Seventh Schedule of the Mediation Act, 2023: Amendment to Section 18 of the MSMED Act
The Seventh Schedule to the Mediation Act, 2023 is linked to Section 62 and provides for substitution of Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006. The provision integrates mediation under the Mediation Act, 2023 into the statutory dispute-resolution mechanism before the Micro and Small Enterprises Facilitation Council (MSEFC).
What the Seventh Schedule changes
The Schedule substitutes Section 18 of the MSMED Act, 2006. Section 18 deals with references concerning amounts due under Section 17. Under the substituted framework, a qualifying dispute may be referred to the MSEFC; mediation is conducted under the Mediation Act, 2023; and, if mediation ends without settlement, the dispute proceeds to arbitration through the Council or an institution or centre providing alternative dispute resolution services.
Text of substituted Section 18
18. Reference to Micro and Small Enterprises Facilitation Council
(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the Council shall either conduct mediation itself or refer the matter to any mediation service provider as provided under the Mediation Act, 2023.
(3) The conduct of mediation under this section shall be as per the provisions of the Mediation Act, 2023.
(4) Where the mediation initiated under sub-section (3) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternative dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996), shall, then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act.
(5) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternative dispute resolution services shall have jurisdiction to act as an Arbitrator or mediator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.
Meaning of the key provisions
Section 17 of the MSMED Act
Section 17 concerns recovery of an amount due for goods supplied or services rendered by a supplier, together with the interest provided under Section 16. The substituted Section 18 permits a reference to the MSEFC in relation to an amount due under Section 17.
Mediation before arbitration
After receiving a reference, the MSEFC may conduct mediation itself or refer the dispute to a mediation service provider under the Mediation Act, 2023. The mediation is governed by that Act. If it terminates without settlement, the dispute may proceed to arbitration.
Arbitration after unsuccessful mediation
Where mediation is unsuccessful, the Council may itself take up the dispute for arbitration or refer it to an institution or centre providing alternative dispute resolution services. The Arbitration and Conciliation Act, 1996 then applies as if the arbitration arose from an arbitration agreement under Section 7(1) of that Act.
Territorial jurisdiction
Sub-section (5) gives the MSEFC or relevant centre jurisdiction to act as arbitrator or mediator where the supplier is located within its jurisdiction, even when the buyer is located elsewhere in India.
Practical significance
The Seventh Schedule aligns the MSMED statutory recovery mechanism with the Mediation Act, 2023. Its structure preserves the MSEFC reference mechanism while expressly placing the mediation stage under the Mediation Act and retaining arbitration as the next statutory dispute-resolution stage where mediation concludes without settlement.
For the authoritative statutory text and commencement position, refer to the official legislation and notifications issued by the Government of India.