Authority: Madras High Court (High Court of Judicature at Madras)

Order Date: 19 August 2026

Case Overview

  • Petitioner: M/s. 3F Industries Ltd., represented by Jitendra Goenka, Director, Aadhaarshila, Chennai.
  • Respondent: M/s. Mahalaxshmi Trading Corporation, represented by Managing Partner Muthumanigandan, Chennai.
  • Civil Revision Petition: CRP No. 6542 of 2025 and CMP No. 32321 of 2025 filed under Article 227 of the Constitution of India to challenge the impugned order dated 13 March 2025 passed by the Micro and Small Enterprises Facilitation Council (MSEFC), Chennai Region.
  • Background of Dispute:
  • On 04 June 2020 the respondent emailed the petitioner offering to arrange term‑finance/re‑finance facilities from banks and NBFCs for a commission of 2%.
  • The petitioner never accepted the offer; no contract was concluded.
  • The respondent later claimed a sum of Rs 33,40,000 (Rs 33.40 lakh) based on an alleged invoice dated 04 September 2021 and approached the MSEFC.
  • The Council, on 28 July 2022, dismissed the claim, holding that the respondent’s alleged activity did not fall within its purview.
  • On 07 February 2023 the Council erroneously re‑opened the matter, issued summons, and on 13 March 2025 passed an award (the impugned order) against the petitioner.
  • Petitioner’s Contentions:
  • The Council had no power to re‑open a closed proceeding; such reopening was ultra‑vires, citing Bajaj Auto Ltd v Ajanta Press (13 Sept 2022).
  • At the time of the alleged contract (04 June 2020) the respondent was not a registered MSME; its Udyam registration was obtained only on 29 Oct 2020, thus it could not be a “supplier” under Section 2(n) of the MSMED Act.
  • The Council failed to treat the respondent as a commission agent and ignored that the actual financing was arranged by Siemens Financial Services Pvt Ltd.
  • Section 18(3) of the MSMED Act mandates arbitration after failure of conciliation; no arbitration was initiated, rendering the award void.
  • Relied on several Supreme Court precedents (Bajaj Auto, SREI Infrastructure Finance Ltd v Tuff Drilling, Grindlays Bank Ltd v Central Government Industrial Tribunal, NBCC (India) Ltd v State of West Bengal, etc.).
  • Respondent’s Contentions:
  • The petitioner participated in the reopened proceedings and therefore cannot challenge the reopening.
  • The Council possessed ancillary powers to recall its earlier order, citing SREI Infrastructure and Grindlays Bank cases.
  • Arbitration had been initiated after the failure of conciliation; the Council’s award was therefore valid.
  • Cited India Glycols Ltd v MSEFC (2025) and Tamil Nadu Cements Corp Ltd v MSEFC (2025) to argue that a writ petition cannot be filed unless arbitration is completed.

Court’s Reasoning

1. Jurisdiction to Re‑open: The petitioner did not challenge the reopening; he voluntarily participated. Under Grindlays Bank and SREI Infrastructure precedents, the Council retained ancillary powers to recall its earlier order. Hence the argument that the reopening was void was rejected.

2. MSME Status at Contract Date: The respondent’s Udyam registration was dated 29 Oct 2020, whereas the alleged commission contract was dated 04 June 2020. Consequently, at the time of the contract the respondent was not a “supplier” as defined in Section 2(n) of the MSMED Act. The Council’s claim therefore fell outside its statutory domain.

3. Failure to Commence Arbitration: The parties’ submissions (including the respondent’s own memo dated 21 Jan 2025) acknowledge that arbitration under Section 18(3) was never initiated—no arbitrator was appointed, no claim or defence statements were filed, and no evidentiary process was conducted. The Court held this a flagrant violation of the statutory mandate.

4. Validity of the Award: Because the award was rendered without the requisite arbitration proceedings, it “has no legs to stand” and must be set aside.

5. Remedy for Respondent: While the award is void, the respondent is not left without recourse. The Court invoked Section 14 of the Limitation Act to allow the respondent to file a civil suit within three months of receipt of the order, without the limitation bar, and to have the claim adjudicated by a competent civil court.

Final Outcome

  • The Civil Revision Petition is allowed.
  • The impugned order/award dated 13 March 2025 passed by the Micro and Small Enterprises Facilitation Council, Chennai Region, is set aside.
  • The respondent is granted liberty to institute a civil suit before the appropriate civil court within three months of receiving a copy of this order; the suit will be entertained without limitation and decided on merits.
  • No costs are awarded. The connected miscellaneous petition is closed.

Topics: MSME Regulation, Civil Litigation