Supreme court refers MSME dispute to arbitration through Delhi international arbitration centre, leaves question of independent recourse under A&C act open

Supreme Court directs MSME dispute to Delhi International Arbitration Centre, leaving the question of independent recourse under the Arbitration and Conciliation Act unresolved.

Patel Infrastructure Ltd. v. Aditya Construction | Civil Appeal No. 10057 of 2026 | Supreme Court of India | Justice Sanjay Kumar and Justice Sanjeev Sachdeva | Decided on August 5, 2026

Background

The Supreme Court was called upon to consider whether a buyer of goods or services from a micro or small enterprise, governed by the Micro, Small and Medium Enterprises Development Act, 2006, can independently invoke arbitration proceedings under the Arbitration and Conciliation Act, 1996, in respect of its claims against such an enterprise.

Counsel for the appellant relied on the Delhi High Court's decision in Uniseven Engineering and Infrastructure Pvt. Ltd. v. Micro and Small Enterprises Facilitation (MSEF) Council, District (South), and the Calcutta High Court's decision in Essar Oil and Gas Exploration and Production Limited v. Gargi Travels Private Limited, in support of the appellant's case.

Contentions

On instructions, senior counsel appearing for the respondent MSME stated that the respondent was agreeable to the appointment of an arbitrator through the Delhi International Arbitration Centre to resolve the disputes between the parties under the Arbitration and Conciliation Act, 1996. It was submitted that, since the appellant was based in Ahmedabad and the respondent, a proprietorship, was based in Basti, Uttar Pradesh, the venue of arbitration be fixed at New Delhi for the convenience of both sides.

Court's Findings

Accepting the offer made on behalf of the respondent, the Supreme Court disposed of the appeal by requesting the Delhi International Arbitration Centre to appoint a suitable arbitrator to resolve the disputes between the parties under the Arbitration and Conciliation Act, 1996, with the venue of arbitration fixed at New Delhi. The appellant was directed to approach the Delhi International Arbitration Centre within two weeks from receipt of a certified copy of the order.

The Court clarified that the question of law raised in the appeal, namely whether an MSME buyer can independently invoke arbitration under the 1996 Act instead of proceeding through the Facilitation Council mechanism under the MSMED Act, was left open to be considered in an appropriate case in the future. Parties were directed to bear their own costs.