The Gauhati High Court has refused to interfere with ongoing arbitration proceedings initiated under the Micro, Small and Medium Enterprises Development (MSMED) Act, holding that statutory remedies must take precedence over contractual dispute clauses agreed between parties. The judgment was pronounced by Justice Manish Choudhury on 18 November 2025.
The case involved the Lokopriya Gopinath Bordoloi Regional Institute of Mental Health (LGBRIMH), Tezpur, which tried to halt arbitration proceedings before the Delhi International Arbitration Centre (DIAC), claiming lack of jurisdiction.
Background
LGBRIMH an autonomous mental health institution of the Union Health Ministry outsourced manpower services to Green Alliance Engineering Services Pvt. Ltd. under a GeM contract effective from November 2021 to November 2022.
The hospital later alleged several contractual violations: delayed wage payments, untimely EPF/ESI deposit, and unauthorised collection of money from workers. It terminated the contract in August 2022 and forfeited the contractor’s bank guarantee.
After failed internal dispute resolution attempts, the service provider approached the Delhi MSME Facilitation Council, claiming delayed payment of ₹40.68 lakh. The Council closed conciliation and referred the matter to DIAC for arbitration.
The Institute protested:
“This is not a delayed payment issue at all, but a case of persistent contractual breach,” counsel for LGBRIMH argued.
Court’s Observations
Justice Choudhury emphasised that the MSMED Act, particularly Sections 15–18, equips registered MSMEs with a statutory right to pursue delayed payment disputes before Facilitation Councils despite any arbitration clause in the contract.
He cited Supreme Court precedents including Gujarat State Civil Supplies Corp. Ltd. v. Mahakali Foods (2023) and M/s Harcharan Dass Gupta v. ISRO (2025), reiterating that:
“A private agreement between the parties cannot obliterate the statutory provisions… Once the mechanism under Section 18 is triggered, it overrides.”
The Court added that jurisdiction is determined by where the supplier (the MSME) is located in this case, Delhi making DIAC’s arbitration legally valid.
Also addressing maintainability under Article 226, Justice Choudhury said contractual disputes without public law implications should ordinarily not be tested via writ jurisdiction.
Decision
Holding the writ petition not entertainable, the Court dismissed it and left LGBRIMH free to contest jurisdiction and merits before the arbitral tribunal itself under Section 16 and 34 of the Arbitration Act:
“This decision should not in any way prejudice any rights, claims and contentions… The Arbitral Tribunal would adjudicate on the same as per its own merits and in accordance with law.”
No order as to costs was passed.
The ruling ultimately draws a clear line: statutory protection for MSMEs against delayed payments cannot be contracted away, even by public institutions.
Case Title:- Lokopriya Gopinath Bordoloi Regional Institute of Mental Health (LGBRIMH), Tezpur vs. M/s Green Alliance Engineering Services Pvt. Ltd. & Ors.
Case Number: Writ Petition (Civil) No. 5962/2025
