MSME Act jurisdiction turns on buyer-supplier privity; a non-contracting site owner cannot be dragged into Section 18 reference.

The text explains that, under the MSME Act, liability to pay under Section 15 arises only where a buyer owes payment to a supplier, and the Section 18 reference mechanism applies only to amounts due under Section 17. Because the petitioner had no privity of contract with the MSME claimants, had not purchased goods or services from them for consideration, and was not the buyer in the dispute, the Facilitation Council could not enlarge its jurisdiction merely because the work was performed at the petitioner's site. The contract also placed responsibility for unauthorised subcontracting on the principal contractor. On that basis, the petitioner was treated as outside the arbitration reference.

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Issues: Whether the petitioner, in the absence of privity of contract and a buyer-supplier relationship with the MSME claimants, could be impleaded in the reference before the Facilitation Council and subjected to arbitration under the Micro, Small and Medium Enterprises Development Act, 2006.

Analysis: The contract between the petitioner and the principal contractor contained a prohibition on unauthorised subcontracting and made the contractor responsible for the acts of sub-contractors. The petitioner had no contract with the two sub-contracting entities and had not received goods or services from them for consideration. On the statutory scheme, liability under Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 arises only where a buyer owes payment to a supplier, and the reference mechanism under Section 18 operates only in respect of amounts due under Section 17. The petitioner therefore did not answer the statutory description of a buyer for the dispute in question, and the Council could not enlarge its jurisdiction by treating the petitioner as liable merely because the work had been carried out at the petitioner's site. The earlier findings regarding absence of privity and the settled position between the petitioner and the principal contractor also supported exclusion of the petitioner from the arbitration reference.

Conclusion: The reference to arbitration could not validly be maintained against the petitioner, and the impugned order was set aside to that extent while being sustained against the other parties.

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