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Section 20: Establishment of Facilitation Council

Micro, Small and Medium Enterprises Development Act, 2006 • Official Statutory Text & Practice Guide

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MSEFC Facilitation Council
Act 27 of 2006
Section 19 All 32 Sections of MSMED Act Section 21
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Legal Commentary & Landmark Judgments: Section 20

Section 20 mandates the establishment of one or more Micro and Small Enterprises Facilitation Councils (MSEFC) by State Governments to serve as specialized statutory conciliation and arbitration tribunals for delayed payment claims.

  • State Statutory Power & Multiple Councils: State Governments are empowered to establish one or more MSEFCs within their territory; large states may establish regional, divisional, or district-level councils.
  • Territorial & Subject-Matter Jurisdiction: Councils possess exclusive statutory jurisdiction to entertain delayed payment references under Section 18 filed by suppliers located within their designated territorial jurisdiction.
  • Self-Contained Statutory Tribunal: Operates as an independent tribunal invested with statutory powers of conciliation and arbitration, superseding regular civil courts.
Key Landmark Precedents:
  • Gujarat State Civil Supplies Corpn. v. Mahakali Foods (P) Ltd. (2023) 6 SCC 401: A 2-Judge Bench held that MSEFC established under Section 20 is a specialized statutory forum; its jurisdiction cannot be ousted, waived, or circumvented by an independent arbitration agreement between the buyer and the supplier.
  • Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan (2021 SCC OnLine SC 1257): The Supreme Court held that MSEFC is bound to act in accordance with Chapter V; it has no jurisdiction to issue summary money orders or ex parte decrees without completing conciliation and entering upon statutory arbitration.
  • Tata Steel Ltd. v. Atma Tube Products Ltd. (2013 SCC OnLine P&H 2452): Punjab & Haryana High Court Full Bench held that MSEFC possesses exclusive statutory competence to adjudicate disputes arising from Chapter V to the exclusion of ordinary civil and arbitration mechanisms.
Courtroom Practice & Strategic Litigation Guidance:

File Section 18 references exclusively before the Facilitation Council having territorial jurisdiction over the registered location/manufacturing plant of the supplier as specified in its Udyam certificate. A forum selection clause in the buyer's purchase order designating a different forum or seat is void against Section 20 under Mahakali Foods.

Section 19 All 32 Sections of MSMED Act Section 21