Maintainability Of Writ Petition Against Orders Passed By Micro & Small Enterprises Facilitation Council U/S 18 MSMED Act: Supreme Court Refers Issue To Larger Bench
The Supreme Court held that access to High Courts under Article 226 of the Constitution is not just a constitutional right but also a part of the basic structure.
The Supreme Court has referred the issue regarding the maintainability of Writ Petitions under Article 226 of the Constitution against orders passed by the Micro and Small Enterprises Facilitation Council under Section 18 of the MSME Act to a larger bench.
The Court pointed out that Pre-deposit was a condition for hearing a decision on the objections to the award. Therefore, another issue which needed consideration was whether there would be an absolute and complete bar to invoke the Writ Jurisdiction under Article 226 of the Constitution even in exceptional and rare cases where fairness, equity and justice were warranted.
A Bench of CJI Sanjiv Khanna, Justice Sanjay Kumar and Justice Manmohan observed, “It would be true to say that the existence of the statutory remedy does not affect the jurisdiction of the High Court to issue a writ. Nevertheless, the writ jurisdiction being discretionary by policy, the writ courts generally insist that the parties adhere to alternative statutory remedies, as this reinforces the rule of law. However, in exceptional cases, writ jurisdiction can still be exercised as a power to access the court for justice and relief.”
Senior Advocate K. Radhakrishnan represented the Appellant, while Senior Advocates Senthil Jagadeesan and E. Om Prakash appeared for the Respondents.
Brief Facts
The Appeal concerned a dispute under the Micro, Small, and Medium Enterprises Development Act, 2006 (MSMED Act). Tamil Nadu Cements Corporation Limited (TANCEM), a wholly-owned Tamil Nadu Government entity, awarded a contract to M/s Unicon Engineers (Company) for the installation of Electrostatic Precipitators (ESPs). Alleging substandard work and delays, TANCEM withheld payments, leading Unicon Engineers to invoke Section 18 of the MSMED Act.
Since the conciliation proceedings had failed, the MSEFC held that the Company was free to approach the MSEFC for arbitration. TANCEM’s challenges to this decision were dismissed at various stages.
Court’s Observations
The Supreme Court identified conflicting judgments on whether writ petitions against MSEFC decisions were maintainable, given the alternative remedy under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The Bench identified a “direct confrontation” between the judgment of the two Judges Bench in Jharkhand Urja Vikas Nigam Limited v. State of Rajasthan (2021) and Gujarat State Civil Supplies Corporation Limited v. Mahakali Foods Private Limited (2023).
In Jharkhand Urja Vikas Nigam Limited (supra), the Apex Court had held that the Order under challenge in the case was not an award in the eyes of law and hence the recourse to Section 34 of the A&C Act was not required. The Writ Petition was held to be maintainable notwithstanding the objections on account of delay and laches.
On the other hand, in Mahakali Foods (supra), the Apex Court held that the specific non-obstante clauses in sub-sections (1) and (4) of Section 18 of the MSMED Act will have an overriding effect any other law, including the A&C Act, and, consequently, the MSEFC can act as a conciliator, and thereupon itself take up the dispute for arbitration or refer it to any institution or centre for such arbitration.
Questions For Reference:
Consequently, the Court referred the following questions to a larger Bench of five Judges:
- Whether the ratio in M/s India Glycols Limited (supra) that a writ petition could never be entertained against any order/award of the MSEFC, completely bars or prohibits maintainability of the writ petition before the High Court?
- If the bar/prohibition is not absolute, when and under what circumstances will the principle/restriction of adequate alternative remedy not apply?
- Whether the members of MSEFC who undertake conciliation proceedings, upon failure, can themselves act as arbitrators of the arbitral tribunal in terms of Section 18 of the MSMED Act read with Section 80 of the A&C Act?
Cause Title: M/s Tamil Nadu Cements Corporation Limited v. Micro and Small Enterprises Facilitation Council & Anr. (Neutral Citation: 2025 INSC 91)
Appearance:
Appellant: Senior Advocate K. Radhakrishnan; Advocates K.V. Jagdishvaran, P. Gandepan and Ashwini Kumar; AOR G. Indira
Respondents: Senior Advocates Senthil Jagadeesan and E. Om Prakash; Advocates Kaushitaki Sharma, Hima Bhardwaj, Vaibhav and Puneet Agarwwal; AOR Mrinal Kanwar
