NB ASSOCIATES

“Work Contract” contention maintainable in Section 11 Petition?

• mail@nbassociates.net
• +91 9811899279

---

Issue:

Whether the Contention that the Agreement is a Works Contract (and Thus Outside the MSMED Act) is Maintainable in a Section 11 Petition

Brief Facts

In Idemia Syscom India Private Limited v. M/S Conjoinix Total Solutions Private Limited, decided on 24 February 2025 by the Delhi High Court, the petitioner filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of a Sole Arbitrator under an arbitration clause contained in a Service Framework Agreement between the parties. Disputes had arisen regarding alleged breach and non-performance of contractual obligations. The respondent, however, was a registered MSME and had initiated proceedings under Section 18 of the MSMED Act before the Micro and Small Enterprises Facilitation Council. The petitioner contended that the agreement between the parties was in the nature of a works contract and therefore fell outside the scope of the MSMED Act. On this basis, it was argued that the proceedings before the Facilitation Council were not maintainable and that the Court should appoint an arbitrator under Section 11.

Court Observations

In paragraph 15 of the judgment in, the Delhi High Court specifically addressed the petitioner’s contention that the agreement was a works contract and therefore outside the ambit of the MSMED Act.

The Court observed that although the petitioner argued that the contract was a works contract and relied on various precedents, the respondent had disputed this characterization. Since the parties were at variance regarding the true nature of the contract, the issue became a triable one requiring detailed appreciation of evidence and interpretation of contractual terms. Such an exercise, the Court held, falls beyond the limited scope of inquiry under Section 11 of the Arbitration and Conciliation Act, 1996.

The Court reiterated that the jurisdiction under Section 11 is confined to forming a prima facie opinion regarding the existence of an arbitration agreement and does not extend to adjudicating complex factual disputes. As the question whether the contract was a works contract involved substantive examination, it was not appropriate for the Court to decide the issue at the Section 11 stage. The Court further noted that the matter could be appropriately examined in the proceedings under the MSMED Act, and if arbitration ensued thereunder, the arbitral tribunal would be the proper forum to determine such contentions.

Final Verdict

The Court held that the petitioner’s contention that the agreement was a works contract and therefore outside the scope of the MSMED Act was not maintainable in a petition underSection 11 of the Arbitration and Conciliation Act, 1996. Since such a contention requires detailed adjudication and examination of evidence, it cannot be decided at the stage of appointment of an arbitrator. Accordingly, the Section 11 petition was dismissed, leaving it open to the parties to raise their jurisdictional objections before the arbitral tribunalconstituted under the MSMED Act.