ARTICLE
22 January 2025

MHCO Update: Supreme Court Judgment On MSME Dispute Resolution

MH
Mansukhlal Hiralal & Co.

Contributor

Mansukhlal Hiralal & Co. a multi-service law firm takes great pride in providing quality legal advice for over 100 years. We have offices in Mumbai & Delhi. The firm has around 25 fee earners which includes partners, of counsels, consultants and associates. We provide complete legal services to a wide array of corporates, individuals, national and international clients. We have a peerless reputation for high professional standards and always adopt an intellectual and practical approach towards our clients’ needs.
The Supreme Court of India ("Court") has recently underscored the importance of clearly stating the intent behind its judgments in a significant ruling involving Micro, Small, and Medium Enterprises ("MSMEs").
India Litigation, Mediation & Arbitration

Introduction

The Supreme Court of India ("Court") has recently underscored the importance of clearly stating the intent behind its judgments in a significant ruling involving Micro, Small, and Medium Enterprises ("MSMEs"). In the case of NBCC (India) Ltd. vs. The State of West Bengal & Ors., the Court clarified that not every judgment is intended to serve as a binding precedent under Article 141 of the Constitution. This ruling emphasizes the necessity for judgments to specify whether they are resolving a specific dispute between the parties or establishing a legal precedent.

Background

The SC's observations arose while addressing a dispute regarding whether unregistered MSMEs could avail themselves of dispute resolution mechanisms under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The appellant argued that unregistered MSMEs could not seek resolution under this section, relying on previous judgments to support their claim. However, the Court rejected this argument, noting that the precedents cited were decided on different issues and did not pertain to the matter at hand. The Court emphasized that its judgments serve dual functions: decision-making and precedent-making. It acknowledged that while many decisions may address specific disputes, they should not automatically be treated as binding precedents unless explicitly stated. This clarification aims to alleviate confusion faced by High Courts and subordinate courts in determining whether a judgment is meant for decision-making or as a binding authority.

Implications for MSMEs

The implications of this ruling are significant for MSMEs across India. By affirming their access to statutory remedies and clarifying their rights under the MSMED Act, the judgment promotes fair treatment in contractual disputes with larger entities. The Court's directive to clearly articulate the intent behind its rulings will also enhance legal certainty and consistency in future cases involving MSMEs.

MHCO Comment: This Supreme Court judgment marks an important advancement in protecting MSME interests by clarifying their rights and ensuring equitable access to dispute resolution mechanisms. The Supreme Court's obiter dicta about their own judgments, which require them to now explicitly distinguish binding decisions from non-binding remarks, are significant because they could relieve the burden of the lower courts and change how Article 141 is currently interpreted.

This article was released on 17 January 2025.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More