Holding

The Limitation Act does not apply to conciliation proceedings under s.18(2) of the MSMED Act, but time‑barred claims may still be referred to conciliation; the Limitation Act does apply to arbitration proceedings under s.18(3) of the MSMED Act, and any extension of limitation due to disclosure under s.22 is to be examined case‑by‑case.

Summary

The appellant, Sonali Power Equipments, supplied transformers to the Maharashtra State Electricity Board between 1993 and 2004 and faced delayed payments. It referred the dispute to the Micro and Small Enterprises Facilitation Council under Section 18 of the MSMED Act, obtaining an award in 2010, which the respondents challenged on the ground that the claim was time‑barred under the Limitation Act. The High Court set aside the award, holding that the Limitation Act applied to arbitration but not to conciliation, and the matter was appealed to the Supreme Court. The Supreme Court examined whether the Limitation Act applies to conciliation under s.18(2) and arbitration under s.18(3) of the MSMED Act, and also considered the effect of the buyer’s disclosure of unpaid amounts under s.22 on limitation. It held that the Limitation Act does not apply to conciliation proceedings, but time‑barred claims may still be referred to conciliation; the Limitation Act does apply to arbitration proceedings, and any extension of limitation due to disclosure must be decided case‑by‑case. Accordingly, the Court partly allowed the appeals, overturning the High Court’s view on conciliation and affirming its view on arbitration.

Issues considered

Whether the Limitation Act, 1963 applies to conciliation proceedings under Section 18(2) of the MSMED Act and whether time‑barred claims can be referred to such conciliation.
Whether the Limitation Act applies to arbitration proceedings under Section 18(3) of the MSMED Act and whether time‑barred claims can be referred to arbitration.
The effect of the disclosure of unpaid amounts in the buyer’s financial statements under Section 22 of the MSMED Act on the limitation period.

Legislation cited

Arbitration and Conciliation Act, 1996s. 2(4), s. 34, s. 37, s. 43, s. 65-81, s. 67, s. 73, s. 74, s. 76
Code of Civil Procedure, 1908
Contract Act, 1872s. 25(3)
Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993
Limitation Act, 1963s. 18, s. 2(4), s. 29(2), s. 3
Micro, Small and Medium Enterprises Development Act, 2006s. 15, s. 16, s. 17, s. 18(2), s. 18(3), s. 22, s. 23, s. 24

Headnote

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 (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

Subjects

ArbitrationConciliationAlternate Dispute ResolutionTime barred claimsSection 18(2) MSMED ActSection 18(3) MSMED ActSpecial law vs general lawLimitation Act applicabilityDisclosure under Section 22Settlement agreementNon‑obstante clause

Judgment

[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 by this Court in
Mahakali Foods, wherein the Court considered the purpose and
1146 [2025] 7 S.C.R.

Supreme Court Reports

object, statutory scheme, and sequence of enactment of the ACA
and the MSMED Act to arrive at the conclusion that the MSMED
Act is a special law that will prevail over the provisions of the ACA,
which is a general law. [Para 41]

Alternate Dispute Resolution – Conciliation – Features of:
Held: i) Conciliation is not an adjudicatory or judicial process where
the conciliator hears the parties and decides a dispute; ii) The parties
to the conciliation resolve their disputes through settlement, whose
terms may be arrived at with the assistance of the conciliator – The
role of the conciliator is to guide and assist the parties in arriving
at a compromise or settlement, make proposals for settlement,
formulate the terms of settlement or assist the parties in doing so,
and reformulate the terms of settlement based on the observations
of the parties; iii) The conciliator must be guided by the principles
of independence, impartiality, objectivity, justice, equity, fair play,
fairness, and confidentiality, and must also consider the rights and
obligations of the parties, trade usages, and business practices
between the parties – He must also take into account the wishes
of the parties and the need for speedy settlement of dispute – The
parties must also cooperate with the conciliator in good faith and
endeavour to comply with the conciliator’s requests; iv) Finally, the
terms of the settlement that are recorded in a settlement agreement
must be signed by the parties and it shall be final and binding on
them – The same is enforceable as an arbitral award. [Para 25]

Micro, Small and Medium Enterprises Development Act,
2006 – s.18(2) – Limitation Act, 1963 – Arbitration and
Conciliation Act, 1996 – ss.2(4), 43 – A full bench of the High
Court has held that the Facilitation Council cannot entertain
time-barred claims for conciliation, and that the provisions of
the Limitation Act are applicable to arbitration proceedings
under the MSMED – Correctness:
Held: The decision of the High Court to the extent of the Limitation
Act being applicable to arbitration proceedings under the MSMED
Act is correct – With respect to conciliation proceedings on the
other hand, this Court is of the opinion that they do not attract
the applicability of the Limitation Act – Further, there is no legal
bar in the Limitation Act, the MSMED Act, the ACA, or the legal
precedents laid down by this Court that proscribes conciliation with
respect to time-barred debts. [Para 2]
[2025] 7 S.C.R. 1147

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

Case Law Cited
State of Kerala v. V.R. Kalliyanikutty [1999] 2 SCR 372 : (1999)
3 SCC 657 – held inapplicable.
A.P. Power Coordination Committee v. Lanco Kondapalli Power
Ltd. [2015] 12 SCR 447; Silpi Industries v. Kerala SRTC [2021] 3
SCR 1044 : (2021)18 SCC 790 – held not per incuriam.
T.N. Generation & Distribution Corpn. Ltd. v. PPN Power Generating
Co. (P) Ltd. [2014] 4 SCR 667 : (2014)11 SCC 53; Gujarat State
Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd. [2022] 19
SCR 1094 : (2023) 6 SCC 401; My Preferred Transformation
& Hospitality Pvt. Ltd. v. M/s Faridabad Implements Pvt. Ltd.,
2025 INSC 56 : [2025] 1 SCR 729; Consolidated Engineering
Enterprises v. Principal Secretary Irrigation Department [2008] 5
SCR 1108 : (2008) 7 SCC 169; Hukumdev Narain Yadav v. Lalit
Narain Mishra [1974] 3 SCR 31 : (1974) 2 SCC 133; Union of
India v. Popular Construction [2001] Supp. 3 SCR 619 : (2001) 8
SCC 47; Commissioner of Customs and Central Excise v. Hongo
India Pvt Ltd. [2009] 4 SCR 1997 : (2009) 5 SCC 791; State of
Punjab v. Jalour Singh [2008] 1 SCR 922 : (2008) 2 SCC 660; M.P.
Steel Corpn. v. CCE [2015] 7 SCR 291 : (2015) 7 SCC 58; Asset
Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [2021] 3 SCR 524 :
(2021) 6 SCC 366; United India Insurance Co. Ltd. v. Ajay Sinha
[2008] 8 SCR 509 : (2008) 7 SCC 454; Afcons Infrastructure Ltd.
& Anr. v. Cherian Varkey Construction Co. (P) Ltd. & Ors. [2010]
8 SCR 1053 : (2010) 8 SCC 24; B.K. Educational Services Pvt.
Ltd. v. Parag Gupta and Associates [2018] 12 SCR 794 : (2019)
11 SCC 633; Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay
[1958] 1 SCR 1122 : AIR 1958 SC 328 – referred to.

List of Acts
Micro, Small and Medium Enterprises Development Act, 2006;
Limitation Act, 1963; Arbitration and Conciliation Act, 1996; Delayed
Payments to Small Scale and Ancillary Industrial Undertakings Act,
1993; Contract Act, 1872; Code of Civil Procedure, 1908.

List of Keywords
Arbitration; Conciliation; Alternate Dispute Resolution; Time
barred claims; Conciliation proceedings under Section 18(2) of
the MSMED Act; Section 18 of the Micro, Small and Medium
Enterprises Development Act, 2006; Special laws; Conciliatory
process; Acknowledgement of liability; Entry in the balance sheet;
1148 [2025] 7 S.C.R.

Supreme Court Reports

Section 18 of the Limitation Act; Limitation Act applicablity to arbitral
proceedings under the MSMED Act; Conflict between s.18(3) of
Micro, Small and Medium Enterprises Development Act, 2006 and
s.2(4) of Arbitration and Conciliation Act, 1996.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 9524-9532
of 2025
From the Judgment and Order dated 20.10.2023 of the High Court
of Judicature at Bombay at Nagpur in CA No(s). 1, 2, 3, 4, 5, 6,
7, 8 and 9 of 2018

Appearances for Parties

Advs. for the Appellant:
Dr. Abhishek Manu Singhvi, Jayant Bhushan, Sr. Advs., Prashant
Pakhiddey, Surjendu Sankar Das, Manav Gill, Ms. Annie
Mittal.
Advs. for the Respondents:
Shikhil Suri, Sr. Adv., Udit Gupta, Anup Jain, Ms. Prachi Gupta,
Ms. Nishtha Goel, Amarendra Kumar, M/S. Udit Kishan and
Associates.

Judgment / Order of the Supreme Court

Judgment

Pamidighantam Sri Narasimha, J.

Table of Contents*

I. Introduction ....................................................................... 2
II. Brief Facts ......................................................................... 3
III. High Court order dated 24.08.2018 .................................. 4
IV. Impugned order: ................................................................ 6
V. Submissions: ..................................................................... 11

* Ed. Note: Pagination as per the original Judgment.
[2025] 7 S.C.R. 1149

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

VI. Issues ................................................................................ 15
VII. Relevant statutory provisions: ........................................... 17
VIII. Whether time-barred claims can be referred to conciliation 26
under Section 18(2) of the MSMED Act ...........................
IX. Whether time-barred claims can be referred to arbitration 35
under Section 18(3) of the MSMED Act ...........................
X. Conclusion ........................................................................ 49

1. Leave granted.

I. Introduction:
2. The issue arising in the present appeals are whether the provisions of
the Limitation Act, 19631 are applicable to conciliation and arbitration
proceedings initiated under Section 18 of the Micro, Small and Medium
Enterprises Development Act, 20062. Further, even if the Limitation
Act is not applicable, whether a supplier can recover a time-barred
debt by taking recourse to the remedies provisioned under Section 18
of the MSMED Act. In the order impugned before us in the present
appeals, a full bench of the High Court has held that the Facilitation
Council cannot entertain time-barred claims for conciliation, and
that the provisions of the Limitation Act are applicable to arbitration
proceedings under the MSMED. On considering the statutory scheme
and provisions of the MSMED Act, the Arbitration and Conciliation Act,
19963, and the Limitation Act, along with the precedents of this Court
as well the submissions of the parties, we have partly allowed the
present appeals as follows. We have upheld the decision of the High
Court to the extent of the Limitation Act being applicable to arbitration
proceedings under the MSMED Act and have provided our reasons
for the same. With respect to conciliation proceedings on the other

1 Hereinafter “Limitation Act”.
2 Hereinafter “MSMED Act”.
3 Hereinafter “ACA”.
1150 [2025] 7 S.C.R.

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hand, we are of the opinion that they do not attract the applicability of
the Limitation Act. Further, there is no legal bar in the Limitation Act,
the MSMED Act, the ACA, or the legal precedents laid down by this
Court that proscribes conciliation with respect to time-barred debts.

II. Brief Facts:
3. The appellants are small-scale industries registered with the District
Industries Centre, Nagpur. The appellants supplied transformers to
respondent no. 1 under various purchase orders between 1993 to
2004. Due to delay in payments, the appellants filed references in
2005-06 before the Industry Facilitation Council established under the
Interest on Delayed Payments to Small Scale and Ancillary Industrial
Undertakings Act, 19934. The 1993 Act came to be repealed by the
MSMED Act, 20065, and the proceedings initiated by the appellants
were taken up by the Micro and Small Enterprises Facilitation Council6
under the MSMED Act.
3.1 By its award dated 28.01.2010, the Facilitation Council allowed
the appellants’ claims and awarded interest on the delayed
payments.
3.2 Respondent nos. 1 and 2 challenged the award under Section
34 of the ACA, and deposited the requisite amount under Section
19 of the MSMED Act. This was allowed by the Commercial
Court by order dated 26.10.2017 and it set aside the award on
the ground that the claims were barred by limitation, against
which order the appellants filed appeals under Section 37 of
the ACA before the High Court.

III. High Court order dated 24.08.2018:
4. On taking up these appeals under Section 37, the division bench
referred the issue of applicability of Limitation Act to proceedings

4 Hereinafter “1993 Act”.
5 Section 32 of the MSMED Act, which reads:
“32. Repeal of Act 32 of 1993.—(1) The Interest on Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993 is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken under the Act so repealed under
sub-section (1) shall be deemed to have been done or taken under the corresponding provisions of
this Act.”
6 Hereinafter “Facilitation Council”.
[2025] 7 S.C.R. 1151

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

under the MSMED Act to a larger bench. It took note of a coordinate
bench’s decision in M/s. Delton Electricals v. MSEDCL7 wherein
the High Court found that the law of limitation applies to claims
filed before the Facilitation Council. The High Court took a different
view and referred the issue to a larger bench for the following
reasons:
4.1 In Delton’s case, the Court held that by virtue of Section 2(4) of
the ACA, which excludes the applicability of Section 43 of the
ACA to statutory arbitrations, the Limitation Act was inapplicable
to arbitrations under the MSMED Act. However, analysing the
issue from a different perspective and interpreting the term
“amount due” in the scheme of the MSMED Act, the High
Court relied on this Court’s decision in State of Kerala v. V.R.
Kalliyanikutty8 and held that “amount due” does not include a
time-barred debt. On this basis, the High Court therein set aside
the award of the Facilitation Council that allowed time-barred
claims as being violative of public policy.
4.2 In the order dated 24.08.2018, the division bench doubted the
correctness of the interpretation of “amount due” in Delton’s
(supra) case as various aspects were not considered by the
Court therein, and it framed 9 issues for consideration by a
larger bench. The relevant portion with the issues framed is
extracted hereinbelow:
“46. We find that in Deltons case, this Court was
not required to look into cardinal issues which may
have made some difference on the outcome. Those
issues are -
A. Whether in view of a more comprehensive scheme
in MSMED Act and improvement made by it over Act
no. 32 of 1993, the jurisdiction of Civil Court is taken
away by 2006 Act?
B. Whether an incongruous situation perceived in
paragraph 71 of its judgment by the Division Bench
in Delton case (supra) can emerge due to reading

7 Commercial Appeal No. 38/2017, judgment dated 31.08.2017.
8 (1999) 3 SCC 657.
1152 [2025] 7 S.C.R.

Supreme Court Reports

of Section 6 of Act no. 32 of 1993, (not in force) and
Section 18 of the MSMED Act?
C. Whether the period of limitation runs from the
appointed date only to find out limitation for cause
of action to approach Council under Section 18 of
2006 Act?
D. Whether Section 21 of 1996 Act has any relevance
in the scheme of Section 18 of the MSMED Act?
E. Whether the peculiar provisions like “thrice the
bank rate of interest”, interest compounded monthly,
direction to mention principal, interest and amount
unpaid in balance sheet by buyer, step by step
approach adopted in Section 18 and overriding
effect in Section 24 of the 2006 Act, all are sufficient
to exclude the applicability of the Limitation Act,
1963?
F. Whether the mention of “unpaid amount” in balance
sheet of the buyer must include “time barred” claims?
G. What is the legislative intent in mandating the
mention of “unpaid amount” or even time-barred
recoveries separately?
H. Whether such disclosure of “unpaid principal
amount” or the “compound interest quantum”
separately gives rise to the fresh or repeated annual
causes of action for recovery of the principal and/or
interest amount?
I. Whether the present controversy need to be viewed
independent of the Act No. 32 of 1993?”

IV. Impugned order:
5. By judgment dated 20.10.2023, a full bench of the High Court framed
the following issues for its consideration:
“(1) Whether the provisions of Indian Limitation Act, 1963
are applicable to conciliation proceedings initiated and
conducted under Section 18 (1) & (2) of MSMED Act,
2006?
[2025] 7 S.C.R. 1153

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

(2) Whether the provisions of Indian Limitation Act, 1963
are applicable to arbitration proceedings under Section
18(3) of MSMED Act, 2006?”
5.1 Taking up the second question on the applicability of the
Limitation Act to arbitration proceedings under Section 18(3) of
the MSMED Act, the High Court proceeded as follows. Relying
on this Court’s decision in Silpi Industries9 and Mahakali Foods10
and the overriding effect of the MSMED Act as provided under
Section 24 therein, the High Court held that Sections 15 to 23
of the MSMED Act will override Section 2(4) of the ACA. The
language of Section 18, which commences with a non-obstante
clause, fortifies this position. Therefore, the conduct of arbitration
under the MSMED Act will be guided by Section 18(3), which
makes the entirety of the ACA, including Section 43, applicable
to arbitrations under the MSMED Act. Further, the Court noted
that taking an alternative view would permit time-barred and
stale claims to be raised in arbitration under the MSMED Act,
which is contrary to the purpose and object of the statute to
provide speedy remedy to the supplier to recover his claims.
The Court also analysed the scheme of the MSMED Act and
observed that the statute prescribes time-limits for payment
under Section 15, provides for a penal rate of interest in case
of default under Section 16, and also provides a time-limit for
the Facilitation Council to decide the reference under Section
18(5). The prescription of such timelines shows that the
legislature did not intend for time-barred claims to be raised in
arbitration under Section 18(3). Finally, the High Court rejected
the appellants’ contention that the decisions in Silpi Industries
(supra) and Mahakali Foods (supra) are per incuriam and held
that the same are binding on it.
5.2 With respect to conciliation under Sections 18(1) and 18(2) of
the MSMED Act, the Court noted that there is no provision that
extends the Limitation Act to conciliation proceedings. It also
noted that conciliation is mandated under the MSMED Act when
a reference is made before the Facilitation Council, and Section

9 Silpi Industries v. Kerala SRTC, (2021) 18 SCC 790.
10 Gujarat State Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd., (2023) 6 SCC 401.
1154 [2025] 7 S.C.R.

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18 has done away with the requirement of consent for conciliation
that is required under the ACA. In case conciliation fails, the
Facilitation Council can take up the dispute for arbitration or
refer it to an institution or centre. Further, taking into account
the purpose and object of the MSMED Act to provide a more
robust mechanism for recovery of “amount due” to the supplier,
the Court held that the MSMED Act does not create any “special
right” in favour of the supplier and the right of recovery of the
amount is the same as available under common law. In this light,
it relied on this Court’s decisions in V.R. Kalliyanikutty (supra)
and A.P. Power Coordination Committee v. Lanco Kondapalli
Power Ltd.11 to hold that “amount due” does not include a time-
barred, stale and dead claim. It also noted that if this were the
legislative intent, there must be a specific provision enacted
to this effect. Further considering the compulsory nature of
statutory conciliation, the buyer must be allowed to take the
defence of limitation. Hence, although the Limitation Act does
not apply to conciliation proceedings, the Facilitation Council
cannot entertain a dead or stale claim.
5.3 In this light, the High Court answered each of the issues
raised in paragraph 46 of the division bench’s order (extracted
hereinabove) as follows:
Issue A: The MSMED Act does not debar the jurisdiction
of the civil court and only provides an alternative, speedy
mechanism under Section 18 for recovery of money with
a higher rate of interest.
Issue B: An incongruous situation as contemplated in
Delton (supra) arises. If the limitation provisions are not
applied to conciliation and arbitration under Section 18 of
the MSMED Act, it would lead to an incongruous situation
where a suit before the civil court for recovery of money
would be rejected on the ground of limitation but the same
can be claimed under Section 18 a number of years after
the supply.

11 (2016) 3 SCC 468, hereinafter “Lanco”. These were subsequently followed in B.K. Educational Services
Pvt. Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633, which is also referred and cited by the High
Court.
[2025] 7 S.C.R. 1155

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

Issue C: Limitation commences from the date provided
under Section 15 of the MSMED Act.
Issue D: Section 21 of the ACA does not have relevance
as conciliation and arbitration are statutorily provided under
Section 18 when a supplier makes a reference before the
Facilitation Council.
Issue E: Section 22 of the MSMED Act mandates the
buyer to make entries in its books of account to ensure
that the remedy under Section 18 is a speedy remedy, and
therefore supports the plea that the Limitation Act applies.
Issues F and G: Section 22 does not have the effect of
permitting dead and stale claims, and the concept of a
continuing cause of action cannot be stretched to “an
absurd point of time, where its enforcement would make it
an engine of oppression and not of providing justice to one”.
Issue H: The purpose and object of Section 16 read with
Sections 22 and 23 is to dissuade the buyer from delaying
payments but not to be used as a tool for oppression by
the supplier by letting time lapse and inflating the claim
by charging interest for that period before the Facilitation
Council. The charging of interest under Section 16 does
not amount to a fresh cause of action at the end of every
month, for then there would be no time limit within which
the supplier is required to raise his claim.
Issue I: Considering the scheme of the 1993 Act and
the MSMED Act, 2006, the latter provides a more robust
recovery mechanism by reducing timelines for payments,
providing for higher interest, and a timeline for conciliation
and arbitration. However, the basic provisions remain the
same and hence, what has been considered and held in
respect of provisions under the 1993 Act will hold good
in respect of the MSMED Act, unless a contrary intention
appears from the language of the MSMED Act.

V. Submissions:
6. We have heard Dr. Abhishek Manu Singhvi and Mr. Jayant Bhushan,
learned senior counsels for the appellants and Mr. Shikhil Suri,
1156 [2025] 7 S.C.R.

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learned senior counsel for the respondents, as well as perused the
written submissions of the parties. The submissions advanced on
behalf of the appellants are as follows:
6.1 The decision of this Court in Silpi Industries (supra) that has held
that the Limitation Act is applicable to arbitration proceedings
under Section 18 of the MSMED Act is per incuriam for two
reasons: first, Section 2(4) of the ACA that excludes the
applicability of Section 43 of the ACA to statutory arbitrations
was not brought to the notice of the Court, and second, the
Court relies on another decision in Lanco (supra), which is itself
per incuriam as it is directly contrary to an earlier coordinate
bench decision in T.N. Generation & Distribution Corpn. Ltd. v.
PPN Power Generating Co. (P) Ltd.12
6.2 Relying on Section 2(4) of the ACA, it is submitted that Section
43, which provides for the applicability of limitation provisions
in arbitral proceedings, does not apply to statutory arbitrations.
Further, the Limitation Act only applies to courts, and not to
quasi-judicial bodies or tribunals. Hence, in view of Section
2(4), Limitation Act cannot be extended to arbitrations under
the MSMED Act. Further, there is no provision under the
MSMED Act providing for the applicability of the Limitation Act
to proceedings under it.
6.3 Section 22 of the MSMED Act mandates the buyer to disclose
in its books of accounts the principal amount and interest due
thereon that remains unpaid to any supplier. It is submitted that
such an entry in the balance sheet or financial statement of the
buyer reflecting the unpaid sum is an acknowledgement of debt
and extends the period of limitation as per Section 18 of the
Limitation Act. Contravention of this requirement is punishable
under Section 27 of the MSMED Act.
6.4 The MSMED Act has been enacted with the object of protecting
suppliers, and the onus is on the buyers to make payments.
Suppliers often do not raise complaints or claims in the fear that
it would jeopardise future business with the buyer. No injustice
would be caused to the buyer if Limitation Act is not applicable.

12 (2014) 11 SCC 53, hereinafter “TANGEDCO”.
[2025] 7 S.C.R. 1157

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

6.5 Finally, with respect to conciliation proceedings, it is submitted
that the same is to provide an opportunity to parties to explore an
amicable settlement. If time-barred claims cannot be referred to
conciliation, it would render Section 25(3) of the Indian Contract
Act, 187213 otiose, which enables parties to agree to pay time-
barred debts. Further, the MSMED Act creates substantive
rights beyond establishing a mechanism for speedy recovery.
Hence, the decisions in V.R. Kalliyanikutty (supra) and Lanco
(supra) do not apply.
7. On behalf of the respondents, it is submitted that:
7.1 The language Section 18(3) of the MSMED Act provides for the
applicability of the ACA to arbitrations under it as if the arbitration
was in pursuance of an arbitration agreement under Section 7(1)
of the ACA. Hence, the statutory fiction places arbitration under
the MSMED Act on the same footing as those under the ACA
and incorporates the entirety of the ACA, including Section 43.
7.2 Section 2(4) of the ACA addresses situations where statutes
mandating arbitration prescribe their own limitation periods,
and then the applicability of Section 43 of the ACA is excluded.
However, when such statutes do not prescribe any such limitation
period, Section 2(4) cannot preclude the applicability of limitation
law to such arbitrations.
7.3 This Court’s decision in Lanco (supra) is not per incuriam as
it took note of the decision in TANGEDCO (supra) and held
that the issue of limitation was not examined in detail therein.
7.4 Further, it is clear from the statutory framework and intent of the
MSMED Act that the intent was not to exclude the applicability
of the Limitation Act. Rather, the applicability of limitation laws
complements the scheme of the MSMED Act for speedy dispute
resolution. Further, a contrary interpretation would create an
anomalous position where claims barred by law can be revived
by approaching a different forum.
7.5 Finally, Section 22 of the MSMED Act that requires disclosure
of the unpaid amount in the buyer’s balance sheet is to promote

13 Hereinafter “Contract Act”.
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transparency and accountability in financial reporting, rather
than alter or extend statutory limitation periods.

VI. Issues:
8. Upon perusing the impugned order, we find that the full bench set
out two issues, namely the applicability of limitation law to arbitration
proceedings and conciliation proceedings respectively under the
MSMED Act. However, in its conclusion, the High Court proceeded
to answer several other issues that were referred to it by the division
bench’s order dated 24.08.2018 (paragraph 46). There are several
questions of law arising therein, such as whether the jurisdiction
of civil courts is ousted by the MSMED Act, commencement of the
limitation period, extension of the limitation period, and applicability
of decisions rendered in the context of the 1993 Act. These issues
do not directly arise for our consideration in the present appeals
and the parties’ submissions have been confined to the two legal
issues framed by the full bench, as well as brief submissions on the
effect of Section 22 of the MSMED Act. In this light, we will confine
our examination to the two issues that have been formulated and
answered by the High Court and while doing so, we will also briefly
deal with Section 22 of the MSMED Act. We may reformulate the
issues arising in the present appeals as follows:
i. Whether the Limitation Act applies to conciliation proceedings
under Section 18 of the MSMED Act, and even if not, whether
time-barred debts can be referred to conciliation?
ii. Whether the Limitation Act applies to arbitration proceedings
under Section 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 under Section 22 on extending the
limitation period?

VII. Relevant statutory provisions:
9. Before we analyse each issue, it would be relevant to understand
the statutory scheme and interplay of the Limitation Act, ACA, and
the MSMED Act.
10. Section 3 of the Limitation Act provides that when a suit, appeal, or
application is filed after the prescribed period of limitation as per the
[2025] 7 S.C.R. 1159

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

Schedule, the same shall be dismissed even if limitation is not set
up as a defence. The calculation of the limitation period is subject
to Sections 4 to 24 of the Limitation Act.14 Further, Section 29(2) of
the Limitation Act makes its provisions applicable to special or local
laws when they prescribe a different period of limitation than what
is provided in the Schedule. In such a situation, Section 3 will apply
as if such period were prescribed in the Schedule, and Sections 4
to 24 will apply to the extent that they are not impliedly or expressly
excluded by the local or special law.15
11. Coming to the ACA, Section 2(4) deals with the applicability of Part I
of the ACA to statutory arbitrations. It provides that all the provisions
of Part I, except Sections 40(1), 41 and 43, shall apply to arbitrations
under other enactments as if such arbitration were pursuant to
an arbitration agreement and as if such other enactment were an
arbitration agreement, except insofar as the provisions of Part I are
inconsistent with the other enactment or rules made thereunder.
Section 2(4) is extracted for ready reference:
“2. Definitions.—
***
(4) This Part except sub-section (1) of section 40, sections
41 and 43 shall apply to every arbitration under any other
enactment for the time being in force, as if the arbitration
were pursuant to an arbitration agreement and as if that
other enactment were an arbitration agreement, except in

14 The relevant portion of Section 3 of the Limitation Act is:
“3. Bar of limitation.— (1) Subject to the provisions contained in sections 4 to 24 (inclusive), every
suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed,
although limitation has not been set up as a defence.”
15 Section 29(2) of the Limitation Act reads:
“29. Savings.—
***
(2) Where any special or local law prescribes for any suit, appeal or application a period of limitation
different from the period prescribed by the Schedule, the provisions of section 3 shall apply as if such
period were the period prescribed by the Schedule and for the purpose of determining any period
of limitation prescribed for any suit, appeal or application by any special or local law, the provisions
contained in sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they
are not expressly excluded by such special or local law.”
Although the expression used in the provision is “expressly excluded”, this Court has consistently
interpreted the same to include implied exclusions. See Hukumdev Narain Yadav v. Lalit Narain Mishra,
(1974) 2 SCC 133, para 17; Union of India v. Popular Construction, (2001) 8 SCC 470, paras 8-11;
Commissioner of Customs and Central Excise v. Hongo India Pvt Ltd, (2009) 5 SCC 791, para 35.
1160 [2025] 7 S.C.R.

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so far as the provisions of this Part are inconsistent with
that other enactment or with any rules made thereunder.”
12. Arbitration agreement is defined in Section 7 of the ACA as an
agreement to submit disputes which have arisen or which may arise
between parties in respect of a defined legal relationship, whether
contractual or not, to arbitration.16
13. Further, Section 43(1) provides for the applicability of the Limitation
Act to arbitral proceedings. It reads:
“43. Limitations.—(1) The Limitation Act, 1963 (36 of
1963), shall apply to arbitrations as it applies to proceedings
in court.”
14. Part III of the ACA deals with conciliation of disputes. Section 67
therein provides for the role of the conciliator, and is extracted for
ready reference:
“67. Role of conciliator.— (1) The conciliator shall assist
the parties in an independent and impartial manner in their
attempt to reach an amicable settlement of their dispute.
(2) The conciliator shall be guided by principles of
objectivity, fairness and justice, giving consideration to,
among other things, the rights and obligations of the parties,
the usages of the trade concerned and the circumstances
surrounding the dispute, including any previous business
practices between the parties.
(3) The conciliator may conduct the conciliation proceedings
in such a manner as he considers appropriate, taking into
account the circumstances of the case, the wishes the
parties may express, including any request by a party that
the conciliator hear oral statements, and the need for a
speedy settlement of the dispute.
(4) The conciliator may, at any stage of the conciliation
proceedings, make proposals for a settlement of the

16 Section 7 defines an arbitration agreement and sets out the mandatory requirements of an arbitration
agreement. The relevant portion is:
“7. Arbitration agreement.— (1) In this Part, “arbitration agreement” means an agreement by the
parties to submit to arbitration all or certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual or not.”
[2025] 7 S.C.R. 1161

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

dispute. Such proposals need not be in writing and
need not be accompanied by a statement of the reasons
therefor.”
15. Sections 68 to 72 deal with the procedural aspects of conciliation,
such as administrative assistance, communication, disclosure of
information, cooperation of parties, and submission of suggestions.
Section 73 provides for a signed and written settlement agreement,
which shall be final and binding on the parties. It reads:
“73. Settlement agreement.— (1) When it appears to
the conciliator that there exist elements of a settlement
which may be acceptable to the parties, he shall formulate
the terms of a possible settlement and submit them to
the parties for their observations. After receiving the
observations of the parties, the conciliator may reformulate
the terms of a possible settlement in the light of such
observations.
(2) If the parties reach agreement on a settlement of the
dispute, they may draw up and sign a written settlement
agreement. If requested by the parties, the conciliator may
draw up, or assist the parties in drawing up, the settlement
agreement.
(3) When the parties sign the settlement agreement, it shall
be final and binding on the parties and persons claiming
under them respectively.
(4) The conciliator shall authenticate the settlement
agreement and furnish a copy thereof to each of the
parties.”
(emphasis supplied)

16. Section 74 provides that such settlement agreement shall have the
same status and effect as an arbitral award on agreed terms on
the substance of the dispute rendered by an arbitral tribunal under
Section 30 of the ACA.
17. Finally, Section 76 provides for termination of the conciliation
proceedings in various circumstances: (i) signing of the settlement
agreement by the parties, (ii) written declaration by the conciliator that
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efforts at conciliation are no longer justified, (iii) written declaration
of the parties to the conciliator that conciliation proceedings are
terminated, or (iv) written declaration of a party to the other party
and conciliator that conciliation proceedings are terminated. Hence,
conciliation is terminated when the parties arrive at and sign the
settlement agreement. It can also be terminated at the behest of the
conciliator or one or both parties, when there is no settlement, by
way of a written declaration. Section 76 of the ACA reads:
“76. Termination of conciliation proceedings.— The
conciliation proceedings shall be terminated—
(a) by the signing of the settlement agreement by the
parties, on the date of the agreement; or
(b) by a written declaration of the conciliator, after
consultation with the parties, to the effect that further
efforts at conciliation are no longer justified, on the date
of the declaration; or
(c) by a written declaration of the parties addressed to the
conciliator to the effect that the conciliation proceedings
are terminated, on the date of the declaration; or
(d) by a written declaration of a party to the other party
and the conciliator, if appointed, to the effect that the
conciliation proceedings are terminated, on the date of
the declaration.”
18. Finally, Chapter V of the MSMED Act that deals with delayed payments
to Micro and Small Enterprises is relevant for our purpose. Section
15 imposes obligations on the buyer17 in respect of timelines for
payment to the supplier18 as follows- on or before the date agreed

17 Buyer is defined under Section 2(d) of the MSMED Act as:
“2. Definitions.— In this Act, unless the context otherwise requires,—
***
(d) “buyer” means whoever buys any goods or receives any services from a supplier for consideration;”
18 Supplier is defined under Section 2(n) of the MSMED Act as:
“2. Definitions.— In this Act, unless the context otherwise requires,—
***
(n) “supplier” means a micro or small enterprise, which has filed a memorandum with the authority
referred to in sub-section (1) of section 8, and includes,—
(i) the National Small Industries Corporation, being a company, registered under the Companies Act,
1956 (1 of 1956);
[2025] 7 S.C.R. 1163

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

upon between the parties in writing, provided that the same does not
exceed 45 days from the day of acceptance or the day of deemed
acceptance19, or where there is no agreement in this behalf, before
the “appointed day”20. Section 15 of the MSMED Act reads:
“15. Liability of buyer to make payment.— Where any
supplier, supplies any goods or renders any services to
any buyer, the buyer shall make payment therefor on or
before the date agreed upon between him and the supplier
in writing or, where there is no agreement in this behalf,
before the appointed day:
Provided that in no case the period agreed upon between
the supplier and the buyer in writing shall exceed forty-five
days from the day of acceptance or the day of deemed
acceptance.”
19. Section 16 of the MSMED Act provides that when the buyer fails to
make the payment as required under Section 15, he shall be liable
to pay compound interest with monthly rests for the period stipulated
therein, at 3 times the bank rate notified by the Reserve Bank.
The rate of interest prescribed under Section 16 shall override any
agreement with the supplier in this behalf and any other law in force
for the time being. Section 16 of the MSMED Act reads:

(ii) the Small Industries Development Corporation of a State or a Union territory, by whatever name
called, being a company registered under the Companies Act, 1956 (1 of 1956);
(iii) any company, co-operative society, trust or a body, by whatever name called, registered or
constituted under any law for the time being in force and engaged in selling goods produced by micro
or small enterprises and rendering services which are provided by such enterprises;”
19 See Section 2(b) of the MSMED Act.
20 Appointed day is defined under Section 2(b) of the MSMED Act as:
“2. Definitions.— In this Act, unless the context otherwise requires,—
***
(b) “appointed day” means the day following immediately after the expiry of the period of fifteen days
from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer
from a supplier.
Explanation.—For the purposes of this clause,—
(i) “the day of acceptance” means,—
(a) the day of the actual delivery of goods or the rendering of services; or
(b) where any objection is made in writing by the buyer regarding acceptance of goods or
services within fifteen days from the day of the delivery of goods or the rendering of services, the
day on which such objection is removed by the supplier;
(ii) “the day of deemed acceptance” means, where no objection is made in writing by the buyer
regarding acceptance of goods or services within fifteen days from the day of the delivery of goods
or the rendering of services, the day of the actual delivery of goods or the rendering of services;”
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“16. Date from which and rate at which interest is
payable.—Where any buyer fails to make payment of the
amount to the supplier, as required under section 15, the
buyer shall, notwithstanding anything contained in any
agreement between the buyer and the supplier or in any
law for the time being in force, be liable to pay compound
interest with monthly rests to the supplier on that amount
from the appointed day or, as the case may be, from the
date immediately following the date agreed upon, at three
times of the bank rate notified by the Reserve Bank.”
20. Section 17 provides for recovery of “amount due”, which includes
the interest provided thereon under Section 16. It reads:
“17. Recovery of amount due.— For any goods supplied
or services rendered by the supplier, the buyer shall be
liable to pay the amount with interest thereon as provided
under section 16.”
21. Section 18, which falls for our interpretation, provides the remedies
for recovery of the “amount due” calculated under Section 17. While
we will deal with the interpretation of its sub-sections in more detail
at a later stage, it is relevant to note the following about the remedial
mechanism: first, any party to a dispute with regard to the amount
due can make a reference before the Facilitation Council; second,
the Facilitation Council shall, on receipt of such reference, conduct
conciliation or refer the dispute for conciliation to an institution or
centre; third, such conciliation shall be conducted as per Sections
65 to 81 of the ACA as if the conciliation is initiated under Part III
of the ACA; fourth, in case of failure and termination of conciliation
without any settlement, the Facilitation Council shall either take up
the dispute for arbitration or refer it to any institution or centre for
arbitration; fifth, the provisions of the ACA shall apply to the dispute
as if the arbitration was pursuant to an arbitration agreement; sixth,
notwithstanding any other law, the Facilitation Council can act as a
conciliator and arbitrator in the dispute when the supplier is located
in its jurisdiction; and seventh, the reference shall be decided within
90 days of it being made. Section 18 is extracted below for ready
reference:
“18. Reference to Micro and Small Enterprises
Facilitation Council.— (1) Notwithstanding anything
[2025] 7 S.C.R. 1165

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

contained in any other law for the time being in force,
any party to a dispute may, with regard to any amount
due under section 17, make a reference to the Micro and
Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1),
the Council shall either itself conduct conciliation in the
matter or seek the assistance of any institution or centre
providing alternate dispute resolution services by making
a reference to such an institution or centre, for conducting
conciliation and the provisions of sections 65 to 81 of the
Arbitration and Conciliation Act, 1996 (26 of 1996) shall
apply to such a dispute as if the conciliation was initiated
under Part III of that Act.
(3) Where the conciliation initiated under sub-section
(2) is not successful and stands terminated without any
settlement between the parties, the Council shall either
itself take up the dispute for arbitration or refer to it any
institution or centre providing alternate dispute resolution
services for such arbitration and the provisions of the
Arbitration and Conciliation Act, 1996 (26 of 1996) shall then
apply to the dispute as if the arbitration was in pursuance
of an arbitration agreement referred to in sub-section(1)
of section 7 of that Act.
(4) Notwithstanding anything contained in any other law for
the time being in force, the Micro and Small Enterprises
Facilitation Council or the centre providing alternate dispute
resolution services shall have jurisdiction to act as an
Arbitrator or Conciliator under this section in a dispute
between the supplier located within its jurisdiction and a
buyer located anywhere in India.
(5) Every reference made under this section shall be
decided within a period of ninety days from the date of
making such a reference.”
22. Section 19 stipulates a pre-deposit requirement for filing an application
under Section 34 of the ACA to set aside the award. Section 20
provides for establishment of the Facilitation Council and Section 21
provides for its composition.
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23. Section 22 mandates the buyer to disclose the unpaid amount along
with interest in its annual statement of accounts.21 Section 23 provides
for the treatment of the interest amount under taxation laws. Section
24 provides for the overriding effect of Sections 15 to 23 as follows:
“24. Overriding effect.— The provisions of sections 15 to
23 shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being
in force.”

VIII. Whether time-barred claims can be referred to conciliation under
Section 18(2) of the MSMED Act:
24. In light of the above statutory provisions, we will decide the first issue
of whether the Limitation Act applies to conciliation proceedings
under Section 18(2) of the MSMED Act, and even if not, whether
time-barred claims can be referred to conciliation.
25. Conciliation has not been defined per se under the ACA or the MSMED
Act. Hence, it would be relevant to refer to decisions where the term
has fallen for consideration and has been interpreted by this Court.
In State of Punjab v. Jalour Singh,22 a 3-judge bench determined the
meaning and scope of conciliation in the context of the powers of the
Lok Adalats under the Legal Services Authorities Act, 1987. Similarly,
in United India Insurance Co. Ltd. v. Ajay Sinha23, this Court relied
on the role of the conciliator under Sections 67 and 73 of the ACA

21 Section 22 of the MSMED Act reads:
“22. Requirement to specify unpaid amount with interest in the annual statement of
accounts.— Where any buyer is required to get his annual accounts audited under any law for
the time being in force, such buyer shall furnish the following additional information in his annual
statement of accounts, namely:—
(i)the principal amount and the interest due thereon (to be shown separately) remaining unpaid to
any supplier as at the end of each accounting year;
(ii) the amount of interest paid by the buyer in terms of section 16, along with the amount of the
payment made to the supplier beyond the appointed day during each accounting year;
(iii) the amount of interest due and payable for the period of delay in making payment (which have
been paid but beyond the appointed day during the year) but without adding the interest specified
under this Act;
(iv) the amount of interest accrued and remaining unpaid at the end of each accounting year; and
(v) the amount of further interest remaining due and payable even in the succeeding years, until such
date when the interest dues as above are actually paid to the small enterprise, for the purpose of
disallowance as a deductible expenditure under section 23.”
22 (2008) 2 SCC 660.
23 (2008) 7 SCC 454.
[2025] 7 S.C.R. 1167

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

to explain conciliation as a dispute resolution mechanism. Finally,
in Afcons Infrastructure Ltd. & Anr. v. Cherian Varkey Construction
Co. (P) Ltd. & Ors.24, this Court explained conciliation as an ADR
remedy under Section 89 of the CPC. The following features of
conciliation can be culled out from these decisions as well as the
statutory provisions:
i. Conciliation is not an adjudicatory or judicial process where the
conciliator hears the parties and decides a dispute.25
ii. The parties to the conciliation resolve their disputes through
settlement, whose terms may be arrived at with the assistance of
the conciliator. The role of the conciliator is to guide and assist
the parties in arriving at a compromise or settlement26, make
proposals for settlement27, formulate the terms of settlement or
assist the parties in doing so,28 and reformulate the terms of
settlement based on the observations of the parties.29
iii. The conciliator must be guided by the principles of independence,
impartiality, objectivity, justice, equity, fair play, fairness, and
confidentiality, and must also consider the rights and obligations
of the parties, trade usages, and business practices between
the parties. He must also take into account the wishes of the
parties and the need for speedy settlement of dispute.30 The
parties must also cooperate with the conciliator in good faith
and endeavour to comply with the conciliator’s requests.31
iv. Finally, the terms of the settlement that are recorded in a
settlement agreement must be signed by the parties and it
shall be final and binding on them.32 The same is enforceable
as an arbitral award.33

24 (2010) 8 SCC 24.
25 Jarlour Singh (supra), para 8; Afcons Infrastructure Ltd. (supra), para 35.
26 Section 67(1) of the ACA; Jarlour Singh (supra), para 8.
27 Section 67(4) of the ACA.
28 Section 73(1) of the ACA; Jarlour Singh (supra), para 8; United India Insurance Co. Ltd. (supra), paras
22-23.
29 ibid.
30 ibid; Sections 67(2) and (3), Section 75 of the ACA.
31 Section 71 of the ACA.
32 Section 73(2) and Section 74 of the ACA; Jarlour Singh (supra), para 12; Afcons Infrastucture Ltd.
(supra), para 38.
33 See Section 74 of the ACA read with Section 30 of the ACA.
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26. Section 18(2) of the MSMED Act provides that conciliation must be
conducted as per Sections 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 Section
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.34 Conciliation being an
out-of-court and non-adjudicatory process of dispute resolution, the
Limitation Act cannot be extended to it.
27. This position of law has been recognised by the High Court in its
impugned order as well, in that it has held that the Limitation Act
does not directly apply to conciliation proceedings. However, the
High Court adopted a different approach and interpreted the term
“amount due” referred in Sections 17 and 18 of the MSMED Act to
hold that time-barred claims are not included, and hence cannot be
referred to conciliation under Section 18(2). In doing so, the High
Court primarily relied on this Court’s decision in V.R. Kalliyanikutty
(supra), and its reliance in Lanco (supra). We will now examine
the legality and correctness of the High Court’s reasoning and
decision by contrasting the present case with the reasoning in V.R.
Kalliyanikutty (supra).
28. In V.R. Kalliyanikutty (supra), a 3-judge bench of this Court examined
whether time-barred claims of the State Financial Corporation and
banks can be recovered through recourse to the mechanism under
the Kerala Revenue Recovery Act, 1968. For this purpose, the Court
interpreted the term “amount due” appearing in Section 71 of that
Act, and whether it would include time-barred claims.35 The Court
held that “amount due” refers to an amount which the creditor has
a right to recover, and does not include a time-barred debt.36 The
Court considered that the Act only provides a special procedure for
speedy recovery of these amounts that the creditor can use instead
of filing a civil suit. It also noted that the Act did not enlarge the

34 M.P. Steel Corpn. v. CCE, (2015) 7 SCC 58, paras 11-32.
35 ibid, para 8.
36 ibid, para 8.
[2025] 7 S.C.R. 1169

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

existing right of recovery, but only provisioned a different process for
recovery.37 This process of recovery is also a judicial process and
is coercive in nature.38 Hence, the Court held that the same would
attract the law of limitation.39 It also observed that the application
of limitation law would advance the public interest of the Act, i.e.,
speedy recovery of amounts.40
29. The question before us is whether the decision in V.R. Kalliyanikutty
(supra) would apply while interpreting “amount due” in the context
of conciliation proceedings under Section 18(2) of the MSMED
Act. Considering the non-adjudicatory and non-coercive nature of
conciliation that we have explained above, we are of the opinion that
this decision does not apply in the present context for the following
reasons:
29.1 One of the considerations of this Court in V.R. Kalliyanikutty
(supra) was that the recovery process under the Kerala
Revenue Recovery Act was a judicial process, and it would
hence attract the law of limitation. However, as we have
explained above, conciliation is not an adjudicatory or judicial
process.
29.2 While Section 18(2) of the MSMED Act does away with the
requirement of consent for conciliation as provided in Section
61 of the ACA and statutorily mandates the Facilitation Council
and parties to explore conciliation for dispute resolution, the
ultimate outcome of conciliation remains entirely dependent on
the parties. Sections 65 to 81 of the ACA apply to conciliation
proceedings under the MSMED Act as per Section 18(2). The
parties must be agreeable to the terms of settlement. The
conciliator cannot, and must not, coerce the parties to agree
to certain terms or settle the dispute. Ultimately, if the parties
are not willing to amicably settle the dispute, either or both

37 ibid, para 16.
38 ibid, paras 16 and 17.
39 ibid, para 17.
40 Ibid, para 14. It is relevant to note that V.R. Kalliyanikutty (supra) has been doubted by a division bench
of this Court in K.P. Khemka v. Haryana SIIDC, (2024) 8 SCC 391 on the point of whether the Kerala
Revenue Recovery Act created a distinct right of recovery. While the legal principle and law laid down
in V.R. Kalliyanikutty (supra) has not been doubted, its application to the statutory provisions has been
referred to a three-judge bench. See K.P. Khemka (supra), para 35 onward.
1170 [2025] 7 S.C.R.

Supreme Court Reports

of them can terminate the conciliation proceedings as per
Section 76 of the ACA. Hence, conciliation cannot be termed
as a “coercive” process, which was another consideration of
the Court in V.R. Kalliyanikutty (supra).
30. For these reasons, the recovery process considered in
V.R. Kalliyanikutty (supra) can be said to stand on a different footing
than conciliation under Section 18(2) of the MSMED Act read with
Sections 65 to 81 of the ACA. Hence, the decision is inapplicable
to the present context. The High Court did not consider these
aspects of the matter, and rather relied on the compulsory nature
of conciliation under Section 18(2) as well as the object of speedy
recovery under the MSMED Act to hold that time-barred claims cannot
be referred to conciliation. As we have already explained, merely
because conciliation is mandatory does not mean that the parties
are required to settle the dispute. They may choose to terminate
conciliation and avail the remedy of arbitration provided in Section
18(3), wherein they can raise all defences available to them in law.
Considering that conciliation is non-adjudicatory by nature and is
rather based on negotiation, compromise, and settlement by the
parties, it is not necessary that the defence of limitation be available
to the parties in this process.
31. There is yet another reason why time-barred claims must not be
excluded from conciliation under the MSMED Act. It is a settled
position of law that the statute of limitation only bars the remedy,
but does not extinguish the underlying right, which in this case is the
right to recover the unpaid amount and interest thereon. The right to
recover of the creditor/supplier and the corresponding liability of the
debtor/buyer to repay the amount subsists even after the expiry of the
limitation period. The creditor can recover a time-barred debt, other
than through remedies through a court of law, such as by adjusting
payments from the debtor made without direction on how it must be
appropriated,41 recovering the amount from a surety/ guarantee, or
enforcing lien or security.42 Further, the parties may also enter into

41 See Section 60 of the Contract Act, which allows the debtor to apply such payment, at his discretion,
to any lawful debt actually due and payable to him from the debtor, whether or not its recovery is time-
barred under limitation law.
42 Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay, AIR 1958 SC 328, para 12; Punjab National Bank v.
Surendra Prasad Sinha, 1993 Supp (1) SCC 499. para 5; Prem Cottex v. Uttar Haryana Bijli Vitran Nigam
Ltd., (2021) 20 SCC 200, para 13.
[2025] 7 S.C.R. 1171

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

a contract for repayment of a time-barred debt, which is recognised
under Section 25(3) of the Contract Act.43
32. A settlement agreement for a time-barred claim arrived at between
the buyer and supplier through conciliation under Section 18(2) is
precisely in the nature of a contract recognised and declared valid
under Section 25(3) of the Contract Act. It is clear that although
certain remedies are no longer available in law to the creditor once
the limitation period expires, the creditor can adopt other methods,
including contractual agreements, to recover time-barred debts.
Conciliation as a dispute-resolution process only facilitates the parties
in arriving at such a contract or settlement agreement. Hence, it is
not correct to exclude time-barred claims from being settled through
conciliation under Section 18(2) of the MSMED Act. The High Court
did not fully appreciate this aspect and rather relied on the object
of speedy recovery to arrive at its conclusion. In doing so, it lost
sight of the forest for the trees and entirely foreclosed a beneficial
mechanism made available to the supplier under the MSMED Act,
and more generally recognised in law, to recover the amounts due
to him even if they are time-barred.
33. For the foregoing reasons, we conclude that neither the Limitation Act
applies to conciliation proceedings under Section 18(2) nor are time-
barred claims excluded from such conciliation. The supplier’s right
to recover the principal amount and interest thereon subsists even
after the expiry of the limitation period, and he may recover the same
through a settlement agreement arrived at through conciliation by the
Facilitation Council under Section 18(2). In case such settlement is
not reached between the parties and the conciliation proceedings are
terminated for this reason, the matter must be referred to arbitration
as per Section 18(3), which we will deal with presently.

43 Section 25(3) of the Contract Act reads:
“25. Agreement without consideration, void, unless it is in writing and registered, or is a
promise to compensate for something done or is a promise to pay a debt barred by limitation
law.—An agreement made without consideration is void, unless—
***
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent
generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor
might have enforced payment but for the law for the limitation of suits. In any of these cases, such
an agreement is a contract.”
1172 [2025] 7 S.C.R.

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IX. Whether time-barred claims can be referred to arbitration under
Section 18(3) of the MSMED Act:
34. The next issue falling for our consideration is whether the Limitation
Act applies to arbitration by the Facilitation Council under Section
18(3), and whether time-barred claims can be referred to arbitration.
At this very stage, it is necessary to take note of this Court’s decision
in Silpi Industries (supra), which the High Court relied on to hold that
time-barred claims cannot be referred to arbitration.
35. In Silpi Industries (supra), the Court was faced with a similar
fact-situation wherein the suppliers initially approached the Industrial
Facilitation Council under the 1993 Act for recovery of time-barred
claims. As conciliation failed, the claims were decided by the
Facilitation Council under the MSMED Act and it made arbitral
awards in favour of the suppliers. The buyer/respondent therein
challenged the award under Sections 34 and 37 of the ACA, wherein
the High Court held that the Limitation Act is applicable to arbitration
claims under the MSMED Act. In the suppliers’ appeals, this Court
considered the issue of whether the provisions of the Limitation Act
apply to arbitration proceedings initiated under Section 18(3) of the
MSMED Act,44 which is the very issue arising for our consideration.
35.1 The Court took note of the statement and objects of the
MSMED Act and the scheme for recovery of delayed payments
under Chapter V, specifically Sections 15 to 18.45 It then relied
on Section 43 of the ACA, which extends the applicability of
the Limitation Act to arbitration proceedings. Since Section
18(3) of the MSMED Act mandates arbitration upon failure of
conciliation, and makes the provisions of the ACA applicable
as if there were an arbitration agreement between the parties,
this Court held that Section 43 of the ACA is also applicable.46
35.2 This Court also affirmed the High Court’s reliance on the
decision in Lanco (supra) to hold that the Limitation Act is
applicable to arbitration proceedings under Section 18(3).47
The relevant portions of the decision are extracted below:

44 Silpi Industries (supra), para 17.1.
45 ibid, paras 24-25.
46 ibid, paras 26-27.
47 ibid, paras 26-27.
[2025] 7 S.C.R. 1173

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

“25. With regard to the first issue, namely, applicability
of Limitation Act, 1963 to the arbitration proceedings
initiated under the provisions of Micro, Small and
Medium Enterprises Development Act, 2006, we need
to notice certain relevant sections of the Act. As per
Section 15 of the said Act, where supplier supplies
any goods or renders any services to any buyer, the
buyer shall make payment on or before the agreed
date between the parties in writing or where there
is no agreement, before the appointed day. Section
16 deals with date from which and rate of interest
payable in the event of not making the payment. The
recovery mechanism for the amount due is covered
by Sections 17 and 18 of the said Act. If any party
has a dispute with regard to amount due under
Section 17, a reference is required to be made to
the Micro and Small Enterprises Facilitation Council.
On such reference, the Council is empowered to
conduct conciliation in the matter or seek assistance
of any institution or centre providing alternate dispute
resolution services by making a reference to such
institution for conducting conciliation. If the conciliation
is not successful, as contemplated under Section
18(2) of the said Act, same stands terminated under
Section 18(3) of the said Act. Thereafter, the Council
shall either itself take up the dispute for arbitration or
refer it to any institution or centre providing alternate
dispute resolution services for such arbitration and
the provisions of the Arbitration and Conciliation Act,
1996 are made applicable as if the arbitration was
in pursuance of arbitration agreement between the
parties, under sub-section (1) of Section 7 of the
1996 Act.
26. Applicability of the Limitation Act, 1963 to the
arbitrations is covered by Section 43 of the 1996
Act. The High Court, while referring to abovesaid
provisions and the judgment of this Court in A.P.
Power Coordination Committee v. Lanco Kondapalli
Power Ltd. has held that the Limitation Act, 1963
1174 [2025] 7 S.C.R.

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is applicable to the arbitrations covered by Section
18(3) of the 2006 Act. A reading of Section 43 itself
makes it clear that the Limitation Act, 1963 shall apply
to the arbitrations, as it applies to proceedings in
court. When the settlement with regard to a dispute
between the parties is not arrived at under Section
18 of the 2006 Act, necessarily, the Micro and Small
Enterprises Facilitation Council shall take up the
dispute for arbitration under Section 18(3) of the 2006
Act or it may refer to institution or centre to provide
alternate dispute resolution services and provisions
of the Arbitration and Conciliation Act, 1996 are made
applicable as if there was an agreement between
the parties under sub-section (1) of Section 7 of the
1996 Act.”
36. The learned senior counsels on behalf of the appellants have made
two submissions regarding the correctness of Silpi Industries (supra),
which otherwise lays down the law on this exact issue. The first is
that the Court therein did not consider the effect of Section 2(4) of
the ACA, which explicitly excludes the applicability of Section 43
to statutory arbitrations, while arriving at its decision. The second
is that the decision in Lanco (supra), relied on by the Court, is per
incuriam as it is contrary to an earlier, coordinate bench decision in
TANGEDCO (supra). We will now consider each of these submissions
in some detail, and while doing so, will also provide our reasoning
for why the Limitation Act must be held applicable to arbitration
proceedings under Section 18(3) of the MSMED Act.
37. We will first deal with the argument regarding applicability of Section
43 of the ACA to arbitrations under Section 18(3) of the MSMED
Act. The significance of Section 43 of the ACA has been explained
by this Court in Consolidated Engineering Enterprises v. Principal
Secretary Irrigation Department48 as making the provisions of the
Limitation Act, which are otherwise only applicable to proceedings
before courts, applicable to arbitrations.49 Without the enactment of

48 (2008) 7 SCC 169.
49 ibid, paras 23, 45; My Preferred Transformation & Hospitality Pvt. Ltd. v. M/s Faridabad Implements Pvt.
Ltd. 2025 INSC 56, paras 10-11.
[2025] 7 S.C.R. 1175

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

Section 43, the Limitation Act would not extend to claims filed before
arbitral tribunals.50
38. It is in this light that we must consider the interplay of Section 2(4) of
the ACA with the provisions of the MSMED Act. If the applicability of
the provisions of Part I of the ACA is determined as per Section 2(4),
it is an inevitable conclusion that Section 43 will not apply to such
arbitrations, and consequently, the Limitation Act will also not apply.
39. Section 18 of the MSMED Act provides for arbitration by the Facilitation
Council in the following terms. Sub-section (1) commences with a
non-obstante clause and provides for reference of a dispute regarding
the amount due under Section 17 to the Facilitation Council. While
Section 18(2) mandates conciliation, Section 18(3) deals with
the eventuality of failure of settlement. It provides that when the
conciliation stands terminated without a settlement, the matter must
be referred to arbitration and the provisions of the ACA shall apply
as if the arbitration is in pursuance of an arbitration agreement under
Section 7(1) of the ACA. It is clear that there is a statutory deeming
fiction that the arbitration under the statute is to be considered as
being pursuant to an arbitration agreement.51 It is also relevant to
note that Section 24 of the MSMED Act provides for the overriding
effect of Sections 15 to 23 notwithstanding anything inconsistent in
any other law for the time being in force.
40. Section 2(4) of the ACA also employs a similar device of deeming
statutory arbitrations as being pursuant to an arbitration agreement,
as if the other enactment is an arbitration agreement. By doing so,
it extends the applicability of Part I of the ACA to such arbitrations,
except certain provisions including Section 43 and except insofar as
the provisions of the ACA are inconsistent with the other enactment
or rules thereunder. Two things are relevant to note here: first, by
default, Section 2(4) extends Part I of the ACA, except Sections
40(1), 41, and 43, to statutory arbitrations; and second, Section 2(4)
itself provides for the overriding effect of the special law in case of
inconsistency with its provisions.

50 ibid.
51 See Mahakali Foods (supra), para 43.
1176 [2025] 7 S.C.R.

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41. There is a clear and apparent conflict in the manner in which the
provisions of the ACA are made applicable – while Section 2(4)
provides for the exclusion of Section 43 to statutory arbitrations,
Section 18(3) provides for the applicability of all the provisions of the
ACA as would apply if there were an arbitration agreement, which
includes Section 43. We are of the opinion that Section 18(3) of the
MSMED Act will prevail over Section 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 Section 18 and the express language
in Section 24. The language of Section 2(4) itself also supports
this overriding effect of the special law. The same has also been
recognised and affirmed by this Court in Mahakali Foods (supra),
wherein the Court considered the purpose and object, statutory
scheme, and sequence of enactment of the ACA and the MSMED Act
to arrive at the conclusion that the MSMED Act is a special law that
will prevail over the provisions of the ACA, which is a general law.52
42. For these reasons, we are of the opinion that the applicability of
the ACA to arbitrations under the MSMED Act is not determined by
Section 2(4) of the ACA, and is rather determined as per Section
18(3) of the MSMED Act. Pursuant to the deeming fiction ingrained in
the language of Section 18(3), the arbitration conducted thereunder
would attract the provisions that are otherwise applicable when
there is an arbitration agreement. This includes Section 43, thereby
making the Limitation Act applicable to arbitral proceedings under
the MSMED Act.
43. In this light, although the Court in Silpi Industries (supra) did not
consider Section 2(4) while arriving at its decision, we have provided
our reasons for why it will not be applicable. The submission by the
appellants that Silpi Industries (supra) is per incuriam on this ground
is therefore rejected and the applicability of the Limitation Act to
arbitrations under Section 18(3), by virtue of Section 43, is affirmed.
44. We will now briefly consider the second contention regarding Lanco
(supra) being per incuriam and contrary to TANGEDCO (supra),
thereby rendering its reliance in Silpi Industries (supra) as incorrect.

52 ibid, paras 33-42.
[2025] 7 S.C.R. 1177

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

It is relevant to note that Lanco (supra) and TANGEDCO (supra)
arise in the context of the Electricity Act, 2003 and the applicability
of the Limitation Act to arbitrations conducted thereunder.
45. In TANGEDCO (supra), a dispute regarding payments under a Power
Purchase Agreement (PPA) was raised before the State Electricity
Regulatory Commission, which allowed the same and held that the
Limitation Act does not apply to claims under the Electricity Act. It is
also relevant to note that the PPA contained an arbitration clause,
which is governed by English law and provided that the arbitration shall
be conducted in England. While considering various submissions,
this Court held that the issue of delay and laches did not arise in the
facts of the case.53 It also rejected the contention of the appellant
therein that the Limitation Act would have applied had the matter
been referred to arbitration, by holding that this situation also does
not arise as the State Commission decided the dispute itself.54 It
then proceeded to observe that even if the matter were referred to
arbitration, Section 43 of the ACA would not apply and consequently,
the Limitation Act would not apply, due to Section 2(4) of the ACA.55
However, the Court finally noted that in any case, the arbitration
clause is governed by English Law and hence the applicability of
Section 43, which is under Part I, does not arise.56
46. It is therefore clear that the issue of limitation as well as the
interpretation of Section 2(4) and the applicability of Section 43 of the
ACA to statutory arbitrations under the Electricity Act did not directly
arise for consideration in TANGEDCO (supra). This has also been
noted by this Court in Lanco (supra)57, wherein the issue directly
falling for the Court’s consideration was whether the Limitation Act
applies to actions instituted before the State Commission under
the Electricity Act.58 The Court noted that the Limitation Act does
not ordinarily apply to proceedings before quasi-judicial bodies or
tribunals59. However, applying the principle in V.R. Kalliyanikutty

53 TANGEDCO (supra), para 64.
54 ibid, para 65.
55 ibid, paras 65-66.
56 ibid, para 69.
57 Lanco (supra), paras 16, 28.
58 ibid, para 9.1.
59 ibid, para 28. The Court relied on M.P. Steel Corpn. (supra).
1178 [2025] 7 S.C.R.

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(supra), the Court held that Electricity Act does not create a new
right to claim amounts that are barred by limitation. An amount that
is not ordinarily recoverable by filing a regular suit, on account of
being barred by limitation, cannot be entertained in exercise of judicial
powers by the State Commission. The Court also considered that
there is no conflict between the provisions of the Limitation Act and
the Electricity Act, in which context it examined the effect of Sections
174 and 175 of the Electricity Act. Ultimately, the Court concluded
that the Limitation Act is applicable to proceedings before the State
Commission under the Electricity Act. The relevant portion of Lanco
(supra) is extracted below:
“30. In such a situation it falls for consideration whether
the principle of law enunciated in State of Kerala v. V.R.
Kalliyanikutty and in New Delhi Municipal Committee v.
Kalu Ram is attracted so as to bar entertainment of claims
which are legally not recoverable in a suit or other legal
proceeding on account of bar created by the Limitation
Act. On behalf of the respondents those judgments were
explained by pointing out that in the first case the peculiar
words in the statute—“amount due” and in the second case
“arrears of rent payable” fell for interpretation in the context
of powers of the tribunal concerned and on account of the
aforesaid particular words of the statute this Court held
that the duty cast upon the authority to determine what is
recoverable or payable implies a duty to determine such
claims in accordance with law. In our considered view a
statutory authority like the Commission is also required
to determine or decide a claim or dispute either by itself
or by referring it to arbitration only in accordance with
law and thus Sections 174 and 175 of the Electricity Act
assume relevance. Since no separate limitation has been
prescribed for exercise of power under Section 86(1)(f)
nor this adjudicatory power of the Commission has been
enlarged to entertain even the time-barred claims, there
is no conflict between the provisions of the Electricity
Act and the Limitation Act to attract the provisions of
Section 174 of the Electricity Act. In such a situation, on
account of the provisions in Section 175 of the Electricity
Act or even otherwise, the power of adjudication and
[2025] 7 S.C.R. 1179

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

determination or even the power of deciding whether a
case requires reference to arbitration must be exercised in
a fair manner and in accordance with law. In the absence
of any provision in the Electricity Act creating a new right
upon a claimant to claim even monies barred by law of
limitation, or taking away a right of the other side to take
a lawful defence of limitation, we are persuaded to hold
that in the light of nature of judicial power conferred on
the Commission, claims coming for adjudication before it
cannot be entertained or allowed if it is found legally not
recoverable in a regular suit or any other regular proceeding
such as arbitration, on account of law of limitation. We have
taken this view not only because it appears to be more
just but also because unlike labour laws and the Industrial
Disputes Act, the Electricity Act has no peculiar philosophy
or inherent underlying reasons requiring adherence to a
contrary view.
31. We have taken the aforesaid view to avoid injustice as
well as the possibility of discrimination. We have already
extracted a part of para 11 of the judgment in State of
Kerala v. V.R. Kalliyanikutty wherein the Court considered
the matter also in the light of Article 14 of the Constitution.
In that case the possibility of Article 14 being attracted
against the statute was highlighted to justify a particular
interpretation as already noted. It was also observed
that it would be ironic if in the name of speedy recovery
contemplated by the statute, a creditor is enabled to recover
claims beyond the period of limitation. In this context, it
would be fair to infer that the special adjudicatory role
envisaged under Section 86(1)(f) also appears to be for
speedy resolution so that a vital developmental factor —
electricity and its supply is not adversely affected by
delay in adjudication of even ordinary civil disputes by
the civil court. Evidently, in the absence of any reason or
justification the legislature did not contemplate to enable a
creditor who has allowed the period of limitation to set in,
to recover such delayed claims through the Commission.
Hence we hold that a claim coming before the Commission
cannot be entertained or allowed if it is barred by limitation
1180 [2025] 7 S.C.R.

Supreme Court Reports

prescribed for an ordinary suit before the civil court. But in
an appropriate case, a specified period may be excluded on
account of the principle underlying the salutary provisions
like Section 5 or Section 14 of the Limitation Act. We
must hasten to add here that such limitation upon the
Commission on account of this decision would be only
in respect of its judicial power under clause (f) of sub-
section (1) of Section 86 of the Electricity Act, 2003 and
not in respect of its other powers or functions which may
be administrative or regulatory.”
47. In view of the above reading of TANGEDCO (supra) and Lanco
(supra), the following can be concluded: first, the issue of applicability
of the Limitation Act to statutory arbitrations is not an issue determining
the rights and liabilities of the parties in TANGEDCO (supra); second,
the issue of applicability of the Limitation Act to statutory arbitrations
does not arise in Lanco (supra), and the Court was in fact dealing
with whether time-barred claims can be entertained in proceedings
before the State Commission; and third, after taking note of the
decision in TANGEDCO (supra), the Court in Lanco (supra) provided
an alternative reasoning based on the principle of V.R. Kalliyanikutty
(supra) to hold that the Limitation Act applies to proceedings under
the Electricity Act. Hence, we are of the opinion that the decision in
Lanco (supra) is not per incuriam, and there is no conflict between
these judgments. We therefore reject the submission by the appellant
on this ground as well.
48. In light of the above reasoning, this Court’s decision in Silpi Industries
(supra) cannot be said to be per incuriam, as has been contended
before us. The Court in Silpi Industries (supra) considered the issue
and conclusively decided that the provisions of the Limitation Act
are applicable to arbitration under Section 18(3) of the MSMED Act.
We have supplemented the reasoning provided in Silpi Industries
(supra) by analysing with the interplay of Section 2(4) of the ACA
and Section 18 and Section 24 of the MSMED Act. Considering the
overriding effect of the provisions of the MSMED Act and the clear
language of Section 18(3), we have arrived at the same conclusion
as in Silpi Industries (supra) that Section 43 of the ACA applies to
arbitrations under Section 18 of the MSMED Act, thereby attracting
the provisions of the Limitation Act to claims made under the MSMED
Act. We answer the second issue accordingly.
[2025] 7 S.C.R. 1181

M/s Sonali Power Equipments Pvt. Ltd. v.
Chairman, Maharashtra State Electricity Board, Mumbai & Ors.

49. Before concluding, we will briefly deal with the contention raised
by the appellant that even if the Limitation Act applies to arbitration
proceedings, the limitation period stands extended due to the
disclosure of unpaid amount in the buyer’s financial statements as
per Section 22 of the MSMED Act. This is based on the application
of Section 18 of the Limitation Act, which provides that a fresh period
of limitation commences when a written acknowledgement of the
liability is signed by the party against whom such right is claimed.60
50. To briefly state the law on the issue, we will refer to this Court’s decision
in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal61. Here, the
issue was the applicability of Section 18 of the Limitation Act when
there is acknowledgment of liability in financial statements. Citing
various precedents on the issue, this Court reaffirmed the position
that an entry in the balance sheet of the debtor would amount to an
acknowledgement of liability as per Section 18 of the Limitation Act.62
However, it also observed that it is not uncommon for such entry to
have notes annexed, or the auditor’s report that must be read along
with the balance sheet, that indicate that such entry does not amount
to an acknowledgement of debt for reasons stated therein.63 While
the law mandates the preparation of the balance sheet, and in our
case, the disclosure of the unpaid amount and interest thereon, the
entry made therein must be examined on a case-to-case basis to
determine whether it amounts to an acknowledgement of debt as per
the requirements of Section 18 of the Limitation Act.64 It is sufficient
to restate this position of law for our purpose.

X. Conclusion:
51. On considering the statutory provisions of the MSMED Act, the ACA,
and the Limitation Act, the precedents of this Court, and on the basis

60 Section 18 of the Limitation Act reads:
“18. Effect of acknowledgment in writing.—(1) Where, before the expiration of the prescribed
period for a suit or application in respect of any property or right, an acknowledgment of liability in
respect of such property or right has been made in writing signed by the party against whom such
property or right is claimed, or by any person through whom he derives his title or liability, a fresh
period of limitation shall be computed from the time when the acknowledgment was so signed…”
61 (2021) 6 SCC 366.
62 ibid, paras 16-17.
63 ibid, para 21.
64 ibid, para 35.
1182 [2025] 7 S.C.R.

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of the above reasoning, we have answered the issues arising in the
present appeals as follows:
i. The Limitation Act does not apply to conciliation proceedings
under Section 18(2) of the MSMED Act. 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.
ii. The Limitation Act applies to arbitration proceedings under
Section 18(3) of the MSMED Act. The applicability of the
provisions of ACA to such arbitrations is determined as per
Section 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 (supra). Further, the extension of the
limitation period on the basis of disclosure under Section 22 of
the MSMED Act must be examined on a case-to-case basis.
52. We therefore partly allow the present appeals arising out of
SLP (C) Nos. 6912-6920/2024 and set aside the impugned order
dated 20.10.2023 arising in Commercial Appeal Nos. 1-9/2018
before the High Court of Bombay Bench at Nagpur to the extent of
applicability of the Limitation Act to conciliation proceedings under
the MSMED Act. We have upheld the High Court’s decision on the
applicability of the Limitation Act to arbitration proceedings under the
MSMED Act for the reasons provided hereinabove.
53. Pending applications, if any, stand disposed of.
54. No order as to costs.

Result of the case: Appeal partly allowed.

†
Headnotes prepared by: Ankit Gyan