LexM/S SONALI POWER EQUIPMENTS PVT. LTD. versus CHAIRMAN, MAHARASHTRA STATE ELECTRICITY BOARD, MUMBAI & ORS.
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[2025] 7 S.C.R. 1144 : 2025 INSC 864 M/s Sonali Power Equipments Pvt. Ltd. v. Chairman, Maharashtra State Electricity Board, Mumbai & Ors. (Civil Appeal No(s). 9524-9532 of 2025) 17 July 2025 [Pamidighantam Sri Narasimha* and Joymalya Bagchi, JJ.] Issue for Consideration (i) Whether the Limitation Act applies to conciliation proceedings u/s.18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), and even if not, whether time-barred debts can be referred to conciliation; (ii) Whether the Limitation Act applies to arbitration proceedings u/s.18 of the MSMED Act, and whether time-barred debts can be referred to arbitration. Further, what is the effect of disclosure of the unpaid amount in the buyer’s financial statements as mandated u/s.22 on extending the limitation period. Headnotes† Micro, Small and Medium Enterprises Development Act, 2006 – s.18 – Limitation Act, 1963 – Arbitration and Conciliation Act, 1996 – Whether the Limitation Act applies to conciliation proceedings u/s.18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), and even if not, whether time-barred debts can be referred to conciliation: Held: The Limitation Act does not apply to conciliation proceedings u/s.18(2) of the MSMED Act – s.18(2) of the MSMED Act provides that conciliation must be conducted as per ss.65 to 81 of the ACA – On perusing these provisions of the ACA, as well as the provisions of the MSMED Act, it is clear that there is no provision that extends the applicability of the Limitation Act to conciliation proceedings – Further, neither s.29(2) nor any other provision of the Limitation Act has the effect of extending its application to conciliation proceedings – On the other hand, it is a settled position that the Limitation Act only applies suits, appeals, and applications filed before courts – Conciliation being an out-of-court and non-adjudicatory process of dispute resolution, the Limitation Act cannot be extended to it – As far as the reference * Author [2025] 7 S.C.R. 1145 M/s Sonali Power Equipments Pvt. Ltd. v. Chairman, Maharashtra State Electricity Board, Mumbai & Ors. of time-barred claim to conciliation is concerned, a time-barred claim can be referred to conciliation as the expiry of limitation period does not extinguish the right to recover the amount, including through a settlement agreement that can be arrived at through the conciliatory process. [Paras 26, 51(i)] Micro, Small and Medium Enterprises Development Act, 2006 – s.18 – Limitation Act, 1963 – Arbitration and Conciliation Act, 1996 – s.2(4) – Whether the Limitation Act applies to arbitration proceedings u/s.18 of the MSMED Act, and whether time- barred debts can be referred to arbitration – Further, what is the effect of disclosure of the unpaid amount in the buyer’s financial statements as mandated u/s.22 on extending the limitation period: Held: The Limitation Act applies to arbitration proceedings u/s.18(3) of the MSMED Act – The applicability of the provisions of ACA to such arbitrations is determined as per s.18(3) and other provisions of the MSMED Act, as these are special laws, rather than by Section 2(4) of the ACA, which is under a general law – This is in addition to the reasoning provided in Silpi Industries – Further, the extension of the limitation period on the basis of disclosure u/s.22 of the MSMED Act must be examined on a case-to-case basis. [Para 51(ii)] Micro, Small and Medium Enterprises Development Act, 2006 – s.18(3) – Limitation Act, 1963 – Arbitration and Conciliation Act, 1996 – s.2(4) – Conflict between s.18(3) of MSMED Act and s.2(4) of ACA: Held: There is a clear and apparent conflict in the manner in which the provisions of the ACA are made applicable–while s.2(4) provides for the exclusion of s.43 to statutory arbitrations, s.18(3) provides for the applicability of all the provisions of the ACA as would apply if there were an arbitration agreement, which includes s.43 – This Court is of the opinion that s.18(3) of the MSMED Act will prevail over s.2(4) of the ACA – There is a clear legislative intent that the provisions of the MSMED Act will have an overriding effect in case of inconsistency, which is evidenced from the non-obstante clause in s.18 and the express language in s.24 – The language of s.2(4) itself also supports this overriding effect of the special law – The same has also been recognised and affirmed
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