law was settled that only claims arising after registration of an entity as a micro or small enterprise would be maintainable under the MSMED Act framework.

“Supplier” Status Arises Upon Registration

• The Court also examined Sections 2(n), 8 and 18 of the MSMED Act.
• Section 2(n) defines a “supplier” as a micro or small enterprise that has filed the prescribed memorandum with the authority referred to in Section 8.
• On a conjoint reading of these provisions, the High Court held that it is upon the requisite registration that a party acquires the status of a “supplier” for purposes of the MSMED Act and becomes entitled to the benefits conferred by the legislation.
• Accordingly, the Court held that a supplier can seek reference of disputes to arbitration under Section 18 only in respect of claims arising after such registration.

MSEFC Jurisdiction Is Linked to Location of Supplier

• The judgment also contains an important finding concerning the territorial jurisdiction of Micro and Small Enterprises Facilitation Councils.
• Examining Sections 18(4) and 18(5), the High Court held that only the MSEFC where the supplier is located has jurisdiction either to arbitrate the dispute itself or refer it to an arbitration institution or alternative dispute resolution centre.
• The Court further held that the MSMED Act contemplates separate competent authorities for different States and does not contemplate an overlap in their territorial jurisdiction.
• Thus, in the present circumstances, the Delhi MSEFC could exercise jurisdiction in accordance with Section 18 only in relation to the supplier located within its jurisdiction. The separate question, however, was whether the appellant’s 2019 Delhi registration could bring earlier claims within the MSMED Act.
• The Court answered that question against the appellant.

Claims Pre-Dated Delhi MSME Registration

• The appellant’s manufacturing unit was stated to have been registered in Rajasthan in connection with manufacturing activity, while its subsequent Delhi registration was in the category of services.
• The disputed claims arose in 2016 and 2017-18, but the appellant invoked the Delhi MSEFC on the strength of a Delhi registration obtained in 2019.
• The High Court held that such claims fell foul of the principle laid down in Silpi Industries because they related to a period prior to the appellant’s registration in Delhi.
• The Tribunal had also recorded specific dates on which the supplies of TMT bars, sand and aggregates were completed. Those transactions were completed well before the relevant 2019 registration on which the appellant had relied before the Delhi MSEFC.

Rajasthan MSME Certificate Did Not Rescue the Claims

• The High Court also rejected the attempt to rely upon the Rajasthan MSME certificate.
• The Arbitral Tribunal had found that the Rajasthan certificate related to an enterprise situated at Neem Ka Thana, Sikar, Rajasthan, and concerned “manufacturing activity”, whereas the claimant before the Tribunal was Shri Krishan Grit Co. having its registered office at Narayana, New Delhi, whose certificate related to “services.”
• The Tribunal also found that the Delhi entity had signed the MoU and supplied the material.
• Justice Gedela held that the Tribunal had reached a definite factual conclusion on the issue, which could not be interfered with within the limited scope of a Section 37 appeal. The Court referred in this context to C & C Constructions Ltd. v. IRCON International Ltd., 2025 SCC OnLine SC 218.
• The High Court further observed that the appellant’s Statement of Claim itself had relied upon the Delhi registration dated 26 February 2019, rather than the Rajasthan registration.

Delhi HC Says Earlier Contrary View Cannot Survive Silpi Industries

• The appellant relied upon M/s Ramky Infrastructure Pvt. Ltd. v. Micro and Small Enterprises Facilitation Council & Anr., 2018 SCC OnLine Del 9671 to contend that MSME registration was not a sine qua non for arbitration concerning claims arising before registration.
• The High Court rejected the reliance, holding that the Supreme Court’s authoritative pronouncement in Silpi Industries laid down the law to the contrary.

Earlier Abandoned Arbitration Was Another Barrier

• The Court also examined another significant aspect of the dispute.
• Before approaching the MSEFC, the appellant had already invoked contractual arbitration concerning the same claims. A sole arbitrator had entered upon the reference, but the appellant failed to file its Statement of Claim, resulting in termination of those proceedings with costs.
• The Tribunal held that the appellant could not abandon those proceedings and subsequently initiate another arbitration concerning the same subject matter after obtaining MSME registration. It described the course adopted as impermissible “forum hunting.”
• The High Court noted that it was undisputed that the claims in the previous arbitration were the same as those raised in the subsequent proceedings and that the earlier proceedings had been terminated because of the appellant’s failure to file its Statement of Claim.
• Referring to Harshbir Singh Pannu v. Jaswinder Singh, 2025 SCC OnLine SC 2742, the Court observed that an aggrieved party has appropriate remedies against termination of arbitration proceedings. Having failed to avail those remedies, the appellant could not reopen the abandoned claims merely by subsequently obtaining registration under the MSMED Act.

Delhi High Court Dismisses Appeal

• The Delhi High Court ultimately found no reason to interfere with the Arbitral Tribunal’s jurisdictional decision.
• The Court held that the appellant’s claims pre-dated its relevant Delhi MSME registration and could not retrospectively be brought within the special dispute-resolution framework of the MSMED Act. The Tribunal’s view concerning the earlier abandoned arbitration was also upheld.
• Accordingly, the Court held that the appeal was “unmerited” and dismissed it.

Why the Judgment Matters for MSMEs

The judgment carries important implications for businesses seeking recovery of delayed payments through the MSEFC mechanism.

An enterprise obtaining MSME registration after contracts have been performed cannot, merely by virtue of that subsequent registration, retrospectively bring historical transactions within the statutory benefits of the MSMED Act.

The timing of the supplier’s registration, the period during which supplies were made, and the territorial jurisdiction of the relevant MSEFC can therefore become decisive jurisdictional questions.

The ruling also demonstrates that subsequent MSME registration cannot ordinarily be used as a procedural route to reopen the same claims after an earlier arbitration has been abandoned without pursuing the remedies available against its termination.

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Source: Delhi High Court

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