The Supreme Court in its recent observation questioned whether an absolute bar exists to invoking writ jurisdiction in exceptional circumstances where fairness or justice requires it.
The Court, while considering the maintainability of writ petitions against orders passed by the Micro and Small Enterprises Facilitation Council (referred to as “MSEFC”) under the Micro, Small and Meduim Enterprises Development Act (referred to as “MSMED Act”), raised fundamental questions about the scope of judicial review in such cases. This issue, including whether alternative remedies like arbitration are adequate and the role of MSEFC members in conciliation and arbitration, has been referred to a larger Bench for further clarification.
Brief Facts:
TANCEM, a government-owned entity, awarded a contract to M/s Unicon Engineers in 2010 for the design and installation of Electrostatic Precipitators at its Ariyalur unit. However, M/s Unicon Engineers failed to meet deadlines and deliver quality work, leading TANCEM to issue several warnings. In 2014, M/s Unicon Engineers filed a petition with the MSEFC, claiming outstanding dues. Despite disputes, the MSEFC ruled in favor of Unicon Engineers in 2016, directing TANCEM to pay the claimed amount with interest. TANCEM challenged the decision in court, but its objections were dismissed, and the enforcement of the award continued. TANCEM filed a Special Leave Petition in the Supreme Court, seeking to overturn the decisions and prevent the sale of its property to satisfy the award.
Contentions of the Petitioner:
The petitioner argued that the ruling in M/s India Glycols Limited which states that writ petitions are not maintainable against orders passed by the MSEFC and that recourse can only be had under Section 34 of Arbitration and Conciliation Act, 1996, is incorrect. The petitioner contended that this interpretation creates an absolute bar to accessing writ jurisdiction under Article 226 of the Constitution, even in exceptional circumstances where fairness, equity, and justice demand intervention. The petitioner further argued that mandatory statutory arbitration under Section 18 of the MSMED Act does not necessarily preclude judicial review, particularly when the statutory remedy is onerous or burdensome, such as the requirement for a pre-deposit.
Contentions of the Respondent:
The respondent maintained that the decision in M/s India Glycols Limited should be upheld, asserting that a writ petition cannot be entertained against any order or award passed by the MSEFC. According to the respondent, the only legal recourse available for challenging such orders is through the mechanism provided in Section 34 of the Arbitration and Conciliation Act, 1996, which mandates a pre-deposit of 75% of the awarded amount. The respondent argued that the alternative remedy in the form of arbitration under the MSMED Act is effective, and the jurisdiction of the High Court under Article 226 should be exercised only in exceptional circumstances, not as a routine alternative.
Observation of the Court:
The Court considered whether a writ petition under Article 226 can be maintained against an order by the MSEFC under Section 18 of the MSMED Act. It referenced Jharkhand Urja Vikas Nigam Limited v. State of Rajasthan (2021), noting that "the Council is obliged to conduct conciliation... and the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act... would apply." It also referred to Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (2023), which held that "provisions relating to conciliation, and thereafter arbitration in the MSMED Act would override an arbitration agreement."
The Court cited M/s India Glycols Ltd. v. MSEFC (2023), which ruled that "a writ petition under Articles 226/227... was not maintainable" due to the statutory remedy under Section 34 of the Arbitration and Conciliation Act, 1996, with a mandatory pre-deposit. The Court questioned whether an absolute bar exists to invoking writ jurisdiction in exceptional circumstances where fairness or justice requires it.
The Court reiterated that writ petitions under Article 226 are fundamental rights, and may be exercised even with alternative remedies if there is a violation of natural justice or jurisdiction. It acknowledged that an alternative remedy must be adequate, and if it imposes unreasonable conditions, writ jurisdiction may still be invoked.
The Court referred key questions to a larger Bench: (i) whether writ petitions against MSEFC orders are completely barred, (ii) under what circumstances an alternative remedy is inadequate, and (iii) if MSEFC members conducting conciliation can act as arbitrators if conciliation fails.
The decision of the Court:
The matter was referred to a larger Bench to address key questions regarding the applicability of writ jurisdiction and the powers of the MSEFC.
Case Title: M/S Tamil Nadu Cements Corporation Ltd v. Micro And Small Enterprises Facilitation Council
Case no: S.L.P.(C) No. of 2025 @ Diary No.3776 of 2023
Citation: 2025 Latest Caselaw 70 SC
Coram: Hon'ble The Chief Justice, Hon'ble Mr. Justice Sanjay Kumar and Hon'ble Mr. Justice K.V. Viswanathan
Advocate for Petitioner: Adv. G. Indira
Advocate for Respondent: Adv. Mrinal Kanwar
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