InCivil Appeal No 7491 of 2023 -SC- Challenge to MSMED Facilitation Council award not maintainable through Writ Petition, must follow Arbitration & Conciliation Act: Supreme Court
Chief Justice Dhananjaya Y Chandrachud, Justice J.B. Pardiwala& Justice Manoj Misra [06-11-2023]

Read Order: M/s India Glycols Limited and Another v. Micro and Small Enterprises Facilitation Council, Medchal - Malkajgiri and Others

Chahat Varma

New Delhi, November 17, 2023: In a significant decision, the Supreme Court has upheld the Telangana High Court's decision that a writ petition challenging an award of the Micro and Small Enterprises Facilitation Council (MSMED Facilitation Council) is not maintainable. The Top Court held that the remedy for challenging such an award lies under Section 34 of the Arbitration and Conciliation Act, 1996.

The present case revolved around a claim filed by M/s S R Technologies (Unit II) (respondent), under the MSMED Act. The Facilitation Council decreed the claim in favour of the respondent, awarding a principal sum of Rs 40,29,862 along with interest. Subsequently, the award of the Facilitation Council was challenged through a writ petition under Articles 226/227 of the Constitution. Initially, the Telangana High Court had set aside the award on the ground of limitation. However, in an appeal, the Division Bench ruled that the writ petition was not maintainable and that the appellant should have pursued the remedy under Section 34 of the Arbitration and Conciliation Act 1996.

A three-judge bench of Chief Justice Dhananjaya Y Chandrachud, Justice J.B. Pardiwala and Justice Manoj Misra observed that, according to Section 19 of the Micro, Small and Medium Enterprises Development Act 2006 (MSMED Act), an application to set aside an award of the Facilitation Council cannot be entertained by any court unless the appellant has deposited seventy-five per cent of the amount specified in the award. Section 18(4) dictates that when the Facilitation Council arbitrates a dispute, the provisions of the Arbitration and Conciliation Act, 1996, apply as if it's in pursuance of an arbitration agreement under Section 7(1) of that Act. Consequently, the remedy under Section 34 of the 1996 Act governs an award of the Facilitation Council.

The bench opined that despite having the remedy under Section 34 of the 1996 Act, the appellant failed to pursue it, and the added condition in Section 19 was not fulfilled.

Further, the bench affirmed the judgment of the Division Bench, holding that the petition under Articles 226/227 of the Constitution was not maintainable. It emphasized that entertaining such a petition to circumvent compliance with the pre-deposit requirement under Section 19 of the MSMED Act would defeat the legislative intent behind the special enactment.

Consequently, the Court disposed of the appeal, affirming the decision of the High Court that the petition challenging the award of the Facilitation Council was not maintainable.