Summary
Noting a direct conflict between earlier decisions on orders of the Micro and Small Enterprises Facilitation Council under Section 18 of the MSMED Act, and expressing reservations about the view that a writ petition can never lie against such orders, the Supreme Court did not decide the appeal but referred to a five-Judge Bench whether writ jurisdiction is completely barred, when the alternative-remedy rule will not apply, and whether Council members who conducted conciliation may themselves arbitrate.
Issues
- Whether the ratio in India Glycols, that a writ petition can never be entertained against an order or award of the MSEFC, completely bars writ petitions before the High Court.
- If the bar is not absolute, in what circumstances the rule of adequate alternative remedy will not apply to orders or awards of the MSEFC.
- Whether members of the MSEFC who conducted conciliation can, on its failure, themselves act as arbitrators under Section 18 of the MSMED Act read with Section 80 of the Arbitration and Conciliation Act, 1996.
Provisions considered
- Section 18, Micro, Small and Medium Enterprises Development Act, 2006Quoted; the Court noted it provides for statutory and mandatory conciliation and then arbitration by the Council or an institution, overriding other law and party autonomy, and that earlier decisions conflict on whether the Council may both conciliate and arbitrate and on the remedies against its orders. (¶¶ 3, 4, 6, 8, 10, 12)
- Section 19, Micro, Small and Medium Enterprises Development Act, 2006A buyer can challenge an order or award only after depositing 75 per cent of the amount; the Court treated this onerous pre-deposit as relevant to whether the statutory remedy is an adequate alternative that bars writ jurisdiction. (¶¶ 7, 12)
- Sections 15, 16 and 17, Micro, Small and Medium Enterprises Development Act, 2006The buyer's liability to pay within the agreed or appointed period, failing which compound interest with monthly rests at three times the RBI bank rate is payable, was noted as one of the stringent features of the statutory scheme. (¶¶ 8, 12)
- Section 80, Arbitration and Conciliation Act, 1996Unless the parties agree otherwise, a conciliator may not act as arbitrator in the same dispute; whether this restrains MSEFC members who conciliated from arbitrating under Section 18 was referred to the larger Bench. (¶¶ 6, 19)
- Article 226, Constitution of IndiaThe Court observed that writ jurisdiction is plenary, part of the basic structure and cannot be curtailed by statute, the alternative-remedy rule being one of self-restraint; whether and when it may be exercised against MSEFC orders was referred. (¶¶ 2, 12, 13, 15, 19)
Held
- There is a direct conflict between Jharkhand Urja Vikas Nigam Ltd. (conciliation and arbitration cannot be clubbed; an order of the Council made without following the arbitral procedure is a nullity open to writ challenge) and Gujarat State Civil Supplies Corporation Ltd. (the non-obstante clauses in Section 18 allow the Council to conciliate and then arbitrate), the latter having been decided without noticing the former. (¶¶ 4, 5, 6, 10)
- The Court expressed reservations about India Glycols Ltd., which held that a writ petition is never maintainable against an MSEFC order and that the only remedy is Section 34 of the Arbitration Act subject to pre-deposit, noting that it did not refer to Jharkhand Urja Vikas Nigam Ltd. (¶¶ 7, 11)
- The Court observed that the power under Article 226 is plenary and cannot be restricted by statute; the alternative-remedy rule is one of discretion and self-restraint, and writ jurisdiction may be exercised despite such a remedy at least where natural justice or fundamental rights are violated, the order is wholly without jurisdiction, or the vires of an Act is challenged. A remedy that is onerous, such as one conditioned on a heavy pre-deposit, may not be an equally efficacious alternative. (¶¶ 13, 14, 15, 16, 17, 18)
- Given the mandatory statutory arbitration, the override of party autonomy, the high compound interest rate and the 75 per cent pre-deposit, the question whether writ jurisdiction is absolutely barred even in rare cases where fairness and justice require it, together with the conciliator-as-arbitrator question, was referred to a five-Judge Bench without deciding the appeal on its merits. (¶¶ 12, 19, 20)
Result
Appeal not decided on merits; three questions referred to a larger Bench of five Judges, and the Registry directed to place the papers before the Chief Justice for constitution of that Bench.