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Can a Buyer File a Counter-Claim Under #msme Samadhaan?

Yes, a Division Bench of the Supreme Court in Silpi Industries v. Kerala State Road Corporation [Civil Appeal Nos. 1570-1578, decided on June 29, 2021], addressed key aspects regarding limitation, counter-claims, and the relevancy of ‘time of registration’ under the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”).

According to this judgment, a counter-claim is maintainable before statutory authorities in arbitral proceedings under the MSMED Act. This is because the provisions of the Arbitration Act apply to arbitration proceedings under Section 18 of the MSMED Act, as if there is an agreement between the parties under Section 7(1) of the Arbitration Act.

The Supreme Court further noted that, since Section 23(2A) of the Arbitration Act expressly provides for the filing of counter-claims and set-offs, there is no reason to restrict the respondent’s right to file a counter-claim or set-off in proceedings before the Facilitation Council. If the buyer is not allowed to file a counter-claim, it could lead to parallel proceedings in different forums, potentially resulting in conflicting outcomes.

Moreover, the Court reiterated that the MSMED Act, as a special beneficial legislation, will override the Arbitration Act in cases where there is a conflict between the two. Thus, when a seller/supplier files a claim under MSME Samadhaan for payment recovery, and the case is referred to arbitration before the MSEFC or an arbitrator, the buyer may file a counter-claim or set-off. This could apply if there is any defect, deficiency, or delay on the seller’s part in the supply of the goods or services.

There is no need for the buyer to initiate separate proceedings to claim damages or compensation from the seller. Instead, the buyer can file its counter-claim in the proceedings before the MSEFC or arbitrator. However, it is important to note that the council or arbitrator may levy additional fees based on the counter-claim amount.

For any issues related to delayed payments or payment recovery, you can contact us at:

MSME Legal Help – Anmol Bakshi, Advocate
Website - www.bakshiandassociates.com, www.msmelegalhelp.com

Mobile - 7982637108, 9873750515, 9811680103, 9811099501 and 9953030208.

E-mail ID - [email protected], [email protected], [email protected], anmolbakshiandassociates.com.

Jai Guru Ji. Shukrana Guruji.

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