MSME Facilitation Councils may act as both conciliators and arbitrators after conciliation fails.

The appellants challenged the common order dated 17 February 2026 by which the learned Single Judge dismissed their writ petitions against the order/award dated 30 May 2023 passed by the Madhya Pradesh Micro Small Facilitation Enterprises Council.

The dispute arose from alleged non-payment for goods supplied by the respondent, leading to a reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”).

The appellants contended that the Council had neither properly concluded conciliation nor validly commenced arbitration under Sections 18(2) and 18(3), and had denied them an effective opportunity to submit pleadings, adduce evidence, and contest the claim.

The Single Judge held that conciliation had been conducted and, upon its failure, the Council had lawfully proceeded to arbitration; the appellants were consequently required to pursue the alternative remedy under Section 19 of the MSMED Act read with Section 34 of the Arbitration and Conciliation Act, 1996.

Whether the MSME Facilitation Council complied with the mandatory procedure under Sections 18(2) and 18(3) of the MSMED Act before passing the order/award dated 30 May 2023.

Whether the Council could act successively as conciliator and arbitrator after the failure of conciliation proceedings.

Whether the appellants could invoke writ jurisdiction under Article 226 despite the availability of the statutory remedy under Section 19 of the MSMED Act read with Section 34 of the Arbitration and Conciliation Act, 1996.

Section 18(2) of the MSMED Act requires the Facilitation Council to undertake conciliation in accordance with the statutory framework, and Section 18(3) permits it, upon failure or termination of conciliation, to either take up the dispute for arbitration itself or refer it to an arbitral institution.

Section 19 of the MSMED Act requires a party challenging an award to pursue the remedy contemplated under Section 34 of the Arbitration and Conciliation Act, 1996, subject to the statutory pre-deposit requirement.

The Court relied principally on Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods (P) Ltd., holding that the MSME Facilitation Council is competent to act as both conciliator and arbitrator after the failure of conciliation proceedings.

The appellants relied on Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan & Others, (2021) 19 SCC 206, and Aurionpro Solutions Ltd. v. Madhya Pradesh Micro and Small Enterprises Facilitation Council, to contend that writ jurisdiction remains available where there is a jurisdictional defect or violation of mandatory procedure; however, the Court found no such defect on the facts.

The Division Bench examined the Council’s procedure and affirmed the Single Judge’s finding that both parties had been given an opportunity to participate in conciliation or compromise under Section 18(2).

Since conciliation failed, it was duly terminated, following which the Council proceeded to adjudicate the dispute under Section 18(3).

Applying Mahakali Foods, the Court held that the Council’s successive performance of the conciliatory and arbitral functions was legally permissible and did not, by itself, constitute an impermissible merger of proceedings.

The appellants’ allegations concerning lack of hearing, absence of pleadings or evidence, invalid initiation of arbitration, and improper award of interest were treated as matters capable of examination in proceedings under Section 34, rather than grounds establishing an apparent jurisdictional or natural-justice violation warranting interference under Article 226.

Accordingly, the alternative statutory remedy was held to be efficacious.

The appellants had an efficacious remedy under Section 19 of the MSMED Act read with Section 34 of the Arbitration and Conciliation Act, 1996.

Finding no error or infirmity in the Single Judge’s order dated 17 February 2026, the Court affirmed it and dismissed Writ Appeals Nos. 2751 and 2753 of 2026.