Supreme Court Constitution Bench to Rule on Writ Petitions Against MSEFC Orders

Supreme Court: The Constitutional Bench of the Supreme Court will be adjudicating whether writ petitions can lie under Article 226 of the Constitution, challenging decisions of the Micro and Small Enterprises Facilitation Council (MSEFC) before various High Courts [Tamil Nadu Cements Corporation vs. MSME Facilitation Council & Anr.]

The bench of three judges comprising the Chief Justice of India, Sanjiv Khanna, and Justices Sanjay Kumar and Manmohan referred this matter to a Constitutional Bench.

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The Constitutional Bench will hold whether the High Courts could entertain writs at all, even in cases where alternative remedies are accessible, if the writs are otherwise held to be maintainable.

Further, the court would consider if the members of the MSEFC, serving as conciliators under Section 18 of the MSMED Act of 2006, can subsequently be arbiters on the same matter. This inquiry involves taming Section 18 of the MSMED Act with Section 80 of the Arbitration and Conciliation Act of 1996, which provides that if the parties so agree, a conciliator may act as an arbiter.

The MSEFC is an authority incorporated under the MSMED Act and aims to settle any dispute arising out of any delay in payments owed by buyers.

The latter is a quasi-judicial body that leans toward the conciliation and arbitration of disputes arising out of conflicts between MSEs and their buyers.

Examination of cases concerning delayed payments made by MSEs by the MSEFC is entrusted to guarantee compliance with payment timeframes from buyers. If conciliation attempts prove unsuccessful, the MSEFC can issue an arbitral award, normally within seven days from the day of granting through the MSME Samadhaan Portal under the provisions of the Arbitration and Conciliation Act 1996.

An order of the MSEFC can be appealed against by way of a petition under Section 34 of the Arbitration and Conciliation Act.

In 2023, a three-judge bench of the Supreme Court of India in the case of India Glycols Vs MSEFC decided that no writ petition was maintainable against an order of MSEFC because the statute provides a mechanism for appeal against such order.

In its ruling this time, the Court doubted the correctness or propriety of the judgment in India Glycols.

"We also have reservations on the dictum in M/s India Glycols Limited (supra) which holds that a writ petition is not maintainable against any order passed by the MSEFC and the only recourse available is in terms of Section 34 of the A&C Act, and that too would require a deposit in terms of Section 19 of the A&C Act," the bench said.

The Court specified whether writ petitions against an order could not be completely barred, since the remedy under Article 226 forms part of the basic structure of the Constitution.

"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,"

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The Court commented notwithstanding that in many cases courts have entertained writs notwithstanding the existence of alternative remedies. The exercise of writ jurisdiction, in this context, is predicated mostly in three contingencies:

1) Where there has been a violation of natural justice or infringement of fundamental rights;

2) An order made in the proceedings is wholly without jurisdiction; or

3) Where the vires of an Act are in question.

The Court also referred to the case of Harbanslal Sahnia v. Indian Oil Corporation to reinforce the principle that "the rule by which an application for a writ is not maintainable is in the nature of discretion and not compulsion."

As a matter of law, the writ courts might exercise jurisdiction in such instances, notwithstanding that alternative remedies exist.

"However, in exceptional cases, writ jurisdiction can still be exercised as a power to access the court for justice and relief," the Bench said.

Therefore, the question of law was referred to a five-judge Constitution Bench.

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