Maintainability of a writ petition against any order/award of MSEFC – matter referred to Constitution Bench.
In a recent judgment, Hon’ble Supreme Court has referred the question of Maintainability of a writ petition against any order/award of Micro and Small Enterprises Facilitation Council (MSEFC) to Constitution Bench.
ABCAUS Case Law Citation:
4390 (2025) (01) abcaus.in SC
In the instant case, the issue before a full bench of Hon’ble Supreme Court was whether a writ petition under Article 226 of the Constitution would be maintainable against an order passed by the Micro and Small Enterprises Facilitation Council (MSEFC) in exercise of power under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, and if yes, under what circumstances.
Section 18 of the MSMED Act provides for a reference to MSEFC. It says that 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 for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. If the conciliation fails, 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 shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement. It further provides that notwithstanding anything contained in any other law for the time being in force, the MSEFC 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.
The Hon’ble Supreme Court observed that the issue is debatable as there are conflicting judgments of the various benches of the Hon’ble Supreme Court.
It was observed that a two judges bench of the Hon’ble Supreme Court had held that the Council is empowered either to take up arbitration on its own or to refer the arbitration proceedings to any institution as specified in the said section. It is open to the Council to arbitrate and pass an award, after following the procedure under the relevant provisions of the Arbitration and Conciliation Act, 1996, particularly Sections 20, 23, 24 and 25. 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. If the appellant had not submitted its reply at the conciliation stage, and failed to appear, the Facilitation Council could, at best, have recorded the failure of conciliation and proceeded to initiate arbitration proceedings in accordance with the relevant provisions of the Arbitration and Conciliation Act, 1996, to adjudicate the dispute and make an award. Proceedings for conciliation and arbitration cannot be clubbed. The said bench had struck down the order passed by the MSEFC as being nullity and contrary to the provisions of the MSMED Act and the mandatory provisions of the Arbitration and Conciliation Act, 1996. The writ petition was held to be maintainable notwithstanding the objections on account of delay and laches.
It was further observed that another Division Bench held that there is no bar on the MSEFC acting as a conciliator and, thereupon, acting as an arbitrator even when Section 80 of the A&C Act states that unless otherwise agreed by the parties, the conciliator shall not act as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceeding in respect of a dispute that is the subject matter of the conciliation proceedings; and the conciliator shall not be presented by the parties as a witness in the arbitral or judicial proceedings. It was also held that the provisions relating to conciliation, and thereupon, arbitration in the MSMED Act being statutory in nature, would override an arbitration agreement as contracted by the parties.
A Full Bench of the Hon’ble Supreme Court held that a writ petition under Articles 226/227 of the Constitution was not maintainable as Section 18 of the MSMED Act provides for recourse to a statutory remedy for challenging an award under Section 34 of the A&C Act.
The Hon’ble Supreme Court observed that the access to High Courts by way of a writ petition under Article 226 of the Constitution of India, is not just a constitutional right but also a part of the basic structure. It is available to every citizen whenever there is a violation of their constitutional rights or even statutory rights. This is an inalienable right and the rule of availability of alternative remedy is not an omnibus rule of exclusion of the writ jurisdiction, but a principle applied by the High Courts as a form of judicial restraint and refrain in exercising the jurisdiction.
The Hon’ble Supreme Court further observed that in another case, where High Court had referred to the arbitration clause which the writ petitioner could take recourse to, the Hon’ble Supreme Court held that the rule of exclusion of writ jurisdiction is a rule of discretion and not of compulsion. In an appropriate case, in spite of availability of alternative remedy, the writ courts can exercise its jurisdiction at least in contingencies. Therefore, there was no need to drive the parties to initiate arbitration proceedings.
The Hon’ble Supreme Court opined that 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.
In the light of the several decisions observed, the Hon’ble Supreme Court referred the following questions to a larger Bench of five Judges:
1. Whether 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?
2. If the bar/prohibition is not absolute, when and under what circumstances will the principle/restriction of adequate alternative remedy not apply?
3. 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?
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