Calcutta High Court Ruling Offers Flexibility For MSME Dispute Resolution

The recent Calcutta High Court ruling has relieved MSMEs nationwide by relaxing the 90-day deadline for arbitration proceedings. The MSMEs were bound to follow a 90-day strict deadline for completing any arbitration proceedings. However, the High Court ruling under Justice Sabyasachi Bhattacharyya states the 90-day timeline for completing the arbitral proceedings under section 18(5) of the MSME Act 2006 as a directory. This means that it is no longer mandatory and is merely a guideline or instruction. Let us discuss some of the benefits of Calcutta High Court’s Ruling below.

How Will Calcutta High Court Ruling Benefit MSMEs In India?

Calcutta High Court Ruling makes the 90-day timeline for completing the arbitral proceedings a directory rather than mandatory. Thus, the MSMEs will receive the following benefits:

1. Directory nature: The MSMEs complete the arbitral proceedings within 90 days. If MSMEs fail to do so, the case has a high chance of dismissal leading to a waste of both MSME’s time and money. However, the relaxation from the high court will help prevent the automatic invalidation of the arbitral proceedings.
2. Freedom to operate at their own pace: MSMEs can now operate according to their own pace without much burden of dismissal. Thus, the more time the MSME will have, the more systematic it will operate. MSMEs will get enough time to gather the documents and witnesses to win the case. It may not need arbitration in that case.
3. Fair Opportunity To MSMEs: The MSME’s case for arbitration proceedings was earlier dismissed after 90 days if not resolved. However, many MSMEs feel unsatisfied with the hearing and want to give it more time before closure. The ruling will allow the MSMEs to express themselves openly and increase the chance to win the case.
4. Increase In Risk Taking: MSMEs don’t take much risk as they feel less confident about timely receiving the payments making their payment cycle imbalanced. Thus, MSMEs’ satisfaction with dispute resolution will lead to MSMEs taking more risks and expanding further. They will get a sense of support that will help them lift.
5. Alternative Dispute Resolution (ADR) Mechanism: There will be more options with MSMEs for dispute resolution. They may move towards the alternative dispute resolution mechanism (ADR). It is much faster and cheaper than arbitration.

MSMEs across the nation will have these benefits that will contribute to their growth. The reduced burden will also increase their capability to expand more. Stay tuned for more information on our website.