Best MSME Facilitation Council – Conciliation & Arbitration Lawyer

When a micro or small supplier files a delayed payment claim, it goes to the Micro and Small Enterprises Facilitation Council of the state. The council handles it in two stages. First, conciliation: the council, or an institution it nominates, tries to help the parties settle. If conciliation does not work, arbitration: the council decides the dispute itself, or refers it to an arbitration institution, applying the Arbitration and Conciliation Act as if there were an arbitration agreement between the parties.

This page is for suppliers taking a case before a council and for buyers who have received a council notice. In short: the Act says the council should decide a reference within 90 days, though many cases take longer. Conciliation is informal and confidential. Arbitration is a formal process with pleadings, documents, and a reasoned award. The award is binding and can be enforced as a decree, and the buyer must deposit 75% before challenging it.

Councils are made up of officials from the state's industries department, representatives of MSME associations and others. Under the MSMED (Amendment) Act, 2026, councils will have three to five members including at least one with a legal background, from 15 December 2026.

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Conciliation and arbitration compared

What happens at conciliation

Conciliation under Section 18(2) follows Sections 65 to 81 of the Arbitration Act. The council, or the institution it has nominated, calls both parties, hears each side's position, and may meet them separately. The aim is a settlement both can accept. The conciliator can make proposals, but cannot impose a decision.

For suppliers, conciliation is a chance to get paid quickly. Come with a clear statement of the invoices, the payments received and the interest claimed, and a sense of what you would accept. Many cases settle on payment of the principal with a reduced interest amount, or in instalments.

For buyers, conciliation is a chance to raise real issues, such as quality complaints or short supply, and to negotiate on interest. Ignoring conciliation simply moves the case to arbitration, where the full Section 16 interest is likely to be awarded if the supplier's claim is proved.

What is said in conciliation is confidential under Section 75 of the Arbitration Act, and cannot be relied on in later arbitration or court proceedings under Section 81. If conciliation fails, the conciliator issues a report and the case moves on.

How the arbitration stage works

Time and typical cost range

Our fees are agreed in writing at the start, stage by stage, and are not linked to the outcome.

Documents for council arbitration

Councils in Delhi NCR

Jurisdiction objections buyers raise

Buyers often argue that the council has no jurisdiction. The common grounds are: the supplier is not a micro or small enterprise; it was not registered when the contract was made or the supplies were made; the contract is a works contract outside the Act; the buyer is located outside the state; or the claim is time-barred.

On registration timing, the law is unsettled. Earlier decisions such as Silpi Industries (2021) and Mahakali Foods (2022) suggested a supplier must be registered on the date of the contract to claim benefits. In NBCC v State of West Bengal (January 2025), a two-judge bench held that registration is not a precondition to approach the council and referred the conflict to a larger bench. Councils deal with this objection case by case.

On works contracts, High Courts have taken differing views. On the buyer's location, under the existing Act the supplier approaches the council where it is located, and the buyer can be anywhere in India. On limitation, Sonali Power (2025) confirms that the Limitation Act applies at the arbitration stage.

These objections are decided by the council as arbitral tribunal under Section 16 of the Arbitration Act. A writ against a jurisdiction ruling is usually not entertained; the objection is kept open for a Section 34 challenge.

For buyers: responding to a council notice

If you are a buyer who has received a council notice, take it seriously. The council can and does pass awards against buyers who do not attend, and the 75% deposit rule makes later challenges expensive.

Start by checking the supplier's Udyam certificate and the dates. Reconcile the claimed invoices with your records. Identify genuine defences: goods rejected in writing within 15 days, short supply, payments not credited, debit notes agreed by the supplier, or limitation. Prepare a counter-claim if you have one. Then attend conciliation with a realistic settlement proposal. Interest under Section 16 grows every month, so delay rarely helps.

If you have been making payments to MSME suppliers late, also consider the tax side. Late payments are disallowed as a deduction until paid under Section 37(2)(g) of the Income-tax Act, 2025, and the MSMED Act requires companies to disclose overdue MSME payments in their annual accounts. See defend an MSME claim.

Laws that apply

How we work

We are a litigation and advisory practice led by Advocate BK Singh, with offices in Dwarka (New Delhi) and Vaishali (Ghaziabad). This is what you can expect:

• Both sides represented: suppliers and buyers.
• Conciliation prepared seriously: with a realistic settlement position.
• Arbitration handled properly: pleadings, documents and jurisdiction objections.
• Award strategy: enforcement or challenge planned in advance.
• Written fee terms: agreed stage by stage, never linked to the outcome.

Mistakes in council cases

When the council refers the case to an institution

Section 18 allows the council to conduct conciliation itself or seek the help of an institution or centre providing alternative dispute resolution services. It also allows the council to take up the dispute for arbitration itself, or refer it to such an institution. Some councils use this to manage heavy caseloads, sending cases to arbitration centres or to panel arbitrators.

When a case is referred, the institution's procedure applies within the framework of the Arbitration Act. The parties may have to pay the institution's fees, which can be higher than the council's nominal charges. If you are a supplier with a modest claim, ask whether the council will hear it directly. If a referral is made, check the institution's fee schedule and the arbitrator's disclosure of independence.

The seat of the arbitration matters for any later challenge. For a council arbitration, the seat is generally the place where the council sits. A challenge goes to the court with jurisdiction over that place.

Evidence in a council arbitration

Councils are less formal than courts, but they decide on evidence. The supplier must prove the supplies, the acceptance, the amounts outstanding and the due dates. Invoices alone are often not enough; delivery proof signed by the buyer, e-way bills, GRNs and the buyer's own ledger or TDS certificates are much stronger.

The buyer must prove its defences. A claim that goods were defective needs written rejection or complaint within 15 days of delivery, test reports, or correspondence at the time. A claim that payments were made needs bank records. A counter-claim for losses needs evidence of the loss, such as invoices for replacement goods or records of production losses.

Witnesses are less common in council arbitrations than in commercial arbitrations, but affidavits from the accounts or stores staff who handled the transactions can be useful. If the other side's document is disputed, say so clearly, and ask for the original.

Costs and the council

Council proceedings themselves usually involve no fee or only a nominal fee. Each side bears its own legal costs unless the award directs otherwise. The council, as arbitral tribunal, has power under Section 31A of the Arbitration Act to award costs, and may do so against a party that has behaved unreasonably, for example by raising frivolous defences or repeatedly seeking adjournments.

For suppliers, the low cost of the council route, compared with arbitration fees or court fees, is one of its main advantages. For buyers, it means that a supplier can pursue even a modest claim without much expense, so settling a genuine claim early is often wise.

The award: what it should contain

A council award should identify the parties, the claim, the defence and any counter-claim, set out the facts found, give reasons for the decision on each point, state the principal amount awarded, the interest under Section 16 up to the date of the award, and the direction for interest to continue until payment, and deal with costs. It should be signed by the members who decided it and dated, and copies should be delivered to both parties.

If the award has an arithmetic or clerical error, either party can ask the council to correct it under Section 33 of the Arbitration Act within 30 days of receipt. If the award has not dealt with a claim or counter-claim that was argued, a party can ask for an additional award within the same period. These are better routes than a court challenge for such defects.

If you are a buyer who lost before the council

A buyer facing a council award has to decide quickly. The three-month window for a Section 34 challenge runs from receipt of the award, and the 75% deposit must be arranged. If the buyer believes the council lacked jurisdiction, for example because the supplier was not registered when the supplies were made, or the contract was a works contract, a challenge may be worth considering, though the law on these points is not settled. If the award is a reasoned decision on the evidence, a challenge is unlikely to succeed and the deposit will tie up money for years.

Many buyers in this position negotiate with the supplier: payment of the principal and part of the interest, in return for the supplier's agreement not to execute the full award. A settlement recorded in writing, with the council or before the court, closes the matter.

Council cases involving government buyers

Government departments and PSUs often respond to council notices slowly, and sometimes do not appear. The council can proceed and pass an award. Government buyers who wish to challenge must deposit 75% like anyone else, and courts have not exempted them.

For suppliers, a council award against a government buyer is often paid after the department obtains internal approvals, which can take time. Writing formally to the department's head, with a copy of the award and a request for payment within a fixed time, often helps. If not paid, execution can be filed against the department's accounts, with the court usually giving a short time to pay first.