Court Rules Limitation Does Not Apply to Conciliation Under MSMED Act, Orders Council to Proceed with Conciliation
In a significant ruling, the Himachal Pradesh High Court has overturned the decision of the Micro and Small Enterprises Facilitation Council, which had rejected a reference by M/s RK Products on the grounds of being time-barred. The court ruled that the principles of limitation do not apply to conciliation proceedings under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
The case involved M/s RK Products, which had filed a reference under Section 18(1) of the MSMED Act to recover an amount of Rs. 2,55,96,949 with interest for delayed payments. The Facilitation Council had dismissed the reference, citing that it was akin to a civil suit and thus subject to the law of limitation, following a delay of nearly eight years.
Justice Ajay Mohan Goel of the Himachal Pradesh High Court clarified that the Facilitation Council is not comparable to a Civil Court and does not have the authority to dismiss a reference based on limitation principles. The court referred to the Supreme Court's rulings in similar cases, emphasizing that conciliation under Section 18(2) of the MSMED Act is a non-adjudicatory process based on negotiation, and time-barred claims are not excluded from such proceedings.
The court directed the Facilitation Council to take the reference back on board and attempt conciliation in accordance with the law. This judgment reinforces the non-applicability of limitation to conciliation under the MSMED Act, allowing enterprises to seek resolution of disputes despite delays.
Bottom Line:
Micro, Small and Medium Enterprises Development Act, 2006 - Reference under Section 18(1) of the MSMED Act cannot be rejected by the Facilitation Council on the ground of limitation; limitation principle does not apply to conciliation proceedings under Section 18(2).
Statutory provision(s):-
Micro, Small and Medium Enterprises Development Act, 2006 - Sections 18(1), 18(2), 18(3);
Arbitration and Conciliation Act, 1996
Limitation Act, 1963.
