SC refers key issues on writ jurisdiction under MSMED Act to larger bench

SC refers key issues on writ jurisdiction under MSMED Act to larger bench

New Delhi, The Supreme Court on Wednesday referred critical questions over the maintainability of writ petitions in high courts against the orders passed by the Micro and Small Enterprises Facilitation Council to a five-judge Constitution bench.

SC refers key issues on writ jurisdiction under MSMED Act to larger bench

A bench comprising Chief Justice Sanjiv Khanna and Justices Sanjay Kumar and Manmohan was dealing with a case filed by a government firm, the Tamil Nadu Cements Corporation Limited v. Micro and Small Enterprises Facilitation Council and another, that raised fundamental issues about the interplay between statutory remedies and writ jurisdiction under Article 226 of the Constitution.

Article 226 of the Constitution gives high courts the power to issue writs to enforce fundamental rights and for other purposes. Authoring the verdict, the CJI outlined three pivotal questions for consideration by a five judge bench.

"Whether the ratio in M/s India Glycols Limited that 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,” read the first question.

Secondly, if the bar/prohibition was not absolute, when and under what circumstances would the principle/restriction of adequate alternative remedy not apply.

The third issue was whether the members of MSEFC who undertake conciliation proceedings, upon failure, could 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.

“The registry is directed to place the papers before the chief justice so that an appropriate decision can be taken on the administrative side for the constitution of a larger Bench in the present case,” the judgement said.

The crucial issue, said the verdict while referring it to the larger bench, 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 in exercise of power under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, and if yes, under what circumstances.

The case stemmed from a dispute regarding the powers of the MSEFC under Section 18 of the MSMED Act, which mandates conciliation and arbitration in disputes involving micro and small enterprises.

Section 18 empowers the MSEFC to resolve disputes through conciliation and, if necessary, arbitration.

However, questions arose whether parties dissatisfied with MSEFC orders could bypass the statutory remedies under the statute and directly approach the high courts through writ petitions.

In previous rulings, the top court offered differing views on this matter.

While a two-judge bench in Jharkhand Urja Vikas Nigam Limited v. State of Rajasthan allowed writ petitions in exceptional circumstances, the judgment in M/s India Glycols Limited took a stricter stance, underlining the mandatory recourse to the A&C Act's remedies.

This divergence in judicial interpretations prompted the current referral to a larger bench.

CJI Khanna said the access to writ jurisdiction under Article 226 was a constitutional right and a part of the basic structure of the Constitution.

It is generally exercised with judicial restraint when alternative statutory remedies were available, said the judgement, but exceptions include cases involving violations of natural justice, lack of jurisdiction, or challenges to the vires of a statute.

The court observed that while the principle of alternative remedies reinforced the rule of law, it couldn't completely bar the exercise of writ jurisdiction in cases warranting immediate judicial intervention.

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