The Subcontractor Stalemate: When MSME Vendors Trigger Section 9 Relief

In one of our recent observations, a mid-sized subcontractor approached the court under Section 9 of the Arbitration and Conciliation Act after a major infra player delayed dues for over 90 days. The catch? There was no formal arbitration clause in the original vendor agreement only a vague MoU trail and email confirmations of work completed.

Despite this, the subcontractor obtained ad-interim relief from the court in the form of status quo on termination and bank guarantees. Why? Because the courts today are increasingly alive to power imbalances especially where smaller vendors are caught in procedural grey zones.

Key Legal and Strategic Insights:

1. Informal Contracts Still Carry Weight

Courts considered email chains, payment schedules, GST filings and correspondence as valid evidence of a commercial relationship.

2. Section 9 as an Equaliser

For smaller vendors who may not survive litigation timelines, interim relief under Section 9 can be the difference between business continuity and collapse.

3. What Big Players Get Wrong

Delaying payments or exploiting drafting ambiguities backfires when courts apply principles of equity and urgency.

4. Where Arbitration Comes In

Eventually, the matter was referred to arbitration — but the Section 9 order shaped the leverage and tempo of the arbitration that followed.

Takeaways:

• MSME vendors must maintain clean documentation — even when not formal contracts.

• Section 9 can be a lifesaver when traditional legal routes seem delayed or unaffordable.

• Infra giants are advised to rethink the short-term “deny and delay” strategy — it doesn’t hold up in emergency hearings.