Supreme Court Constitution Bench to decide whether writ petitions are maintainable against MSEFC orders

A Constitution Bench of the Supreme Court will decide whether writ petitions filed before High Courts under Article 226 of the Constitution against orders passed by Micro and Small Enterprises Facilitation Council (MSEFC) are maintainable [Tamil Nadu Cements Corporation Vs MSME Facilitation Council & Anr]..A three-judge bench of the Court comprising Chief Justice of India (CJI) Sanjiv Khanna and Justices Sanjay Kumar and Manmohan referred the issue to a Constitution Bench.The Constitution Bench will also determine the circumstances under which High Courts can entertain writ petitions despite the availability of alternative remedies, if writ petitions are held to be maintainable. Further, the Court will address whether MSEFC members, who act as conciliators under Section 18 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, can subsequently serve as arbitrators in the same dispute. This question involves reconciling Section 18 of the MSMED Act with Section 80 of the Arbitration and Conciliation Act of 1996. The latter restricts conciliators from acting as arbitrators unless expressly agreed upon by the parties.MSEFC was established under the MSMED Act to address issues related to delayed payments to micro and small enterprises (MSEs). The council serves as a quasi-judicial body that facilitates the resolution of disputes between MSEs and their buyers, acting as both a conciliator and arbitrator. It is mandated to examine cases filed by MSEs regarding delayed payments, ensuring that buyers comply with payment timelines. If conciliation fails, the MSEFC can issue an arbitral award in accordance with the Arbitration and Conciliation Act of 1996, typically within a stipulated timeframe of seven days from the application submission through the MSME Samadhaan portal. The order of MSEFC can be challenged by filing a petition under Section 34 of the Arbitration and Conciliation Act. In 2023, a three-judge bench of the Supreme Court in India Glycols Vs MSEFC ruled that a writ petition was not maintainable against an order of MSEFC as the statute provides a mechanism for an appeal the order. .In today's judgment, the Court questioned the correctness of 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 further observed whether filing writ petitions against an order could not be barred completely since remedy under Article 226 is 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,".The Court observed that in many cases courts have exercised writ jurisdiction despite the availability of alternative remedies. It further noted that the exercise of writ jurisdiction is premised on three contingencies: i) where there is a violation of principles of natural justice or fundamental rights; ii) where an order in a proceeding is wholly without jurisdiction; or iii) where the vires of an Act is challenged..The Court further cited the case of Harbanslal Sahnia v. Indian Oil Corporation in which it was held that "the rule of exclusion of writ jurisdiction is a rule of discretion and not of compulsion." It emphasised that in appropriate cases, despite the availability of alternative remedies, writ courts can exercise jurisdiction in the aforementioned contingencies.."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, it proceeded to refer the question of law to a five-judge Constitution Bench. .[Read Judgment]