Section 18 gives MSME disputes a statutory route through the Micro and Small Enterprises Facilitation Council: conciliation first, then arbitration, with a 90-day decision target. Four Supreme Court rulings shape how the route works today: the Council can arbitrate even after conciliating, an arbitration clause does not oust it, limitation applies to the arbitration but not the conciliation, and a buyer challenging an award must first deposit 75%.

1. The route in stages

2. Who may refer

Section 18(1) says “any party to a dispute”. In NBCC (India) Ltd. v. State of West Bengal (10 January 2025) the Court read this as not confined to registered suppliers and referred the question of registration timing to a three-judge bench (Article 5). Until that reference is decided, a buyer’s objection to a supplier’s status is a real jurisdictional risk, and the Council can rule on its own jurisdiction.

3. An arbitration clause does not oust the Council

In Gujarat State Civil Supplies Corporation v. Mahakali Foods (2023) the Supreme Court held that Chapter V of the MSMED Act overrides the Arbitration and Conciliation Act. A reference to the Council is therefore maintainable even if the contract has its own arbitration clause. The Council that conciliated may also arbitrate, and the proceedings are governed by the 1996 Act. The Court has also treated section 18(4) as vesting jurisdiction in the Council where the supplier is located, which affects any contractual seat or venue clause (see the 2025 decision in Harcharan Dass Gupta, which should be read in full before it is relied on).

4. Limitation: the Sonali Power ruling

On 17 July 2025 the Supreme Court decided that the Limitation Act does not apply to conciliation under section 18(2), and that a time-barred claim can be referred to conciliation and settled, because limitation bars the remedy and does not extinguish the debt. It also held that the Limitation Act does apply to arbitration under section 18(3) through section 43 of the 1996 Act, so a buyer can plead limitation there. A section 22 balance-sheet disclosure may or may not extend limitation as an acknowledgement, and that is examined case by case.

5. Challenging an award: the 75% deposit

Under section 19, an application to set aside an award by a buyer who is not the supplier is not entertained unless the buyer deposits 75% of the award amount in the way the court directs. The buyer’s decision to challenge therefore needs a cash-flow plan at the outset. The deposit is a condition of being heard, so the merits of the challenge are not considered until it is made.

6. What the 2026 Amendment Act would change

Once commenced, the amendments would require mediation before the Council or a mediation service provider to be completed within 90 days from the date fixed for first appearance, require the Council to act within 30 days of mediation ending, and require the award within 90 days of completion of pleadings (new section 18(4A)). They would also allow online proceedings, make settlements and awards recoverable as arrears of land revenue and capable of recognition as debts under the Insolvency and Bankruptcy Code, 2016, and require a court to release part of the section 19 deposit to the supplier and to order payment of at least 50% of the award where a challenge remains pending beyond six months. These changes operate only from the dates the Central Government notifies, and the earlier conciliation-based procedure applies until then.