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Statutory Arbitrations

When the statute itself
is the arbitration agreement.

Not every arbitration begins with a clause in a contract. Parliament and the State Legislatures have provided, in a range of special enactments, that disputes arising under those Acts shall be resolved by arbitration — whether or not the parties ever agreed to it. These are statutory arbitrations. The Delhi Arbitration Centre conducts statutory references marked to it by Government authorities and statutory Councils — foremost among them the Micro and Small Enterprises Facilitation Councils under Section 18 of the MSMED Act, 2006 — on a dedicated, subsidised fee schedule notified for statutory matters.

Fee Schedule for Statutory Arbitrations The MSMED Route
Section 2(4), A&C ActPart I of the Arbitration and Conciliation Act, 1996 applies to every arbitration under any other enactment, as if that enactment were an arbitration agreement.
Some 24 Central ActsFrom the MSMED Act and the National Highways Act to the Telegraph Act and co-operative laws — plus numerous State enactments providing for arbitration.
MSMED Act — Section 18DAC's principal statutory stream: delayed-payment disputes referred by Facilitation Councils for institutional arbitration.
Subsidised Statutory FeesA separately notified, flat slab-wise fee schedule for statutory arbitrations — with no addition for a sole arbitrator.
The Concept

Arbitration by operation of law

"Statutory arbitrations" are arbitrations conducted in accordance with the provisions of special Acts which themselves provide for arbitration of disputes arising on matters covered by those Acts. There are about twenty-four such Central Acts, and many State Acts — notably those relating to co-operative societies — likewise provide for arbitration of disputes under them. In these cases the source of the tribunal's jurisdiction is not the consent of the parties but the command of the statute; the enactment stands in the place of the arbitration agreement.

DAC conducts statutory arbitration proceedings in cases marked directly to it by the Government authorities and statutory Councils empowered to refer disputes for arbitration. Because the parties in a statutory reference have not chosen their forum, the neutrality and institutional discipline of the Centre matter even more than in a consensual arbitration — the reference must be administered so that the award it produces is beyond reproach.

Section 2(4)–(5), Arbitration and Conciliation Act, 1996 — application of Part I to statutory arbitrations
"(4) This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder. (5) Subject to the provisions of sub-section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto."

The provision replaces Section 46 of the repealed Arbitration Act, 1940. Its effect is that the entire machinery of Part I — appointment, procedure, interim measures, the reasoned award, the narrow Section 34 challenge and enforcement as a decree under Section 36 — is available in a statutory arbitration, save where the special Act provides otherwise.

The Principal Stream

The MSMED Act, 2006 — Section 18 references

The Micro, Small and Medium Enterprises Development Act, 2006 is the most significant source of statutory arbitration in India today. Where a buyer fails to pay a micro or small enterprise supplier within the period prescribed by Section 15, the supplier may refer the dispute to the Micro and Small Enterprises Facilitation Council. The Council first attempts mediation (as the process now stands after the Mediation Act, 2023); where that fails, Section 18(3) requires the Council either to take up the dispute for arbitration itself or to refer it to an institution or centre providing alternative dispute resolution services — and the Arbitration and Conciliation Act, 1996 then applies as if there were an arbitration agreement under Section 7. DAC is such an institution: Councils refer their statutory arbitrations to the Centre, which constitutes the tribunal from its panel under the eligibility rules notified for statutory matters and administers the reference to award.

Payment Within 45 Days — Sec. 15The buyer must pay the supplier by the agreed date, and in no case beyond forty-five days from the day of acceptance or deemed acceptance.
Compound Interest — Sec. 16Delayed payment carries compound interest with monthly rests at three times the bank rate notified by the Reserve Bank — the Act's principal deterrent.
Institutional Reference — Sec. 18(3)Where mediation fails, the Council may refer the dispute to an institution such as DAC; the 1996 Act then applies as if an arbitration agreement existed.
Time-Bound ProceedingsMediation within 90 days of first appearance; the Council to proceed to arbitration within 30 days of its termination; the award within 90 days from completion of pleadings.
Recovery as Land Revenue — Sec. 18AA mediated settlement or award under Section 18 may be recovered as an arrear of land revenue through the District Collector where the buyer's assets lie.
75% Pre-Deposit, 50% Release — Sec. 19A challenge requires deposit of 75% of the award; where the challenge remains pending beyond six months, the court orders release of at least 50% to the supplier.
Overriding Effect — Sec. 24Sections 15 to 23 have effect notwithstanding anything inconsistent in any other law for the time being in force.
ODR & Wider JurisdictionThe Central Government may provide an online mechanism for mediation and arbitration; a supplier may approach the Council where it is registered, wherever the buyer is located.
Silpi Industries v. Kerala State Road Transport Corporation, (2021) 18 SCC 790

The Supreme Court held the MSMED Act to be a special enactment that overrides the Arbitration and Conciliation Act; that the Limitation Act, 1963 applies to arbitrations under Section 18(3); and that a counter-claim is maintainable in such proceedings — settling the procedural frame within which statutory references are conducted.

Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods (P) Ltd., (2023) 6 SCC 401

The Court affirmed that the Section 18 mechanism prevails over an independent arbitration agreement between the parties, and that the Council or the institution to which it refers the dispute may proceed to arbitration notwithstanding such an agreement — placing the statutory route beyond contractual displacement.

The MSMED (Amendment) Act, 2026

Passed by Parliament in August 2026, the amendment prescribes firm timelines for Section 18 proceedings — 90 days for mediation, 30 days for the Council to proceed to arbitration, and 90 days from completion of pleadings for the award — inserts Section 18A for recovery of settlements and awards as arrears of land revenue, retains the 75% pre-deposit for challenges while mandating release of at least 50% to the supplier where a challenge is pending beyond six months, and enables online dispute resolution. For institutions administering Section 18 references, the 90-day award clock is now the defining discipline of the reference.

Other Enactments

Statutes that provide for arbitration

Beyond the MSMED Act, a number of Central and State enactments direct that particular disputes be determined by arbitration. Illustratively:

The Indian Telegraph Act, 1885 — Sec. 7BDisputes concerning any telegraph line, appliance or apparatus between the telegraph authority and the person for whose benefit it is provided are determined by an arbitrator appointed by the Central Government, whose award is conclusive between the parties.
The National Highways Act, 1956 — Sec. 3G(5)Where the compensation determined by the competent authority for acquired land is not acceptable to either party, the amount is determined by an arbitrator appointed by the Central Government.
The Electricity Act, 2003 — Secs. 79(1)(f) & 86(1)(f)The Central and State Regulatory Commissions adjudicate disputes between licensees and generating companies, and may refer any such dispute for arbitration — the modern successor to the arbitration provisions of the repealed Indian Electricity Act, 1910.
Co-operative Societies LawsThe Multi-State Co-operative Societies Act, 2002 (Sec. 84) and the State Co-operative Societies Acts provide for disputes touching the business of a society to be referred to arbitration.
Land Acquisition & UtilitiesSeveral utility, land-acquisition and infrastructure statutes contain compensation-arbitration provisions of the National Highways Act pattern, with the arbitrator appointed by the appropriate Government.
And OthersIn all, some twenty-four Central Acts and numerous State enactments provide for arbitration of disputes arising under them — each governed by Part I of the 1996 Act through Section 2(4), save where inconsistent.
General Manager, Telecom v. M. Krishnan, (2009) 8 SCC 481

Illustrating the force of a statutory arbitration clause, the Supreme Court held that the special remedy of arbitration under Section 7B of the Telegraph Act governs disputes concerning telegraph services, the special law prevailing over the general.

At DAC

How the Centre conducts a statutory reference

Receipt of the referenceThe order of reference from the Facilitation Council or the referring Government authority is received and registered by the Registrar, DAC, with notice to the parties.
Constitution of the tribunal under the statutory eligibility rulesThe arbitrator is appointed by the Centre from its panel in accordance with the standing-and-experience tiers notified for statutory references (set out below), with written Section 12 disclosures.
Pleadings on the statutory clockStatement of claim, defence and counter-claim, if any, are completed within the timelines fixed by the tribunal, mindful that the award must follow within ninety days of completion of pleadings.
Hearings — summary, physical or virtualStatutory references are conducted with the summary discipline and online facilities of the Centre, so that geography and formality never delay a small supplier's remedy.
The award — and its transmissionA reasoned award applying Sections 15 to 19 of the MSMED Act, transmitted to the parties and the referring Council, enforceable under Section 36 of the 1996 Act and, after the 2026 amendment, recoverable as arrears of land revenue under Section 18A.

The reference comes from the statute. The neutrality comes from the institution. The award comes on time.

Fee Schedule

DAC Arbitration Fees under Statutory Arbitrations

The Centre has notified a dedicated, subsidised fee schedule for statutory arbitrations. All amounts are flat, slab-wise and payable by each side; there is no additional percentage for a Sole Arbitrator. The notification also prescribes the standing and experience an arbitrator must possess for statutory references, graded by the amount in dispute.

Revised DAC Arbitration Fees under Statutory Arbitrations

Ref. No. DAC/R-07/2024 · Dated 15.10.2024
Applicable w.e.f. 1st November 2024

Schedule A — Administrative Fees payable to DAC by each side

Sr. Sum in Dispute Fee by each side
1. Up to Rs. 2,00,000 Rs. 2,500
2. Rs. 2,00,001 to Rs. 5,00,000 Rs. 5,000
3. Rs. 5,00,001 to Rs. 10,00,000 Rs. 7,500
4. Rs. 10,00,001 to Rs. 20,00,000 Rs. 10,000
5. Rs. 20,00,001 and above Rs. 20,000

Schedule B — Arbitrator's Fees payable to the Ld. Arbitrator by each side

Sr. Sum in Dispute Fee by each side
1. Up to Rs. 2,00,000 Rs. 10,000
2. Rs. 2,00,001 to Rs. 5,00,000 Rs. 12,500
3. Rs. 5,00,001 to Rs. 10,00,000 Rs. 15,000
4. Rs. 10,00,001 to Rs. 20,00,000 Rs. 20,000
5. Rs. 20,00,001 to Rs. 30,00,000 Rs. 30,000
6. Rs. 30,00,001 to Rs. 40,00,000 Rs. 40,000
7. Rs. 40,00,001 to Rs. 50,00,000 Rs. 50,000
8. Rs. 50,00,001 onwards — as per Schedule IV of the Arbitration & Conciliation Act, 1996, without the 25% extra for a Sole Arbitrator Tribunal

Eligibility of Arbitrators in Statutory References as prescribed by the notification

Up to Rs. 10 lakhsMinimum 3 years' standing at the Bar as an Advocate, or a retired Judicial Officer / Government servant on the judicial or administrative side.
Rs. 10 lakhs – 25 lakhsMinimum 5 years' standing (or retired Judicial Officer / Government servant), and experience in at least 10 arbitration matters as arbitrator or counsel.
Rs. 25 lakhs – 50 lakhsMinimum 7 years' standing (or retired Judicial Officer / Government servant), and experience in at least 15 arbitration matters.
Rs. 50 lakhs and aboveMinimum 10 years' standing (or retired Judicial Officer / Government servant), and experience in at least 25 arbitration matters.

Note: While computing experience in arbitration matters, cases handled for Banks/NBFCs are not taken into account. Notified under the signature of the Registrar, DAC. For sums in dispute up to Rs. 50,00,000, the fees payable by each side may be computed instantly on the Centre's online Fees Calculator.

Download the Notification (PDF) Open the Fees Calculator

Refer statutory arbitrations to DAC

Micro and Small Enterprises Facilitation Councils and Government authorities wishing to refer statutory arbitrations to the Centre under Section 18(3) of the MSMED Act or any other enactment — and parties whose references have been marked to DAC — may write to the Registrar.

Write to the Registrar, DAC

[email protected]   +91-9315100181   +91-9315156330

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