M/s. Tamil Nadu Cements Corporation Ltd. vs. Micro and Small Enterprises Facilitation Council
Citation: 2025 INSC 91; Civil Appeal arising out of SLP (C) Diary No. 3776/2023
Bench: Chief Justice Sanjiv Khanna, Justice Sanjay Kumar, Justice Manmohan
Background
The case arose from a contractual dispute between Tamil Nadu Cements Corporation Ltd. (TANCEM), a government-owned entity, and M/s Unicon Engineers, a micro/small enterprise. TANCEM withheld payments alleging substandard work and delays. Unicon Engineers invoked Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), leading to conciliation proceedings before the Micro and Small Enterprises Facilitation Council (MSEFC). After conciliation failed, the dispute was referred to arbitration as per Section 18 of the MSMED Act. TANCEM challenged the MSEFC’s orders through a writ petition under Article 226 of the Constitution, raising the question of its maintainability given the alternative remedy under the Arbitration and Conciliation Act, 1996 (A&C Act).
Key Legal Issues
Maintainability of Writ Petitions:
Whether a writ petition under Article 226 is maintainable against orders/awards passed by the MSEFC under Section 18 of the MSMED Act, considering the alternative remedy of challenging arbitral awards under Section 34 of the A&C Act.
Role of MSEFC Members:
Whether members of the MSEFC who conduct conciliation proceedings can subsequently act as arbitrators in the same dispute, in light of Section 80 of the A&C Act, which generally prohibits conciliators from acting as arbitrators.
Supreme Court’s Analysis
The Court noted conflicting precedents on the issue. In Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan (2021), the Supreme Court allowed writ petitions against MSEFC orders, holding that such orders were not arbitral awards. Conversely, Gujarat State Civil Supplies Corp. v. Mahakali Foods (2023) emphasized that the MSMED Act’s provisions override other laws, and the MSEFC acts as both conciliator and arbitrator, limiting writ jurisdiction.
The Court clarified that the existence of an alternative statutory remedy (like Section 34 of the A&C Act) does not absolutely bar writ petitions, but restricts them to exceptional circumstances—such as when there is a violation of natural justice, lack of jurisdiction, or manifest injustice.
On the second issue, the Court acknowledged the tension between Section 18 of the MSMED Act (which allows the MSEFC to act as both conciliator and arbitrator) and Section 80 of the A&C Act (which prohibits this dual role). The Court recognized the need for clarity on whether MSEFC members can legally transition from conciliators to arbitrators in the same dispute.
Outcome and Directions
The Supreme Court did not issue a final ruling on these questions. Instead, recognizing the importance and recurring nature of these legal issues, the Court referred the matter, along with connected cases, to a larger Bench for authoritative determination.
The Registry was directed to place the present case and related matters before the Chief Justice for appropriate constitution of a larger Bench.
Significance
This judgment highlights the complexity of judicial review over MSEFC orders and the interplay between the MSMED Act and the A&C Act. The Supreme Court’s referral to a larger Bench underscores the need for a clear, authoritative pronouncement on:
The scope of writ jurisdiction against MSEFC decisions, and
The permissibility of MSEFC members acting as both conciliators and arbitrators.
Until resolved, these questions will continue to impact dispute resolution involving micro and small enterprises across India.
RELATED Blog
0 comments