A) ABSTRACT / HEADNOTE

This appeal raises the constitutional and procedural question whether writ jurisdiction under Article 226 of the Constitution is available to challenge orders/awards passed by the Micro and Small Enterprises Facilitation Council (MSEFC) under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), notwithstanding the statutory regime prescribing conciliation, arbitration and restrictive pre-deposit requirements. The Supreme Court records conflicting precedents: a Two-Judge Bench in Jharkhand Urja Vikas Nigam Ltd. treated certain MSEFC orders as not being awards and entertained writ relief; a Division Bench in Gujarat State Civil Supplies Corporation Ltd. upheld the MSEFC’s statutory arbitration power including its ability to act after conciliation; and a Three-Judge Bench in M/s India Glycols Ltd. held writ petitions against MSEFC orders to be barred, directing the statutory route under Section 34 read with Section 19 (pre-deposit).

The Court in this appeal (Sanjiv Khanna, CJI) recognises these tensions, reaffirms the fundamental character of Article 226 (part of the basic structure), and identifies established exceptions where writ jurisdiction may be exercised despite alternate remedies:

(i) breach of natural justice or violation of fundamental rights;

(ii) proceedings wholly without jurisdiction;

(iii) challenge to the vires of legislation. Finding substantial divergence in precedents and reservations about the absolutist rule in India Glycols, the Court refers three precise questions :

(i) whether India Glycols bars writs entirely;

(ii) if not, when the alternative-remedy rule yields; and

(iii) whether conciliators on MSEFC may act as arbitrators contrary to Section 80 of the Arbitration & Conciliation Act, 1996 to a five-Judge Bench. The matter is thus directed to be placed for constitution of a larger Bench.

Keywords: Article 226, Section 18 MSMED Act, Section 19 MSMED Act, Section 34 A&C Act, writ jurisdiction, alternative remedy, pre-deposit, natural justice, statutory arbitration.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

This appeal challenges an order of the Madras High Court which declined writ relief against an MSEFC order and upheld the propriety of statutory remedies. The dispute originates from a procurement and turnkey contract awarded by TANCEM to M/s Unicon Engineers for electrostatic precipitators. Unicon invoked Section 18 MSMED Act seeking conciliation and thereafter an award/directions in its favour. TANCEM challenged the award in various fora before MSEFC, in execution proceedings, by Section 34 petition under the A&C Act, and by writ contending, inter alia, the vires of Sections 16–19 MSMED Act and alleged unlawful process.

The case falls into the broader jurisprudential conflict whether statutory arbitration/conciliation under the MSMED Act (including pre-deposit rules under Section 19) ousts the High Court’s Article 226 writ jurisdiction entirely or whether exceptional cases still permit direct constitutional relief. The Supreme Court analysed relevant precedents (Jharkhand Urja, Gujarat State Civil Supplies, India Glycols), statutory text (notably the non-obstante clauses in Section 18), and constitutional doctrine emphasizing that writ jurisdiction is a constitutional basic structure and not lightly displaced by legislative prescriptions. The Court framed three specific questions for a larger Bench to resolve the tension between statutory finality and judicial protection against jurisdictional or fundamental defects.

D) FACTS OF THE CASE

TANCEM awarded a turnkey contract dated 16.04.2010 to M/s Unicon Engineers for two ESPs at Ariyalur for Rs.7,50,60,543/-. Performance allegedly faltered: repeated warnings (May–Oct 2012), complaints about sub-standard work, and remedial orders. Unicon filed a Section 18 MSMED reference on 17.01.2014 claiming Rs.2,66,80,157/- (cost overrun etc.). MSEFC conducted conciliation; by order dated 04.06.2016 recorded failure of conciliation and directed payment totalling specified sums with interest at three times RBI bank rate compounded monthly, and declared Unicon free to seek arbitration.

TANCEM sought recall under Section 33 A&C Act, filed Section 34 before Madras High Court, and pursued writ remedies challenging vires of Sections 16–19 MSMED Act. Execution steps followed: attachment, deposits, conditional releases and appeals; High Court at various stages held objections barred by limitation or by Section 19 non-compliance. A fresh writ by TANCEM was dismissed on 13.07.2022 and the Division Bench on 07.12.2022; this SLP challenges those outcomes and raises the question whether writ relief under Article 226 is maintainable against MSEFC orders.

E) LEGAL ISSUES RAISED

i. Whether a writ petition under Article 226 is maintainable against an order passed by MSEFC under Section 18 MSMED Act?
ii. Whether the ratio in M/s India Glycols (three-Judge) that writ petitions are categorically barred against MSEFC orders is correct and absolute?
iii. If the bar is not absolute, when will the principle of alternative statutory remedy not apply?
iv. Whether members of MSEFC who undertake conciliation can thereafter act as arbitrators in arbitration proceedings under Section 18 read with Section 80 A&C Act?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The counsel for TANCEM submitted that Sections 16–19 impose onerous conditions (notably Section 19 pre-deposit) and impede access to justice; hence writ jurisdiction should remain available in appropriate cases.
ii. It was argued that the MSEFC’s order dated 04.06.2016 was either not a valid award in law or was passed in violation of procedure and natural justice, thereby warranting immediate judicial intervention under Article 226.
iii. Counsel emphasised public-law dimensions where a State-owned entity (TANCEM) faces execution and attachment without adequate protection, and that statutory arbitration cannot be a cloak for denial of fundamental safeguards.

G) RESPONDENT’S ARGUMENTS

i. The counsel for Unicon/MSEFC contended that the MSMED Act provides a complete, efficacious statutory scheme mandatory conciliation/arbitration and Section 19 pre-deposit and that the High Courts should decline writ interference in favour of statutory remedies (as held in India Glycols).

ii. It was submitted that the non-obstante clauses in Section 18 manifest legislative intent to override other laws and to create a distinct, speedy remedy tailored for micro and small enterprises; judicial bypass would frustrate parliamentary design.

H) JUDGEMENT

The Court granted leave and analysed the statutory scheme and precedents. It observed the direct tension between Jharkhand Urja (which entertained writs in limited contexts) and Gujarat State Civil Supplies / India Glycols (which adopted a more restrictive stance). The Court reaffirmed that Article 226 access to High Courts forms part of the Constitution’s basic structure and that the plenary writ power cannot be ousted by statute. The judgment reiterated settled exceptions:

(i) violation of natural justice/fundamental rights;

(ii) proceedings wholly without jurisdiction;

(iii) vires challenges where writs remain available despite alternate remedies.

The Court expressed reservations about the absolutist dictum in India Glycols that writs are never maintainable against MSEFC awards, particularly given the onerous pre-deposit constraint under Section 19 and the potentially crippling effect of enforcing awards without adequate judicial oversight. Observing that statutory arbitration under Section 18 is mandatory and displaces party autonomy, the Court nonetheless concluded that the question involves intricate interplay of statutory construction and constitutional safeguards and therefore merits consideration by a larger Bench. Accordingly, three questions were referred to a five-Judge Bench for authoritative resolution. Registry directed to place papers before the Chief Justice for constitution of the larger Bench.

a. RATIO DECIDENDI

The operative judicial decision is procedural: the Supreme Court did not resolve the ultimate conflict but held that

(i) Article 226 remains a constitutionally protected route and cannot be entirely negated by statute;

(ii) established exceptions permit writ relief even when a statutory remedy exists;

(iii) the divergent precedents and the consequences of Section 19’s pre-deposit requirement justify a reference to a five-Judge Bench to determine whether India Glycols’ bar is absolute and to clarify when writ jurisdiction will be available. The referral itself is the binding outcome.

b. OBITER DICTA

The Court’s observations on the harshness of Section 19 (pre-deposit), on the high interest rate (three times RBI rate) and on the distinction between conciliation and arbitration, while not finally deciding legal propositions, indicate judicial apprehension that statutory machinery should not result in denial of justice. The remarks emphasise that alternative remedies must be adequate and efficacious and that onerous procedural conditions may render them constitutionally susceptible to writ scrutiny. The Court further questioned whether conciliators can become arbitrators consistent with Section 80 A&C Act. These observations are persuasive but reserved for the Larger Bench.

c. GUIDELINES

1. A writ petition under Article 226 is not automatically excluded by statutory alternative remedies; High Courts retain jurisdiction in recognised exceptions.

2. Where statutory remedy imposes onerous conditions (e.g., crippling pre-deposit), courts should examine adequacy and efficacy before refusing writ relief.

3. Conflicting precedents on MSEFC’s powers must be authoritatively resolved by a Larger Bench.

4. Administrative registry to list for constitution of five-Judge Bench; parties should frame issues confined to the three referred questions.

I) CONCLUSION & COMMENTS

The judgment is procedural and interlocutory in nature but of substantial constitutional and commercial significance. By referring the matter to a five-Judge Bench, the Court preserves the High Courts’ discretionary jurisdiction while recognising the legislative policy behind MSMED’s speedy remedy for micro and small enterprises. The decision signals judicial caution against absolute ouster of constitutional remedies and invites the Larger Bench to reconcile party autonomy, statutory arbitration, and constitutional access to justice particularly where statutory conditions (like Section 19 pre-deposit) may be unduly burdensome.

The referral is likely to produce authoritative guidance on:

(a) the extent to which India Glycols must be read restrictively or overruled;

(b) criteria for exercising Article 226 despite alternative remedies; and

(c) whether conciliators can convert to arbitrators under Section 18 without contravening Section 80 A&C Act.

Practitioners must closely monitor the Larger Bench to advise clients on strategy whether to pursue speedy statutory remedies with compliance or to seek writ relief in cases exhibiting jurisdictional breach, breach of natural justice, or unconstitutionality.

J) REFERENCES

a. Important Cases Referred

i. Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan and Others, (2021) 19 SCC 206.
ii. Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (Unit 2) & Anr., (2023) 6 SCC 401.
iii. M/s India Glycols Ltd. & Anr. v. Micro and Small Enterprises Facilitation Council, Medchal-Malkajgiri & Ors., 2023 SCC OnLine SC 1852.
iv. Himmatlal Harilal Mehta v. State of Madhya Pradesh & Ors., (1954) 1 SCC 405.
v. Harbanslal Sahnia & Anr. v. Indian Oil Corporation & Ors., (2003) 2 SCC 107.
vi. Whirlpool Corporation v. Registrar of Trade Marks, Mumbai & Ors., (1998) 8 SCC 1.
vii. Radha Krishan Industries v. State of Himachal Pradesh & Ors., (2021) 6 SCC 771.
viii. Shyam Kishore & Ors. v. Municipal Corporation of Delhi & Anr., (1993) 1 SCC 22.
ix. Tecnimont Pvt. Ltd. v. State of Punjab & Ors., (2021) 12 SCC 477.

b. Important Statutes Referred

i. Micro, Small and Medium Enterprises Development Act, 2006 (Sections 15–19, 18(2)–(5)).
ii. Arbitration and Conciliation Act, 1996 (Part III, Sections 65–81; Section 80; Section 34).
iii. Constitution of India (Article 226).
iv. Code of Civil Procedure, 1908.