Section 21: Composition of Facilitation Council

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

MSME Law
3x Compound Interest
MSEFC Facilitation Council
Act 27 of 2006
Statutory Defined Terms in this Section: (Click any term for official legal definition)

Legal Commentary & Landmark Judgments: Section 21

Section 21 governs the statutory composition, member qualifications, and administrative constitution of the Micro and Small Enterprises Facilitation Council (MSEFC).

  • Executive Chairmanship: The Council is chaired ex officio by the Director of Industries of the State Government or another officer not below that rank.
  • Multi-Disciplinary Membership: Consists of not less than three and not more than five members appointed from: (i) micro and small enterprise associations, (ii) banks and financial institutions, and (iii) persons having special knowledge in industry, commerce, or law.
  • Quorum & Procedural Rules: State Governments frame procedural rules under Section 30 governing quorum, notice of meetings, and recusal of members having personal interest.
Key Landmark Precedents:
  • Welspun Corp Ltd. v. MSEFC (2021 SCC OnLine Bom 4488): The Bombay High Court held that an MSEFC cannot pass valid arbitral awards without fulfilling the statutory quorum prescribed under state MSEFC rules; proceedings conducted by improperly constituted councils are coram non judice.
  • Eden Realty Ventures (P) Ltd. v. MSEFC (2020 SCC OnLine Cal 2145): The Calcutta High Court ruled that members of MSEFC must not have any financial or personal conflict of interest in the disputing parties, and principles of natural justice apply rigorously to Council proceedings.
  • Bharat Heavy Electricals Ltd. v. MSEFC (2014 SCC OnLine Del 4488): Emphasized that the administrative composition of the Council under Section 21 does not dilute its quasi-judicial obligations as an arbitral tribunal under the Arbitration and Conciliation Act, 1996.
Courtroom Practice & Strategic Litigation Guidance:

Before the MSEFC, verify at the outset whether the bench meets the minimum statutory quorum (usually 3 members including the Chairperson or designated officer) under the applicable State MSEFC Rules. An award signed by fewer members than required by quorum rules is vulnerable to challenge under Section 34 of the Arbitration Act.