Synopsis

The appellant (contractor) invoked arbitration under a contract with the respondent (Indian Oil Corporation Ltd.) containing a unique clause: only “notified claims” could be referred to arbitration, and whether a claim was “notified” had to be decided by the General Manager of the respondent before the arbitrator could proceed. The respondent initiated that pre‑arbitral determination but the process stalled. The appellant then approached the MSME Facilitation Council under Section 18 of the MSME Act, which rejected the reference on the ground that the appellant was not a “supplier” under the MSME Act. Thereafter, the appellant filed a writ petition seeking directions to complete the pre‑arbitral process. The Single Judge dismissed the writ petition as not maintainable. The Division Bench allowed the appeal, holding that: (i) pursuing a remedy under the MSME Act does not abandon or extinguish the right to arbitrate under the original contract; (ii) the respondent’s own omission to complete the pre‑arbitral process cannot render the appellant remediless; (iii) the original invocation of arbitration remains valid; and (iv) the time spent in pursuing MSME proceedings and the writ petition shall be excluded for limitation. The respondent was directed to complete the determination under Clause 9.0.2.0 within eight weeks.

Court: High Court of Delhi

Coram: Honourable the Chief Justice and Honourable Mr. Justice Anish Dayal

Date of Judgment: 16th April 2026

Citation: LPA 254/2026 (2026:DHC:3351-DB)

Core Law: Arbitration and Conciliation Act, 1996 – arbitration clause, pre‑arbitral condition; Micro, Small & Medium Enterprises Development Act, 2006 – Section 18 (reference to MSME Facilitation Council); abandonment of arbitration; exclusion of time spent in bona fide legal proceedings for limitation

2. Legal Framework

Major laws and provisions involved

• Arbitration and Conciliation Act, 1996 – Sections 8, 11, 16 (competence‑competence)

• Micro, Small & Medium Enterprises Development Act, 2006 – Section 18 (reference of disputes to Facilitation Council), Section 2(n) (definition of “supplier”)

• Contractual arbitration clause – Clauses 9.0.1.0 (arbitration of notified claims), 9.0.2.0 (excluded matters, pre‑arbitral determination by General Manager)

Key legal principles applied

Pursuing an alternative

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