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SUPREME COURT OF INDIA
SANJIV KHANNA, CJI, SANJAY KUMAR, MANMOHAN, JJ.
M/s Tamil Nadu Cements Corporation Limited – Appellant
Versus
Micro and Small Enterprises Facilitation Council and Another – Respondents
Civil Appeal No. of 2025 [Arising Out of S.L.P. (C) No. of 2024, Diary No. 3776 of 2023]
Decided On : 22-01-2025
(A) Constitution of India – Article 226 – Writ Jurisdiction – Invocation of – Access to High Courts by way of writ petition under Article 226 of Constitution of India, is not just a constitutional right but also a part of basic structure – It is available to every citizen whenever there is violation of their constitutional rights or even statutory rights – This is an inalienable right and rule of availability of alternative remedy is not an omnibus rule of exclusion of writ jurisdiction, but a principle applied by High Courts as a form of judicial restraint and refrain in exercising jurisdiction – Power to issue prerogative writs under Article 226 of Constitution is plenary in nature and same is not limited by any provision of Constitution and cannot be restricted or circumscribed by a statute – Writ Courts, despite availability of alternative remedies, may exercise writ jurisdiction at least in three contingencies: (i) where there is a violation of principles of natural justice or fundamental rights; (ii) where an order in a proceeding is wholly without jurisdiction; or (iii) where the vires of an Act is challenged. (Paras 13 and 14)
(B) Constitution of India – Articles 226 and 227 – Writ Petition – Alternate remedy – Existence of statutory remedy does not affect jurisdiction of High Court to issue a writ – Nevertheless, writ jurisdiction being discretionary by policy, writ courts generally insist that parties adhere to alternative statutory remedies, as this reinforces rule of law – However, in exceptional cases, writ jurisdiction can still be exercised as a power to access court for justice and relief – An alternative remedy must be equally efficacious and adequate. (Para 15)
(C) Micro, Small and Medium Enterprises Development Act, 2006 – Section 18 – Constitution of India – Article 226 – Writ Petition – Maintainability – Section 18 of MSMED Act provides for statutory and mandatory conciliation on reference being made to MSEFC by any party to a dispute with regard to an amount due under Section 17 of MSMED Act – Section 18 also overrides principle of party autonomy when they enter into arbitration agreement which prescribes procedure for appointment of Arbitrator and conduct of arbitral proceedings – MSEFC as a statutory authority performs a statutory role and functions within four corners of law – Matter referred to larger Bench for authoritative pronouncement. (Paras 8, 12, 13, 19 and 20)
Facts of the case:
Seminal issue which arises for consideration in the present appeal is whether a writ petition under Article 226 of the Constitution would be maintainable against an order passed by Micro and Small Enterprises Facilitation Council in exercise of power under Section 18 of Micro, Small and Medium Enterprises Development Act, 2006 and if yes, under what circumstances.
Findings of Court:
It is it appropriate to refer following questions raised in the present appeal to a larger Bench of five Judges, namely:
(i) Whether ratio in M/s India Glycols Limited (supra) that a writ petition could never be entertained against any order/award of MSEFC, completely bars or prohibits maintainability of the writ petition before High Court?
(ii) If bar/prohibition is not absolute, when and under what circumstances will principle/restriction of adequate alternative remedy not apply?
(iii) Whether 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?
First and second question will subsume question of when and in what situation a writ petition can be entertained against order/award passed by MSEFC acting as Arbitral Tribunal or Conciliator.
Result : Matter referred to Larger Bench.
Based on the facts provided, the following findings can be made:
The dispute primarily concerns the contractual obligations and performance of M/s Unicon Engineers in executing the work related to the installation of Electrostatic Precipitators (ESPs) for TANCEM. The contractor's failure to meet contractual standards and delays has led to financial and operational issues for TANCEM (!) .
The initiation of proceedings under Section 18 of the MSMED Act by M/s Unicon Engineers indicates that the dispute was recognized as falling within the scope of micro and small enterprise disputes, and the MSEFC was the designated forum for resolution (!) .
The order by the MSEFC to proceed with arbitration after unsuccessful conciliation suggests that the dispute was deemed arbitrable under the statutory framework, and the parties were directed to resolve their issues through arbitration rather than litigation (!) .
The subsequent orders for enforcement and execution of the arbitral awards reflect the recognition of the awards' finality and the legal mechanisms available for their implementation (!) .
TANCEM's challenge to the orders and the statutory provisions indicates a contention regarding the jurisdiction of the MSEFC, the validity of the dispute resolution process, and the procedural conditions imposed, such as deposit requirements for challenging awards (!) .
The legal proceedings, including writ petitions and appeals, highlight ongoing questions about the scope of judicial review over the orders of the MSEFC, particularly concerning the enforceability of arbitral awards and the protection of the rights of the parties to access courts (!) .
The case underscores the complex interaction between statutory dispute resolution mechanisms under the MSMED Act, arbitration processes, and constitutional rights to judicial review, especially in situations where jurisdictional or procedural errors are alleged (!) .
Overall, the findings suggest that while the dispute resolution framework aims to facilitate speedy resolution of micro and small enterprise disputes, issues of jurisdiction, procedural compliance, and access to judicial remedies remain significant points of contention in this case (!) .
JUDGMENT :
SANJIV KHANNA, CJI.
1. Leave granted.
2. The seminal issue which arises for consideration in the present appeal is whether a writ petition under Article 226 of the Constitution would be maintainable against an order passed by the Micro and Small Enterprises Facilitation Council1 [For short ‘MSEFC’] in exercise of power under Section 18 of the Micro, Small and Medium Enterprises Development Act, 20062 [For short ‘MSMED Act’] and if yes, under what circumstances.
3. Section 18 of the MSMED Act reads as under:
(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 itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.
(3) Where the conciliation initiated under sub-section (2) 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 alternate 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.
(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.
(5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.”
4. A two Judges Bench of this Court in Jharkhand Urja Vikas Nigam Limited vs. State of Rajasthan and Others, (2021) 19 SCC 206 after interpreting the provisions of the MSMED Act, including the powers of the MSEFC under sub-section (2) and (3) of Section 18, had observed:
15. There is a fundamental difference between conciliation and arbitration. In conciliation, the conciliator assists the parties to arrive at an amicable settlement, in an impartial and independent manner. In arbitration, the Arbitral Tribunal/arbitrator adjudicates the disputes between the parties. The claim has to be proved before the arbitrator, if necessary, by adducing evidence, even though the rules of the Civil Procedure Code or the Evidence Act may not apply. Unless otherwise agreed, oral hearings are to be held.
16. If the appel
Writ Jurisdiction – Access to High Courts by way of writ petition under Article 226 of Constitution of India, is not just a constitutional right but also a part of basic structure – It is available t....
Orders by MSEFC failing to follow arbitration procedures under the MSMED Act are not valid awards, allowing for writ petitions under Article 226 due to natural justice violations.
Important Point : The court established that statutory remedies must be exhausted before invoking writ jurisdiction against awards under the MSMED Act.
Writ petition against arbitral award is maintainable; petitioner must follow remedies under Arbitration Act.
The High Court cannot entertain writ petitions challenging awards of the Micro and Small Enterprises Facilitation Council without the mandatory deposit of 75% of the awarded amount as per Section 19 ....
The High Court cannot exercise its writ jurisdiction under Article 226 or 227 of the Constitution against the awards or orders passed by the Arbitral Tribunals as it would defeat the object of minimi....
The mandatory pre-deposit requirement under Section 19 of the MSMED Act, 2006 for challenging an award and the overriding effect of the MSMED Act, 2006 over the Arbitration Act, 1996 in specific disp....
Jurisdictional challenges to arbitration awards must be raised under Section 34 of the Arbitration Act, and the pre-deposit requirement under Section 19 of the MSME Act is mandatory.
The court ruled that a party to a dispute cannot waive the mandatory conciliation requirement under Section 18(2) of the MSMED Act, validating subsequent arbitration proceedings.
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