2025 INSC 91 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2025

(Arising out of S.L.P.(C) No. of 2025 @ Diary No.3776 of 2023)

M/s Tamil Nadu Cements Corporation Limited …..Appellant

Versus

Micro and Small Enterprises Facilitation

Council and Another …..Respondents

J U D G M E N T

Sanjiv Khanna, CJI

Leave granted.

2. The seminal issue which arises for consideration in the present appeal

is 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

1

in exercise of power under Section 18

of the Micro, Small and Medium Enterprises Development Act, 2006,

2

and if yes, under what circumstances.

1 For short, ‘MSEFC’.

2 For short, ‘MSMED Act’.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 1 of 24

3. Section 18 of the MSMED Act reads as under:

“Reference to Micro and Smal enterprises Facilitation

Council.— (1) Notwithstanding anything contained in any

other law for the time being in force, any party to a dispute

may, with regard to any amount due under section 17, make a

reference to the Micro and Small Enterprises Facilitation

Council.

(2) On receipt of a reference under sub-section (1), the Council

shall either itself conduct conciliation in the matter or seek the

assistance of any institution or centre providing alternate

dispute resolution services by making a reference to such an

institution or centre, for conducting conciliation and the

provisions of sections 65 to 81 of the Arbitration and

Conciliation Act, 1996 (26 of 1996) shall apply to such a

dispute as if the conciliation was initiated under Part III of that

Act.

(3) Where the conciliation initiated under sub-section (2) is not

successful and stands terminated without any settlement

between the parties, the Council shall either itself take up the

dispute for arbitration or refer it to any institution or centre

providing alternate dispute resolution services for such

arbitration and the provisions of the Arbitration and Conciliation

Act, 1996 (26 of 1996) shall then apply to the dispute as if the

arbitration was in pursuance of an arbitration agreement

referred to in sub-section(1) of section 7 of that Act.

(4) Notwithstanding anything contained in any other law for the

time being in force, the Micro and Small Enterprises

Facilitation Council or the centre providing alternate dispute

resolution services shall have jurisdiction to act as an Arbitrator

or Conciliator under this section in a dispute between the

supplier located within its jurisdiction and a buyer located

anywhere in India.

(5) Every reference made under this section shall be decided

within a period of ninety days from the date of making such a

reference.”

4. A two Judges Bench of this Court in Jharkhand Urja Vikas Nigam

Limited v. State of Rajasthan and Others,

3

after interpreting the

provisions of the MSMED Act, including the powers of the MSEFC

under sub-section (2) and (3) of Section 18, had observed:

3 (2021) 19 SCC 206.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 2 of 24

“14. From a reading of Sections 18(2) and 18(3) of

the Msmed Act it is clear that the Council is obliged to conduct

conciliation for which the provisions of Sections 65 to 81 of the

Arbitration and Conciliation Act, 1996 would apply, as if the

conciliation was initiated under Part III of the said Act. Under

Section 18(3), when conciliation fails and stands terminated,

the dispute between the parties can be resolved by arbitration.

The Council is empowered either to take up arbitration on its

own or to refer the arbitration proceedings to any institution as

specified in the said section. It is open to the Council to

arbitrate and pass an award, after following the procedure

under the relevant provisions of the Arbitration and Conciliation

Act, 1996, particularly Sections 20, 23, 24 and 25.

15. There is a fundamental difference between conciliation and

arbitration. In conciliation, the conciliator assists the parties to

arrive at an amicable settlement, in an impartial and

independent manner. In arbitration, the Arbitral

Tribunal/arbitrator adjudicates the disputes between the

parties. The claim has to be proved before the arbitrator, if

necessary, by adducing evidence, even though the rules of the

Civil Procedure Code or the Evidence Act may not apply.

Unless otherwise agreed, oral hearings are to be held.

16. If the appellant had not submitted its reply at the

conciliation stage, and failed to appear, the Facilitation Council

could, at best, have recorded the failure of conciliation and

proceeded to initiate arbitration proceedings in accordance

with the relevant provisions of the Arbitration and Conciliation

Act, 1996, to adjudicate the dispute and make an award.

Proceedings for conciliation and arbitration cannot be

clubbed.”

5. Thereupon, referring to the facts in the case, this Court struck down the

order dated 06.08.2012 passed by the MSEFC as being nullity and

contrary to the provisions of the MSMED Act and the mandatory

provisions of the Arbitration and Conciliation Act, 1996.

4

This court

observed that the order under challenge was not an award in the eyes

of law and hence the recourse to Section 34 of the A&C Act was not

required. The writ petition was held to be maintainable notwithstanding

the objections on account of delay and laches.

4 For short, “A&C Act”.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 3 of 24

6. Another Division Bench of this Court in Gujarat State Civil Supplies

Corporation Limited v. Mahakali Foods Private Limited (Unit 2)

and Another,

5

without noticing the judgment in Jharkhand Urja Vikas

Nigam Limited (supra), observed that the specific non-obstante

clauses in sub-sections (1) and (4) of Section 18 of the MSMED Act

have the effect of overriding any other law for the time being in force,

including the A&C Act, and, consequently, the MSEFC can act as a

conciliator, and thereupon itself take up the dispute for arbitration or

refer it to any institution or centre for such arbitration. This would be

valid, despite Part III of the A&C Act comprising Sections 65 to 81

being applicable to conciliation in terms of sub-section (2) of Section 18

of the MSMED Act. In other words, there is no bar on the MSEFC acting

as a conciliator and, thereupon, acting as an arbitrator even when

Section 80 of the A&C Act states that unless otherwise agreed by the

parties, the conciliator shall not act as an arbitrator or as a

representative or counsel of a party in any arbitral or judicial

proceeding in respect of a dispute that is the subject matter of the

conciliation proceedings; and the conciliator shall not be presented by

the parties as a witness in the arbitral or judicial proceedings.

6

It was

also held that the provisions relating to conciliation, and thereupon,

arbitration in the MSMED Act being statutory in nature, would override

an arbitration agreement as contracted by the parties. The

5 (2023) 6 SCC 401.

6 80. Role of conciliator in other proceedings.—Unless otherwise agreed by the

parties,—

(a) the conciliator shall not act as an arbitrator or as a representative or counsel of a

party in any arbitral or judicial proceeding in respect of a dispute that is the subject of the

conciliation proceedings;

(b) the conciliator shall not be presented by the parties as a witness in any arbitral or

judicial proceedings.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 4 of 24

MSEFC/Arbitral Tribunal under Section 18(3) of the MSMED Act is

competent to rule on its own jurisdiction as also the other issues in

view of Section 16 of the A&C Act. This observation was made in the

context of the objections raised that the party being subjected to

arbitration was not a ‘supplier’ as per the definition in Section 2(n) of

the MSMED Act or on the ground that any subsequent registration

obtained under the MSMED Act would be prospective and, therefore,

statutory arbitration under Section 18 of the MSMED Act could not be

invoked.

7

7. A three-Judges Bench of this Court in M/s India Glycols Limited and

Another v. Micro and Small Enterprises Facilitation Council,

Medchal - Malkajgiri and Others,

8

referring to the judgment in

Gujarat State Civil Supplies Corporation Limited (supra), held that a

writ petition under Articles 226/227 of the Constitution was not

maintainable as Section 18 of the MSMED Act provides for recourse to

a statutory remedy for challenging an award under Section 34 of the

A&C Act. A particular reference was made to Section 19 of the MSMED

Act which states that no application for setting aside a decree, award or

order made by the MSEFC/institution/centre providing for alternate

dispute resolution services shall be entertained by a court unless the

appellant (not being a supplier) has deposited with it seventy-five per

cent of the amount in terms of the decree, award or order in the

manner as directed by the court. Proviso to the Section 19 of the

7 A two Judges Bench of this Court Bench in NBCC (India) Ltd. v. The State of West Bengal and

Others, 2025 INSC 54, has referred this issue to a larger Bench.

8 2023 SCC OnLine SC 1852.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 5 of 24

MSMED Act states that pending disposal of the application for setting

aside of the decree, award or order, the court shall order that such

percentage of the amount deposited shall be paid to the supplier, as it

considers reasonable under the circumstances of the case and on such

conditions as it deems necessary to impose.

9

This judgment of three

Judges Bench does not refer to the earlier judgment of two Judges

Bench of this Court in Jharkhand Urja Vikas Nigam Limited (supra).

8. Section 18 of the MSMED Act provides for statutory and mandatory

conciliation on the reference being made to the MSEFC by any party to

a dispute with regard to an amount due under Section 17 of the

MSMED Act. Section 17 states that for the goods supplied or services

rendered by the supplier, the buyer shall be liable to pay the amount

with interest thereon as provided in Section 16. Section 16 states that

where a buyer fails to make payment of the amount to the supplier, as

required under Section 15, the buyer shall, notwithstanding anything

contained in any agreement between the buyer and the supplier or in

any other law for the time being in force, be liable to pay compound

interest with monthly rests to the supplier from the appointed date or

from the date immediately following the date agreed upon, at three

times of the bank rate notified by the Reserve Bank.

10

9 19. Application for setting aside decree, award or order.—No application for setting aside any

decree, award or other order made either by the Council itself or by any institution or centre providing

alternate dispute resolution services to which a reference is made by the Council, shall be entertained

by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of

the amount in terms of the decree, award or, as the case may be, the other order in the manner

directed by such court: Provided that pending disposal of the application to set aside the decree,

award or order, the court shall order that such percentage of the amount deposited shall be paid to the

supplier, as it considers reasonable under the circumstances of the case, subject to such conditions

as it deems necessary to impose.

10 Sections 15, 16 and 17 of the MSMED Act, read as under:

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 6 of 24

9. It would be appropriate at this stage to refer to the basic facts of the

present case.

The appellant – Tamil Nadu Cements Corporation Limited

11

is a

wholly-owned undertaking of the Government of Tamil Nadu. It is

registered under the Companies Act, 1956 and has two cement

manufacturing units at Alangulam and Ariyalur. For the units at

Ariyalur, TANCEM had called for tender on 27.01.2010 on turnkey

basis for design, supply, erection and commissioning of two

Electrostatic Precipitators

12

for clinker coolers at a total contract

value of Rs.7.50 crores under the provisions of Tamil Nadu

Transparency in Tenders Act, 1998 and the Tamil Nadu

Transparency in Tenders Rules, 2000.

On 16 April 2010, TANCEM issued a work order in favour of M/s

Unicon Engineers for design, supply, erection and commissioning of

two ESPs for clinker coolers at Ariyalur Cement Works on turnkey

basis for the total value of Rs.7,50,60,543/- as per drawing and

specification mentioned in tender documents. It is averred that M/s

15. Liability of buyer to make payment.—Where any supplier supplies any goods or

renders any services to any buyer, the buyer shall make payment therefor on or before the date

agreed upon between him and the supplier in writing or, where there is no agreement in this behalf,

before the appointed day:

Provided that in no case the period agreed upon between the supplier and the buyer in writing

shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.

16. Date from which and rate at which interest is payable.—Where any buyer fails to

make payment of the amount to the supplier, as required under Section 15, the buyer shall,

notwithstanding anything contained in any agreement between the buyer and the supplier or in any

law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on

that amount from time the appointed day or, as the case may be, from the date immediately following

the date agreed upon, at three times of the bank rate notified by the Reserve Bank.

17. Recovery of amount due.—For any goods supplied or services rendered by the supplier,

the buyer shall be liable to pay the amount with interest thereon as provided under Section 16.

11 For short, ‘TANCEM’.

12 For short, ‘ESP’.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 7 of 24

Unicon Engineers failed to deliver on its promise to build and

commission the ESPs as undertaken.

From 16.05.2012 till 08.10.2012, TANCEM issued several warning

letters to M/s Unicon Engineers for delay in execution of civil works.

TANCEM also sent a letter dated 16.11.2013 to M/s Unicon

Engineers requesting to complete all the works before 30.11.2013.

It also raised concerns regarding the substandard quality of work

done for the ESPs, which on inspection were found not to be in

accordance with the contractual stipulations.

Thereafter, M/s Unicon Engineers, on 17.01.2014, filed the petition

under Section 18 of the MSMED Act before the MSEFC claiming an

amount of Rs.2,66,80,157 /- with interest.

On 20.01.2014, the MSEFC wrote a letter to TANCEM stating that

M/s Unicon Engineers had filed a plea before it to facilitate the

realization of the pending payment of Rs.50,08,801/- and

Rs.2,16,71,296 towards the cost overrun, totalling Rs.2,66,80,157/-

and requested TANCEM to give its comments on the petition filed

by M/s Unicon Engineers.

On 26.01.2014, TANCEM, citing the poor performance of the ESPs

commissioned by M/s Unicon Engineers, issued a work order

amounting to Rs.3,07,800/- to one V. Sundararajan, contractor, to

carry out modification work at those ESPs.

Thereafter, M/s Unicon Engineers sent a demand letter dated

14.02.2014 to TANCEM seeking payment of Rs.14,15,167

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 8 of 24

immediately, extension of delivery period of ESPs up to 30.07.2014

and for issuance of amended work order with the revised price.

On 27.03.2014, TANCEM sent a letter to its Ariyalur Unit and

marked a copy to M/s Unicon Engineers. TANCEM directed its

Ariyalur Unit for exploring possibility of amicable settlement with M/s

Unicon Engineers to resolve the various issues raised in respect of

smooth functioning of ESPs and the excess payment being claimed

by them through MSEFC towards design, supply, erection and

commissioning of the ESPs.

Thereafter, on 08.04.2014, TANCEM sent a letter to M/s Unicon

Engineers stating that cooler ESPs commissioned by it were not

running to its full efficiency and requested it to submit an action plan

for rectification.

On 27.05.2014, 19.06.2014 and 01.10.2014, TANCEM had sent

letters to M/s Unicon Engineers to attend to the problems being

faced with the ESPs. It is alleged that M/s Unicon Engineers failed

to rectify the issues cropping up in the ESPs and hence, TANCEM

issued a work order in favour of M/s Perfect Engineers to repair

ESP insulation amounting to Rs.4,02,417/-.

On 14.10.2014, MSEFC, M/s Unicon Engineers was directed to

produce documentary evidence in support of its case and to rectify

the issues with the ESPs.

MSEFC on 04.06.2016, held that this was the fourth hearing of the

case, and adequate opportunities had been given to TANCEM, and

the council was of the opinion that the conciliation proceedings had

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 9 of 24

failed. Accordingly, M/s Unicon Engineers was free to approach the

MSEFC for arbitration. Sections 15 and 16 of the MSMED Act are

simply quoted by the MSEFC to issue directions to TANCEM to pay

Rs.39,66,144, along with the interest. The relevant portion of the

order dated 04.06.2016 reads:

“This is 4

th

hearing in this case. Since adequate

opportunities were given to the respondent, the Council

recorded the failure of conciliation between the petitioner

and the respondent. In view of above facts and

circumstances, the council ordered that the applicant is

free to approach the council for arbitration as conciliation

between them has failed.

Section 15 of the MSMED Act 2006 is extracted

hereunder:

“Where any supplier supplies any goods or renders any

services to any buyer, the buyer shall make payment

there for on or before the date agreed upon between him

and the supplier in writing or where there is no agreement

in this behalf, before the appointed day: Provided that in

no case the period agreed upon between the supplier and

the buyer in writing shall exceed forty-five days from the

day of acceptance or the day of deemed acceptance.

Section 16 of the MSMED Act 2006 is extracted

hereunder:

“Where any buyer fails to make payment of the amount to

the supplier, as required under section 15, the buyer

shall, notwithstanding anything contained in any

agreement” between the buyer and the supplier or in any

law for the time being. Being in force be liable to pay

compound interest with monthly rests, to the supplier on

that amount from the appointed day or, as the case may

be, from the date immediately following the date agreed

upon, at three times of the bank rate notified by the

Reserve Bank.

The council directs that the petitioner is entitled to recover

the balance retention amount of Rs. 39,66,144/- along

with interests due to piecemeal releases of the total

retention money, of Rs.1,17,57,399/- with effect from

31.03.2011 (2) Rs.1,57,59,537/- along with interests, with

effect from 17.01.2014 towards additional expenditures

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 10 of 24

incurred by, the petitioner due to the delay of 3 years in

execution of civil works by the respondent.

Therefore, the Respondent shall be liable to pay the

balance retention amount of Rs.39,66,144/- along with

interests due to piece meal releases of the total retention

money of Rs.1,17,57,399/-with effect from 31.03.2011 &

(2) Rs.1,57,59,537/- along with interests with effect from

17.01.2014 towards additional expenditures incurred by

the petitioner due to the delay of 3 years in execution of

civil works by the respondent, together with compounded

interest with monthly rest, at three times of the Bank rate

notified by the Reserve Bank of India as stipulated in the

MSMED Act 2006 from the appointed due dates

respectively as above, to, the petitioner, till the date of

settlement.

With this order, the petition filed before the council on

17.01.2014 by the petitioner stands disposed.”

On 30.06.2016, M/s Unicon Engineers herein sent a letter to

TANCEM to release the payment as per the order dated 04.06.2016

passed by the MSEFC.

On 19.09.2016, TANCEM filed a petition under Section 33 of the

A&C Act to recall/set aside the order/award dated 04.06.2016

passed in favour of M/s Unicon Engineers.

On 26.09.2016, M/s Unicon Engineers sent a letter to MSEFC

requesting to reject the petition filed by TANCEM on the grounds

that it was barred by limitation and that TANCEM had not furnished

75% of the amount as pre-deposit, as mandated by Section 19 of

the MSMED Act.

TANCEM filed a detailed reply on 06.10.2016 qua the objections

raised by M/s Unicon Engineers. Similar objections were again

raised by M/s Unicon Engineers to the response filed by TANCEM.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 11 of 24

Thereafter, MSEFC passed an order dated 25.10.2016 dismissing

the recall petition on grounds of delay, objections raised by M/s

Unicon Engineers and lack of provision to recall the award.

On 16.12.2016, M/s Unicon Engineers filed an execution petition

before the High Court of Judicature at Madras claiming an amount

of Rs.5,88,88,591/- in terms of the order passed by the MSEFC.

On 31.12.2016, TANCEM filed a petition under Section 34 of the

A&C Act before the High Court of Judicature at Madras to set aside

the award passed by MSEFC and to direct M/s Unicon Engineers to

pay the amount due for the loss incurred towards various heads

including interest and damages.

TANCEM also filed a counter affidavit in the execution proceedings

initiated by M/s Unicon Engineers.

TANCEM filed a writ petition before the High Court of Judicature at

Madras in 2017 challenging the vires of Sections 16 to 19 of

MSMED Act.

The objections of TANCEM in the execution proceedings before the

High Court of Judicature at Madras were dismissed vide order

dated 10.10.2017 and it was held that an executing court cannot go

beyond a final and binding decree even if it is erroneous until the

same is set aside in appeal or revision.

TANCEM filed an Application for waiver of pre-deposit of 75% of the

award amount as stipulated under Section 19 MSMED Act, which

was disposed of vide order dated 20.07.2018 by the Single Judge

of the High Court of Judicature at Madras directing TANCEM to pre-

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 12 of 24

deposit the amount as per the MSMED Act within eight weeks from

the date of the order.

Meanwhile, the High Court of Judicature at Madras vide order dated

25.02.2019 directed attachment of the movables of TANCEM in the

execution proceedings. TANCEM sought a stay against the

attachment order. The High Court of Judicature at Madras vide

order dated 11.03.2019 granted an interim stay on the condition that

TANCEM deposit an amount of Rs. 3 crores.

The High Court of Judicature at Madras vide order dated

29.04.2019 noted that there were 7 Special Leave Petitions

13

pending before this Court challenging the vires of Section 16 to 19

of the MSMED Act and hence, the writ petition filed by TANCEM

raising a similar challenge, be listed after the disposal of SLPs

pending before this Court.

Thereafter, on 04.07.2019, TANCEM was granted three weeks to

make the pre-deposit of 75% of the decretal amount for maintaining

the appeal as per Section 19 of the MSMED Act.

TANCEM deposited the differential amount of Rs.1,41,66,443/- as

against the 75% of the decretal amount since it had already

remitted Rs.3 crores.

M/s Unicon Engineers filed an application before the High Court of

Judicature at Madras to withdraw Rs. 3 crores which was deposited

by TANCEM. The Single Judge vide order dated 31.07.2019

allowed M/s Unicon Engineers to withdraw Rs.1.50 crores. On

appeal by TANCEM, the Division Bench vide order dated

13 For short, ‘SLP’.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 13 of 24

06.08.2019 directed that M/s Unicon Engineers will furnish an

undertaking that if TANCEM succeeds before the executing court it

would refund the sum of Rs.1,50,00,000/- with interest @ 6% per

annum from the date of receipt to the date of refund. The

disbursement of Rs.1,50,00,000/- to the decree holder was subject

to the final decision of the executing court. The Master of the Court

vide order dated 16.08.2019 directed to issue a cheque of Rs. 1.5

crore in favour of M/s Unicon Engineers.

TANCEM filed an SLP against the order dated 06.08.2019 of the

Division Bench before this Court. This Court vide order dated

11.01.2021, after recording the statement of TANCEM that the

amount deposited had not been withdrawn, directed that the order

of withdrawal of Rs.1,50,00,000/- shall remain stayed.

The SLP was subsequently disposed of by directing M/s Unicon

Engineers to furnish a security for Rs. 1,50,00,000/- and the High

Court was requested to expedite the hearing of the objections and

decide O.P. Nos. 692/2019 and 1030/2019 expeditiously, and

preferably within six months.

TANCEM also filed a transfer petition before this Court seeking

transfer of the writ petition filed by it before the High Court of

Judicature at Madras challenging the vires of Sections 16 to 19 of

the MSMED Act. The writ petition of TANCEM before the High Court

was tagged with the batch of petitions pending before this Court

vide order dated 15.10.2020.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 14 of 24

By the order dated 09.09.2021 of the Single Judge, objections filed

by TANCEM under Section 34 of the A&C Act were held to be not

maintainable on account of being barred by limitation and as being

beyond the condonable period. The same were also dismissed on

account of the failure of TANCEM to make mandatory deposit in

terms of Section 19 of the MSMED Act.

The appeal preferred against the same was dismissed as

withdrawn vide order dated 28.04.2022 by the Division Bench of the

High Court of Judicature at Madras. In the meanwhile, M/s Unicon

Engineers filed a calculation memo claiming Rs.8,18,26,844/- as

the balance amount due from TANCEM. This amount was later

revised to Rs.7,88,23,549/-. Objections to the said calculation were

filed by TANCEM.

In these circumstances, TANCEM again preferred a fresh writ

petition assailing the order dated 04.06.2016 of the MSEFC in

which an interim order was passed in its favour. However, vide

order dated 13.07.2022, the Single Judge dismissed the writ

petition observing that the relief sought by TANCEM would be

governed by the fate of the proceedings challenging the vires of

Sections 16 to 19 of the MSMED Act, which was now pending

before this Court in a batch of matters. It was held that in case

TANCEM’s challenge to the vires of the aforesaid provisions

succeeded, the relief as sought by it may be granted and the

amount already disbursed/released to M/s Unicon Engineers would

be refunded.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 15 of 24

TANCEM being aggrieved by the said order preferred a writ appeal

before the High Court, which came to be dismissed by the

impugned judgment dated 07.12.2022 observing that TANCEM had

already exhausted all remedies and that the dismissal on grounds

of limitation cannot be challenged by contending that the award was

null and void.

After the said judgment was pronounced, M/s Unicon Engineers

pursued the execution petition in the High Court of Judicature at

Madras and the executing court vide order dated 14.12.2022

directed to bring the property of TANCEM for sale.

In such circumstances referred to above, TANCEM has filed the

present SLP.

10.In our opinion, there is a direct confrontation between the judgment of

the two Judges Bench of this Court in Jharkhand Urja Vikas Nigam

Limited (supra) and Gujarat State Civil Supplies Corporation

Limited (supra).

11.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.

12.This is a case of statutory arbitration that is mandatory. It is possible to

argue that it bars a party from moving the court of law under Section 9

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 16 of 24

of the Code of Civil Procedure, 1908.

14

Section 18 also overrides the

principle of party autonomy when they enter into an arbitration

agreement which prescribes the procedure for the appointment of an

arbitrator and conduct of arbitral proceedings. The statute further

prescribes an undoubtedly high rate of interest – three times the

Reserve Bank rate of interest – presently 6.5 per cent i.e. 19.5 per

cent. The interest is compounded with monthly rests. Lastly, an order or

award can be challenged by ‘the buyer’

15

only on deposit of seventy-

five per cent of the awarded amount, thereby restricting the right to

challenge the order/award passed except on compliance of stringent

conditions, which are not prescribed when an appeal is preferred under

the CPC. Pre-deposit is a condition for hearing a decision on the

objections to the award. The issue therefore which arises and needs

consideration is whether there would be an absolute and complete bar

to invoke writ jurisdiction under Article 226 of the Constitution even in

exceptional and rare cases where fairness, equity and justice may

warrant the exercise of writ jurisdiction.

13.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

14 For short, ‘CPC’.

15 Section 2(d) of the MSMED Act defines ‘buyer’ as - (d) “buyer” means whoever buys any goods or

receives any services from a supplier for consideration.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 17 of 24

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.

16

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. Noticeably, the MSEFC as a statutory authority performs

a statutory role and functions within the four corners of the law.

14.Following the aforesaid dictum, this Court in Harbanslal Sahnia and

Another v. Indian Oil Corporation and Others

17

, had taken notice of

the fact that the High Court had referred to the arbitration clause which

the writ petitioner could take recourse to, to hold that the rule of

exclusion of writ jurisdiction is a rule of discretion and not of

compulsion. In an appropriate case, in spite of availability of alternative

remedy, the writ courts can exercise its jurisdiction at least in three

contingencies, as referred to above. In the facts of the said case, this

Court interfered observing that there were peculiar circumstances as

the dealership had been terminated on an irrelevant and non-existence

cause. Therefore, there was no need to drive the parties to initiate

16 Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others (1998) 8 SCC 1. See also,

L. Chandra Kumar v. Union of India and Others, (1997) 3 SCC 261; S.N.Mukherjee v. Union of India,

(1990) 4 SCC 594; Union of India and Others v. Parashotam Dass, 2023 SCC OnLine SC 314.

17 (2003) 2 SCC 107.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 18 of 24

arbitration proceedings. Following the judgments in Whirlpool

Corporation v. Registrar of Trade Marks, Mumbai and Others

18

and

Harbanslal Sahnia (supra), this Court in Radha Krishan Industries v.

State of Himachal Pradesh and Others

19

laid down the following

principles:

“27. The principles of law which emerge are that:

27.1. The power under Article 226 of the Constitution to

issue writs can be exercised not only for the enforcement

of fundamental rights, but for any other purpose as well.

27.2. The High Court has the discretion not to entertain

a writ petition. One of the restrictions placed on the power

of the High Court is where an effective alternate remedy

is available to the aggrieved person.

27.3. Exceptions to the rule of alternate remedy arise

where: (a) the writ petition has been filed for the

enforcement of a fundamental right protected by Part III

of the Constitution; (b) there has been a violation of the

principles of natural justice; (c) the order or proceedings

are wholly without jurisdiction; or (d) the vires of a

legislation is challenged.

27.4. An alternate remedy by itself does not divest the

High Court of its powers under Article 226 of the

Constitution in an appropriate case though ordinarily, a

writ petition should not be entertained when an

efficacious alternate remedy is provided by law.

27.5. When a right is created by a statute, which itself

prescribes the remedy or procedure for enforcing the right

or liability, resort must be had to that particular statutory

remedy before invoking the discretionary remedy under

Article 226 of the Constitution. This rule of exhaustion of

statutory remedies is a rule of policy, convenience and

discretion.

27.6.In cases where there are disputed questions of

fact, the High Court may decide to decline jurisdiction in a

writ petition. However, if the High Court is objectively of

the view that the nature of the controversy requires the

18 (1998) 8 SCC 1.

19 (2021) 6 SCC 771.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 19 of 24

exercise of its writ jurisdiction, such a view would not

readily be interfered with.”

15.Thus, it would be true to say that the existence of the statutory remedy

does not affect the jurisdiction of the High Court to issue a writ.

Nevertheless, the writ jurisdiction being discretionary by policy, the writ

courts generally insist that the parties adhere to alternative statutory

remedies, as this reinforces the rule of law. However, in exceptional

cases, writ jurisdiction can still be exercised as a power to access the

court for justice and relief. It is in this context, that a Constitution Bench

of five Judges way back in 1954 in Himmatlal Harilal Mehta v. State

of Madhya Pradesh and Others

20

had observed that the principle that

the High Court should not issue a prerogative writ when an alternative

remedy is available may not apply when the remedy under the statutes

is onerous and burdensome in character, such as when the party has

to deposit the whole amount of the tax before filing an appeal. An

alternative remedy must be equally efficacious and adequate. While

examining the scope of the right to file a writ petition when the statute

requires a pre-deposit of tax—an obligation argued as imposing an

onerous condition on the right to appeal—this Court in Shyam Kishore

and Others v. Municipal Corporation of Delhi and Another,

21

after

relying upon several other decisions, observed that the validity of rigid

provisions banning entertainment of appeal when taxes are not paid

have been upheld so long as the conditions are not so onerous as to

amount to unreasonable restriction. In the alternative, the right is

20 (1954) 1 SCC 405.

21 (1993) 1 SCC 22.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 20 of 24

almost illusory. Diluting the requirement to pay the disputed tax, this

Court observed:

“44. (…)Sometimes, to compel the assessee to pay up

the demanded tax for several years in succession might

very well cripple him altogether. This apart, an assessee

may not be able to deposit the tax while filing the appeal

but may be able to pay it up within a short time, or at any

rate, before the appeal comes on for hearing in the

normal course. There is no reason to construe the

provision so rigidly as to disable him from doing this.

Again, when an appeal comes on for hearing, the

appellate judge, in appropriate cases, where he feels

there is some great hardship or injustice involved, may be

inclined to adjourn the appeal for some time to enable the

assessee to pay up the tax. Though it will not be

expedient or proper to encourage adjournment of an

appeal, where it is ripe for hearing otherwise, only on this

ground and as a matter of course, an interpretation which

leaves some room for the exercise of a judicial discretion

in this regard, where the equities of the case deserve it,

may not be inappropriate. The appellate judge's incidental

and ancillary powers should not be curtailed except to the

extent specifically precluded by the statute. We see

nothing wrong in interpreting the provision as permitting

the appellate authority to adjourn the hearing of the

appeal thus giving time to the assessee to pay the tax or

even specifically granting time or instalments to enable

the assessee to deposit the disputed tax where the case

merits it, so long as it does not unduly interfere with the

appellate court's calendar of hearings. His powers,

however, should stop short of staying the recovery of the

tax till the disposal of the appeal. We say this because it

is one thing for the judge to adjourn the hearing leaving it

to the assessee to pay up the tax before the adjourned

date or permitting the assessee to pay up the tax, if he

can, in accordance with his directions before the appeal

is heard. In doing so, he does not and cannot injunct the

department from recovering the tax, if they wish to do so.

He is only giving a chance to the assessee to pay up the

tax if he wants the appeal to be heard. It is, however, a

totally different thing for the judge to stay the recovery till

the disposal of the appeal; that would result in modifying

the language of the proviso to read: “no appeal shall be

disposed of until the tax is paid”. Short of this, however,

there is no reason to restrict the powers unduly; all he

has to do is to ensure that the entire tax in dispute is paid

up by the time the appeal is actually heard on its merits.

We would, therefore, read clause (b) of Section 170 only

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 21 of 24

as a bar to the hearing of the appeal and its disposal on

merits and not as a bar to the entertainment of the appeal

itself.”

16.Equally important are the observations with reference to the right to file

a writ petition under Articles 226 and 227 of the Constitution in certain

situations. In this regard, this Court in Shyam Kishore (supra) has

observed:

“45.If the provision is interpreted in the manner above

suggested, one can steer clear of all problems of

constitutional validity. The contention on behalf of the

Corporation to read the provision rigidly and seek to

soften the rigour by reference to the availability of

recourse to the High Courts by way of a petition under

Articles 226 and 227 in certain situations and the

departmental instructions referred to earlier does not

appear to be a satisfactory solution. The departmental

instructions may not always be followed and the resort to

Articles 226 and 227 should be discouraged when there

is an alternative remedy. A more satisfactory solution is

available on the terms of the statute itself. The

construction of the section approved by us above vests in

the appellate authority a power to deal with the appeal

otherwise than by way of final disposal even if the

disputed tax is not paid. It enables the authority to

exercise a judicial discretion to allow the payment of the

disputed tax even after the appeal is filed but, no doubt,

before the appeal is taken up for actual hearing. The

interpretation will greatly ameliorate the genuine

grievances of, and hardships faced by, the assessee in

the payment of the tax as determined. Though an

assessee may not be able to acquire an absolute stay of

the recovery of the tax until the dispute is resolved, he will

certainly be able to get breathing time to pay up the same

where his case deserves it. If this interpretation is placed

on the provision, no question of unconstitutionality can at

all arise.”

17.In Govind Parameswar Nair and Others v. Municipal Corporation

of Greater Bombay and Others,

22

a Constitution Bench of five Judges

22 (2001) 9 SCC 166

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 22 of 24

agreed with the interpretation given by the three-Judges Bench in

Shyam Kishore (supra).

18.Recently, in Tecnimont Private Limited (Formerly known as

Tecnimont ICB Private Limited) v. State of Punjab and Others,

23

in

regard to the question relating to alternative remedy where the

disputed amount is required to be deposited to avail the statutory

remedy, this Court observed that there is some divergence of opinion,

albeit several cases like Shyam Kishore (supra) have attempted to

find a solution to provide some support in cases involving extreme

hardship where the writ petition would not be dismissed on the ground

of equally efficacious alternative remedy.

19.In the light of the aforesaid decisions, we deem it appropriate to refer

the following questions raised in the present appeal to a larger Bench

of five Judges, namely:

(i)Whether the ratio in M/s India Glycols Limited (supra) 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?

(ii)If the bar/prohibition is not absolute, when and under what

circumstances will the principle/restriction of adequate

alternative remedy not apply?

23 (2021) 12 SCC 477.

Civil Appeal a/o. SLP (C) Diary No.3776/2023 Page 23 of 24

(iii)Whether the members of MSEFC who undertake conciliation

proceedings, upon failure, can 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 first and second question will subsume the question of

when and in what situation a writ petition can be entertained

against an order/award passed by MSEFC acting as an arbitral

tribunal or conciliator.

20.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.

...….......………………......CJI.

[Sanjiv Khanna]

…........……………….….......J.

[Sanjay Kumar]

…........……………….….......J.

[Manmohan]

New Delhi;

January 22, 2025.

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