Supreme Court Refers Question of Writ Jurisdiction Against MSEFC Orders to Five‑Judge Bench

A bench of Chief Justice Sanjiv Khanna and Justices Sanjay Kumar and Manmohan heard an appeal by M/s Tamil Nadu Cements Corporation Limited challenging an order of the Micro and Small Enterprises Facilitation Council (MSEFC) under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The core issue concerned whether a writ petition under Article 226 is maintainable against an order passed by the MSEFC exercising powers under Section 18, and if so, in what circumstances.

The Court granted leave and recorded that there was a direct conflict in earlier precedents on whether statutory remedy under Section 18/19 of the MSMED Act ousted writ jurisdiction. The three‑judge bench identified substantial questions of law requiring a larger constitutional bench and referred the following points to a five‑judge Bench: (i) whether the ratio in M/s India Glycols Ltd. that a writ petition could never be entertained against any order/award of the MSEFC completely barred writ jurisdiction; (ii) if no absolute bar existed, when and under what circumstances the principle of adequate alternative remedy would not apply; and (iii) whether members of the MSEFC who undertook conciliation could thereafter act as arbitrators under Section 18 read with Section 80 of the Arbitration and Conciliation Act, 1996. The Court directed registry to place papers before the Chief Justice for constitution of the larger Bench.

The Court, in its reasoning, observed: "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. This is an inalienable right and the rule of availability of alternative remedy is not an omnibus rule of exclusion of the writ jurisdiction, but a principle applied by the High Courts as a form of judicial restraint and refrain in exercising the jurisdiction. 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. It has been well settled through a legion of judicial pronouncements of this Court that the writ courts, despite the availability of alternative remedies, may exercise writ jurisdiction at least in 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."

Background

The dispute arose from a contractual litigation between TANCEM (the appellant) and M/s Unicon Engineers over supply, erection and commissioning of Electrostatic Precipitators (ESPs) at Ariyalur cement unit. Unicon filed a reference under Section 18 of the MSMED Act claiming Rs.2.66 crores; the MSEFC recorded failure of conciliation and, by order dated 04.06.2016, directed payment to Unicon totalling various heads including retention and additional expenditure with compounded interest at "three times of the Bank rate notified by the Reserve Bank" as stipulated by the MSMED Act. TANCEM challenged the order by remedies under the Arbitration & Conciliation Act, filing Section 34 objections in the Madras High Court and also pursued writ remedies and other proceedings contesting vires of Sections 16–19 of the MSMED Act and contesting limitation and pre‑deposit requirements under Section 19.

The Supreme Court recorded the existence of conflicting precedents: a two‑judge Bench in Jharkhand Urja Vikas Nigam Ltd. had held that writs were maintainable against MSEFC orders in some circumstances; a different two‑judge Bench in Gujarat State Civil Supplies had upheld statutory arbitration and the MSEFC’s power to act as conciliator and thereafter as arbitrator; and a three‑judge Bench in M/s India Glycols Ltd. had held that writ petitions were not maintainable and that Section 19 pre‑deposit conditions applied to challenges. Noting that the question was one of constitutional importance—balancing statutory arbitration and access to writ jurisdiction—the Court found it appropriate to refer the issues to a larger Bench. Leave was granted and the Registry was directed to take steps for constitution of the five‑judge Bench; no final adjudication on the merits was made in the present order.

Case Details: Case No.: 2025 INSC 91 Case Title: M/s Tamil Nadu Cements Corporation Limited v. Micro and Small Enterprises Facilitation Council and Another Appearances: For the Petitioner(s): [Not indicated in the judgment] For the Respondent(s): [Not indicated in the judgment]