Can writ courts intervene in MSEFC disputes? SC refers to Constitution bench
The SC framed the questions around whether a writ petition under Article 226 of the Constitution can be entertained against an order or award passed by MSEFC
The Supreme Court has referred to a Constitution bench the question of whether a writ petition under Article 226 of the Constitution can ever be entertained against orders passed by the Micro and Small Enterprises Facilitation Council (MSEFC).

The three-judge bench, led by Chief Justice of India Sanjiv Khanna and comprising justices Sanjay Kumar and Manmohan, sought an authoritative ruling on the issue, which holds immense implications for numerous businesses and suppliers engaged in disputes under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
Referring the matter to a five-judge bench by an order on Wednesday, the Supreme Court framed the questions around whether a writ petition under Article 226 of the Constitution can be entertained against an order or award passed by MSEFC, and if so, under what exceptional circumstances.
The issue arose in light of conflicting precedents, including a three-judge bench decision in M/s India Glycols Limited Vs MSEFC, Medchal-Malkajgiri (2023), which held that writ petitions challenging MSEFC orders were barred due to the availability of statutory remedies under the Arbitration and Conciliation (A&C) Act, 1996. However, this judgment did not address earlier rulings, such as Jharkhand Urja Vikas Nigam Limited (2021), where the top court held that MSEFC’s dual role as conciliator and arbitrator was governed by specific provisions of the A&C Act.
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The bench noted that the conflicting judgments raised questions about the statutory and constitutional framework governing MSEFC proceedings. Senior advocates Saurabh Kirpal, assisted by Karanjawala & Co, and Arvind Datar, appearing for the petitioners, argued that a five-judge bench was necessary to resolve the divergence in judicial interpretation.
“The access to high courts by way of a writ petition under Article 226 of the Constitution is not just a constitutional right but also a part of the basic structure,” underscored the bench, stressing that while statutory remedies must ordinarily be pursued, exceptional cases may warrant writ jurisdiction where fairness, equity or justice demands.
The reference order added: “The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and the same is not limited by any provision of the Constitution and cannot be restricted or circumscribed by a statute.”
Under Section 18 of the MSMED Act, disputes involving delayed payments to micro or small enterprises must first undergo mandatory conciliation, failing which the MSEFC can either arbitrate the dispute itself or refer it to another institution. The statute mandates a pre-deposit of 75% of the awarded amount for buyers seeking to challenge an MSEFC order under Section 34 of the A&C Act.
The Court pointed out that this requirement, coupled with the high interest rate prescribed under Section 16—three times the Reserve Bank of India’s bank rate, currently 19.5%—imposed onerous conditions on buyers.
The judgment acknowledged that the principle of alternative remedy, while an important judicial restraint, is not an inflexible rule. The bench cited earlier precedents, including the 1954 decision in Himmatlal Harilal Mehta Vs State of Madhya Pradesh to stress that alternative remedies must be adequate and efficacious, and their onerous nature could justify invoking writ jurisdiction.
The decision to refer the matter to a larger bench highlights the top court’s call for striking a balance between statutory arbitration frameworks under the MSMED Act and the constitutional guarantee of access to justice through writ jurisdiction.
