The High Court will not entertain a petition under Article 227 to challenge an arbitral award when a specific statutory remedy exists, as doing so would bypass the mandatory pre-deposit requirement and undermine the legislative intent of the dispute resolution framework.

Headnote:(A) Constitution of India - Article 227 - Micro, Small and Medium Enterprises Development Act, 2006 - Sections 18 and 19 - Arbitration and Conciliation Act, 1996 - Section 34 - Challenge to arbitral award - Maintainability of petition under Article 227 - Existence of alternative remedy - Requirement of pre-deposit under Section 19 - High Court cannot entertain challenge when statute provides for efficacious alternative remedy and statutory pre-deposit - Purpose of legislative mandate regarding pre-deposit should not be defeated by invoking constitutional writ jurisdiction. (Paras 30, 31, 34, 39)

(B) MSMED Act, 2006 - Section 8 - Registration - Whether registration is required at the time of contract execution for maintaining a reference - Subsequent registration of activities by an entity already holding registration relates back to initial registration - Council held to have jurisdiction. (Paras 26, 27, 29)

Facts of the case:
The petitioner challenged an arbitral award arising from a lease agreement, arguing that the opposite party lacked jurisdiction under the relevant statutory framework as it was not registered at the time of execution. The lower council rejected the challenge, and the matter was brought before the High Court via a constitutional challenge.

Findings of Court:
The Court determined that the constitutional challenge was used primarily to circumvent the mandatory statutory requirement of a 75% pre-deposit. Furthermore, based on the evidence, the entity held a valid registration prior to the contract, affirming the council's jurisdiction.

Issues: Whether an application under Article 227 is maintainable to challenge an arbitral award and whether an entity must be registered as an enterprise at the time of contract execution to maintain a reference under the relevant statutory framework.

Ratio Decidendi: The Court held that when an efficacious alternative statutory remedy exists—specifically a mechanism for setting aside an award that includes a mandatory pre-deposit—the extraordinary jurisdiction of the High Court should not be invoked to bypass these conditions. The legislative intent behind pre-deposit provisions must be upheld.

Result: The petition was dismissed as not maintainable.

Hiranmay Bhattacharyya, J.:-

1. This application under Article 227 of the Constitution of India is at the instance of the Buyer Unit praying for a declaration that the award dated December 21, 2023 passed by the West Bengal State Micro, Small Enterprise Facilitation Council (for short “the Facilitation Council”) under Section 31 of the Arbitration and Conciliation Act 1996 is nullity and for setting aside the said award.

2. By an indenture of lease dated May 22, 2018 the opposite party granted a lease in favour of the petitioner in respect of an area measuring about 3815 Sq. Ft. situated at the first floor of the building along with storage space on the mezzanine floor with two car parking spaces in the said building. The opposite party approached the Facilitation Council for realization of dues from the petitioner. Since settlement between the parties could not be arrived at in conciliation hearings, the conciliator terminated the process of conciliation and initiated the process of arbitration as per Sections 18(3) read with Section 18(4) of the MSMED Act, 2006. The opposite party filed its statement of claim and the petitioner filed its statement of objection. The Facilitation Council passed an award on December 21, 2023. Being aggrieved by such award the petitioner has approached this Court.

3. Mr. Basu learned Senior Advocate appearing for the petitioner contended that the opposite party obtained MSME registration in respect of real estate activities on January 12, 2022. He, therefore, contended that the opposite party could not claim to be a supplier within the definition of supplier under Section 2(n) of the Micro, Small and Medium Enterprise Development Act, 2006 (for short “the 2006 Act”) as on the date of execution of the lease agreement dated May 22, 2018. Mr. Basu contended that registration of the opposite party unit subsequent to the lease agreement cannot give the opposite party the legal status of an enterprise under the 2006 Act for claiming the benefits under the said Act. He contended that registration of a unit will be prospective and shall apply for supply of goods and services subsequent to registration but cannot operate retrospectively. In support of such contention he placed reliance upon the decision of the Hon’ble Supreme Court in the case of M/S Silpi Industries Industries vs. Kerala State Road Transport Corporation reported at (2021) 9 SCC 609.

4. Mr. Basu contended that the opposite party could not have approached the Facilitation Council by way of a reference under Section 18 of the 2006 Act with regard to any amount alleged to be due to the opposite party. Mr. Basu contended that the reference made under Section 18 of the 2006 Act at the instance of the opposite party as well as all subsequent steps pursuant thereto including the award dated 21.12.2023 is nullity as the MSME Council lacked jurisdiction to entertain a reference at the instance of the opposite party with regard to a dispute arising out of a lease agreement dated 22.05.2018. In support of such contention he placed reliance upon the decision of the Anisminic Limited vs. FCC reported at [1969] 2 AC 147 [HL], Boddington vs. British Transport Police reported at [1998] 2 All ER 203 HL and in the case of Embassy Property Developments (P) Ltd. vs. State of Karnataka reported at (2020) 13 SCC 308.

5. Mr. Banerjee learned Senior Advocate for the opposite party seriously disputed the submissions made by Mr. Basu. He contended that the opposite party is a registered Macro, Small and Medium Enterprise Unit since May 31, 2011 and UDYAM registration was issued on December 22, 2015. He, thus, contended that the opposite party was a registered MSME Unit prior to the execution of the lease agreement dated May 22, 2018. Mr. Banerjee learned Senior Advocate raised an objection as to the maintainability of the instant application under Article 227 of the Constitution of India challenging an arbitral award. By referring to the provisions of Section 18

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2025 Supreme(Online)(Cal) 7155

The High Court will not entertain a petition under Article 227 to challenge an arbitral award when a specific statutory remedy exists, as doing so would bypass the mandatory pre-deposit requirement and undermine the legislative intent of the dispute resolution framework.

Cases Referred (8)