Your supplier registered on Udyam after the goods were supplied. Does the MSMED Act still apply to those supplies?
On this judgment, no. The Supreme Court held that a party who was not a 'supplier' within s.2(n) of the MSMED Act on the date of entering into the contract cannot claim any benefit as a supplier under the Act. It also held that Chapter V of the MSMED Act overrides the Arbitration and Conciliation Act 1996 and that an independent arbitration agreement does not bar a reference to the Facilitation Council.
Decided by the Supreme Court (Uday Umesh Lalit CJI, S. Ravindra Bhat J and Bela M. Trivedi J) on 2022-10-31, reported as Civil Appeal No. 6167 of 2013; Civil Appeal No. 127 of 2018; Civil Appeals arising out of SLP(C) Nos. 12884/2020, 31227/2018, 7375/2020, 2135/2021 and 6166/2021. It bears on section MSMED s.2(n), section MSMED s.15, section MSMED s.18 of the Income Tax Act 1961, in How Tax Law Is Read matters.
s.43B(h) fastens on a sum payable to a micro or small enterprise 'registered under section 8'. Whether the supplier was registered when the goods moved, or only later, decides whether clause (h) is engaged at all. This is the Supreme Court statement practitioners work from - but it is now the subject of a reference to a larger Bench, and an entry that does not say so is worse than useless.
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A group of appeals raised common questions on the interplay between the MSMED Act 2006 and the Arbitration and Conciliation Act 1996: whether Chapter V of the MSMED Act overrides the Arbitration Act; whether a reference to the Micro and Small Enterprises Facilitation Council under s.18 lies where the parties have their own arbitration agreement; whether the Council, having attempted conciliation, may then act as the arbitral tribunal; and whether a party who obtained registration under the MSMED Act only after the contract was entered into can claim the Act's benefits in respect of that contract.
The Court set out numbered conclusions at para 34. Chapter V of the MSMED Act 2006 overrides the Arbitration Act 1996 (conclusion (i)). No party to a dispute with regard to any amount due under s.17 is precluded from making a reference to the Facilitation Council though an independent arbitration agreement exists (conclusion (ii)). Proceedings before the Council acting as arbitral tribunal under s.18(3) are governed by the Arbitration Act 1996 (conclusion (iv)), and the Council is competent to rule on its own jurisdiction and other issues by virtue of s.16 of that Act (conclusion (v)). A party who was not the 'supplier' as defined in s.2(n) on the date of entering into the contract cannot seek any benefit as the supplier under the MSMED Act (conclusion (vi)).
The Court treated the MSMED Act as a special statute, later in time on the point and enacted for a defined class, so that its Chapter V machinery prevails over the general arbitration law and a private arbitration clause cannot oust the statutory reference. Registration was approached as a question of status: the Act confers rights on a 'supplier' as defined, and a person who did not answer that definition when the bargain was struck has no standing to claim, at a later date, rights the Act gives to suppliers. Registration was therefore treated as operating prospectively and not as reaching back over supplies already made.
A party who was not the 'supplier' as per the definition contained in Section 2(n) of the MSMED Act, 2006 on the date of entering into contract cannot seek any benefit as the 'supplier' under the MSMED Act, 2006.
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Handle my notice → Ask a CA on WhatsAppOn this judgment, no. The Supreme Court held that a party who was not a 'supplier' within s.2(n) of the MSMED Act on the date of entering into the contract cannot claim any benefit as a supplier under the Act. It also held that Chapter V of the MSMED Act overrides the Arbitration and Conciliation Act 1996 and that an independent arbitration agreement does not bar a reference to the Facilitation Council. This was decided by the Supreme Court (Uday Umesh Lalit CJI, S. Ravindra Bhat J and Bela M. Trivedi J) and bears on section MSMED s.2(n), section MSMED s.15, section MSMED s.18 of the Income Tax Act 1961. It is reported as Civil Appeal No. 6167 of 2013; Civil Appeal No. 127 of 2018; Civil Appeals arising out of SLP(C) Nos. 12884/2020, 31227/2018, 7375/2020, 2135/2021 and 6166/2021. s.43B(h) fastens on a sum payable to a micro or small enterprise 'registered under section 8'. Whether the supplier was registered when the goods moved, or only later, decides whether clause (h) is engaged at all. This is the Supreme Court statement practitioners work from - but it is now the subject of a reference to a larger Bench, and an entry that does not say so is worse than useless. If it applies to you, the first step is this: Get the Udyam certificate and read the date of registration against the dates of the invoices, not against the date of payment.
A group of appeals raised common questions on the interplay between the MSMED Act 2006 and the Arbitration and Conciliation Act 1996: whether Chapter V of the MSMED Act overrides the Arbitration Act; whether a reference to the Micro and Small Enterprises Facilitation Council under s.18 lies where the parties have their own arbitration agreement; whether the Council, having attempted conciliation, may then act as the arbitral tribunal; and whether a party who obtained registration under the MSMED Act only after the contract was entered into can claim the Act's benefits in respect of that contract. The matter was decided on 2022-10-31 by the Supreme Court (Uday Umesh Lalit CJI, S. Ravindra Bhat J and Bela M. Trivedi J). On those facts the Supreme Court held as follows. The Court set out numbered conclusions at para 34. Chapter V of the MSMED Act 2006 overrides the Arbitration Act 1996 (conclusion (i)). No party to a dispute with regard to any amount due under s.17 is precluded from making a reference to the Facilitation Council though an independent arbitration agreement exists (conclusion (ii)). Proceedings before the Council acting as arbitral tribunal under s.18(3) are governed by the Arbitration Act 1996 (conclusion (iv)), and the Council is competent to rule on its own jurisdiction and other issues by virtue of s.16 of that Act (conclusion (v)). A party who was not the 'supplier' as defined in s.2(n) on the date of entering into the contract cannot seek any benefit as the supplier under the MSMED Act (conclusion (vi)).
The Court treated the MSMED Act as a special statute, later in time on the point and enacted for a defined class, so that its Chapter V machinery prevails over the general arbitration law and a private arbitration clause cannot oust the statutory reference. Registration was approached as a question of status: the Act confers rights on a 'supplier' as defined, and a person who did not answer that definition when the bargain was struck has no standing to claim, at a later date, rights the Act gives to suppliers. Registration was therefore treated as operating prospectively and not as reaching back over supplies already made. In the words reproduced by the source cited on this page: "A party who was not the 'supplier' as per the definition contained in Section 2(n) of the MSMED Act, 2006 on the date of entering into contract cannot seek any benefit as the 'supplier' under the MSMED Act, 2006." The decision followed or applied M/s. Silpi Industries v. Kerala State Road Transport Corporation, decided 29 June 2021 - the registration-timing approach is to the same effect.
It was decided by the Supreme Court on 2022-10-31 and is reported as Civil Appeal No. 6167 of 2013; Civil Appeal No. 127 of 2018; Civil Appeals arising out of SLP(C) Nos. 12884/2020, 31227/2018, 7375/2020, 2135/2021 and 6166/2021. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section MSMED s.2(n), section MSMED s.15, section MSMED s.18, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The Court set out numbered conclusions at para 34. Chapter V of the MSMED Act 2006 overrides the Arbitration Act 1996 (conclusion (i)). No party to a dispute with regard to any amount due under s.17 is precluded from making a reference to the Facilitation Council though an independent arbitration agreement exists (conclusion (ii)). Proceedings before the Council acting as arbitral tribunal under s.18(3) are governed by the Arbitration Act 1996 (conclusion (iv)), and the Council is competent to rule on its own jurisdiction and other issues by virtue of s.16 of that Act (conclusion (v)). A party who was not the 'supplier' as defined in s.2(n) on the date of entering into the contract cannot seek any benefit as the supplier under the MSMED Act (conclusion (vi)). It arises in How Tax Law Is Read matters, on section MSMED s.2(n), section MSMED s.15, section MSMED s.18 of the Income Tax Act 1961, and was decided by Uday Umesh Lalit CJI, S. Ravindra Bhat J and Bela M. Trivedi J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where registration post-dates the supply, take the point under conclusion (vi), and in the same breath disclose NBCC (India) Ltd v State of West Bengal, which has doubted it and referred the question. Do not carry the conclusion across to s.43B(h) as though it were settled; no income-tax decision has applied it to clause (h). Where the Facilitation Council's jurisdiction is in issue despite an arbitration clause, conclusions (i) and (ii) are the short answer.
Under appeal, and the appeal has not been decided. Conclusion (vi) has been doubted. In NBCC (India) Ltd v State of West Bengal, decided 10 January 2025, a two-Judge Bench set out conclusion (vi) as it stands at para 52.6 of that judgment, held that the question had never been formulated or decided in the earlier cases, and referred to a three-Judge Bench whether an enterprise can invoke s.18 without prior registration under s.8. The reference is to a larger Bench, not an appeal against this judgment, and until it is answered conclusion (vi) is the operative Supreme Court statement. Separately, in Tamil Nadu Cements Corporation Ltd v Micro and Small Enterprises Facilitation Council, decided 22 January 2025, questions about writ challenges to Council orders and about Council members who have conciliated then arbitrating were referred to a five-Judge Bench; that reference does not touch conclusion (vi). No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The numbered conclusion (vi) quoted here was returned whole and identically by two separate retrievals - once from this judgment at para 34 and once from the NBCC judgment which sets it out at its para 52.6 - and is recorded on that basis. Conclusions (i), (ii), (iv) and (v) were read from para 34; conclusion (iii), on a Council that has conciliated then acting as arbitrator, was not recovered in its own words and is not stated here. Paragraph 33, which carries the reasoning on registration, was recovered only in part. This is an arbitration judgment; it says nothing about the Income-tax Act and the transfer of conclusion (vi) to s.43B(h) is an argument, not a holding. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Court set out numbered conclusions at para 34. Chapter V of the MSMED Act 2006 overrides the Arbitration Act 1996 (conclusion (i)). No party to a dispute with regard to any amount due under s.17 is precluded from making a reference to the Facilitation Council though an independent arbitration agreement exists (conclusion (ii)). Proceedings before the Council acting as arbitral tribunal under s.18(3) are governed by the Arbitration Act 1996 (conclusion (iv)), and the Council is competent to rule on its own jurisdiction and other issues by virtue of s.16 of that Act (conclusion (v)). A party who was not the 'supplier' as defined in s.2(n) on the date of entering into the contract cannot seek any benefit as the supplier under the MSMED Act (conclusion (vi)).
TaxSphere, “Gujarat State Civil Supplies Corporation Ltd v Mahakali Foods Pvt Ltd”, https://taxnotice.vittsphere.com/caselaw/case/gujarat-state-civil-supplies-v-mahakali-foods-supplier-status-at-date-of-contract/ (validity last checked 2026-09-17)
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