Maintainability of Writ Against MSEFC Award and Role of MSEFC Members as Arbitrators: Supreme Court Refers to Larger Bench
The Supreme Court, in M/s Tamil Nadu Cements Corporation Ltd. v. Micro and Small Enterprises Facilitation Council & Anr., held that an aggrieved party can file a writ petition under Article 226 of the Constitution against an order/award of the MSEFC under Section 18 of the MSME Act. However, noting a conflicting ruling in M/s India Glycols Ltd. v. MSEFC, which barred writ petitions and restricted challenges to Section 34 of the Arbitration and Conciliation Act (A&C Act) with a 75% pre-deposit requirement under Section 19 of the MSME Act, the Court referred the issue to a larger bench.
Additionally, the Court addressed inconsistencies in prior rulings regarding whether MSEFC conciliators can act as arbitrators under the A&C Act. In Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan, it held that conciliators cannot serve as arbitrators, whereas in Gujarat State Civil Supplies Corp. Ltd. v. Mahakali Foods, it ruled otherwise. Observing this conflict, the Court also referred this issue to a larger bench.
The key questions referred to a five-judge bench are:
1. Whether M/s India Glycols Ltd. completely bars writ petitions against MSEFC orders/awards before the High Court.
2. If not absolute, under what circumstances the principle of adequate alternative remedy does not apply.
3. Whether MSEFC members conducting conciliation can act as arbitrators under Section 18 of the MSME Act, read with Section 80 of the A&C Act.
The case arose from M/s Tamil Nadu Cements Corporation Ltd. challenging the 75% pre-deposit condition under Section 19 of the MSME Act. The Madras High Court dismissed the writ, citing it as a statutory requirement. The Appellant argued that, in exceptional circumstances—such as violations of natural justice, fundamental rights, lack of jurisdiction, or constitutional challenges—the High Court’s writ jurisdiction under Article 226 remains intact. The Supreme Court acknowledged this contention but, given the contrary ruling in M/s India Glycols Ltd., referred the issue to a larger bench.