
SUPREME COURT JUDGMENT ON MSME DISPUTE RESOLUTION
Introduction
The Supreme Court of India (“Court”) has recently underscored the importance of clearly stating the intent behind its judgments in a significant ruling involving Micro, Small, and Medium Enterprises (“MSMEs”). In the case of NBCC (India) Ltd. vs. The State of West Bengal & Ors., the Court clarified that not every judgment is intended to serve as a binding precedent under Article 141 of the Constitution. This ruling emphasizes the necessity for judgments to specify whether they are resolving a specific dispute between the parties or establishing a legal precedent.
Background
The SC's observations arose while addressing a dispute regarding whether unregistered MSMEs could avail themselves of dispute resolution mechanisms under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The appellant argued that unregistered MSMEs could not seek resolution under this section, relying on previous judgments to support their claim. However, the Court rejected this argument, noting that the precedents cited were decided on different issues and did not pertain to the matter at hand. The Court emphasized that its judgments serve dual functions: decision-making and precedent-making. It acknowledged that while many decisions may address specific disputes, they should not automatically be treated as binding precedents unless explicitly stated. This clarification aims to alleviate confusion faced by High Courts and subordinate courts in determining whether a judgment is meant for decision-making or as a binding authority.
Implications for MSMEs
The implications of this ruling are significant for MSMEs across India. By affirming their access to statutory remedies and clarifying their rights under the MSMED Act, the judgment promotes fair treatment in contractual disputes with larger entities. The Court's directive to clearly articulate the intent behind its rulings will also enhance legal certainty and consistency in future cases involving MSMEs.
MHCO Comment: This Supreme Court judgment marks an important advancement in protecting MSME interests by clarifying their rights and ensuring equitable access to dispute resolution mechanisms. The Supreme Court's obiter dicta about their own judgments, which require them to now explicitly distinguish binding decisions from non-binding remarks, are significant because they could relieve the burden of the lower courts and change how Article 141 is currently interpreted.
This update was released on 17 Jan 2025.
The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.
Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
Advocates, Solicitors and Notaries
T: +91 22 40565252
Mumbai Office: Surya Mahal, 2nd Floor, 5, Burjorji Bharucha Marg, Fort, Mumbai-400 023, India
Delhi Office: Block C-9, Lower Ground Floor, Jangpura Extension, New Delhi - 110 014, India
www.mhcolaw.com
"Noted lawyer in the Real Estate practitioner from India" - Chambers & Partners
Please consider the environment before printing this email
The information contained in this communication is intended solely for the use of the individual or entity to whom it is addressed and others authorized to receive it. This communication may contain confidential or legally privileged information. If you are not the intended recipient, any disclosure, copying, distribution or action taken relying on the contents is prohibited and may be unlawful. If you have received this communication in error, or if you or your employer does not consent to email messages of this kind, please notify the sender immediately by responding to this email and then delete it from your system. No liability is accepted for any harm that may be caused to your systems or data by this message.
Subscribe to our Knowledge Repository
If you would like to receive content directly in your inbox from our knowledge repository, please complete this subscription form.