MSME arbitration follows Limitation Act rules, allows counterclaims, but later registration cannot revive past supply claims.

Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 brings post-conciliation arbitration within the Arbitration and Conciliation Act, 1996, so the Limitation Act, 1963 applies through Section 43. A respondent may also raise counter claim or set-off under Section 23(2A), and excluding such claims would risk parallel proceedings. However, MSME benefits are available only prospectively: registration obtained after the contract and supplies were completed does not retrospectively confer supplier status for those past claims. On the stated facts, the challenge to appointment of the arbitrator failed.

---

---

Issues: (i) Whether the Limitation Act, 1963 applies to arbitration proceedings initiated under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006; (ii) Whether counter claim is maintainable in such arbitration proceedings; (iii) Whether a supplier who obtained registration only after the contract and supplies had been concluded could invoke the Micro, Small and Medium Enterprises Development Act, 2006 and resist appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether the Limitation Act, 1963 applies to arbitration proceedings initiated under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006.

Analysis: Section 18(3) makes the provisions of the Arbitration and Conciliation Act, 1996 applicable to arbitration after failed conciliation as if the arbitration were pursuant to an arbitration agreement. Section 43 of the 1996 Act expressly applies the Limitation Act, 1963 to arbitrations in the same manner as to court proceedings. The statutory scheme therefore extends limitation law to arbitrations conducted under Section 18(3) of the 2006 Act.

Conclusion: The Limitation Act, 1963 applies to arbitration proceedings under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006.

Issue (ii): Whether counter claim is maintainable in such arbitration proceedings.

Analysis: Section 18(3) incorporates the 1996 Act for arbitration after conciliation fails, and Section 23(2A) permits a respondent to raise a counter claim or set-off within the scope of the arbitration agreement. The 2006 Act is a special beneficial statute with overriding effect under Section 24, and denying counter claims would lead to parallel proceedings and defeat the statutory mechanism intended for expeditious resolution of disputes.

Conclusion: Counter claim and set-off are maintainable in arbitration proceedings under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006.

Issue (iii): Whether a supplier who obtained registration only after the contract and supplies had been concluded could invoke the Micro, Small and Medium Enterprises Development Act, 2006 and resist appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.

Analysis: The benefit of the 2006 Act is available only to an enterprise that answers the statutory description at the relevant time. Registration under Section 8 operates prospectively and cannot retrospectively confer the status of supplier for completed contracts and past supplies. As the claimant had not obtained registration when the contract was executed and the supplies were made, the statutory forum under the 2006 Act was not available for those claims.

Conclusion: The claimant was not entitled to invoke the 2006 Act, and the order appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 was upheld.

Final Conclusion: The special statutory mechanism under the Micro, Small and Medium Enterprises Development Act, 2006 governs limitation and permits counter claims, but its benefits cannot be claimed retrospectively for supplies made before registration; on the facts, the appeals were dismissed.

Ratio Decidendi: Where Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 brings an arbitration within the framework of the Arbitration and Conciliation Act, 1996, the Limitation Act applies through Section 43, and a respondent may raise counter claim or set-off under Section 23(2A); however, statutory benefits under the 2006 Act are available only prospectively to an enterprise duly covered at the relevant time.

---