Private Arbitration Clauses Cannot Override Statutory Mandates Under MSMED Act : Supreme Court

The Supreme Court of India has delivered a crucial judgment affirming that arbitration under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, is statutory and mandatory in nature. The apex court explicitly ruled that parties involved in disputes covered by the MSMED Act cannot mutually agree to opt-out of the arbitration mechanism provided under the Act. This decision is a significant step towards protecting the dispute resolution rights of small suppliers and ensuring that they have access to a swift and effective mechanism for resolving payment disputes with larger entities.