![Dispute Sent to DIAC by Consent, MSME Arbitration Question Left Open: Supreme Court in M/s. Patel Infrastructure Ltd. v. M/s. Aditya Construction [2026 INSC 804]](/assets/images/article-corporate.svg)
Quick Answer: The Supreme Court did not decide whether a buyer of goods or services from a micro or small enterprise can start arbitration against it directly under the Arbitration and Conciliation Act, 1996. The respondent MSME agreed to arbitration through the Delhi International Arbitration Centre (DIAC). So the Court disposed of the appeal by asking DIAC to appoint an arbitrator, with New Delhi as the venue, and left the question of law open for a future case.
In M/s. Patel Infrastructure Limited v. M/s. Aditya Construction (2026 INSC 804), the appeal raised the question whether a buyer from an MSME governed by the Micro, Small and Medium Enterprises Development Act, 2006 can independently invoke the Arbitration and Conciliation Act, 1996 for its claim against the MSME (para 2). The respondent MSME's senior counsel, on instructions, agreed to arbitration through DIAC under the 1996 Act, with New Delhi as the venue (para 4). Accepting this "fair offer", a Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva disposed of the appeal on those terms. The question of law was left open for an appropriate case (paras 5–6).
Status: Appeal disposed of by consent; Delhi International Arbitration Centre requested to appoint a suitable arbitrator; venue at New Delhi; question of law left open; parties to bear their own costs (paras 5–6).
Headnote: Buyer's Arbitration Against an MSME Supplier
Micro, Small and Medium Enterprises Development Act, 2006 – Arbitration and Conciliation Act, 1996 – Whether a buyer from a micro or small enterprise can independently initiate arbitration under the 1996 Act for its claim against the MSME – Consent of the MSME to arbitration through the Delhi International Arbitration Centre – Venue of arbitration – Question of law left open.
Held: (i) The appeal raised an "interesting question of law" on whether a buyer from an MSME can seek arbitration of its claim by independently taking recourse to the 1996 Act (para 2).
(ii) The appellant relied on decisions of the Delhi High Court in Uniseven Engineering and Infrastructure Pvt. Ltd. and of the Calcutta High Court in Essar Oil and Gas Exploration and Production Limited (para 3).
(iii) The respondent MSME, on instructions, agreed to arbitration through DIAC under the 1996 Act and suggested New Delhi as the venue for the convenience of both parties (para 4).
(iv) The Court accepted the offer "so as to give a quietus to the matter without further ado" and requested DIAC to appoint a suitable arbitrator, with the venue at New Delhi (para 5).
(v) The appellant must approach DIAC within two weeks of receiving a certified copy of the order (para 5).
(vi) The question of law raised in the appeal is left open to be considered in an appropriate case in future (para 6).
(paras 2–6)
Case Details: M/s. Patel Infrastructure Ltd. v. M/s. Aditya Construction (2026 INSC 804)
Final Outcome: Appeal disposed of; DIAC requested to appoint a suitable arbitrator under the 1996 Act; venue at New Delhi; question of law left open; parties to bear their own costs.
Case: M/s. Patel Infrastructure Limited v. M/s. Aditya Construction
Neutral Citation: 2026 INSC 804
Case No.: Civil Appeal No. ___ of 2026 (arising out of SLP (C) No. 3250 of 2026)
Court: Supreme Court of India (Civil Appellate Jurisdiction) – Non-Reportable
Date of Decision: 5 August 2026
Bench: Justice Sanjay Kumar (author) and Justice Sanjeev Sachdeva
Relevant Acts & Sections: Micro, Small and Medium Enterprises Development Act, 2006; Arbitration and Conciliation Act, 1996
Impugned Order(s): Not identified in the order
Counsel: Ms. Tanyiya Bansal for the appellant; Mr. Sanjay Bhaseen, Senior Advocate, for the respondent MSME (paras 3–4)
Source: Supreme Court of India (official website)
Key Holdings of the Supreme Court
- The question whether a buyer from an MSME can independently invoke the 1996 Act against the MSME was raised but not decided (paras 2, 6).
- The respondent MSME consented to arbitration through DIAC under the 1996 Act (para 4).
- DIAC is requested to appoint a suitable arbitrator to resolve the disputes between the parties (para 5).
- The venue of arbitration is New Delhi, since the appellant is based in Ahmedabad and the respondent in Basti, Uttar Pradesh (paras 4–5).
- The appellant must approach DIAC within two weeks of receiving a certified copy of the order (para 5).
- The question of law is left open for an appropriate future case (para 6).
Brief Facts of the Case
The appellant, M/s. Patel Infrastructure Limited, has its registered office at Ahmedabad, Gujarat. The respondent, M/s. Aditya Construction, is an MSME run as a proprietorship with its office at Basti in Uttar Pradesh (para 4).
The appeal raised whether a buyer from an MSME can initiate arbitration for its claim against the MSME by independently taking recourse to the Arbitration and Conciliation Act, 1996 (para 2). The order does not set out the underlying contract, the nature of the claims or the impugned order.
The appellant's counsel relied on Uniseven Engineering and Infrastructure Pvt. Ltd. v. Micro and Small Enterprises Facilitation (MSEF) Council, a Delhi High Court decision of 5 July 2023. Counsel also relied on Essar Oil and Gas Exploration and Production Limited v. Gargi Travels Private Limited, a Calcutta High Court decision of 20 April 2023 (para 3 and footnotes 1–2).
Issues Before the Supreme Court
- Whether a buyer of goods or services from a micro or small enterprise governed by the MSMED Act, 2006 can initiate arbitration for its claim against the MSME by independently invoking the Arbitration and Conciliation Act, 1996 (para 2).
Court's Findings and Reasoning
Question raised (para 2): The Court described the issue as an "interesting question of law" on the interplay between the MSMED Act, 2006 and the 1996 Act for claims by a buyer against an MSME.
Appellant's submissions (para 3): The Court noted that "effective arguments" were advanced for the appellant, relying on the Delhi High Court's decision in Uniseven Engineering and the Calcutta High Court's decision in Essar Oil and Gas.
Respondent's consent (para 4): On instructions, the respondent's senior counsel stated that the MSME was agreeable to an arbitrator being appointed through DIAC to resolve the inter se disputes under the 1996 Act. He asked that the venue be New Delhi, as the parties were based in Ahmedabad and Basti.
Disposal by consent (para 5): Accepting the fair offer to give a quietus to the matter, the Court requested DIAC to appoint a suitable arbitrator under the 1996 Act. It fixed the venue at New Delhi and gave the appellant two weeks to approach DIAC.
Question left open (para 6): Since the appeal was disposed of on consent, the question of law was expressly left open for an appropriate case in future.
Final Outcome and Directions
- The appeal is disposed of, requesting the Delhi International Arbitration Centre to appoint a suitable arbitrator for the disputes between the appellant and the respondent under the 1996 Act (para 5).
- The venue of the arbitration shall be New Delhi (para 5).
- The appellant shall approach DIAC within two weeks from the date of receipt of a certified copy of the order (para 5).
- The question of law raised is left open to be considered in an appropriate case (para 6).
- Parties to bear their own costs (para 6).
Legal Principle Laid Down
No principle of law was laid down. The Court expressly left open whether a buyer from a micro or small enterprise can independently invoke the Arbitration and Conciliation Act, 1996 for its claim against the MSME (para 6). The order shows that such a dispute can be resolved by consent through institutional arbitration under the 1996 Act, here through DIAC with a neutral venue (paras 4–5).
Precedents Relied Upon
- Uniseven Engineering and Infrastructure Pvt. Ltd. v. Micro and Small Enterprises Facilitation (MSEF) Council, District (South), W.P. (C) 11233/2021, Delhi High Court, decided on July 5, 2023 – Cited by the appellant; not ruled upon. Noted at para 3.
- Essar Oil and Gas Exploration and Production Limited v. Gargi Travels Private Limited, A.P. No. 73 of 2023, Calcutta High Court, decided on April 20, 2023 – Cited by the appellant; not ruled upon. Noted at para 3.
Important Paragraphs of the Judgment
Verbatim extracts from the order. For the full text, refer to the judgment PDF below.
Para 2: "An interesting question of law was sought to be raised by way of this appeal, that is, whether a buyer of goods or services from a micro or small enterprise (MSME), governed by the Micro, Small and Medium Enterprises Development Act, 2006, can seek to initiate arbitration proceedings in respect of its claim against such MSME by independently taking recourse to the Arbitration and Conciliation Act, 1996."
Para 4: "... the respondent MSME is agreeable to the appointment of an arbitrator through the aegis of the Delhi International Arbitration Centre to resolve the inter se disputes between the parties through the process of arbitration governed by the provisions of the Arbitration and Conciliation Act, 1996."
Para 5: "Accepting the fair offer made by the learned senior counsel so as to give a quietus to the matter without further ado, the appeal is disposed of requesting the Delhi International Arbitration Centre to appoint a suitable arbitrator to undertake the resolution of the disputes between the appellant, M/s Patel Infrastructure Limited, and the respondent, M/s Aditya Construction ..."
Para 5: "The venue of the arbitration shall be at New Delhi. The appellant shall approach the Delhi International Arbitration Centre within two weeks from the date of receipt of a certified copy of this order."
Para 6: "The question of law raised in this appeal is, however, left open to be considered in an appropriate case in future."
Practical Impact of the Ruling
- For buyers dealing with MSMEs: Whether a buyer can bypass the MSMED Act and invoke the 1996 Act directly remains undecided by the Supreme Court (para 6).
- For MSME suppliers: Consenting to institutional arbitration under the 1996 Act can end protracted litigation on the forum question (paras 4–5).
- For practitioners: The Delhi High Court's Uniseven Engineering and the Calcutta High Court's Essar Oil and Gas decisions were cited, but the Supreme Court expressed no view on them (paras 3, 6).
- For choosing a venue: Where parties are in different States, a neutral venue such as New Delhi may be fixed by consent for convenience (paras 4–5).
- For timelines: The appellant must act within two weeks of receiving the certified copy to approach DIAC (para 5).
FAQs on Buyer's Arbitration Against an MSME
1. What did the Supreme Court decide in Patel Infrastructure v. Aditya Construction?
It disposed of the appeal by consent, requesting DIAC to appoint an arbitrator under the 1996 Act with New Delhi as the venue, and left the question of law open (paras 5–6).
2. What was the question of law?
Whether a buyer from a micro or small enterprise governed by the MSMED Act, 2006 can initiate arbitration of its claim against the MSME by independently invoking the 1996 Act (para 2).
3. Did the Supreme Court answer that question?
No. It was left open to be considered in an appropriate case in future (para 6).
4. Why was New Delhi chosen as the venue?
The appellant's registered office is in Ahmedabad and the respondent's office is in Basti, Uttar Pradesh, so New Delhi was suggested for the convenience of both parties (paras 4–5).
5. What must the appellant do next?
Approach DIAC within two weeks from receipt of a certified copy of the order (para 5).
Keywords: 2026 INSC 804, Patel Infrastructure v. Aditya Construction, MSMED Act 2006, buyer arbitration against MSME, Arbitration and Conciliation Act 1996, Delhi International Arbitration Centre, DIAC, MSME Facilitation Council, Uniseven Engineering, Essar Oil and Gas v. Gargi Travels, question of law left open, Justice Sanjay Kumar, Justice Sanjeev Sachdeva, Supreme Court non-reportable judgment
Related on LegalTaxGuru
Download Judgment PDF – Patel Infrastructure v. Aditya Construction
Source: Supreme Court of India (official website).